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PETITIONER: S.K.G. SUGAR LTD.

       Vs.

RESPONDENT: STATE OF BIHAR & ORS.

DATE OF JUDGMENT:       15/01/1997

BENCH: K. RAMASWAMY, S. SAGHIR AHMAD, G.B. PATTANAIK

ACT:

HEADNOTE:

JUDGMENT:                          O R D E R      These two  appeals  arise  from  the  judgment  of  the Division Bench of the Patna High Court, made on November 13, 1984 in Order No. 11 and Review Order arising thereunder the CWJC No. 2370/84.      The admitted position is that the appellant factory had a ‘reserved  area’ under  Section 31  of the Bihar Sugarcane (Regulation of  Supply and  Purchase) Act,  1981 (for short, the ‘Supply  Act’) and  had the  sugarcane supplied  by  the growers. The  Central Government, exercising the power under Clause 3  of the Sugarcane (Control) Order, 1966 (for short, the ‘Order’)  determined the  minimum price for sugarcane at Rs. 13.92  per quintal.  The State  Government announced  on March 31,  1983 the  price of  Sugarcane at  Rs.  20.50  per quintal. The  cane growers  supplied the  sugarcane  to  the appellant, but the appellant admittedly had paid the minimum price determined  under the Order But the difference between the price  fixed under  the Order and the price announced by the State  Government was  not paid.  As a  consequence, the Collector save  a certificate  of dues for realisation under the Revenue  Recovery  Act.  Calling  those  proceedings  in question, the writ petition came to be filed. The contention raised in  the High  Court as  well as in this Court is that the Central  Government having  determined the  price of the sugarcane at Rs. 13.92 per quintal, the State Government was devoid of  power to  fix the  price at Rs. 20.50 per quintal and, therefore,  the Collector  has no  power to  issue  the certificate of arrears; since what is due is the price fixed under the Order which has already been paid, there is no due in accordance with law.      She Y.V.  Giri, learned  counsel for the appellant, had contended that  Section 42 of the Supply Act prescribes only the power for fixation of the price in respect of the units, namely, Khandasari  Unit or  any  unit  manufacturing  sugar under open  pan process. Under the provision, the Government have no  power to  fix higher price of sugarcane supplied to sugar factory  than that  is fixed for the Khandasari units. The fixation  of the  price at  Rs.  20.50  per  quintal  is without  any   authority  of  law  or  jurisdiction.  For  a certificate proceeding  what is  required to be proceeded is

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the due  in accordance  with law  but not in accordance with any order  passed by  the  State  Government.  The  dues  in accordance with  the price fixed under Clause 3 of the Order having been  paid, the appellant is not due of any sugarcane price payable  to the  cane growers and, therefore, the view taken by the High Court is not correct in law. Even if there are dues,  the same  could be  recovered in  a suit  by  the growers. We find no force in the contentions.      Under the  Order. The  object of the Order is to ensure that the  cane growers should not be compelled to sell their sugarcane at  a price minimum to the price prescribed by the Central Government  under Clause 3 of the Order. In State of Madhya Pradesh  vs. Jaora  Sugar Mills  Ltd. & Ors. etc. [CA Nos. 1811-14/96]  decided on  October 10, 1996 by a Bench of two Judges,  to which  two of  us  (K.  Ramaswamy  and  G.B. Pattanaik,  JJ.)   were  members,   considered  the  similar question and held thus:      "Rule 3  [3]  determines  "where  a      producer  of  sugar  purchases  any      sugarcane   from    a   grower   of      sugarcane or  from a 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 of  sugarcane      growers’  co-operative  society  or      that fixed under sub-clause (1), as      the case  may be, either a the gate      of  the  factory  or  at  the  cane      collection centre  or  transfer  or      deposit the necessary amount in the      Bank Account  of the  seller or the      co-operative society,  as the  case      may be."      Clause   (3A)   to   Rule   3   was      introduced by  way of  an amendment      made in  GSR 62(E), dated 2.2.1978.      For payment  of the price within 15      days with  interest on  the delayed      payment at  the  rate  of  15%  per      annum for  the period of such delay      beyond 14 days has been introduced.      Earlier, it was covered by the Act.      Clause (1)  of  Rule  3  fixes  the      minimum price  of sugar  payable by      the purchase  of the  sugarcane  as      fixed by  the Central Government in      the   manner   indicated   therein.      Clause (2)  of Rule  3 is  relevant      for the  purpose of this case which      shows that "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)".      Section  23(3)  of  the  Act,  also

