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PETITIONER: SHRI SITARAM SUGAR COMPANY LIMITED & ANR. ETC.

       Vs.

RESPONDENT: UNION OF INDIA & ORS.

DATE OF JUDGMENT13/03/1990

BENCH: THOMMEN, T.K. (J) BENCH: THOMMEN, T.K. (J) MUKHARJI, SABYASACHI (CJ) SHETTY, K.J. (J) AHMADI, A.M. (J) SAIKIA, K.N. (J)

CITATION:  1990 AIR 1277            1990 SCR  (1) 909  1990 SCC  (3) 223        JT 1990 (1)   462  1990 SCALE  (1)475  CITATOR INFO :  RF         1991 SC 363  (12)  R          1991 SC 724  (13)  RF         1991 SC1902  (16)  RF         1992 SC1033  (38)

ACT:     Essential  Commodities Act, 1955: S.  3(3-C)--Government of India Notifications dated November 28, 1974 and July  11, 1975--Fixing  prices of levy sugar on zonal  basis--Validity of--Whether  legislative in character--Whether  amenable  to judicial  review--Determination  of  price--Requirement   of ’having    regard   to’   Clauses   (a)   to    (d)--Whether mandatory--Power  delegated  to  fix  different  prices  for different  areas, different factories or different kinds  of sugar--Nature and scope of-Whether matter of economic  poli- cy--Whether falls within purview of court.     Judicial review of State action--Legislative,  executive or quasijudicial--Nature and scope of.     Administrative  law--Delegation  of  legislative   power Judicial  review--Scope  of--Courts not  to  interfere  with matters of economic policy.     Administrative   Law--Administrative  action--Principles of  natural  justice--Observance of--Even if  rule  of  audi alteram partem not attracted reasonableness and fair play in action must be observed.     Constitution of India, Article 14: Principle of equality must govern every State action.

HEADNOTE:     Clause  (f) of sub-s. (2) of the  Essential  Commodities Act,  1955  empowers the Central Government to  require  any person dealing in any essential commodity to sell the  whole or  specified  part  of such commodity to it  or  the  State Government  or to a nominee of such Government.  Sub-section (3)  provides  for payment to such a seller  (a)  the  price agreed upon consistently with the controlled price, if  any, fixed  under  the  section; (b) the  price  calculated  with reference  to  the controlled price, if any; and  (c)  where

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none of these applies, a price calculated at 910 the  market rate prevailing in the locality at the  date  of the  sale.  Subsection (3-A) deals with orders made  with  a view  to  controlling the rise in prices or  preventing  the hoarding of any foodstuff in any locality and  determination of price for payment to the seller, notwithstanding anything contained   in sub-s.(3).  Sub-section (3-C) lays down  that where any producer is required by an order made with  refer- ence to cl. (f) of sub-s. (2) to sell any kind of sugar  and either  no  notification in respect of such sugar  has  been issued  under sub-s. (3-A) or any such  notification  having been issued has ceased to remain in force by efflux of time, then notwithstanding anything contained in sub-s. (3), there shall  be  paid to that producer an amount  therefore  which shall be calculated with reference to such price of sugar as the  Central  Government  may, by  order,  determine  having regard to (a) the minimum price, if any, fixed for sugarcane by  Central Government under this section; (b) the  manufac- turing  cost of sugar; (c) the duty or tax, if any, paid  or payable thereon; and (d) the securing of a reasonable return on  the  capital employed in the business  of  manufacturing sugar,  and different prices may be determined from time  to time  for different areas or for different factories or  for different kinds of sugar.     The  Central  Government  by  notifications  dated  28th November, 1974 and 11th July, 1975 issued in exercise of the power under sub-s. (3-C) of s. 3 of the Act fixed the prices of levy sugar for 1974-75 production.     The petitioners, owners of sugar mills operating in  the State  of Uttar Pradesh in areas classified for the  purpose of  determining  the price of levy sugar as  West  and  East zones,  challenged  the validity of the said orders  on  the grounds that they were ultra vires the Act and violative  of their  fundamental  rights as the prices of levy  sugar  had been  determined arbitrarily with reference to  the  average cost profiles of factories grouped together in zones without regard  to their individual capacity and  cost  characteris- tics; that although the Government has the discretion to fix different prices for different areas or for different facto- ries, or for different kinds of sugar, such wide  discretion has  to  be  reasonably exercised, that  the  words  ’having regard to’ occurring in sub-s. (3-C) is a mandatory require- ment  demanding strict compliance with clauses (a)  to  (d); that the ingredients of the said clauses should,  therefore, have  been  examined with reference to each  producer  as  a condition  precedent  to the determination of the  price  of sugar; that the Central Government had not applied its  mind to  the  relevant questions to which they were  expected  to have  regard  to in terms of thesub-section;  and  that  the expression ’determine’ used in sub-section (3-C) indicates 911 that  the  order  to which that expression  referred  to  is quasi-judicial  amenable to judicial review. For the  inter- veners  it  was contended that the cost  incurred  by  units having  lower  crushing capacity should  be  neutralised  by giving them an incremental levy price.     For  the respondents it was contended that the  division of  the  country into zones and the method  adopted  by  the Government in fixing price of levy sugar was fully supported by  the  recommendations of various expert  bodies  and  the Tariff Commission and was upheld in Anakapalle Co-op.  Agri- cultural & Industrial Society Ltd. Etc. v. Union of India  & Ors., [1973] 2 SCR 882 and the Panipat Co-op. Sugar  Mills". The  Union  of  India, [1973] 2 SCR 860; that  the  cost  of

