U.P. COOPERATIVE CANE UNION FEDERATION v. WEST U.P. SUGAR MILL ASSOCIATION AND ORS

Citation: [2004] SUPP. 2 S.C.R. 238

Court: Supreme Court of India

Bench: S. RAJENDRA BABU, K.G. BALAKRISHNAN, P. VENKATARAMA REDDI, B.N. SRIKRISHNA, G.P. MATHUR

Case summary

U.P. COOPERATIVE CANE UNION FEDERATION v. WEST U.P. SUGAR MILL ASSOCIATION AND ORS.pdf

Judgment text

U. P. COOPERATIVE CANE UNION FEDERATION V. WEST U. P. SUGAR MILL ASSOCIATION AND ORS. MAY 5, 2004 [RAJENDRA BABU CJ. , K. G. BALAKRISHNAN, VENKATARAMA REDD! , B. N. SRIKRISHNA ANO G. P. MATHUR, JJ. ] Sugarcane Act, 1934; Sections 5 and 7/UP. Factories Act, 1938; Sections 21and 22-AIU. P. Sugarcane (Regulation ofsupply and Purchase) Act, 1953; Sections 16 & 17/U. P. Sugarcane (Supply and Purchase) Order, 1954/Sugarcane (Control) Order, 1955/Sugarcane (Control) Order, 1966; Clause 2(g). 3, and 5-A! Essential Commodities Act, 1956; Section 3 : Fixation of price of sugurcane-Central Government/State Government-Jurisdiction of-State Government fixing the price!

Stute Advised price over and above the statutory minimum price fixed by the Central Government Challenge to---Order of the State Government quashed by High Court-However, in another matter, on the similar issue the High Court al/ou•ed the writ petition in favour ofthe State-On appeal, Held: Per majority · The provincial Governments couldfix price ofsugarcane taking into account local conditions and empowered to make rules thereof-Sugar Control Order stipulates price could either be the minimum price as fixed by the Central Government or as agreed between the growers and the producers and includes additional price as well-Thus, there could be a price other than the minimum price fixed by the Central Government and it could be higher than the minimum price so fixed-Repugnancy would arise ifthe State Government fixes a price lower than the minimum price- By fixing higher price the provisions of 1966 Order stood complied with by the State Government.

Regulator; of the State Government-State Government imposing statutory conditions on sugarcane growers for continuous supply offresh(v hurvested sugarcane ofmi//s--lmplications-State Government in exercise U. P. CO-OP. CANE UNION FEDERAT! ON v. WEST U. P. SUGAR MILL ASSON. 239 ofits regulato1y power could also fix higher price ofthe sugarcane for the benefit ofthe cane growers-Fixation ofhigherprice by the Sate Government by itself could not have any major or substantial impact on the fixation ofprice of the levy sugar by the Central Government-State Government frxed the prices uniformly and notfactorywise as was the impact offixation ofthe statutory price ofthe sugarcane by the Central Government-Hence, State Advised Price morejust and equitable-Essential Commodities Act- Section 3; Constitution of India, 1950-Article 254.

Agreement between the sugarcane growers and sugar producers- Terms-Enforcing of-Agreement is the single composite transaction-It is not open to the producers to enforce the terms thereofto their advantage and refuse the State Advised Price on the ground that their consent was not obtained voluntarily. Words and Phrases 'Price', 'minimum price', 'agreed price '-Meening ofin the context of Sugarcane Supply and (Control) Order, 1966. 'goods '-Meaning of in the context of Sales of Goods Act. 'Regulate '-Meaning ofin the context ofUP. Sugarcane (Regulation of Supply and Purchase) Act, 1953.

Per minority : Central Government is empowered under the Essential Commodities Act to regulate the production, supply and distribution of the essential commodities and provide for controlling the price thereof-Power to control includes power to fix the minimum price-Power of the Central Government under the Central Act and that ofthe State Government under 1953 Act are mutually exclusive-Since the State Legislation does not contain provisions even for fixation of minimum price of sugarcane, the State Government cannot possess power to fix a price higher than the minimum-Fixation ofprice higher than the minimum price by the State executive. hit by Article 14 ofthe Constitution and renders its constitutionality open to challenge-Such fixation of price of sugarcane by the State amounts to violation of the fundamental right guaranteed under Article 19(1){3) ofthe Constiturion--Stute Advised Price unnounced by the State Government despite protest by the sugar producers--Hence.

it cunnot be termed as consensual price between the purties-Constitution of India, 1950-Articles 1. / & 19. Words and Phrases : 'minimum price·. 'fair price', 'remunerative price' and 'maximum price '-Meaning of in the context of Essential Commodities Act, 1955. 'Advised Price '-Meaning of in the context of U. P. Sugarcane (Regulation of Supply and Purchase) Act, 1953. The questions which arose in these appeals and transfer petitions relate to the competence of the State Government to fix the State Advised Price for purchase ofsugarcane by the manufacturer/occupier of sugar factory over and above the minimum price fixed by the Central Government and validity ofthe procedure adopted for ensuring payment of the price to sugarcane growers. It was contended by the appellant-U. P. Cooperative Cane Unions Federation that since the Central Government fixed only the minimum price, it was op.

en for the State Government to fix a higher price for sugarcane; that the State Government could not only fix a higher price but could also advise sugarcane growers/factories to agree and pay a higher price for sugar cane to the sugarcane growers; that the Central Government while fixing the minimum statutory price ofthe sugarcane did not take into consideration various bye-products produced during the course ofproduction ofsugar; that the sugar mills make considerable amount of money/profit by selling them; that the State Government having regard to local conditions and profit earned by the sugar factories from the sale of the bye products could fix a fair/reasonable and realistic price of the sugarcane; and that there is no repugnancy between the price fixed by the Central Government and State Advised price as fixed by the State Government. It was submitted by the State Government that the Central Government in pursuance of the provisions under the Essential U. P. CO-OP.

CANE UNION FEDERATION v. WEST U. P. SUGAR MILL ASSON.

241 commodities Act has made sugar cane (Control) Order; and since the purpose of the Sugarcane (Control) order was to ensure uninterrupted supplies of sugarcahe, it must be construed in the context of policy of the Central Government to appropriate a portion of the production of sugar and sell it as levy sugar at controlled price; that the statutory minimum price as fixed by the Central Government was basically linked to fixation of the price of levy sugar and not linked to fixation of the price of sugarcane; that the additional price could only be paid to the sugarcane growers when the sugar mills earn profit which is only a matter of chance; that the production of sugar from sugarcane needs large investment and price is the main incentive for the farmers, however, the price fixed by the Central Government was bare minimum and not a remunerative price; that the power to determine remunerative price vested with the State Government under the regulatory provisions of 1953 Act; that the State Government in exercise of its power under the 1953 Act could bring about an agreement between the sugarcane • growers, Sugarcane Growers Co-operative Society and occupiers of sugar factories whereby the sugarcane grower would be bound to supply certain quantity of freshly harvested sugarcane and in case of non-supply he would be liable to pay penalty; that since the sugarcane grower is liable to pay penalty by the same analogy the State Government is obliged to determine and pay the remunerative price to the sugarcane growers; and that the price so determined by the State Government represents the true price.

Respondent-Association submitted that there are no specific provisions under the 1966 Order which could empower the State Government to fix the price of sugarcane over and above the price fixed by the Central Government; that there exists a clear repugnancy between the price·fixed by the Central Government and the price fixed by the State Government, thus, the price fixed by the Central Government would prevail; that the fixation of higher price by the State Government would completely dislocate the mechanism for determination ofthe price of the levy sugar by the Central Government as provided under the Essential Commodities Act, that there was no agreement between the sugarcane growers/Sugarcane Growers Cooperative Society and the occupiers of the sugar factories for payment of the State Advised Price; and that levy could not be compelled to pay the State Advised Price since they had never given their consent thereto in the agreement.

Disposing of the appeals and transfer petitions, the Court HELD : Per G. P. MATHUR, J. (for himself, Rajendra Babu, CJ. and K. G. Balakrishnan, J. ) : 1. 1. The Central Legislature enacted the Sugarcane Act, 1934 with the objective that the initiative in the matter of fixation of prices for sugarcane must be left to Provincial Governments so as to suit local conditions. The purchase of sugarcane intended for use in factory in any controlled area at a price less than the minimum price notified was made an offence under the provisions of the Act, which conferred wide powers on the Provincial Government to make rules for the purpose of carrying into effect the objects of the Act. [265-H; 266-C] 1. 2. The Central Government exercising powers under Section 3 of the Essential Commodities Act made the Sugarcane Control Order, 1955. This order was repealed by the Sugarcane (Control) Order 1966.