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    couched   in    similar   language,      enables to  novate by  contract the      minimum price  fixed by the Central      Government  in   respect  of   cess      payable to Government.      This would  clearly  indicate  that      despite  the  fixation  of  minimum      price under  clause (1)  of Rule 3,      by agreement  between the sugarcane      grower and  the  purchaser  of  the      sugarcane, they would be at liberty      to agree  to sell  or purchase  the      sugarcane at  a higher  price  than      that  was   fixed  by  the  Central      Government under clause (1) of Rule      3. Only for postponement of payment      beyond 14  days, there should be an      agreement in  writing  between  the      parties    obviously    with    the      concurrence    of    the    Central      Government or  authorised authority      in that  behalf. Thus,  there is no      statutory   prohibition   in   that      behalf to  pay higher  price.  That      would be further clear by Rule 3(2)      which  speaks   of   the   contract      between the  parties for payment of      higher  price  of  sugarcane  fixed      under clause (1) of Rule 3 pursuant      to the agreement or pursuant to the      minimum price  fixed by the Central      Government under  Rule 3(1)  of the      Order.      Under  Rule   3(1)  and  additional      price fixed  under Rule  5A, it was      within the  domain of  the contract      between the  sugarcane growers  and      the factories  who could  agree  to      pay price  higher than  the minimum      price fixed  under the  Order. What      sub-rule (2) of Rule 3 prohibits is      the purchase  or sale  or agreement      in that  behalf, for bargain to pay      price lesser than the minimum  rice      fixed by the Central Government. In      other words,  the sugarcane growers      should not be compelled to sell the      sugarcane at  a price  lesser  than      what was  prescribed by  the Order.      Thus, we  hold that  there  was  no      statutory   prohibition    at   the      relevant  time   to  agree  to  pay      higher price  than was  fixed under      the order."      There is,  thus, no  prohibition on  payment of  higher price, it  is seen  and it is not disputed that there was an agreement by  the  Sugar  Factory  Owners  Association  with growers of  sugarcane entered  in January  1983 wherein  the price to  the sugarcane  at Rs. 20.50 per quintal was agreed to be  paid. It  is stated in the judgment of the High Court that this  was fixed after the agreement between the Millers Association and  the farmers  at a  meeting convened  by the State Government and the agreement was notified by the State Government.  The   High  Court  has  also  stated  that  the appellant had played prominent part in fixation of the price

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and it acted upon it till March 31, 1983. What was contended in the  High Court  was that though the agreement was there, since the  Company is  an independent  entity in  the eye of law, it  is not  bound by  such an agreement and, therefore, the appellant  is entitled to resile from the agreement with the  farmers   at  that   meeting  convened   by  the  State Government. In Jaora’s case this Court had held thus:      "The question  is: whether  such  a      higher price  has been agreed to be      paid to the sugarcane growers, when      contract has  come  into  existence      between  the  respondents  and  the      cane growers  with the aegis of the      appellants?  As   a  facts,  except      Kaluram,  all   representatives  of      other factories were present at the      time of  the agreement  dated March      21, 1976.  As  far  as  Kaluram  is      concerned, on the first occasion he      was  present,  but  on  the  second      occasion  when   the  meeting   was      adjourned, he  was not  present, it      has been  averred in  the  counter-      affidavit that the Secretary of the      Sugarcane     Factories     Owners’      Association had contracted him when      he  was   in   the   hospital   and      thereafter,   the   agreement   was      entered into. Though, subsequently,      an  attempt   was   made   by   the      Secretary to  wriggle out  from it,      the Government  has stated that and      the  sugarcane  growers  have  also      agreed for  the same, we are of the      considered  view   that  he  was  a      consenting  party   and  there  was      consensus ad  idem  to  pay  higher      price of sugarcane than the minimum      price   fixed    by   the   Central      Government and  they acted upon it.      There was  no prohibition  for oral      agreement   between   growers   and      owners through  the service  of the      Cane  Commissioners,   a  statutory      authority to effect such agreement.      It would  thus be  clear  that  the      Cane Commissioner  having power  to      compel the  cane growers  to supply      cane  to   the  factory  Khandasari      unit, he  has incidental  power and      duty bound to ensure payment of the      price of  the sugarcane supplied by      the  sugarcane  grower.  The  price      fixed  or  agreed  is  a  statutory      price  and   bears  the   stamp  of      statutory first charge on the sugar      and assets  of the factory over any      other  contracted   liabilities  to      recover the  price of the sugarcane      supplied   to    the   factory   of      Khandasari unit.      Thus, it would be seen that the Act      regulates the  recovery as  arrears      of land  revenue. According, demand      has been  for payment of the amount