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manufacturing  sugar depends not only on recovery  from  the sugarcane, duration of crushing season, crushing capacity of the  plant,  the sugarcane price paid and  the  capital  em- ployed, but also to a considerable extent on the  conditions of  the plant and machinery, quality of management,  invest- ment policy, relations with cane growers and labour,  finan- cial  reputation  etc.;  that to  group  together  factories having a high cost profile and to determine a price special- ly  applicable to them is to put a premium on  incompetence, if  not mismanagement; and that the orders  determining  the price of sugar in terms of sub-section (3-C) were of general application and, therefore, legislative in character and the omission,  if  any,  to consider the  peculiar  problems  of individual producers was not a ground of judicial review. Dismissing the writ petitions, the Court     HELD: 1. The notifications dated 28th November, 1974 and 11th  July,  1975 issued under sub-s. (3-C) of s. 3  of  the Essential  Commodities  Act, 1955 are intra rites  the  Act. There is no merit in the challenge. [950F, 918F-G]     2.1 Sub-section (3-C) is attracted whenever any producer is required to sell sugar by an order made with reference to sub-s.  (2)(f)  and no notification has  been  issued  under sub-s.  (3-A) or any such notification, having been  issued, has  ceased  to  be in force.  It  operates  notwithstanding anything  contained in sub-s. (3). This means the  compensa- tion  payable to the seller in the circumstances  attracting sub-s. (3-C) is not the price postulated in sub-s. (3).  Nor is it the price mentioned under sub-s. (3-A), for that  sub- section cannot be in operation when sub-s. (3-C) is attract- ed.  What is payable under sub-s. (3-C) is an amount  calcu- lated with reference to the price of sugar. [930F-H] 912     The  Panipat  Cooperative Sugar Mills v.  The  Union  of India, [1973] 2 SCR 860, referred to.     2.2  The  price of sugar is determined  by  the  Central Government  having regard to the factors mentioned  in  cls. (a)  to (d) of sub-s. (3-C). This is done with reference  to the  industry as a whole by a process of costing in  respect of a representative cross-section of manufacturing units and not  with  reference  to any individual  seller.  The  order notifying  the price is required by sub-ss. (5) and (6),  to be notified in official gazette and laid before both  Houses of Parliament. [931H, 932A, 936G, 931G]     3. The words ’having regard to’ in sub-s. (3-C) are  the legislative  instruction  for the general  guidance  of  the Government  in determining the price of sugar. They are  not strictly  mandatory, but in essence directory. They  do  not mean  that the Government cannot, after taking into  account the matters mentioned in cls. (a) to (d), consider any other matter which may be relevant. The expression is not  "having regard only to" but "having regard to". These words are  not a fetter, they are not words of limitation. [936D, 934E]     Union  of India v. Kamlabhai Harjiwandas Parekh &  Ors., [1968]  1 SCR 463; Commissioner of Income Tax v.  Williamson Diamonds  Ltd.,  L.R. 1958 A.C. 41; Commissioner  of  Income Tax,  West Bengal, Calcutta v. Gungadhar Banerjee & Co.  (P) Ltd., [1965] 3 SCR 439; Saraswati Industrial Syndicate  Ltd. etc’. v. Union of India, [1975] 1 SCR 956; State of Karnata- ka & Anr. etc. v. Shri Ranganatha Reddy & Anr. etc.,  [1978] 1  SCR  641; State of U. P. & Ors. v. Renusagar  Power  Co., [1988]  4  SCC 59 and O’May & Ors. v. City  of  London  Real Property Co. Ltd., [1982] 1 All E.R. 660, referred to.     4.1 In considering the reasonableness of the order  made by  the  Government’ in exercise of its power  under  sub-s. (3-C)  the Court will not strictly scrutinise the extent  to

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which  matters  mentioned in cls. (a) to (d), or  any  other matters  have been taken into account by the  Government  in making  its estimate of the price. There is sufficient  com- pliance with the sub-section if the Government has addressed its mind to the factors which it may reasonably consider  to be relevant, and has come to a conclusion, which any reason- able person placed in the position of the Government,  would have come to. [936E-F]     4.2  In  the instant case, the material brought  to  the notice  of the Court does not support the arguments  at  the bar that the Central Government had not applied its mind  to the relevant questions to which 913 they  were expected to have regard in terms of the  statute. Nor  any  data has been furnished to show  that  the  prices determined  by the Government would have been different  had the  ingredients of cls. (a) to (d) of the sub-section  been examined with reference to each individual producer  instead of  a representative cross section of  manufacturing  units. [947A, 934D]     5.1  Judicial decisions are made according to law  while administrative decisions emanate from administrative policy. Quasi-judicial  decisions are also administrative  decisions emanating  from  adjudication but they are subject  to  some measure  of  judicial procedure, such as  rules  of  natural justice.  Legislative orders can be distinguished from  rest of orders by reference to the principle that the former  are of  general application. They are made formally by  publica- tion and for general guidance with reference to which  indi- vidual decisions are taken in particular situations,  [937C, 939E, 938A-B] H.W.R. Wade.’ Administrative Law, 6th ed., 47, referred to.     5.2  An instruction may be treated as  legislative  even when  it is not issued formally but by circular or a  letter or the like. What matters is the substance and not the form, or  the name. Where an authority to whom power is  delegated is  entitled to sub-delegate his power, be  it  legislative, executive  or  judicial, then such authority may  also  give instructions to his delegates and these instructions may  be regarded as legislative. However, a judicial tribunal cannot delegate its functions except when it is authorised to do so expressly or by necessary implication. [938B-C, D-E]     Griffith and Street.’ Principles of Administrative  Law, 5th  ed., p. 65 and Bernard & Ors. v. National  Dock  Labour Board & Ors., [1953] 2 Q.B. 18 at 40, referred to.     5.3 What distinguishes legislation from adjudication  is that  the  former affects the rights of individuals  in  the abstract and must be applied in a further proceeding  before the  legal  position of any particular  individual  will  be definitely  touched by it; while adjudication operates  con- cretely  upon  individuals  in  their  individual  capacity. [938F] Davis.’  Administrative Law Text, 3rd ed., p. 123,  referred to.     5.4  A  statutory instrument such as a  rule,  order  or regulation emanates from the exercise of delegated  legisla- tive power which is a 914 part  of the administrative process resembling enactment  of law by the legislature. It affects the rights of individuals in the abstract. [939D-E, C]     Bernard Schwartz.’ Administrative Law [1976] p. 144  and Davis: Administrative Law Text, p. 123, referred to.     5.5 When the function is treated as legislative, a party affected  by  the order has no right to notice  and  bearing