The definition of 'price' given in Clause 2(g) of the Sugarcane (Control) Order, 1966 shows that it can either be the price or the minimum price fixed by the Central Government. So far as the power of the Central Government is concerned, under Clause 3(1) ofthe order it can fix only the "minimum price" of sugarcane to be paid by the producers ofsugar for the sugarcane purchased by them. This is the lowest permissible rate. The effect of Clause 3(2) of the order is that a producer of sugar can under no circumstances purchase sugarcane at a price lower than the minimum price fixed under Clause 3(1) and there is a similar prohibition on the cane grower and he cannot sell or agree to sell sugarcane to a producer of sugar below the said price.

But the 1966 Order, in view of definition of "price" given in Clause 2(g) and also the language used in Clauses 3 and 3-A, clearly contemplates that there can be a price other than the minimum price" ofsugarcane as agreed to between the producer and the sugarcane grower or the Sugarcane Growers' Co-operative Society'. The provision as laid down under sub-clause (5) of Clause S- A again contemplates payment of price higher than the minimum price fixed under Clause 3(1 ). A whole reading ofthe 1966 Order, thus, would U. P. CO-OP. CANE UNlON FEDERATION v. WEST U. P. SUGAR MlLL ASSON. 243 show that the Central Government shall fix the minimum price of sugarcane but there can be a price higher than the minimum price which may be in the nature ofagreed price between the producer ofsugar and the sugarcane grower or the sugarcane growers co-operative society. So the field for a price higher than the minimum price is clearly left open in the 1966 Order by the Central Government.

[266-D, E; 268-C-D-E-F-G; 269-B-C] 1. 3. The provisions in the U. P. Sugarcane (Regulation of Supply and Purchase) Act, 1953, U. P. Sugarcane (Regulation of Supply and Purchase) Rules, 1954 and the U. P. Sugarcane Supply and Purchase Order, 1954, have been made for the benefit ofthe sugar factory so that it is assured ofand gets a continuous supply offreshly harvested sugarcane in quantity according to its crushing capacity and for the whole duration ofthe crushing season. No doubt the cane grower also gets some advantage in the sense that purchase of his yield is assured but at the same time many limitations and restrictions are imposed upon him. In view of the statutory provisions, the position of a cane grower becomes entirely different from that ofa farmer producing any other kind of:;tgricultural crop where there arc absolutely no restrictions upon him.

It is in this scenario, which is not the creation ofthe cane grower but ofthe statutory provisions operating in the field, that the question whether the State has any authority or power to fix the price of the sugarcane supplied to a producer of sugar (sugar factory) arose. [275-G-H; 276-A-BI 1. 4. The various provisions of U. P. Sugarcane (Regulation of Supply and Purchase) Act, 1953 Act show in unmistakable terms that it regulates the supply and purchase of sugarcane required for use in sugar factories. 'Regulate' means to control or to adjust by rule or to subject to governing principles. It is a word of broad impact having wide meaning comprehending all facets not only specifically enumerated in the Act, but also embraces within its fold the powers incidental to the regulation envisaged in good faith and its meaning has to be ascertained in the context in which it has been used and the purpose of the statute. [276-C-D-El VSR & Oil Mills v. State of A. P.

, AIR (1964) SC 1781; State of Tamilnadu v. Mis. Hindu Stone & Ors. , [198112 SCC 205; K. Ramanathan v. State of Tamil Nadu & Anr. , 11985] 2 sec 116 and Jiyajeerao Cotton Mills Ltd. & Anr. v. Madhya Pradesh Electricity Board & Anr, (1989] Suppl. 2 SCC 52, relied on. 1. 5. The provisions of U. P. Sugarcane (Regulation of Supply and Purchase) Act, 1953 show that the legislature has made very elaborate provisions regarding supply ofsugarcane by canegrowers, its purchase by the sugar factories and payment of price thereof. In fact, very detailed and exhaustive provisions have been made in the Rules and the U. P. Sugarcane Supply Order, 1954 to ensure that at the time of delivery of sugarcane by the canegrowers, its weight and price are correctly recorded and the price is paid to them within 14 days, failing which sugar factory is liable to pay interest.

In such circumstances, the irresistible conclusion which can be drawn is that the regulatory power possessed by the State Government shall also include the power to fix the price of the sugarcane. If it is held that the State under its power of regulation cannot fix the price, then the statutory provision contained in the 1953 Act, the Rules and 1954 Order will become completely one sided, operating entirely for the benefit of sugar factories giving them many advantages with no corresponding obligations and leaving the canegrower in a lurch with host of restrictions upon him. This can never be the intention of the Legislature. It will not be fair to read the Act and the Rul~s in such a restrictive manner. 1281-C-D-E-F-GI 1. 6. There is no indication in the proforma of the agreement as contained in the appendix to U. P. Sugarcane (Supply and Purchase) Order, 1954 or in the Order that the word "Government" would refer to Central Government.

If the State Government is prescribing a proforma of an agreement which is to be executed by a canegrower or a canegrowers' cooperative society and the occupier of the factory regarding sale and purchase of sugarcane wherein the word "Government" is used, it can only mean the State Government and not the Central Government unless there is clear indication to the contrary. The only logical inference which can be drawn is that the word "Government" refers to State Government. 1282-D-EI 2. 1. Sugarcane supplied to sugar factory are "goods" within the meaning of Section 2(7) of Sale of Goods Act. Th provisions under sub- U. P. CO-OP. CANE UNION FEDERATION v. WEST U. P. SUGAR MILL ASSON. 245 sections (1) and (3) of Section 4 and Section 5 of the Act show that price is an essential element of sale of goods. 1280-E-F] Popatlal Shah v. State of Madras, 11953) SCR 677 and State of Madras v. Gannon Dunkerley, [1958) SCR 379, referred to. 2. 2.

There is a difference between "the price" which is a fixed amount and "the minimum price" which only indicates the lowest permissible rate. The 1966 Order, which itself was made by the Central Government more than a decade ago and was amended in 1978 and Clauses 3(3) and 3-A thereof contemplate an "agreed price" which in view of the mand~te of Clause 3(2) is bound to be higher than the "minimum price" fixed under Clause 3(1). Naturally it is this "agreed price" which' is to be mentioned in the agreements for sale and purchase of sugarcane in Forum B and C otherwise the very purpose of entering into agreements would be defeated. 1282-G-H; 283-A-B] Ch. Tika Ram. Ji & Ors. v. State ofUttar Pradesh & Ors. , [1956] SCR 393, distinguished. 2. 3. The State Government in exercise of its regulatory power can fix the price of sugarcane.

The mere fact that this price is not to the liking of the sugar factory does not mean that it cannot form the basis for supply ofsugarcane by the canegrowers or canegrowers cooperative society to the sugar factory. It is well settled that even a compulsory sale does not lose the character of a sale. [284-E] Salar Jung Sugar Mills Ltd. v. State ofMysore & Ors. , 11971] 1 SCC 23, followed. Indian Steel & Wire Products Ltd. v. State ofMadras, [1968) 1 SCR 479; Andhra Sugar Mills Ltd. v. State ofAndhra Pradesh, 11968] 1 SCR 705 and Sukhnandan Saran Dinesh Kumar v. Union of India & Ors. , 11982] 2 sec 150, relied on. 3. The reservation or assignment of area for growing of the sugarcane is made for the benefit of a sugar factory.

The agreements executed by the canegrowers or canegrowers cooperative society in favour of occupier of a factory are also for the benefit of the sugar factory as by such agreements it gets an assurance of a continuous supply of freshly harvested sugarcane on the days indicated in the requisition slips issued by it so that there may not be any problem in getting optimum quantity of raw material throughout the crushing season. In absence of the agreements the sugar factory factory will also be a loser as it may face great problem in getting the supply ofsugarcane according to its requirement. The occupiers ofthe factory are themselves keen for execution of the agreements but their only objection is to the mention of State Advised Price.

The agreement is one composite transaction and it is not open to them to contend that the terms thereof which are to their advantage should be enforced but the term relating to price notified by the State Government should not be enforced as their consent in that regard was not a voluntary act. However, having regard to the advantages derived by the sugar factories, they are fully bound by the agreement wherein the State Advised Price may be mentioned and it is not open to them to assail the clause relating to price ofsugarcane on the ground that their consent was not voluntary or was obtained under some kind of duress. 1289-B-C-D-EI 4. Under Sub-section (1) of Clause of the 1966 Order, the Central Government can only fix a minimum price of sugarcane.