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    in a  sum of  Rs. 6,34,166/-  in CA      No. 1813/80, Rs. 13,40,700/- in Can      No. 1814  and Rs.  2,71,000/- in Ca      No.  1812/80.   Thus,  the  demands      issued against  the respondents are      in accordance  with the  provisions      of the  Act and  they are liable to      pay the same."      It is  not in  dispute that  under Section  31  of  the Supply Act,  the State  Government  has  power  to  fix  the reserved area,  in other  words, zone was carved out for the appellant for  the supply  of sugarcane  to the factory. All the farmers  who are  cultivating the  sugarcane within that zone are  bound by  the State  action to supply sugarcane to the factories  within that  reserved area. Consequently, the factory  also   is  bound   by  the  actions  of  the  State Government. Obviously, pursuant to the obligation had by the State under  the Supply Act, the meeting was convened by the State Government whereat the factory owners’ Association and farmers participated  and agreed  to fixed  the price at Rs. 20.50 per  quintal of  sugarcane. As a consequence, both the cane growers  as well as the owners of the factory are bound by the  decision. This  having been  agreed upon,  the price fixed by the State Government in excess of the minimum price fixed by  the Central Government under Clause 3 of the Order would be  the price  fixed for  supply of  sugarcane and the Government would  be entitled to enforce the liability. As a consequence, the  Collector was  empowered and duty bound to issue a  certificate of  the dues as arrears of land revenue for recovery under the Revenue Recovery Act. The certificate obviously relates  to the  difference  between  the  minimum price fixed  by the  Central Government, i.e., Rs. 13.92 per quintal and  the  price  of  Rs.  20.50  determined  by  the agreement between  the  parties.  Under  the  circumstances, there need  not be any separate agreement to be entered into between the  cane growers  in  the  reserved  area  and  the appellant’s factory  to be  enforceable. We  hold  that  the certificate issued by the Collector is valid in law. As held earlier, the  State  Government  acted  in  their  statutory capacity to  fix the increased price of the sugarcane. There is no  need for the growers to file separate suit to recover the difference  of the  price. The  recovery proceedings are the appropriate  course of  action rightly  adopted  by  the State Government.      Shri Giri  next sought  to contend  that the appellant- factory was  notified to  be taken  over and  denotified for divestment and  in the  interregnum sales and purchases have taken place  and the  consequence  thereof  requires  to  be considered. The  appellant had crushed the sugarcane through vacuum pan  process  in  producing  sugar  in  the  relevant period. So it alone is liable to pay the cane price. We find that the  question in  this case of sharing the liability by the State  Government does  not  arises.  Therefore,  it  is unnecessary for us to go into the question in these appeals. By order  dated February  29, 1996 passed by this Court, the State Government was directed to work out the amount due and payable to  the cane  growers in  terms of  the  undertaking given to  this Court  at the  time of  passing  the  interim order. Pursuant thereto, it appears and it is not in dispute that  the   Government  has  worked  out  the  dues  at  Rs. 62,90,398.72 and  made a  demand on  March 22,  1996 and  in furtherance thereof,  the appellant has deposited the amount on April  3, 1996.  In view  of the  above, if  there is any other demand  than what was directed, the respondents are at liberty to proceed in accordance with law and if there is no

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demand and the demand has already been satisfied, then it is needless to  mention that  the respondents  may not take any further steps in that behalf.      The appeals  are accordingly  dismissed with  the above observations. No costs.