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PETITIONER: GUPTA SUGAR WORKS

       Vs.

RESPONDENT: STATE OF U.P. & ORS.

DATE OF JUDGMENT26/10/1987

BENCH: SHETTY, K.J. (J) BENCH: SHETTY, K.J. (J) RAY, B.C. (J)

CITATION:  1987 AIR 2351            1988 SCR  (1) 577  1987 SCC  Supl.  476     JT 1987 (4)   154  1987 SCALE  (2)824  CITATOR INFO :  R          1990 SC1277  (55,57)

ACT:      U.P. Khandsari  Sugar (Levy)  order 1981:  Levy  order- Validity of  Khandsari manufacturers  required to  surrender 50% of  production-Fixation  of  price  for  levy  khandsari sugar-Whether valid-Whether  colourable exercise  of  power. The U.P.  Khandsari  Sugar  (Levy)  order,  1981  issued  in exercise  of   powers  under  section  3  of  the  Essential Commodities  Act,  1955,  required  Khandsari  manufacturing units  to  surrender  levy  of  50%  of  the  production  by sulphitation units  in the  first process.  The balance  50% with the  total production  by subsequent  process was  left free to  be sold  in the  open market  by the  manufacturing units. The  price fixed for the levy Khandsari sugar was Rs. 320 per quintal.

HEADNOTE: %      In a writ petition, the petitioner challenged the price fixation on  the ground;  that the  State Government had not taken into  consideration the  guidelines in-built  in  sub- section 3C  of section  3 of  the Essential Commodities Act, 1955, that  the levy  order was  unreasonable  or  excessive restriction  on  the  fundamental  rights  guaranteed  under Articles 19(1)(g)  and 14  of the Constitution, and that the levy was  a colourable  exercise of  the power  as the State Government sold  the levy  sugar by public auction realising large profit.      Dismissing the Writ Petition, ^      HELD: 1.1  The Court  does not  act  like  a  Chartered Accountant nor acts like an Income-Tax officer. The Court is not concerned  with any  individual case  of any  particular problem.  The   Court  only   examines  whether   the  price determined was with due regard to considerations provided by the  statute,  and  whether  extraneous  matters  have  been excluded from determination. [580D-E]      Union of India v. Cynamide India Ltd. AIR 1987 Sept. SC 180’ at 1805. followed.      1.2 The  primary consideration in the fixation of price

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would be 578 the interest  of consumers  rather than  that of  producers. [581F]      Since the  petitioners in the instant case, are allowed to sell  freely at  any rate they like, the remaining 50% of the Sugar  (after excluding  the 50% which they have to give for levy)  as also  the produce  by  the  second  and  third process, the  loss if any caused to the petitioners would be minimal. [581Gl      New India Sugar Works v. State of Uttar Pradesh & Ors., [1981] 3 SCR 29, relied.      1.3 It  is clear  from the  Preamble, that  the primary object of the Essential Commodities Act, 1955 was to control production,   supply,    and   distribution   of   essential commodities, and  to make  such commodities  available at  a reasonable price.  The exercise  provided under  the Act was intended ultimately  to serve  the interest of consumers. It is fundamental  in the  entire scheme  of the Act. But then, the interest  of the industry as a whole cannot be left out. It is  also required  to be borne in mind. The levy price of sugar should  ensure reasonable return to the industry. That is one  of the  guidelines provided  under sub-section 3C of section 3  of the  Act. But  that does  not  mean  that  the interest  of  producers  should  outweigh  the  interest  of consumers. It  would be tilting the balance too much. [582C- F]      1.4 There is no colourable exercise of power. There was every justification  for the  sale by  public  auction.  The petitioner  and  some  other  producers  delivered  inferior quality of  Khandsari, which was found to be unacceptable to consumers  at   Fair  Price   Shops.  The   State   officers accordingly  reported   to  the   Government,  which  issued instructions to  distribute the levy sugar liberally through permits  for   marriages  and   religious   functions.   The consumers, however,  could not  come forward. The Government then directed  the disposal of levy sugar by public auction. It was not with a view to earn profit, although incidentally the Government  made some profit. The levy sugar was brought to public  sale  only  to  prevent  deterioration  when  the consumers refused to accept it. [583A-C]      The Panipat  Co-operative Sugar mills v. Union of India [197312 SCR  860 and  Anakapalle Coop.  Agrl.  &  Industrial Society Ltd.  v. Union  of India  & Ors.,  [1973] 2 SCR 882, referred to. 579