This clause should be read along with sub-clause (2) which creates an embargo or prohibition that no person shall sell or agree to sell sugarcane to a producer of sugar and no such producer shall purchase or agree to purchase sugarcane at a price lower than that fixed under Sub-clause (1). The inconsistency or repugnancy will arise ifthe State Government fixed a price which is lower than that fixed by the Central Government. But, if the price fixed by the State Government is higher than that fixed by the Central Government, ther '. WEST U. P. SUGAR MILL ASSON. [SRIKRISHNA, J. ] 311 U. P. Sugarcane Act, 1953. The object of the enactment of the 1953 Act is stated thus : "With the promulgation ofthe Industries (Development and Regulation) Act, 1951 with effect from 8th May 1952, the regulation of the sugar industry has become exclusively a Central subject. The State Governments are now only concerned with the supply of sugarcane to the sugar factories.

The Bill is being introduced in order to provide for a rational distribution of sugarcane to factories, for its development on organised scientific lines, to protect the interests of the cane-growers and of the industry and to put the new Act permanently on the Statute Book" (See - Statement of Objects and Reasons published in the U. P. Gazette Extraordinary dated 15th July, 1953]. In exercise ofthe rule making power conferred by Section 28 of the Act, the U. P. Government made the U. P. Sugarcane Rules, 1954 and also in exercise of the powers conferred by Section 16 of the Act, promulgated the U. P. Sugarcane Order, 1954. On Ist April 1955, Parliament enacted the Essential Commodities Act, 1955 [Act X of 1955] to provide in the interests of the general public "for the control of production, supply and distribution of, and trade and commerce in, certain commodities". This Act defines 'essential commodity' in Section 2(a)(v) to be any "foodstuffs, including edible oilseeds and oils".

By clause (b), "food-crops" is defined to include crops of sugarcane. By clause (xi), the definition of 'essential commodity' extends to any other class of commodity which the Central Government may declare to be an essential commodity for the purpose of the Act, being a commodity with respect to which Parliament has power to make laws by virtue of Entry 33 in List III in the Seventh Schedule to the Constitution. Section 3(1) empowers the Central Government, if necessary or expedient to do so "for maintaining or increasing the supplies of any essential commodity or for securing their equitable distribution and availability at fair prices", by an order to provide "for regulating or prohibiting the production, supply and distribution thereof and trade and commerce therein. " Under clause (c) of sub-section (2) of Section 3, such an order may provide for controlling the price at which essential commodity may be bought or sold.

In exercise of the powers conferred by Section 3 of the Essential Commodities Act, the Central Government ;iromulgated on 27th August 1955, the Sugar Control Order, 1955 and the Sugarcane Control Order, 1955. Clause 3(a) of the Sugarcane Control Order, 1955 empowers the Central Government, after consultation with appropriate authorities, to fix in respect of any area 'the price or the minimum price' to be paid by a producer of sugar for sugarcane purchased by him in that area. It also empowers fixation of different prices for different areas or different qualities of sugarcane or on the basis of recovery of sugar from sugarcane having regard to various factors enumerated therein. Clause 3(2) provides that no person shall sell or agree to sell sugarcane to a producer of sugar or factory and no producer or factory shall purchase or agree to purchase sugarcane at a price lower than that notified under this clause.

Clause (4) empowers the Central Government to prohibit or restrict or otherwise regulate the export of sugarcane from any area for supply to different factories and also to direct that no gur or sugar shall be manufactured from sugarcane except under and in accordance with the conditions specified in a licence issued in this behalf. Clause (5) requires every producer or factory to comply with the directions made under the order. By clause (7) of this order, the Sugar and Gur Control Order, 1950 was repealed. On 16. 7. 1966, the Central Government notified the Sugarcane (Control) Order, 1966. Clause 2(g) defines 'price' to mean the price or the minimum price fixed by the Central Government, from time to time, for sugarcane delivered, inter alia, to a sugar factory.

Clauses 3 and 3-A bear reproduction and read thus :- Clause 3 : Minimum price ofsugarcane payable by producer ofsugar- (l) The Central Government may, after consultation with such authorities, bodies or associations as it may deem fit, by notification in the official Gazette, from time to time, fix the minimum price of sugarcane to be paid by producers of sugar or their agents for the sugarcane purchased by them, having regard to - (a) the cost of production of sugarcane; (b) the return to the grower from alternative crops and the general trend of prices of agricultural commodities; (c) the availability of sugar to the consumer at a fair price; lJ. P. CO-OP. CANE UNION FEDERATION v. WEST U. P. SUGAR MILL ASSON. [SRIKR! SHNA, J.

] 313 (d) the price at which sugar produced from sugarcane is sold by producers of sugar; and (e) the recovery of sugar from sugarcane : [Provided that the Central Government or, with the approval of the Central Government, the State Government, may, in such circumstances and subject to such conditions as specified in Clause 3-A, allow a suitable rebate in the price so fixed. ] Explanation - (1) Different prices may be fixed for different areas or different qualities or varieties of sugarcane. (2) No person shall sell or agree to sell sugarcane to a producer of sugar or his agent, and no such producer or·agent shall purchase or agree to purchase sugarcane, at a price lower than that fixed under sub-clause (1).

(3) Where a producer ofsugar purchases any sugarcane from a grower of sugarcane or from a Sugarcane-grower's Co-operative Society, the producer shall, unless there is an agreement in writing to the contrary between the parties, pay within fourteen days from the date of delivery of the sugarcane to the seller or tender to him the price of the cane sold at the rate agreed to between the producer and the sugarcane-grower or Sugarcane-growers' Co-operative Society or that fixed under sub-clause (I), as the case may be, either at the gate of the factory or at the cane collection centre or transfer or deposit the necessary amount in the bank account oftne seller or the co-operative society, as the case may be. [Subs. by G. S. R. 945, dated 18. 5. 1968]. (3-A) Where a producer ofsugar or his agent fails to make payment for the sugarcane purchased within 14 days .

ofthe date oidelivery, he shall pay interest on the amount due at the rate of 15 per c~nt per annum for the period of such delay beyond 14 days. Where__payment of interest on delayed payment is made to a cane-growers' society, the sociefy$tym . pass on the interest to the cane-growers concerned after deducting adivinlstrative charges, if any, permitted by the rules of the said society. [Ins. by G. S. R. 62(E) dated 2. 2. 1978]. (4) Where sugarcane is purchased through an agent, the producer or the agent shall pay or tender payment uf such price within the period and in the manner aforesaid and if neither of them has so paid or tendered payment, each ofthem shall be deemed to have contravened the provisions of this clause. (5) At the time of payment at the gate of the factory or at the cane collection centre, receipts, if any, given by the purchaser, shall be surrendered by the cane-grower or co-operative society.

(6) Where payment has been made by transfer or deposit of the amount to the bank account ofthe seller or the co-operative society as the case may be, the receipt given by the purchaser, if any, to the grower or the co-operative society if not returned to the purchaser, shall become invalid. (7) In case, the price of the sugarcane remains unpaid on the last day ofthe sugar year in which cane supply was made to the factory on P/ .. mnt of the suppliers of cane not coming forward with their claims therefore or for any other reason, it shall be deposited by the producer of sugar with the Collector of the district in which the factory is situated, within three months of the close of the sugar year. The Collector shall pay, out of the amount so deposited, all claims, considered payable by him and preferred before him within three years of the close of the sugar year in which the cane was supplied to the factory.

The amount still remaining undisbursed with the Collector, after meeting the claims from the suppliers, shall be credited by him to the Consolidated Fund of the State, immediately after the expiry ofthe time limit of3 years within which claims therefore could be preferred by the suppliers. The State Government shall, as far as possible, utilise such amounts, for development of sugarcane in the State. Clause 3-A : Rebate that can be deductedfrom the price paidfor sugarcane - A producer of sugar or his agent shall pay, for the sugarcane purchased by him, to the sugarcane-grower or the sugarcane-growers' co-operative society, either the minimum price of sugarcane fixed under Clause 3, or the price agreed to between the producer or his agent and the sugarcanegrower or the sugarcane-growers' co-operative society, as the case may be U. P. CO. OP. CANE UNION FEDERATION v. WEST U. P. SUGAR MILL ASSON. [SRIKRISHNA, l. ] 3J5 (hereinafter referred to as the agreed price).......... [Subs. by G. S.

R. 815(E) dated 24. 9. 1976) Clause 4 empowers the Central Government 'or·a State Government, with the concurrence ofthe Central Government', to fix the minimum price or the price of sugarcane to be paid by producers of the khandsari sugar for the sugarcane purchased by them with the proviso that the minimum price or the price ofsugarcane so fixed shall not exceed the minimum price of sugarcane fixed by producers of sugar in the region with a further proviso that no person shall sell or agree to sell sugarcane to a producer of khandsari sugar or his agent, and no such producer . or his agent shall purchase or agree to purchase sugarcane, 'at a price lower than that fixed under clause (4)'.