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unless, of course, the statute so requires. It is  neverthe- less  imperative that the action of the authority should  be inspired by reason. It being of general application  engulf- ing  a wide sweep of powers, applicable to all  persons  and situations of a broadly identifiable class, the  legislative order  may not be vulnerable to challenge merely by  reasons of  its omission to take into account individual  peculiari- ties and differences amongst those failing within the class. [939F, 943C, 939F-G]     Union  of  India & Anr. v. Cynamide India Ltd.  &  Ant., [1987] 2 SCC 720 and Saraswati Industrial Syndicate Ltd., v. Union of India, [1975] 1 SCR 956, referred to.     5.6  The orders in the instant case, duly  published  in the  official gazettes notifying the prices  determined  for sugar  of various grades and produced in various zones,  and applicable without exception to all producers failing within well  defined  groups can be legitimately  characterised  as legislative. No rule of natural justice is applicable to any such order. [941H, 942A, 943B-C]     Union  of  India & Anr. v. Cynamide India Ltd.  &  Anr., [1987]  2 SCC 720; State of U.P. & Ors. v.  Renusagar  Power Co.,  [1988] 4 SCC 59; Saraswati Industrial  Syndicate  Ltd. etc.  v.  Union of India, [1975] 1 SCR 956; Prag Ice  &  Oil Mills  & Anr. etc. v. Union of India, [1978] 3 SCR  293  and Bates  v. Lord Hailsham of St. Marylebone & Ors.,  [1972]  3 All ER 1019, referred to.      6.  It  is with reference to  predetermined  prices  of sugar  that subsection (3-C) postulates the  calculation  of the  amount payable to each producer who has sold  sugar  in compliance  with an order made with reference to cl. (f)  of sub-s. (2). The calculation of such amount is in  contradis- tinction  to  the determination of price of  sugar,  a  non- legislative act. The individual orders to that effect  being administrative  orders  rounded on the  mechanics  of  price fixation,  they must be left to the better instructed  judg- ment  of the executive, and in regard to them the  principle of audi alteram partem is not applicable- All that is 915 required  is reasonableness and fair play which are  in  es- sence  emanations  from  the doctrine  of  natural  justice. [942B, 936F-G, 943A-B]     The  Panipat  Cooperative Sugar Mills v.  The  Union  of India,  [1973] 2 SCR 860; A.K. Kraipak & Ors. etc. v.  Union of  India & Ors., [1970] 1 SCR 457 and State of U.P. &  Ors. v. Renusagar Power Co., [1988] 4 SCC 59, referred to.     Union  of  India & Anr. v. Cynamide India Ltd.  &  Anr., [1987] 2 SCC 720, distinguished.     7.1 Any Act of the repository of power, whether legisla- tive  or administrative or quasi-judicial, is open to  chal- lenge  if  it is in conflict with the  Constitution  or  the governing  Act or the general principles of the law  of  the land  or  it is so arbitrary or unreasonable  that  no  fair minded authority could ever have made it. [946C]     E.P. Royappa v. State of TamilNadu & Anr., [1974] 2  SCR 348;  State of U.P. & Ors. v. Renusagar Power Co., [1988]  4 SCC  59;  Saraswati Industrial Syndicate Ltd.  v.  Union  of India,  [1975]  1 SCR 956; Mrs. Maneka Gandhi  v.  Union  of India & Anr., [1978] 1 SCC 248; Ramana Dayaram Shetry v. The International  Airport Authority of India & Ors.,  [1979]  3 SCR  1014;  Ajay Hasia & Ors. v. Khalid Mujib  Sehravardi  & Ors.,  [1981]  1  SCC 722; D.S. Nakara & Ors.  v.  Union  of India, [1983] 1 SCC 305; The Barium Chemicals Ltd. & Ant. v. The  Company Law Board & Ors., [1966] Supp. SCR  311;  Leila Mourning  v. Family Publications Service, 411 US 356, 36  L. Ed.  2d 318; Kruse v. Johnson, [1988] 2 Q.B. 91;  Associated

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Provincial  Picture Houses Ltd. v.  Wednesbury  Corporation, [1948]  1  K.B. 223; Westminster Corporation v.  London  and North Western Railway, [1905] AC 426; Mixnam Properties Ltd. v. Chertsey U.D.C., [1965] AC 735; Commissioners of  Customs JUDGMENT: ney v. Forde, [1971] AC 632 (H.L.); Carltona Ltd. v. Commis- sioners  of Works, [1943] 2 All ER 560; Point of  Ayr.  Col- lieries  Ltd. v. Lloyd George, [1943] 2 All E.R. 546;  Scott v.  Glasgow Corporation, [1899] AC 470; Robert Baird  L.D.v. City  of Glasgow, [1936] AC 32; Manhattan General  Equipment Co. v. Commissioner, [1935] 297 US 129; Yates (Arthur) & Co. Pty Ltd. v. Vegetable Seeds Committee, [1945-46] 72 CLR  37; Bailey  v. Conole, [1931] 34 WALR 18; Boyd Builders Ltd.  v. City of Ottawa, [1964] 45 DLR 2d 211; Re Burns & Township of Haldimand, [1966] 52 DLR 2d 1014 and Lynch v. Tilden Produce Co., 265 US 315, referred to. 916     7.2  Where a question of law is at issue, the Court  may determine the rightness of the decision of the authority  on its own independent judgment. If the decision does not agree with that which the Court considers to be the right one, the finding of law by the authority is liable to be upset. Where it is a finding of fact, the Court examines only the reason- ableness  of the findings. When the finding is found  to  be rational  and  reasonably based on  evidence  then  judicial review  is exhausted even though the finding may not  neces- sarily  be what the Court would have come to as a  trier  of fact. [944C-E]     7.3 Whether an order is characterised as legislative  or administrative or quasi-judicial, or, whether it is a deter- mination  of law or fact, the judgment of the  expert  body, entrusted with power, is generally treated as final and  the judicial  function  is exhausted when it is  found  to  have warrant in the record and a rational basis in law. [944E-F]     Rochester  Tel. Corp. v. United States, [1939] 307  U.S. 125,  83  L. Ed. 147; Associated Provincial  Picture  Houses Ltd. v. Wednesbury Corporation, [1948] 1 K.B. 223 and  Chief Constable  of the North Wales Police v. Evans, [1982] 1  WLR 1155 at 1160, referred to.     7.4  The  orders, in the instant case,  are  undoubtedly based  on  an exhaustive study by experts.  They  are  fully supported by the recommendations of the Tariff Commission in 1969 and 1973 and are not shown to be either  discriminatory or unreasonable or arbitrary or ultra vires. [946D-E]     8.1  Judicial  review is not concerned with  matters  of economic  policy. Nor is price fixation within the  province of  the Courts. The Court does not substitute  its  judgment for  that  of the legislature or its agents  as  to  matters within  the province of either. The Court does not  supplant the "feel of the experts" by its own views. When the  legis- lature acts within the sphere of its authority and delegates power to an agent, it may empower the agent to make findings of fact which are conclusive provided such findings  satisfy the test of reasonableness and are consistent with the  laws of the land. [948F, 949B, 948F-G]     M/s.  Gupta Sugar Works v. State of U.P. & Ors.,  [1987] Supp.  SCC  476;  Railroad Commission of Texas  v.  Rowan  & Nichols  Oil  Company,  311 US 570-577, 85 L.  ed.  358  and Mississippi  Valley Barge Line Company v. United  States  of America, 2.92 US 282-290, 78 L.ed 1260, referred to. 917     8.2  In  the  instant case, sufficient  power  has  been delegated  to  the  Central Government by  sub-s.  (3-C)  to formulate  and  implement its policy decisions by  means  of statutory  instruments and executive orders.  Classification