JUDGMENT:      ORIGINAL JURISDICTION: Writ Petition No. 7993 of 1982.      (Under Article 32 of the Constitution of India).      R.K. Jain and R.P. Singh for the Petitioner.      Prithiviraj and Mrs. Shobha Dikshit for Respondent Nos. 1 and 3 to 5.      Kuldip Singh,  Additional Solicitor  General, Mr.  C.V. Subba Rao and B. Parthasarthy for Respondent No. 2.      The Judgment of the Court was delivered by      JAGANNATHA SHETTY,  J. This is a petition under Article 32 of  the Constitution.  The petitioner  is engaged  in the manufacture of  Khandsari sugar.  The petitioner  challenges the validity  of the U.P. Khandsari Sugar (Levy) order, 1981 ("Levy order").  It was  issued in  exercise of powers under Section 3  of the  Essential Commodities Act, 1955 by virtue of delegation  of power  by  the  Central  Government  under

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Section 5 of the said Act. The levy order requires Khandsari manufacturing  units   to  surrender  levy  of  50%  of  the production by  sulphitation units  in the first process. The balance 50%  of that  process with  the total  production by subsequent processes  was left  free to  be sold in the open market by  the manufacturing  units. The price fixed for the levy Khandsari sugar was Rs. 320 per quintal .      The petitioner  challenges the  price fixation  on  the ground  that   the  State  Government  has  not  taken  into consideration the  guidelines in-built  in sub-section 3C of section 3  of  the  Essential  Commodities  Act,  1955.  The petitioner alleges  that the  levy order  is unreasonable or excessive restriction  on the  fundamental rights guaranteed under Articles  19(1)(g) and  14 of  the Constitution. lt is also the  case of  the petitioner  that the State Government sold the levy sugar by public auction realising large profit and the  levy therefore,  was a  colourable exercise  of the power.      Before considering these contentions, we may start with recent observation  of o.  Chinnappa Reddy,  J. in  Union of India v. Cynamide India Ltd. AIR 1987 Sept. SC 1802 at 1805: . .           "Price fixation  is neither  the function  nor the           forte of  the Court.  We concern ourselves neither           with the  policy nor with the rates. But we do not           totally deny ourselves the jurisdiction to inquire           into the question, in appropriate 580           proceedings, whether  relevant considerations have           gone in  and irrelevant considerations kept out of           the determination  of the  price. For  example, if           the legislature has decreed the pricing policy and           prescribed the  factors  which  should  guide  the           determination of the price, we wilt, if necessary,           inquire into  the question  whether the policy and           the  factors  are  present  to  the  mind  of  the           authorities  specifying   the   price.   But   our           examination  will   stop  there.  We  will  go  no           further. We  will not  deluge ourselves  with more           facts and  figures.  The  assembling  of  the  raw           materials and  the mechanics of the price fixation           are the  concern of  the executive and we leave it           to  them.   And,  we   will  not   revaluate   the           considerations even if the prices are demonstrably           injurious to  some manufacturers or producers. The           Court will,  of course,  examine if  there is  any           hostile discrimination.  That is  a different ’cup           of tea’ altogether."      This will  be  the  parametre  and  the  limitation  of inquiry  by  Courts  whenever  the  price  fixation  of  any essential commodity  is called into question. The Court does not act like a Chartered accountant nor acts like an Income- Tax officer.  The Court is not concerned with any individual case or  any particular  problem. The  Court  only  examines whether  the   price  determined  was  with  due  regard  to considerations  provided   by  the   statute.  And   whether extraneous matters have been excluded from determination.      In the  present case  even this limited inquiry appears to be  unnecessary. The  validity of the same levy order was the subject  matter of  decision of  this Court in New India Sugar Works  v. State  of Uttar Pradesh & Ors. l 1981] 3 SCR 29.      There Fazal Ali, J. who spoke for the Bench observed:           "It was  next strongly  contended that in fixation           of the  price of levy sugar the Government has not