Clause 5-A provides that where a producer of sugar purchases sugarcane, from a sugarcane-grower during each sugar year, he shall be liable to pay, in addition to the minimum sugarcane price fixed under Clause 3, an additional price, if found due in accordance with the formula enumerated in Second Schedule to the Order. Under sub-clause (2) of Clause 5-A, an appropriate authority may be authorised to determine the additional price payable under sub-clause (I) who shall intimate the same in writing to the producer of sugar and the sugarcane-grower. Under sub-clause (4), the manner of payment of the additional price may be prescribed as directed by the Central Government or the State Government, from time to time.

Under sub-clause (5), no additional price determined under subclause (2) or sub-clause (3) is required to be paid by a producer of sugar who pays a price higher than the minimum price fixed under Clause 3 to the sugarcane-grower, provided that, "the price so paid is not less than the total price comprising the minimum sugarcane price fixed under Clause 3 and the additional price detennined under sub-clause (2) or sub-clause (3). " Under sub-clause (6), it is provided that any extra price paid by the producer of sugar to the sugarcane-grower over and above the minimum sugarcane price fixed under Clause 3, shall be adjusted against the additional sugarcane price determined under sub-clause (2) or sub-clause (3) and the balance, if any, shall be paid to the sugarcane-grower. Sub-clause (7) provides that, additional price shall be payable to the sugarcane-grower if he, in performance of his agreement with a producer of sugar, has supplied not less than 85% of the sugarcane so agreed.

Clause 6 empowers the Central Government to: (i) reserve areas where sugarcane is grown to determine the quantity of sugarcane which a factory will require for crushing during any year; (ii) to fix, with respect to any specified sugarcane-grower or sugarcane-growers generally in a· reserved area, the quantity or percentage of sugarcane which he by himself or as a member of a co-operative society of suga,.

cane-growers operating in such area, shall supply to the factory concerned; (iii) direct a sugarcanegrower or a sugarcane-growers' co-operative society, supplying sugarcane to a factory, and the factory concerned, to enter into an agreement to supply or purchase the quantity of sugarcane fixed; (iv) direct that no gur or khandsari sugar shall be manufactured from sugarcane except in accordance with the conditions specified in the licence; and (v) "prohibit or restrict or otherwise regulate" the export of sugarcane from any area (including a reserved area) except under and in accordance with a permit issued in his behalf. Sub-clause (2) makes it obligatory on every sugarcane-grower, Sugarcane-growers' Co-operative Society and factory, to whom an order is issued under sub-clause (1), to supply or purchase the quantity of sugarcane covered by the agreement entered into.

Any wilful failure on the part ofthe sugarcane-grower, sugarcane-growers' co-operative society and factory to do so, is constituted a breach of the provisions of the Order. Under Clause 11, the powers under the Order shall, subject to specified conditions, be exercisable also by an officer or authority of the Central Government and the State Government or any officer or authority of the State Government. As a matter of practice, it has been found that in the States such as U. P. , A. P. , Bihar, Tamil Nadu and Haryana, the State Governments have been pressurising the sugar producers to enter into agreements for payment of purchase price of sugarcane at a rate higher than that decided under the U. P. CO·OP. CANE UNION FED~RATION ,.. WESTU. P. SUGAR MILL ASSON. [SRIKRISHNA, J. ] 317 Sugarcane (Control) Order, 1966.

In the case of Tamil Nadu, it has been "frankly conceded that there is no statutory basis and that the State Advised Price was merely an executive act intended to resolve a dispute between the contending parties. As far as the States ofU. P. , Haryana and Bihar are concerned, counsel for the respective States and the sugarcane suppliers contend that the State is fully empowered under the State Legislation to fix a price. for sale/purchase of sugarcane to sugar producers as 'remunerative price' which would take into account several local factors. This price is popularly described as 'State Advised Price' (SAP) and arrived at by calling for a meeting at the highest level, and after hearing the representatives of the contending parties. In order to appreciate the contentions urged at the bar, I would take up the cases arising under the U. P. Sugarcane Act, 1953. Mr. Shanti Bhushan, learned Senior Counsel appearing on behalf of the West U. P.

Sugar Mills Association (the association of sugar producers), questioned the power of the State Government under the U. P. Sugarcane Act, 1953 and the subordinate legislation made thereunder to fix any price for sale of sugarcane by the sugarcane-growers to the sugarcane factories. Before we attempt a detailed analysis of the provisions of the Acts, Rules and Or. ders, we strrightaway notice that in none ofthem is there any reference to the so-called 'State Advised Price', which appears to be a term coined for convenience, either. by the State Government, or by the parties, and popularised by usage. Even if such an expression is to be found absent in the concerned legislations, the question is whether there is a statutory basis for the 'State Advised Price'. The U. P.

Sugarcane Act, 1953, as its preamble indicates, is "an Act to regulate the supply and purchase of sugarcane required for us~ in sugar factories and Gur, Rab or Khandsari Sugar Manufacturing Units and other connected matters'. Chapter II ofthis Act establishes certain administrative machinery called 'the Sugarcane Board and the Development Council'. The functions ofthe Sugarcane Board are indicated in Section 4 and pertain to advising the State Government on the following matters :- (a) matters pertaining to the regulation ofsupply and purchase ofcane for sugar factories; (b) the varieties of cane which are suitable or unsuitable for use in sugar factories; (c) the maintenance ofhealthy relations between occupiers or managers offactories, cane-growers, Cane-growers' Constitution-operative Societies, Cane Development Council; and (d) such other matters as may be prescribed.

The functions of the Development Council are indicated in Section 6(1) as unde~ :- (a) to consider and approve the programme of development for the zone; (b) to devise ways and means for the execution of the development plan in all its essentials such as. cane varieties, cane seed, sowing programme, fertilizers and manures; (c) to undertake the development of irrigation and other agricultural facilities in the zone; (d) to take necessary steps for the prevention and control of diseases and pests and to render all possible help in the soil extension work; (e) to impart technical training to cultivators in matters relating to the production of cane; (t) to administer the funds at its disposal for the execution of the development scheme subject to the general or special directions ofthe Cane Commissioner; and (g) to perform other prescribed functions pertaining and conducive to the general development of the zone. U. P. CO·OP. CANE UNION FEDERATION v. WESTU. P. SUGAR MILL ASSON.

[SRIKRISHNA, J. ] 319 Chapter ! II which deals with "Supply and Purchase ofCane" contains the fasciculus of Sections 12 to 19. Under Section 12, an officer known as Cane Commissioner makes estimates of requirements of the quantity of cane, which will be required by any factory after getting appropriate infonnation from the factory. Sections 13 and 14 deal with the manner of keeping information as to the cane-growers and Cane-growers' Co- B' operative Society by registers and by surveys carried out by the State Government. Section 15 empowers the Cane Commissioner to reserve and assign any area for the purposes of supply of cane to a factory in accordance with the provisions of Section 16 during one or more crushing seasons as may be specified. It also empowers him to cancel such order or alter the boundaries of the area so reserved or assigned. Under subsection (2) of Section 15, where any area has been declared as .

reserved area for a factory, the occupier of such factory shall, if so directed by the Cane Commissioner, purchase all the cane grown in that area, 'which is offered for sale to the factory'. According to sub-section (3), where any area has been declared as assigned area for a factory, the occupier of such factory 'shall purchase such quantity ofcane grown in that area and offered for sale to the factory' as may be determined by the Cane Commissioner. There is an appeal provided to the State Government against the order of the Cane Commissioner passed under sub-section (I). Then comes Section 16 on which most of the addressed arguments turn. It reads thus :- "16. Regulation ofpurchase and supply of cane in the reserved and assigned areas - (I) The State Government may, for maintaining supplies, by order, regulate - (a) the distribution, sale or purchase of any cane in any reserved or assigned area; and (b) purchase of cane in any area other than a reserved or assigned area.

(2) Without prejudice to the generality of the foregoing powers such order may provide for - (a) the quantity ofcane to be supplied by each cane-grower or Cane-growers' Co-operative Society in s_uch area to the factory for which the area has so been reserved or assigned; (b) the manner in which cane grown in the reserved area of the assigned area, shall be purchased by the factory for which the area has been so reserved or assigned and the circumstance in which the cane grown by a canegrower shall not be purchased except through Canegrowers' Co-operative Society; (c) the form and the terms and conditions ofthe agreement to be executed by the occupier or manager of the factory for which an area is reserved or assigned for the purchase of cane offered for sale; (d) the circumstances under which permission may be granted - (i) for the purchase of cane grown in reserved or assigned area by a Gur, Rab or Khandsari Manufacturing Unit or any person or factory other than the factory for which area has been reserved or assigned, and (ii) for the sale of cane grown in a reserved or assigned area to a Gur, Rab or Khandsari Manufacturing Unit or any person or factory other than the factory for which the area is reserved or assigned; (e) such incidental and consequential matters as may appear to be necessary or desirable for this purpose.