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of sugar factories with due regard to  geographical-cum-agro economic  considerations for the purpose of determining  the price of sugar in terms of the said sub-section is a  policy decision based on exhaustive expert conclusions. Such  clas- sification,  cannot, in the absence of evidence to the  con- trary, be characterised as arbitrary or unreasonable or  not rounded  on  an intelligible differentia having  a  rational nexus  with the object sought to be achieved by  sub-section (3-C). [949E, 947B-D]     The  Panipat  Cooperative Sugar Mills v.  The  Union  of India, [1973] 2 SCR 860 and T. Govindaraja Mudaliar etc.  v. The State of TamilNadu & Ors., [1973] 3 SCR 222, applied.     Federal  Power Commission v. Hope Gas Co., 320  US  591; Union of India & Anr. v. Cynamide India Ltd. &Anr., [1987] 2 SCC 720 and M/s. Gupta Sugar Works v. State of U.P. &  Ors., [1987] Supp. SCC 476, referred to.     8.3  If the petitioners nevertheless incur losses,  such losses  need not necessarily have arisen by reason  of  geo- graphical  zoning, but for reasons totally unconnected  with it, such as the condition of the plant and machinery, quali- ty of management, investment policy, labour relations,  etc. These are matters on which they have not furnished data. The decisions  in  Anakapalle,  [1973] 2 SCR  882  and  Panipat, [1973]  2 SCR 860 do not require  reconsideration.  [947D-E, 950E-F]     8.4  Whether the policy should be altered to divide  the sugar industry into groups of units with similar cost  char- acteristics  with  particular  reference  to  recovery  from sugarcane, duration of the crushing season, size and age  of units  and capital cost per tonne of output, without  regard to their location, is a matter for the Central Government to decide.  What  is best for the sugar industry  and  in  what manner  the  policy should be  formulated  and  implemented, bearing  in mind the fundamental object of the  statute,  is again a matter for decision exclusively within the  province of  the Central Government. Such matters do  not  ordinarily attract the power of judicial review. [949E-G]     Secretary of Agriculture, etc. v. Central Roig  Refining Company  etc., 338 US 615-617, 94 L. ed.  391-392,  referred to. 918

& ORIGINAL JURISDICTION: Writ Petition Nos. 464 & 617 of 1977. (Under Article 32 of the Constitution of India. )     K. Parasaran, Attorney General, Shanti Bhushan,  Ashwani Kumar,  K.G.  Bhagat, L.N. Sinha, Raja  Ram  Aggarwal,  S.P. Gupta, H.K. Puri, V. Parthasarthy, T.C. Sharma, P.P.  Singh, Ms. A. Subhashini, Mrs. Sushma Suri, G. Gopalakrishnan, O.P. Rana,  A.V. Rangam and Shartha Raju for the  appearing  par- ties.     F.S.  Nariman, K.K. Venugopal, A.K. Verma,  D.N.  Mishra and S. Kachawa for the intervener in W.P. No. 464/77. The Judgment of the Court was delivered by     THOMMEN,  J. The petitioners are owners of  sugar  mills operating in the State of Uttar Pradesh in areas  classified for  the purpose of determining the price of levy  sugar  as West and East Zones. They challenge the validity of  notifi- cations  dated  28th  November, 1974  and  11th  July,  1975 (Annexures 8 & 9) issued by the Central Government in  exer- cise  of its power under sub-section (3-C) of section  3  of the Essential Commodities Act, 1955 (Act No. 10 of 1955), as

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amended to date (hereinafter referred to as the ’Act’).  The petitioners  do not, and cannot, challenge the  validity  of the subsection by reason of Article 3 lB of the Constitution of  India.  By the impugned orders, the  Central  Government fixed  the prices of levy sugar for 1974-75 production.  For the purpose of determining the prices, the country is divid- ed into 16 zones, and the prices fixed for various grades of sugar  in  terms of section 3 (3-C) of the Act vary  from  ’ zone  to zone. Prices are determined with reference  to  the geographical-cum-agro-economic considerations and the  aver- age  cost profiles of factories located in their  respective zones.  Each State for this purpose constitutes  a  separate zone,  while U.P. is divided into 3 zones and Bihar  into  2 zones.  The petitioners contend that these orders are  ultra vires  the Act and violative of their fundamental fights  as the  prices of levy sugar have been  determined  arbitrarily with  reference  to the average cost profiles  of  factories grouped together in zones without regard to their individual capacity  and cost characteristics. Such prices do  not  re- flect  the  actual manufacturing cost of sugar  incurred  by producers like the petitioners or secure to them  reasonable returns  on the capital employed by them. Geographical  zon- ing,  for the purpose of price fixation, they point out,  is an irrational’ and discriminatory system of     (1)  Published  in the Gazette  of  India  Extraordinary dated 28.11.1974 and 11.7.1975. 919 averaging wide cost disparities amongst producers of  widely varying capacity. Cost of manufacture of sugar depends on  a number  of factors, such as recoveries from the  sugarcanes, duration  of the crushing season, crushing capacity  of  the plant, the sugarcane price paid and the capital employed  in the manufacture of sugar. These factors vary from factory to factory.  Fixation of the levy sugar prices on  zonal  basis without  regard to these divergent factors and the  compara- tive  cost profiles gives the owners of bigger factories  an undue  advantage over producers like the  petitioners  whose factories  are comparatively of lower crushing capacity  and whose manufacturing cost is consequently higher. Clubbing of the petitioners’ factories with dissimilar factories in  the same zones for the purpose of price fixation is  discrimina- tory, arbitrary and unreasonable. The petitioners point  out that  the system of geographical zoning for the  purpose  of price  determination  has been severely  criticised  by  the Bureau  of Industrial Costs & Prices (The "BICP")  who  have strongly recommended the division of the sugar industry into groups  of  units having similar cost  characteristics  with particular reference to recovery, duration, size and age  of the unit and capital cost per tonne of output, and irrespec- tive of their location.     The  respondents,  on the other hand, contend  that  the classification of sugar industry into 15 zones (now 16)  was upheld  by a Constitution Bench of this Court in  Anakapalle Co-operative  Agricultural  & Industrial Society  Ltd.  etc. etc. v. Union of India & Ors., [1973] 2 SCR 882. The conten- tion that the zonal system was discriminatory and  violative of constitutional principles was pointedly urged, but  cate- gorically rejected by this ’Court. The method adopted by the Government  in fixing the price of levy sugar is fully  sup- ported by the recommendations of various expert bodies.  The Tariff Commission in its 1973 Report recommended division of the  country  into 16 zones for this purpose. The  price  of sugar  is fixed with reference to the Cost  Schedule  recom- mended  by  that body. These recommendations  are  based  on various  factors such as cost and output of  individual  la-