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         taken  into   consideration  the   fact  that  the           petitioners would  undergo a  serious loss because           the price  would not  be sufficient  even to cover           their manufacturing  cost. We are, however, unable           to agree  with this  argument. The policy of price           control has  for  its  dominant  object  equitable           distribution and  availability of the commodity at           fair price  so as  to benefit the consumers. It is           manifest  that   individual   interest,   however,           precious they  may be  must yield  to  the  larger           interest of the 581           community viz.,  in the  instant case,  the  large           body of  the consumers  of sugar. In fact, even if           the petitioners  have to  bear some loss there can           be no  question of the restrictions imposed on the           petitioners being unreasonable. In Shree Meenakshi           Mills  Ltd.  v.  U.O.I.  this  Court  observed  as           follows.                "If fair  price is  to  be  fixed  leaving  a                reasonable margin  of profit,  there is never                any question  of infringment  of  fundamental                right  to   carry  on  business  by  imposing                reasonable restrictions.                     In determining  the reasonableness  of a                restriction imposed  by law  in the  field of                industry, trade  or commerce,  it has  to  be                remembered that  the mere  fact that  some of                those who  are engaged  in these are alleging                loss after  the imposition  of law  will  not                render the law unreasonable."                                         (Emphasis supplied).      Similar view  was taken  by this  Court in  the case of Prag Ice  and oil  Mills &  Anr. v. Union of India [ 1978] 3 SCR 293  where the Court speaking through Beg, C.J. Observed as follows:           "It has  also to  be remembered that the object is           to secure  equitable distribution and availability           at fair  price so  that it  is the interest of the           consumer and  not of  the producer  which  is  the           determining factor in applying any objective tests           at any particular time."      In this  view of  the matter, the primary consideration in the  fixation of price would be the interest of consumers rather than  that of  the producers. Moreover, we think that since the petitioners are allowed to sell freely at any rate they like  the remaining  50% of  the sugar (after excluding the 50%  which they  have to  give for  levy)  as  also  the produce by  the second  and third  process, the  loss if any caused to the petitioners would be minimal.      Mr.  R.K.  Jain  learned  counsel  for  the  petitioner however, urged  that the  above case  did not  lay down  the correct law.  He said  that the primary consideration in the fixation of  price would  not be  the interest of consumers, but to ensure a reasonable return to producers. That H 582 according to  him the law laid down by this Court in (i) The Panipat Co-operative  Sugar Mills v. Union of India [19731 2 SCR 860 and Anakapalle Coop. Agrl. & Industrial Society Ltd. v. Union of India & Ors., [ 1973] 2 SCR 882. Since these two decisions have  not been  referred to in the New India Sugar Works case  we should  refer this case to a larger bench for decision.      We do  not think  that the  counsel is justified in his submission. We  do not  find any diversity of views taken in

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the aforesaid  cases. All  those cases  concerned  with  the price  fixation   of  the   essential  commodity  under  the essential Commodities Act. The primary object of the Act was to  control   the  production  supply  and  distribution  of essential commodities and to make such commodities available at a  reasonable price.  The Preamble  of the  Act makes  it clear. It  reads: "An  Act to provide in the interest of the general public,  for the  control of  the production, supply and distribution  of, and  trade  and  commerce  in  certain commodities."      The  exercise  provided  under  the  Act  was  intended ultimately  to  serve  the  interest  of  consumers.  It  is fundamental in  the entire  scheme of the Act. But then, the interest of  the industry  as a whole cannot be left out. It is also  required to  be borne  in mind.  The levy  price of sugar should  ensure reasonable return to the industry. That is one  of the  guidelines provided  under sub-section 3C of Section 3  of the  Essential Commodities  Act. But that does not mean  that the interest of producers should outweigh the interest of  consumers. It  would be tilting the balance too much. Such  a contention  in our opinion, also runs afoul of our earlier analysis.      It is  true that  there  is  no  express  reference  to Panipat and  Anakapalle in  the judgment  in New India Sugar Works. But  the judgment  need not  be a digest of cases. It need not be written like a thesis. The decision in New India Sugar Works  may be  brief, but  not less predictable on the principles of Panipat and Anakapalle. There this Court found the levy price reasonable even from the point of view of the industry. This  Court took  into consideration  the  liberty reserved to  manufacturers to  sell freely  50% of the Sugar manufactured and  also 100%  of the  produce by  2nd and 3rd processes. This  Court was  of opinion  that by  such a free sale the industry could get reasonable return. We agree with this conclusion and see no reason for reconsideration.      As to  the grievance  of the  petitioner that the State has made 583 profit by  the sale of Khandsari sugar at public auction, we perused the  counter affidavit  of the State. We do not find any colourable  exercise  of  the  power.  There  was  every justification for  the sale  by public  auction. It has been stated  that   the  petitioner   and  some  other  producers delivered inferior  quality of  Khandsari. That was found to be unacceptable  to consumers at Fair Price Shops. The State officers  accordingly   reported  to   the  Government.  The Government issued  instructions to distribute the levy sugar liberally  through   permits  for  marriages  and  religious functions. The  consumers, however,  could not come forward. The Government  then directed  the disposal of levy sugar by public auction.  It was  not with  a  view  to  earn  profit although incidentally  the Government  made some profit. The levy sugar  was brought  to  public  sale  only  to  prevent deterioration when  the consumers  refused to  accept it. We have no  reason to  doubt the explanation given by the State Government.      In the result, the Writ Petition fails and is dismissed with costs. N.P.V.                                   Petition dismissed. 584