" The contention assiduously canvassed by the State Governments and the counsel for the cane-growers is that the power ofthe State Government under Section 16 is a wide power intended for maintenance of supplies U. P. CO-OP. CANE UNION FEOERATION v WEST U. P. SUGAR MILL ASSON. [SRIKRISHNA, J. J 321 empowering the State Government by order to 'regulate, inter alia, the distribution, sale or purchase of any cane in any reserved or assigned area'. The contention is that the power to regulate a sale or a purchase of cane in a reserved or assigned area would necessarily take within its scope the power to fix the price at which such sale or purchase can be effected. The contention is sought to be buttressed by highlighting that the object of reservation of sugarcane area is to ensure that there is no interruption to the supply of sugarcane leading to disruption of the production ofsugar, which has been declared to be an essential commodity.

Unlike other raw-materials, sugarcane needs to be grown for a specific period and harvested at a specific time to maintain its sugar content so that it will yield the maximum sugar when crushed. This determines the imperative necessity for continuous supply of sugarcane to the sugar factories depending on their crushing capacity and crushing program. It is contended that the economy of the U. P. State and its revenues depend, to a very great extent, on the crushing of sugarcane and production of sugar. Molasses, which is the bye-product, is utilised by distilleries for manufacturing rectified spirit, which in tum is used for the manufacture ofpotable liquor and other chemical products. It is also urged that crushing of sugarcane results in the bye-product of bagasse, which is used as fuel or by paper mills.

Hence, the counsel contended that, in view ofthe crucial importance of timely supply and crushing of sugarcane, the 1953 Act has conferred upon the State Government the power of regulation of sale and purchase of sugarcane under Section 16 and the power under Section 17 to ensure speedy payment of cane price. This power the Government exercises by calling for a tripartite meeting wherein conflicting points of view are put forward and ultimately a decision is arrived at as to what should be the higher price payable which is termed as the 'State Advised Cane Price'. It is contended, that this power of the State Government to fix a price higher than the minimum price fixed by the Central Government is discernible in the State's power to 'regulate the sale and purchase of sugarcane' with a view to maintaining supplies.

It is also contended that the word 'regulate' has been held to be a very wide power even empowering fixation ofroyalty, higher tariff for electricity, fixing rates for cinema and so on as evidenced in the following judgments :- I. Adoni Cotton Mills Ltd. & Ors. v. A. P. State Electricity Board & Ors. , (1976] 4 SCC 68 [para 7] 2. State of Tamil Nadu v. Mis. Hind Stone & Ors. , (1981] 2 sec 205 [para 1OJ 3. K. Ramanathan v. State of Tamil Nadu & Anr. , (1985J 2 SCC 116 (paras 11, 15, 18-20 & 23J 4. D. K. Trivedi & Sons and Ors. v. State of Gujarat & Ors. , [I986] (Supp) SCC 20 (paras 30 & 31 J 5. Jiyajeerao Cotton Mills Ltd. & Anr. v. MP. Electricity Board & Anr. , (1989J Supp (2) SCC 52 [para 32] 6. Deepak Theatre, Dhuri v. State of Punjab & Ors. , (1992] Supp I sec 684 [paras 3-1OJ 7. Quarry Owners' Association v. State of Bihar & Ors.

, (2000J 8 sec 655 (paras 25, 26, 31 & 61(c)J Counsel for the sugarcane-growers' and the State also contended that the expression 'regulate' is used in Section 16 in the context ofmaintaining supplies and "sale or purchase".. The expression 'sale or purchase' would necessarily include all aspects or ingredients ofsale as it cannot be gainsaid that price is certainly an important ingredient of sale. The provisions of the Sale of Goods Act, Contract Act, Transfer of Property Act, Article 366(29) ofthe Constitution ofIndia and a number ofauthorities were relied upon to contend that price is an essential ingredient of sale and that the State could regulate it That the power to regulate production, supply and distribution of a commodity may, in an appropriate context, be wide enough to include the power to fix the price, is incontestable.

However, the background against and the context in which the power of regulation has been given and the scheme of the Statute determine the content of such power. The counsel for the sugar factories urge that the background, context and evolution of the Statute belie such a construction. From the Sugarcane Act of 1934 U. P. CO·OP. CANE UNI. ON FEDERATION v. WEST U. P. SUGAR MILL ASSON. [SRIKRISHNA, J. ] 323 down to the U. P. Sugarcane Act, 1953, it would appear that after 1938 there has been a distinct shift and the power of price fixation of sugarcane was taken over by the Central Government for larger reasons of policy. They point out that in Ch. Tika Ramji & Ors. Etc. v. The State ofUttar Pradesh & Ors. , (1956] SCR 393, the very Act, namely, the U. P. Sugarcane Act, 1953, was challenged as unconstitutional on several grounds including the ground that it was inconsistent with the provisions of the Essential Commodities Act, 1955.

After elaborate consideration of the legislative history of the Act and an analytical contrast of the provisions of the Essential Commodities Act with the U. P. Sugarcane Act, 1953, the Constitution Bench ofthis Court came to the specific finding that the power to fix minimum price of sugarcane, which existed under the U. P. Act I of 1938 had been deleted from the U. P. Sugarcane Act, 1953 since it was being exercised by the Centre under Clause 3 of the Sugar and Gur (Control) Order, 1950. In fact, the Constitution Bench ofthis Court in Ch. Tika Ramji's case (supra) came to the conclusion that there was no repugnancy between the Essential Commodities Act, 1955 and the U. P. Sugarcane Act, 1953 as they operated in different spheres, there being no conflict or overlapping in the matter ofprice fixation. Counsel rely heavily on the following observations from Ch.

Tika Ramji 's case (supra) :- (a) "Even the power reserved to the State Government to fix minimum prices of sugarcane under Chapter V of the U. P. Act of I of 1938 was deleted from the impugned Act the same being exercised by the Centre under clause 3 of Sugar and Gur Control Order, I950, issued by it in exercise ofthe powers conferred under Section 3 of Act. XXIV of 1946. The prices fixed by the Centre were adopted by the State Government and the only thing which the State Government required under rule 94 was that the occupier of a factory or the purchasing agent should cause to be put up at each purchasing centre a notice showing the minimum price of cane fixed by the Government meaning thereby the Centre.

The State Government also incorporated these prices which were notified by the Centre from time to time in the forms ofthe agreements which were to be entered between the cane growers, the cane-growers' co-operative societies, the factories and their purchasing agents for the supply and purchase of sugarcane as provided in the U. P. Sugarcane Supply and Purc~ase Order, 1954. The only provision which was retained by the State Government in the impugned Act for the protection of the sugarcane growers was that contained in Section 17 whlch provided for the payment of price of sugarcane by the occupier of a factory to the sugarcane grower~. It could be recovered from such occupier as if it ~e an arrear of land revenue.

This comparison goes to show that the impugned Act merely confined itselfto the regulatinn ofthe supply and purchase ofsugarcane required for use in sugar factories and did not concern itself at all with the controlling or licensing ofthe sugar factories, with the production or manufacture of sugar or with the trade and commerce in, and the production, supply and distribution of, sugar. If that was so, there was no question whatever of its trenching upon the jurisdiction of the Centre in regard to sugar industry which was a controlled industry within Entry 52 ofList I and the U. P. Legislature had jurisdiction to enact the law with regard to sugarcane and had legislative competence to enact the impugned Act. " (pp. 422-423) (b) "....... the only question which remained to be considered was whether there was any repugnancy between the provisions ofthe Central legislation and the U. P. State legislation in this behalf. As we have noted above, the U. P.

State Government did not at all provide for the fixation of minimum prices for sugarcane nor did it provide for the regulation of movement of sugarcane as was done by the Central Government in clauses (3) and (4) of the Sugarcane Control Order, 1955. The impugned Act did not make any provision for the same and the only provision in regard to the price of sugarcane which was to be found in the U. P. Sugarcane Rules, 1954, was contained in Rule 94 which provided that a notice of suitable size in clear bold lines showing the minimum price of cane fixed by the Government and the rates at which the cane is being purchased by the centre was to be put up by U. P. CO-OP. CANE UNION FEDERATION v. WEST U. P. SUGAR MILL ASSON. [SRIKRISHNA, J. ] 325 an occupier of a factory or the purchasing agent as the c~l]\ may be at each purchasing centre. The price of cane fi~~d by Government here only meant the price fixed by the appropriate Government which wo!