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bour,  cane price (accounting for about 70 per cent  of  the cost  of sugar production), quality of sugarcane,  taxes  on sugarcane,  cost of other material, transport charges,  cost of storing the sugar produced, cane development charges  and other overhead expenses, selling expenses etc. These factors are almost identical for the entire zone.     The  cost of manufacturing sugar, the  respondents  con- tend,  depends  not  only on recovery  from  the  sugarcane, duration of crushing season, crushing capacity of the plant, the sugarcane price paid and the capital employed, as stated by the petitioners, but also to a consider- 920 able  extent  on the condition of the plant  and  machinery, quality  of  management, investment policy,  relations  with cane growers and labour, financial reputation etc. They say: "It is evident from the Tariff Commission Report of 1959, as also  the Official Directory of the Bombay  Stock  Exchange, that the petitioner Company has been consistently  diverting huge  amounts  for investments running  into  several  lakhs elsewhere instead of ploughing back the same into the  peti- tioner’s  sugar industry in question. Thus,  the  petitioner Company  has been neglecting the sugar factory and for  such neglect of their own they cannot blame the Zonal System."     Mr. Shanti Bhushan, appearing for the petitioners,  does not  object to the factories being grouped together  on  the basis  of factors common to them with a view to  fixing  the prices  applicable to them as a class of producers. He  does not advocate fixation of price separately for each unit.  He says that the sugar factories must be grouped together,  not on the basis of their geographical location, but  similarity in  cost characteristics. He relies upon the 1976 Report  of the  BICP. The present system of fixing prices according  to the  regions, where the factories are located, he  says,  is based  on "averaging wide cost disparities" as a  result  of which  manufacturers like the petitioners incurring  a  high cost  of production and others incurring a low cost of  pro- duction are treated alike. Such a system works to the disad- vantage  of the former and to the advantage of  the  latter. This,  Mr. Shanti Bhushan contends, is an  unreasonable  and invalid  classification  and  violative  of   constitutional principles. While this line of argument is supported by  Mr. Raja Ram Agarwal, Mr. S.P. Gupta appearing for the interven- er  in Civil Writ Petition No. 464 of 1977 advocates  aboli- tion  of  zonal classification or grouping of any  kind  and supports fixation of price for each individual factory  with reference to its cost and regardless of any other considera- tion. Such unit-wise determination alone, according to  him, satisfies the requirements of Section 3(3-C). Any system  of zoning or grouping for determination of price, he  contends, will  fail to meet the norms of that sub-section. Mr. M  .M. Abdul Khader, on the other hand, submits that while  averag- ing  and costing with reference to a  representative  cross- section  may ordinarily be an appropriate method for  deter- mining the fair price, such a method is inappropriate for  a small  zone like Kerala where there are only three  manufac- turing units. In respect of such a zone, he says,  unit-wise fixation of price is the only just and proper method. 921     Mr.  K.K.  Venugopal, counsel for  Indian  Sugar  Mills’ Association  (ISMA), on the other hand, supports the  zoning system.  He says that, except for a few producers  like  the petitioners,  all the rest of them in the country  have  ac- cepted the principle of zoning. In his written  submissions, Mr. Venugopal states as follows: "As  was seen during the course of hearing only 2 or 3  per-

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sons  have  come forward challenging zoning. There  are  389 sugar  factories in the country and the  present  intervener has  166  members. Besides there are 220  members  with  the cooperative sector. Their Association being National Federa- tion  of Cooperative Sugar Factories Ltd., has  also  inter- vened  in these petitions and have adopted the arguments  of ISMA. Hence almost the entire industry has supported  zoning and  only  a handful of people who also  factually  are  not high-cost units have opposed zoning." Mr.  Venugopal  submits that the present  case  is  squarely covered by the decisions of this Court in Anakapalle Cooper- ative  Agricultural & Industrial Society Ltd. etc.  etc.  v. Union  of  India & Ors., [1973] 2 SCR 882  and  The  Panipat Cooperative Sugar Mills v. The Union of India, [1973] 2  SCR 860.  He says that the petitioners have not made out a  case for reconsideration of these two decisions. He refers to  T. Govindaraja Mudaliar etc. etc. v. The State of Tamil Nadu  & Ors.,  [1973] 3 SCR 222 at 228 to 230 and submits that  this Court would not reexamine an earlier decision merely because certain aspects of the question had not been noticed in that decision.  Mr. Venugopal, however, advocates  neutralisation of  the  high cost incurred by the old  units  having  lower crushing  capacity by giving them an incremental levy  price as recommended by the High Level Committee in 1980.     Before  we examine the provisions of section  3(3-C)  in the  context  of  the general scheme of the  Act,  we  shall briefly  refer to the observations of this Court  in  Anaka- palle, [1973] 2 SCR 882 and Panipat, [1973] 2 SCR 860. Grover,  J.  speaking for the Bench  in  Anakapalle  (supra) states’: "The  system  of  fixing the prices,  according  to  certain regions or zones, is not a new one. The Tariff Commission in 1959 favoured the formation of four zones. In the report  of the  Sugar Enquiry Commission 1965 it was pointed  out  that the Government had actually fixed the prices for 22 922 zones  which meant that from four zones the number had  been increased  to twenty two or more. The Commission was of  the view  that  there should be five zones only in  addition  to Assam.  The Tariff Commission, 1969 however recommended  the constitution  of fifteen zones largely on  State-wise  basis with  an exception only in case of Uttar Pradesh and  Bihar. Uttar  Pradesh was divided into three zones and  Bihar  into two.  The Tariff Commission had been specifically  requested to  inquire into the working of the zonal system,  the  main point  for  inquiry  being the zones into  which  the  sugar producers  should be grouped having regard to the  basis  of classification to be recommended by the Commission. The view of the Commission was that on the whole the number of  price zones  should  be  fifteen which would  reduce,  though  not eliminate,  the  inter-se anomalies in  the  cost  structure without  resorting to the extreme of the fixation  of  price for  each unit or a single or at the most two, one  for  the sub-tropical  and  other for the tropical  one.  The  Tariff Commission hoped that in the course of time conditions would be  created making the operation of the  second  alternative feasible."     Rejecting  the contention that it was the  zonal  system that  caused  the losses allegedly incurred by some  of  the sugar producers, Grover, J. says that ordinarily these units ought to have made profits. The reasons for incurring losses can  be  many, such as inefficiency, failure to  pursue  the right  policy, poor management and planning etc., but  these reasons have no relation to the zonal system. That system by and large has led to efficiency and provides an incentive to

