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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 in 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, 1986 (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 the State  Government  was  not  paid.  As  a  consequence,  the Collector gave  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 of  fix the  price at Rs. 20.50 per quintal and, therefore,  the Collector  has no  power is  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, has contended that  Section 42 of the Supply Act prescribes only the power  for fixation  of the  price  in  respect  of  the unites, namely,  Khandasari Unit  or any  unit manufacturing sugar  under  open  pan  process.  Under  the  proviso,  the Government have  no power  to fix  higher price of sugarcane supplied to  sugar factory 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 haveing been paid, the appellant is not due of any sugarcane price payable  to the cane growers and, therefore, tghe 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. Sub-clause (1) of Clause 3 of the order provides thus:      "The Central  Governemnt may, after      consultation with such authorities,      bodies of  associations as  it  may      deem fit,  by  notifiction  is  the      Official  Gazette,   from  time  to      time,  fix  the  minimum  Price  of      sugarcane to  be paid  by producers      of sugar  of their  agents for  the      sugarcane pruchased by them, having      regard  to...   Provided  that  the      Central  Governemnt  or,  with  the      approval of the Central Government,      the State  Government, may, in such      circumstances and  subject to  such      condition as  it may specify, allow      a suitable  rebate in  the price so      fixed."      It is  seen that  what is  postulated under Clause 3 of the order  is the  fixation of  the minimum price payable to the cane  growers for  the sugarcane  supplied by  them  and purchased nby  a  sugar  factory  or  its  agents.  Equally, Clasuse 5A prescribes payment of additional price consistent withg the  returns had  by the  factory. Clause  3A  equally provides rebates  that can  be given in respect of the price for sugarcane.  A reading  of these  relevant Clause  in the Order does  not show  that there  is any  prohibition on the factoyr or the association of the factories entering into an agreement  to  pay  higher  price  than  the  minimum  price prescribed under  the Oder.  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 byu the  Central Government  under Clause 3 of the Order. In State of  Madhya  Pradesh  vs.  Jaora  Sugar  Mills  Ltd.  & Ors.etc. [CA No. 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  pruchases  any      sugarcane   from    a   grower   of      sugarcane or froma sugarcane from a      growr  of   sugrance  or   from   a      sugarcane   growr’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      thedate   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 at  the gate  of the factory

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    or at the cane collection centre or      transfer or  deposit the  necessary      amount in  the Bank  Account of the      seller   or    the    co-opoerative      socieyt, as the case may be".      Clause (3A) to Rule 3 ws 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 pruchser of      the  sugarcane   as  fixed  by  the      Central Governemnt  in  the  manner      indicated therein,  Clasue  (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  pruchase or  agree  to      puchase sugarcane, at a price lower      than that  fixed under  sub-clasuse      (1)". Section  23(3)  of  the  Act,      also 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  purchase  of  the      sugarcane, they would be at liberty      to agree  to sell  or purchase  the      sugarcane at  a higher  price thatn      that  wass  fixed  by  the  Central      Government under clause (1) of Rule      3. Only for postponement of payment      bey9nd 14  days, there should be an      agreemtnt in  writing  between  the      parties    obviously    with    the      concurrence    of    the    Central      Government or authoriesed 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

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    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  that      the  minimum  price  fixed  by  the      Central Government. In other words,      the sugarcane growers should not be      compelled to  sell the sugarcane at      a  price   lesser  that   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  hn january  1983 wjereom  tje [roce tp  tje sigarcame  at Rs. 20.50 per quintal was agreed to be  paid. It is stated in the judgement of the High Court that this  was fixed after the agreement between the Millers Association and  the farmers  at a  meeting convened  by the Stte Government  and the agreement was notified by the State Governemt. The High Court has also stated that the appellant had played  prominent part  in fixation  of the price and it acted upon  it till Mrach 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  usch  a      hgher price  has been  agreed to be      paid to thge sugarcane growers, whe      contrt  has   come  into  existence      between  the  respondents  and  the      cane growers  with the aegis of the      appellants?  As   a  facts.  except      kaluram,  all   reprsentatives   of      other factories were present at the      time to  the agreement  dated  mrch      21,1976.  As   far  as  Kaluram  is      concerned, on the first occasion he      was  present,  but  on  the  second      occasion  when   the  meeting   was      adjorned, he  was not  present.  it      has been  averred in  the  counter-      affidavit that  the  Sercretary  of      the  sugracene   factories  owners’      Association  had   contracteed  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  form it,      the Government   have  stated  that      and the sugarcane growers have also      agreed for  the same, we are of the      considered   view   that   he   was      consenting  party   and  there  was      consensue ad  idem  to  pay  higher

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    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  Commissioner,   a   statutory      authority to effect such agreement.      It would  thus be  clear  that  the      Cane Commissioner  having power  to      compel th  cane growers  to  supply      cane to the factory khandsari 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  statutroy      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      Khandsari unit.      Thus, it would be seen that the Act      regulates the  recovery as  arrears      of   land   revenue.   Accordingly,      demand has  been for payment of the      amount n a sum of Rs. 6,34,166/- in      CA No.  1813/80, Rs.13,40,700/-  in      CA 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 ar  liable to      pay the same".      It is not in dipute 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 cultifating the sugarcane within that zone ar bopund 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  anf 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 haveing 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 upply of sugarcane and the Governemnt would beentitled to  enforce the  liablity. As  a consequence, the Collector  was   empowered  and   duty  dbound  to  issue  a vcertrificate of  the dues  as arrears  of land  revenue for recoery under  the Revenue  Recorvery 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 neednot  be any  sparte 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

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cerfificate issued by the Collector is vaild 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 contened that the appelahnt- factory was  notified to  be taken  over and  denotified for dvestment and  in the  interretgum sales  and purchases have taken place  and the  consequence  thereof  requires  to  be considered. The  appellant had  crushed the sugarcane though 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 liablity by the State  Government  does  not  arise.  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 courtr  at the  time of  passing the  interim order. Pursuanat  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 andif there is no demand and the demand has already been satisfied, than 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.