:lld be the Central Government, under clause 3 ofthe Sugarcane Control Order, 1955, because in fact the U. P. State Government never fixed the price ofsugarcane to be purchased by the factories. Even the provisions in behalf of the agreements contained in clauses 3 and 4 ofthe U. P. Sugarcane Regulation of Supply and Purchase Order, 1954, provided that the price was to be the minimum price to be notified by the Government subject to such deductions, if any, as may be notified by the Government from time to time meaning thereby the Central Government, the State Government not having made any provision in that behalfat any time whatever. The provisions thus made by the Sugarcane Control Order, 1955, did not find their place either in the impugned Act or the Rules made thereunder or the U. P.

Sugarcane Regulation of Supply and Purchase Order, 1954, and the provision contained in Section 17 of the impugned Act in regard to the payment of sugarcane price and recovery thereof as if it was an arrear of land revenue did not find its place in the Sugarcane Control Order, 1955. These provisions, therefore, were mutually exclusive and did not impinge upon each other there being thus no trenching upon the field ofone Legislature by the other. " (vide 433-434) (c) "Suffice it to say that none of these provisions do overlap, the Centre being silent with regard to some ofthe provisions which have been enacted by the State and the State being silent with regard to some ofthe provisions which have been enacted by the Centre. There is no repugnancy whatever between these provisions and the impugned Act and the Rules framed thereunder as also the U. P. Sugarcane Regulation of Supply and Purchase Order, 1954 do not trench upon the field covered by Act X of 1955.

There being no repugnancy at all, therefore, no question arises of the operation of Article 254(2) of the Constitution and no provision ofthe impugned Act and the Rules made thereunder is invalidated by any provision contained in Act LXV of 1951 as amended by Act XXVI of 1953 or Act X of 1955 and the Sugarcane Control Order, 1955 issued thereunder. " (p. 435) These observations of the Constitution Bench in Ch. Tika Ramji's case (supra) do support the arguments ofthe respondents-sugar producers. A distinction is sought to be made that Ch. Tika Ramji's case (supra) does not decide the issue as to the content of the regulatory power under the U. P. Sugarcane Act, 1953 and, therefore, these observations are not of any avail. This argument cannot be accepted. The question posed before the Constitution Bench was one of inconsistency between Central Legislation and State Legislation, the State Legislation being the U. P. Sugarcane Act, 1953.

The basis for the decision in Tika Ramji (supra) is that the two operated on separate planes and that the provisions "were mutually exclusive and did not impinge on each other" there being no trenching upon the field ofone legislature by the other. I cannot impute to the Constit:ition Bench an incomplete analysis ofthe provisions ofthe U. P. Sugarcane Act, 1953 when it made these observations. The observations necessarily suggest to me that the full extent of the State's power under the 1953 Act was reckoned with and compared against the power of the Central Government under the Central Legislation after which only the Constitution Bench arrived at its finding that there was no conflict and upheld the constitutional validity of the U. P. Sugarcane Act, 1953. There was no tentativeness or ad hoc1sm in the observations; nor were they made only pro tern. The very Statute (U. P.

Sugarcane Act, 1953) having the subject matter of construction and interpretation by the Constitution Bench, it is not open, for this Bench at least, to take a different view with regard to its construction. The respondents seek to counter these arguments by seeking to read Ch. Tika Ramji's case (supra) in a different manner. According to them, the contrast made by Ch. Tika Ramji 's case (supra) between the Central Legislation and the U. P. State Legislation was not on the general issue of price, but only with regard to 'minimum price' on which, there being no U. P. CO-OP. CANE UNION FEDERATION v. WEST U. P. SUGAR MILL ASSON. [SRIKRISHNA, J. ] 327 provision in the State Act, no conflict was discovered. The counsel for growers contend that Ch. Tika Ramji 's case (supra) had no occasion to examine repugnance from the stand point of higher price, nor was there an examination of the scope of Section 16 of the 1953 Act and the ambit of State's regulatory power in Ch.

Tika Ramji's case (supra). A number ofarguments were addressed to impress upon us that there is no repugnance between the Essential Commodities Act, 1953 read with Sugarcane (Control) Order, 1966 and the U. P. Sugarcane Act, 1953. It was . argued that the Central Act does not occupy the whole gamut ofprice fixing and as the field of 'price' was not fully occupied, leaving plenty of room available for exercise of legislative power by the State. In my view, it is unnecessary to go into this question. Even assuming that the field of price is not fully covered by the Essential Commodities Act, 1955, the question is whether the Statute before us empowers the State government to fix a price of sale/purchase of sugarcane at a price higher than the price fixed under the Sugarcane (Control) Order, 1966? The only legislation upon which the sugarcane-growers' rely is the U. P. Sugarcane Act, 1953.

This very Act was the subject matter of consideration and interpretation by the Constitution Bench of this Court in Ch. Tika Ramji 's case (supra). After comparing this with the provisions of the Essential Commodities Act of 1955 and the Sugarcane (Control) Order, 1966 made thereunder, the Constitution Bench found that the two did not operate on a collision course because the provisions dealt with subjects which are "mutually exclusive and did not impinge on each other" there being no trenching upon the field ofone legislature by the other. Whether the State Legislature has the power at all of fixing a purchase price for sugarcane at a price higher than the minimum price fixed under the Sugarcane (Control) Order, 1966, is question that need not detain me. As and when such an issue arises before some court, it will be considered by the court. For the nonce, I am concerned with the interpretation of Section 16 and 17 of the U. P.

Sugarcane Act, 1953 which must necessarily proceed on the hasis of what has been found in Ch. Tika Ramji 's case (supra) after an examination of its provisions and the Statement of Objects and Reasons appended to the Bill which preceded the said Act of 1953. Two further points of distinction were sought to be drawn as to why the ratio of Ch. Tika Ramji's case (supra) would not apply to the present case. First, that Ch. Tika Ramji 's case (supra) did not have the benefit of . examining the Sugarcane (Control) Order, 1966. Second, that Ch. Tika kamji's case (supra) was only concerned with comparing the power to fix the minimum price and did not concern itself with the power of the State Government to fix any higher price. In my view, these distinctions are purely chimerical. A comparison between the Sugarcane (Control) Order, 1955 and Sugarcane (Control) Order, 1966 brings out the hollowness of the first distinction.

Under the Sugarcane (Control) Order, 1955, clause (1)(2)(c) defined 'price' to mean the price fixed by the Central Government from time to time, for sugarcane delivered at the factory gate. It then empowered the Central Government vide clause (3) to fix in respect of any area 'the price' or 'the minimum price' to be paid for the sale/purchase of sugar. The only change made in the Sugarcane (Control) Order, 1966 is that the expression 'price' has been defined in clause (2)(g) to mean "the price or the minimu. m price fixed by the Central Government from time to time", for sugarcane delivered, inter alia, to a sugar factory. Clause (3) empowers the fixation of minimum price of sugarcane. Sub-clause (2) of clause (3) prohibits the sale/purchase or agreement to sell/purchase sugarcane at a price lower than fixed under sub-clause (I).

Sub-clause (3), however, requires the producer of sugar who purchases sugarcane from a grower, unless there is an agreement in writing to the contrary, to pay within 14 days from the date of delivery of the wgarcane or tender within the same period the price ofthe cane sold "at the rate agreed to between the producer and the sugarcane-grower or Sugarcane-growers' Co-operative Society or that fixed under sub-clause (1 ), as the case may be". Consequently, if the parties have agreed upon a higher price, the Sugarcane (Control) Order, 1966 recognises that and obligates such amount to be paid. This is also recognised by clause (3-A) dealing with the rebate that can be deducted.

Under this clause, the producer of sugar is required to pay "either the minimum price of sugarcane fixed under clause (3) or the price agreed to between the producer or his agent or the sugarcane grower or the Sugarcane-growers' Co-operative Society, as the case may be (hereinafter referred to as 'the agreed price')". In addition, Section 5 and 5-A deal with the additional amount to be paid by the producer of the sugar 'in addition to the minimum sugarcane price fixed under clause (3)'. The distinction that is sought to be drawn, U. P. CO-OP. CANE UNION FEDERATION'· WEST U. P. SUGAR MILL ASSON. [SRIKRISHNA, J. ] 329 therefore, has no basis in my view. The Sugarcane (Control) Order of 1955 A talked only in terms of minimum price and did not deal with additional price.