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cut  down the cost. Healthy competition among the  units  in the same zone should in the normal. course result in  reduc- tion of cost and greater efficiency in the operation of  the units. It is proper management and planning that would  lead to the success of any commercial venture. The contention  of the  producers that they have been incurring losses  on  ac- count  of the zonal system is opposed to the  evidence  pro- duced by them. The Court has rejected the extreme contention that prices should be fixed unitwise, i.e., on the basis  of actual cost incurred by each unit. Referring to this conten- tion, this Court observes: "Apart  from the impracticability of fixing the  prices  for each  unit in the whole country, the entire object and  pur- pose of controlling prices would be defeated by the adoption of such a system." 923     Grover,  J.  states that, during the earlier  period  of price  control, it was on an all India basis that the  price was fixed. That is still the objective. If such an objective is achieved, it would undoubtedly be conducive to conferring proper benefit on the consumers. The objective of the Tariff Commission  is to have only two regions for the whole  coun- try, viz., sub-tropical and tropical.     The Court has rejected as baseless the criticism against the principle of weighted average adopted in the fixation of price in each zone. Such a principle is well recognised  and acted  upon by various Sugar Enquiry Commissions.  A  proper cost study is intended to do justice to the weak and  strong alike.  There is abundant justification for  continuing  and sustaining the zonal system. The varying climatic conditions of  each  State have been taken into account. For  the  same reason, Bihar is divided into 2 zones and U.P. into 3 zones, while,  in  the  case of many other States,  each  State  is treated  as  a single zone. This system of  zoning  is  thus adopted with special reference to climatic and agro-economic conditions.  Rejecting the contention that the zonal  system has resulted in discriminatory treatment, this Court states: "We  are  unable  to hold that while  classifying  zones  on geographical-cum-agro-economic consideration, any  discrimi- nation was made or that the price fixation according to each zone taking into account all the relevant factors would give rise  to such discrimination as would attract Article 14  of the Constitution." Even  if  there is no price control,  the  uneconomic  units would be at a great disadvantage. The Court states: "Even  if there is no price control each unit will  have  to compete  in the market and those units which are  uneconomic and  whose  cost is unduly high will have  to  compete  with others  which  are more efficient and the cost of  which  is much  lower.  It  may be that uneconomic  units  may  suffer losses but what they cannot achieve in the open market  they cannot insist on where price has to be fixed by the  govern- ment.  The Sugar Enquiry Commission in its 1965  report  ex- pressed  the view that "cost-plus" basis of  price  fixation perpetuates inefficiency in the industry and is,  therefore, against the long-term interest of the country." Considering  the general principle involved in  price  fixa- tion, the Court states: 924 "It  is  not therefore possible to say that  the  principles which  the Tariff Commission followed in fixing  the  prices for  different  zones  are either not  recognised  as  valid principles for fixing prices or that simply because in  case of  some factories the actual cost was higher than  the  one fixed  for  the zone in which that factory was  situate  the

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fixation  of price became illegal and was not in  accordance with  the provisions of sub-section (3-C). It has  not  been denied that the majority of sugar producers have made  prof- its  on the whole and have not suffered losses. It  is  only some  of them which assert that their actual cost is far  in excess  of the price fixed. That can hardly be a ground  for striking  down the price fixed for the entire zone  provided it   has   been  done  in  accordance  with   the   accepted principles  .....  ". The Court concludes: "When  prices have to be fixed not for each unit but  for  a particular region or zone the method employed by the Commis- sion  was  the  only practical one and even  if  some  units because  of circumstances peculiar to them suffered  a  loss the price could not be so fixed as to cover their loss. That cannot  possibly  be the intention of the  Parliament  while enacting sub-section (3-C) of section 3 of the Act. If  that were so the price fixation on zonal or regional basis  would have to be completely eliminated. In other words, the entire system  of  price control which is contemplated  wilt  break down  because  fixation of price for each  unit  apart  from being impractical would have no meaning whatsoever and would not be conducive to the interest of the consumer. ’ ’     This  Court has thus in Anakapalle (supra) rejected  the argument  that  the alleged loss incurred by  certain  sugar producers  is attributable to fixation of price on  a  zonal basis;  or the zonal system has led to inefficiency or  lack of incentive, or it has resulted in unequal or unfair treat- ment.  On the other hand, the zonal system has encouraged  a healthy  competition  amongst the units in  the  same  zone. Unit-wise  fixation is impracticable. The Tariff  Commission is  the  best  judge in selecting units for  cost  study  to determine the average cost. The fair price has to be  deter- mined  with reference to the conditions of a  representative cross section of the industry. For all these reasons,  there is  ample  justification in continuing  and  sustaining  the zonal system for 925 the  purpose  of price fixation. Price has to be  fixed  for each zone and necessarily it varies from zone to zone. There is  no  discrimination in the classification of zones  on  a geographical-cum-agro-economic  consideration and  any  such classification is perfectly consistent with the principle of equality.     In  Panipat, [1973] 2 SCR 860, Shelat, J.  speaking  for the  same  Constitution Bench that has  decided  Anakapalle, [1973]  2 SCR 882, referes to the norms adopted in  sub-sec- tion (3-C), viz., (a) determination by the Government of the "price  of  sugar", and (b) payment of "an  amount"  to  the manufacturer,  and  states that the concept  of  fair  price which is what is referred to in sub-section (3-C) as  "price of  sugar" does not by any account mean the actual  cost  of production of every individual manufacturer. Such price  has to be arrived at by a process of costing with reference to a representative cross section of the manufacturing units.  He states: "The  basis  of  a fair price would have to be  built  on  a reasonably  efficient and economic representative  crosssec- tion on whose workings cost-schedules would have been worked out and the price to be determined by Government under  sub- section (3-C) would have to be built." So  stating,  Shelat, J. rejects the  contention  that  such price  has to be determined unit-wise. Any such fixation  of price,  he points out, would be contrary to the  concept  of partial  control  postulated  by the  subsection  and  would

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perpetuate  inefficiency and mismanagement. But, of  course, any such price, he hastens to add, has to be fixed  reasona- bly and on relevant considerations. Referring to the  policy of partial control, Shelat, J. states: "   .....   the Central Government was confronted  with  two main  problems (a) deterioration in the sugar industry,  and (b)  the  conflicting  interests of  the  manufacturer,  the consumer and the cane grower. The floor price of cane  fixed by  Government was intended to protect the farmer  from  ex- ploitation, but that was found not to be an incentive enough to  induce him to increase his acreage. A device had  to  be found  under which a price higher than the minimum could  be paid  by  the manufacturer of sugar. The  consumer,  on  the other hand, had also to be protected against the  spiralling of  sugar price and his needs, growing as they were, had  to be satisfied at some reasonable price." 926 Shelat,  J. emphasises the need to modernise  the  factories which alone would yield a reasonable return. This is what he states: ’Both  these and a larger production of sugar would  not  be possible  unless there was a reasonable return  which  would ensure  expansion, which again would not be possible  unless new  machinery for such expansion was brought in and  facto- ries,  particularly in U.P. and Bihar, were  modernised  and renovated. A fair price for sugar, therefore, had to be such as  would  harmonise and satisfy at least  to  a  reasonable extent these conflicting interests."     Significantly, the BICP’s recommendation to group  indi- vidual  units  having homogenity in  cost,  irrespective  of their location, was not accepted by the Central  Government, particularly  because the Tariff Commission itself had  con- sidered  the question and reached the conclusion  that  geo- graphical-cum-agro-economic   considerations  demanded   the grouping  of  factories with reference to  State  zones,  or subzones as in the case of U.P. and Bihar. To group them  on the basis of their location in various regions of the  coun- try  for the purpose of price fixation is a rational  method reflecting  economic realities. This is particularly  so  as conditions generally vary from State to State as regards the availability and quality of sugarcane, labour conditions and other  factors, whereas within the same region like  facili- ties  are generally available to all factories. If the  cost structure varies from factory to factory, such variation  is not necessarily caused by the non-availability, or the  poor quality  of  raw  material, or the  labour  conditions,  but probably for reasons unconnected with them, such as the  age of  the plant, availability of finance, management  ability, etc. There is great force in the submission of the  respond- ents  that  to group together factories having a  high  cost profile  and  to determine a price specially  applicable  to them is, as recognised by this Court in Panipat (supra)  and Anakapalle (supra), to put a premium on incompetence, if not mismanagement.     The  history of control over sugar has been set  out  at length in Panipat (supra) and we do not wish to burden  this judgment  with a narration of the circumstances  which  have led  to the introduction of partial control under which  60% of the output of sugar is acquired and the balance left  for free sale. It is in implementation of this policy that  sub- section  (3-C) of section 3 was inserted2 Before we  examine the     2.  For an illuminating discussion of this  aspect,  See A.M.  Khusro, Price Policy, Lancer International (1987),  p. 62-63:

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927 provisions  of  that sub-section under  which  the  impugned notification have been issued, we shall refer to the  statu- tory scheme.     The  Act  was,  as stated in the  preamble,  enacted  by Parliament  "to  provide,  in the interest  of  the  general public,  for the control of the production, supply and  dis- tribution  of, and trade and commerce in,  certain  commodi- ties". The entire Act is devoted to the cause of the general public  with a view to achieving equitable  distribution  of essential commodities at fair prices.     Section 3 of the Act confers wide power upon the Central Government  to  control  production,  supply,  distribution, etc., of essential commodities. It reads: "3.  Powers  to control  production,  supply,  distribution, etc.,  of essential commodities--(1) If the Central  Govern- ment  is of opinion that it is necessary or expedient so  to do  for maintaining or increasing supplies of any  essential commodity  or for securing their equitable distribution  and availability  at fair prices or for securing  any  essential commodity for the defence of India or the efficient  conduct of military operations, it may, by order, provide for  regu- lating  or prohibiting the production, supply and  distribu- tion thereof and trade and commerce therein."     Sub-section  (2) of section 3 says that, without  preju- dice  to the generality of the powers conferred by  sub-sec- tion (1), an order made         "After  many  years  of  adverse  experience  a  new strategy of dual pricing was introduced in sugar. The  mills were  asked  to deliver to the  public  distribution  system about  60 per cent of their output say at Rs.2 per  Kg.  and were allowed to sell the balance of 40 per cent in the  free market at say Rs.6 per kg. The mills were delighted to do so as  they  got very much enhanced receipts from  their  flee- market  sales.  With  larger receipts they  offered  in  the following season a higher price to the farmer (the sugarcane grower)  who, in turn, grew and offered more cane. In  other words, the law of supply which had been held captive, as  it were, was freed from bondage. With a higher price offer from the  mills, the cane growers brought more land under  sugar- cane,  diverted  land from other crops to  cane,  used  more inputs, produced and delivered to the mills more cane and in fact  diverted cane deliveries from the open-pan  system  to the  mill system. Having thus obtained much more  cane,  the mills produced much more sugar and sold 30-40 per cent of it in  the free market. Within a year or two,  the  free-market price  of sugar fell from Rs.6 to Rs.3 or even  Rs.2.50.  At this  rate consumers began to buy more in the  free  market, millions of ration cards remained unused and the demands  on the  public distribution declined  substantially.  Prolonged shortages of sugar got converted into a relative abundance." 928 under that sub-section may provide for the matters specified in  subsection  (2).  One of them is what  is  contained  in clause  (f) of sub-. section (2) which empowers the  Central Government  to require any person dealing in  any  essential commodity  to  sell the whole or a specified  part  of  such commodity to the Central Government or the State  Government or to a nominee of such Government. It reads: "(2)  Without  prejudice  to the generality  of  the  powers conferred  by sub-section (1), an order made thereunder  may provide- (a)................................................. .................................................... (f) for requiring any person holding in stock, or engaged in