The Sugarcane (Control) Order, 1966, after enumerating the mechanism for fixation of minimum price, goes on to indicate that, if the 1 parties agree upon it, a rate higher than that minimum rate would become payable and deals with the matter of enforcement of such payment, B calculation of the rebate, under clause (3-A), set-off available of the additional amounts against advances and such other issues. I am, therefore; unable to accept the first distinction made for and I think that the observations in Ch. Tika Ramji 's case (supra), though made in the context of Sugarcane (Control) Order, 1955, are equally applicable C in the context of the Sugarcane (Control) Order, 1966. Now to the second distinction. Ch. Tika Ramji 's case (supra) was considering the conflict between the provisions of the Central Legislation, namely, the Essential Commodities Act, 1955 and the U. P. Sugarcane Act, 1953.

Under Section 3 of the Essential Commodities Act, 1955, the Central Government is D specifically empowered, inter alia, to 'regulate' the production supply and distribution ofthe essential commodity or trade and commerce therein and also may provide for controlling the 'price' at which the essential commodity may be bought or sold. The power to 'control the price' is of the widest amplitude and takes into its fold the power to fix the minimum E price, the fair price, the remunerative price or even the maximum price. It was this power which was contrasted with the power of the State Government under the U. P. Sugarcane Act, 1953. After making such a contrast, Ch. Tika Ramji 's case (supra) came to the specific conclusion that the State Act did not, in any way, impinge upon the area covered by the F Central Act as the provisions of the two Acts are "mutually exclusive and did not impinge on each other" there being no trenching upon the field of one legislature by the other.

While contrasting this power of the Central Government and its exercise under the Sugarcane (Control) Order, 1955, as against the powers of the State Government under the provisions of the '. , U. P. Sugarcane Act, 1953, Ch. Tika Ramji's case (supra) discerned no G power for price fixation in the State Government under the provisions of 1953 Act and that is why its constitutional validity was upheld. In fact, when Ch. Tika Ramji's case (supra) fails to discover any provision in the State Legislation for minimum price fixation with regard to sale/purchase of sugarcane, and upholds its constitutional validity on that very ground, H 330 SUPRCME COURT REPORTS [2004] SUPP. 2 S. C. R. it would be futile to attempt to discover in the State Act a power to fix a price higher than the minimum price.

Another interesting contention advanced on behalf of the sugarcanegrowers' is that there is a distinction between 'minimum price' fixed, which is exclusively within the province ofthe Central Government under the provisions of the Essential Commodities Act, 1955 and what the State seeks to fix is 'fair price' or 'remunerative price'. It is contended that the two are not repugnant, there being no conflict between the Centre's power to fix 'minimum price' and the State's power to fix the 'remunerative price' or the 'fair price'. In my view, the question is not one of repugnancy. The question is one of tracing the source of the power, if, at all, it exists. By merely calling it 'fair price' or 'remunerative price', one cannot wish away the consequences of non-payment thereof. The coasequence of not paying the minimum price is penal liability incurred under the provisions of the Essential Commodities Act, 1955 read with the Sugarcane (Control) Order, 1966.

I see no corresponding legislative provision for non-payment of the so-called 'fair price' or 'remunerative price' under the U. P. Act of 1953. Even assuming that such a power of higher price fixation exists, the power can only be adjudicatory in nature. The minimum price is the price which when fixed has to be paid by all purchasers ofcane. Anything higher than that would require adjudication of rival claims for which I see no machinery under the U. P. Sugarcane Act of 1953 or under the delegated legislation made thereunder. There are also no guidelines indicated in the 1953 Act as to the basis on which the so-called fair price, rem11nerative price or State Advised Price is to be arrived at. To fix the State Advised Price much above the centrally fixed minimum price, and that too by an executive fiat, may render the constitutionality of such power open to challenge as arbitrary and hit by Article 14 of the Constitution.

Looked at from the practical point of view, if the contention of the cane-growers is accepted, what is payable in the State would, in reality, be the minimum price payable for sugarcane. Calling it as the 'fair price' or 'remunerative price' would merely be a matter of semantics and not substance. An illustration from the field of industrial adjudication may be considered. A minimum wage is payable under the Minimum Wages Act, 1948. All industries are required to pay this; or else, they have no right U. P. CO-OP. CANE UNION FEDERATION v. WEST U. P. SUGAR MILL ASSON. [SR! KR! SHNA, !. ] 331 to exist and must necessarily close down [See in this connection Messrs. Crown Aluminium Works v. Their Workmen]. Employers are not precluded from voluntarily paying wages higher than minimum wages to the workmen.

However, if the workmen want to enforce a fair wage, a rate ofwage higher than the minimum wage, it can only be done by an elaborate process ofadjudication envisaged under the Industrial Disputes Act, I947. It is only by such an award adjudicated by that process which can fix rate higher than the minimum rate of wages. In my view, this principle would equally apply to a situation of fixing of the fair price for purchase of cane. I see no adjudicatory machinery, nor guidelines, under the U. P. Sugarcane Act of 1953 for doing it. Except the bald reference to 'regulation of sale and purchase of cane', there is nothing else therein to indicate the mode, conditions under which, or the guidelines subject to which such an exercise of fixing the fair price can be exercised, and that too by a mere executive fiat.

I find it extremely difficult to infer such a power of fixation of price higher than the minimum price in a Statute which is utterly bereft of any adjudicatory mechanism or guidelines, particularly when the subordinate legislation is replete with references to the 'minimum price fixed by the Government', which too was interpreted by Ch. Tika Ramji 's case (supra) as the 'minimum price fixed by the Central Government'. I am, therefore, unable to accept this argument. Based on the doctrine of contemporanea expositio, counsel for the sugarcane-growers' attempted to read the State's power by reference to some provisions of the subordinate legislation made under the U. P. Sugarcane Act, 1953. Clause 3 of the U. P. Sugarcane Order, 1956 was referred to.

Under this clause, the occupier of a factory is required to estimate by 3 lst of October every year the quantity of cane which each grower enrolled is required to offer in Form A to supply cane grown in the reserved area to the occupier of the factory. Correspondingly, the occupier of the factory, for which the area has been reserved, is required within 14 days of the receipt of the offer to enter into an agreement in Form B or Form C of the Appendix, with tlie cane-grower or the Cane-growers' Co-operative Society. A reference to Form B and Form C indicate that what is contemplated therein is only an agreement by the first party cane-grower to sell cane to the second party 'at the minimum price notified by Government subject to deductions, if any, . as may be notified by the Government from time to time'. There is hardly anything in this which supports the contention advanced. Thus, it would appear that the U. P.

Sugarcane Order, 1954 did not contemplate anything more than the minimum price fixed by the Government to be stipulated in the form of a statutory contract. In the U. P. Sugarcane Rules, 1954, Chapter IX deals with payments. The only reference made in the Rules to the price, as indicated in Ch. Tika Ramji 's case (supra), is in Rule 94. Rule 94(b) requires a notice to be put up by the occupier ofa factory in suitable size in clear bold letters showing the 'minimum price' of cane fixed by the Government and the rates at which cane is being purchased at the centre. It is not the 'cane-growers' case before us that the State Government ever fixes the 'minimum price'. As observed in Ch. Tika Ramji's case (supra), the reference here is obviously is to the minimum price ofcane fixed by the Central Government. The reference to the rates at which the cane is purchased in a particular factory could be conceivably to the agreed price between the cane-grower and the producer of sugar.

There is no doubt that the provisions of the Sugarcane (Control) Order, 1966, the U. P. Sugarcane Act, 1953 and the subordinate legislation thereto permit the sugarcane-grower and the sugar producer to agree upon a price at a rate higher than the rate fixed by the Central Government statutorily. What may be permissible consensually between the parties does not empower the State to fix a price higher than the statutory minimum price on pain of sanction for disobedience. It is contended for the cane-growers that the Sugarcane (Control) Order, 1966 itself recognises that the parties may, by an agreement, pay a rate higher than that fixed by the Central Government and, ifthere is such an agreement, the agreed rate would be substituted for the minimum rate fixed by the Central Government; such an agreement need not be evidenced by any writing as it car. be an ora!

agreement also, since oral agreements are permitted under Section I0 of the Indian Contract Act, 1872 in the absence of a law to the contrary. Such oral agreements are also capable of enforcement as much as an agreement in writing. Section 16(2)(c) of the U. P. Sugarcane Act, 1953 confers powers to prescribe forms and terms U. P. CO-OP. CANE UNION FEDERATION v. WEST U. P. SUGAR MILL ASSON. [SRIKRISHNA, J. ] 333 ofthe agreement to be executed by the occupier or manager of the factory for purchase of sugarcane. Chapter IX of the Rules prescribed thereunder deals with payment of cane price and issuance of parchas. By reason of the Rules and the U. P. Sugarcane Order, 1954, vide clause 3(3) requiring agreements to be entered into by prescribed forms, requisition, slips/ parchas are issued which would indicate the cane price, total quantity of cane supplied and the total amount payable.

Once such a parcha has been issued indicating the quantity of cane supplied, the rate at which the cane is supplied and the total amount payable, the agreed rate indicated becomes payable in lieu of the minimum rate fixed by the Central Government and would have the same legal efficacy as the minimum rate fixed by the Central Government. That there is sufficient leeway for consensual payment ofa rate higher than the minimum rate is beyond doubt. If such a rate has been agreed upon, orally or in writing, then that higher rate substitutes itself in the place ofthe minimum rate fixed by the Central Government. The question before us is not as to what can be consensually done. The question is, in the absence ofconsensus, does the State have the power under the 1953 Statute concerned to determine a higher rate than the minimum rate as the rate payable for the cane supplied?

I am afraid, the argument begs the question and does not indicate the manner in which such a power, if it exists, can be discovered, It is not necessary for me to notice or discuss in detail the authorities relied upon by the parties to show that there is no conflict between the provisions ofthe U. P. Sugarcane Act, 1953, the provisions ofthe Essential Commodities Act, 1955 and the subordinate legislation thereunder. This exercise has already been done by the Constitution Bench of this Court in Ch. Tika Ramji 's case (supra) and it is only after this exercise was done that the constitutional validity of the Act was upheld. I, therefore, decline to go into the question of 'occupied field', on which much stress has been ~- Another contention urged on behalf of the cane-growers' is that, under Article 162 ofthe Constitution, as expounded by the decision ofthis Court in Rai Sahib Ram Jawaya Kapur & Ors. v.

The State of Punjab, [ 1955] 2 SCR 225, it is open to the State to issue executive orders even ifthere is no legislation in support thereof, provided the State had the power to legislate on the subject in respect ofwhich action is taken. It is contended that the instant legislation falls within Entries 33 and 34 of List III - Concurrent List and, therefore, the State Legislature is fully competent to legislate with reference to these entries. Consequently, the executive is equally empowered to issue an order to the same extent by reason ofArticle 162 of the Constitution. Hence, even if there is no statutory basis for the State Advised Price, it is legal and valid by reason of the exercise of executive powers within the meaning of Article 162. The contention is unsound and cannot be accepted. A Constitution Bench of this Couit in State ofMadhya Pradesh & Anr. v.

Thakur Bharat Singh, [1967] 2 SCR 454, was presented with the same argument and rejected it in the following words :- "In our judgment, this argument involves a grave fallacy. All executive action which operates to the prejudice of any person must have the authority of law to support it, and the terms of Article 358 do not detract from that rule. Article 358 expressly authorises the State to take legislative or executive action provided such action was competent for the State to make or take, but for the provisions contained in Part III ofthe ::onstitution. Article 358 does not purport to invest the State with arbitrary authority to take action to the prejudice of citizens and others".

The observations in Rai Sahib Ram's case (supra) were also explained away in Thakur Bharat Singh 's case (supra) by pointing out that the action taken there did not amount to infraction of the guarantee under Article 19(1)(g) of the Constitution, since no fundamental rights ofthe petitioners were violated by the executive act of the Government done in furtherance oftheir policy of nationalisation of text-books for students. This judgment in effect rejects this contention. It is obvious that fixing of a higher price of sugar, compulsorily payable, is a restriction on the fundamental right guaranteed under Article 19(1 )(g) and cannot be legally done except under a law. Much debate was carried out with regard to realisations made by the States by sale of molasses and bagasse and as to how the fixing of State U. P. CO-OP. CANE UNION FEDERATION v. WEST U. P. SUGAR MILL ASSON. [SRIKRISHNA, J.

] 335 Advised Price by the States at rates higher than the minimum prescribed by the Central Government had resulted in financial loses to the sugar producers. Certain amount o~ data was also placed on record with a view to persuading us to take the particular view which was canvassed. After scrutiny of the data on record, I am of the view that the. data on record is insufficient to draw any conclusions as urged by both sides. In any event, according to me, the discovery of the State's power is a question of law, which turns upon the construction of statute in question, and not upon the consequences that may have flowed from the exercise of such power. If there is such power, then the consequences are justified; conversely, if there is none, the consequences are not justified. It is needless, therefore, to be drawn into this controversy with regard to the economic consequences of the State Advised Price. The construction of the U. P. Sugarcane Act, 1.

953 has to be made against the legislative background. Under Section 3(2) of the Sugarcane Act, 1934, the State Governments were empowered to fix a minimum price or minimum prices for the purchase of sugarcane in a controlled area intended for use in any factory. In Section 21 of the U. P. Act I of 1938, there was a specific power vested with the Provincial Government to fix the minimum price. In respect of any area, the minimum price to be paid by the occupier of the factories or purchasing agents for cane purchased in that area could be determined by a notification issued by the Governor, after consultation with the Board. A contrast with the provisions ofthe U. P. Sugarcane Act, 1953 indicates total absence of such a power to fix a price.

If the 1953 Act intended to grant to the State the power to fix any price - State Advised Price, remunerative price or fair price as is called - the Statute would have in terms indicated it and not left it to guesswork or p inference from the general words used in Sections 16 & 17 of the Act. A reference to the Statement of Objects and Reasons attached to the Bill which was moved supports this construction of the U. P. Sugarcane Act, 1953. Much was urged before us as to whether the fixation ofState Advised Price was merely a populist measure intended to pacify the clamour ofone section of the society, namely, the cane-growers'. Despite the vehemence with which each side presented its view, it appears to me that this debate is wholly unnecessary, and misplaced, in a court of law where the provisions of the Statute have to be construed to ascertain the State's power.

It was contended that the State exercises its powers by taking into account various factors as to what they are and what they ought to be. There is no indication whatsoever of these in the Statute. As far as the Statute is concerned, it lays down no guidelines for exercise ofsuch power, ifany. Against the background of legislative history, and the observations made in Ch. Tika Ram. Ji 's case (supra), I am of the view that it is difficult to discern any such power in the State to fix the State Advised Price, called by whatever name, at a rate higher than the minimum rate fixed by the Central Government, which could be made binding on the parties. Learned counsel for the sugar producers urged that given the Central Legislation on the subject, namely, the Essential Commodities Act, 1955 and the statutory orders made thereunder, the State Government had no legislative power at all to fix the price of sugarcane.

In my view, it is not necessary to consider this larger question or to answer it presently. We are, for the present, concerned with the U. P. Sugarcane Act, 1953. I see no basis for exercise of such power by the State Government in that Statute. As to whether any other suitably worded Statute investing such a power in the State Government would conflict with the Essential Commodities Act, 1953 or not, is not the question that needs to be answered presently. Hence, I refrain from expressing any opinion thereupon. In the judgments in S. K. G. Sugar Ltd. 's case (supra) and Jaora Sugar Mill's case (supra), it was found, as a matter of fact, that there existed valid consensual agreements between the factories and the sugarcane-growers. Hence, it was held that higher price which had been agreed had to be paid by the sugar factories. In the present case before us, it is pointed out that U. P. Sugar Mills Association had written detailed letters to the Government of U. P.

in September 1996 to refrain from fixing any State Advised price which, the Association declared, would not be binding on the sugar mills [see pages 109-116, Vol. II ofC. A. No. 460of1997]. Despite such strong protest, the State Advised Price was announced by the U. P. Government on 15th November 1996. Immediately thereafter, the associations and the factories have filed their writ petitions before the High Court challenging the State Advised Price on 18th November 1996. Consequently, there was no occasion for the State Government to exercise its diplomacy and bring out a consensual price between the parties; nor was there any occasion for the State Government in U. P. to declare a State Advised Price on the basis of consensus. The Division Bench of the Allahabad High Court in the U. P. CO-OP. CANE UNION FEDERATION v. WEST U. P. SUGAR MILL ASSON. [SRIKRISHNA. !. ] 337 judgment impugned in C. A. No.

460 of 1997, while allowing the writ petition, has held that there was no agreement for paying the State Advised Price. The judgment of this Court in Maharashtra Rajya Sahkari Sakkar Karkhana Sangh Ltd. & Ors. v. State ofMaharashtra & Ors. , [1995] Supp. 3 sec 475, is distinguishable, since it was decided on its peculiar facts. The distinguishing feature in that case was that the bye-Jaws under which the co-operative society was formed, empowered the State Government to determine the price for supply of sugarcane to be paid to the members as long as the loans advanced to the co-operative society were not fully paid. It is in exercise ofthe power under this bye-law that the State