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the  production, or in the business of buying or selling  of any essential commodity ,-- (a)  to sell the whole or a specified part of  the  quantity held in stock or produced or received by him, or (b) in the case of any such commodity which is likely to  be produced  or received by him, to sell the whole or a  speci- fied  part  of such commodity when produced or  received  by him, to  the  Central Government or a State Government or  to  an officer  or  agent of such Government or  to  a  Corporation owned  or  controlled by such Government or  to  such  other person or class of persons and in such circumstances as  may be specified in the order."     The  power contained in sub-section (1)  or  sub-section (2) is exercisable by an order. An ’order’ is defined  under section  2  to include a direction  issued  thereunder.  Any order  made under section 3 by the Central Government or  by an  officer  or authority of the Central Government  is  re- quired  by  sub-section (6) of section 3 to be  laid  before both  Houses of Parliament, as soon as may be, after  it  is made.  Any order made under section 3 which is of a  general nature or affecting a class of persons has to be notified in the official gazette. [Subsection (5) of section 3]. 929     Sub-section  (3)  of section 3 provides that  where  any person has sold any essential commodity (sugar being such  a commodity)  in compliance with an order made with  reference to clause (f) of sub-section (2), he shall be paid the price of  the goods purchased from him as provided  under  clauses (a),  (b) and (c) of sub-section (3). This subsection  oper- ates only where an order has been made under sub-section (1) with  reference  to  clause (f) of  sub-section  (2).  While clause  (a) of the sub-section postulates an  agreed  price, consistently  with the controlled price, if any, clause  (b) speaks  of  a price calculated with reference  to  the  con- trolled  price, if any, when no agreement is reached.  Where neither  clause (a) nor clause (b) applies,  either  because there  is  no agreement or because there  is  no  controlled price, the seller has to be paid, as per clause (c), a price calculated at the market rate prevailing in the locality  at the date of the sale.     Sub-section  (3-A)  empowers the Central  Government  to regulate  in accordance with the provisions of the  sub-sec- tion  the price of any foodstuff sold in a locality in  com- pliance  with an order made with reference to clause (f)  of sub-section  (2). This power is exercisable by  a  direction which  has to be duly notified in the official Gazette.  The power  to  issue the direction is  notwithstanding  anything contained  in sub-section (3). Before issuing the  notifica- tion, the Central Government has to form an opinion that the price of any foodstuff (including sugar) has to be regulated for  the  purpose of cotrolling the rise in  its  prices  or preventing its hoarding in any locality. Any such  notifica- tion  will  remain  in force for any  specified  period  not exceeding  3  months.  The price payable in  such  cases  is either  the  agreed price consistently with  the  controlled price,  if any, or where no such agreement is possible,  the price calculated with reference to the controlled price,  if any,  or where neither of these two methods  is  applicable, the  price calculated with reference to the  average  market rate  prevailing  in  the locality during the  period  of  3 months  immediately prior to the date of  the  notification. The  average  market rate will be determined by  an  officer authorised by the Central Government and the rate so  deter- mined by him is not liable to be questioned in any court.

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   Sub-section  (3-C) which is the crucial  provision,  was inserted in 1967. It reads: "(3-C). Where any producer is required by an order made with reference to clause (f) of sub-section (2) to sell any  kind of  sugar  (whether  to the Central Government  or  a  State Government or to an officer or agent of such Govern- 930 ment or to any other person or class of persons) and  either no  notification  in respect of such sugar has  been  issued under  sub-section  (3-A) or any such  notification,  having been  issued,  has ceased to remain in force  by  efflux  ot time,  then,  notwithstanding, anything  contained  in  sub- section (3), there shall be paid to that producer an  amount therefore  which shall be calculated with reference to  such price  of  sugar as the Central Government  may,  by  order, determine, having regard to-- (a)  the minimum price, if any, fixed for sugarcane  by  the Central Government under this section; (b) the manufacturing cost of sugar; (c) the duty or tax, if any, paid or payable thereon; and (d)  the  securing  of a reasonable return  on  the  capital employed in the business of manufacturing sugar, and different prices may be determined from time to time for different areas or for different factories or for  different kinds of sugar. Explanation--For the purposes of this sub-section,  "produc- er" means a person carrying on the business of manufacturing sugar." (emphasis supplied)     Sub-Section (3-C) is attracted whenever any producer  is required  to sell sugar by an order made with  reference  to sub-section (2)(f) and no notification has been issued under sub-section  (3-A)  or any such  notification,  having  been issued, has ceased to be in force. Whenever sub-section  (3- C)  is attracted, it operates notwithstanding anything  con- tained  in  sub-section  (3). This  means  the  compensation payable  to the seller in the circumstances attracting  sub- section  (3-C)  is not the price postulated  in  sub-section (3).  Nor is it the price mentioned under sub-section  (3A), for that sub-section cannot be in operation when sub-section (3-C)  is attracted. What is payable under sub-sectin  (3-C) is  an "amount" calculated with reference to the  "price  of sugar"  determined in the manner indicated in that  sub-sec- tion. 931     Construing  sub-section  (3-C), this  Court  in  Panipat [1973] 2 SCR 860,870 says: "Sub-section  3C, with which we are presently concerned  was inserted  in  sec. 3 by sec. 3 of Act 36 of 1967.  The  sub- section lays down two conditions which must exist before  it applies. The first is that there must be an order made  with reference  to sub-section 2 cl. (f), and the second is  that there is no notification under sub-section 3A or if any such notification has been issued it is no longer in force  owing to efflux of time. Next, the words "notwithstanding anything contained in sub-section" suggest that the amount payable to the person required to sell his stock of sugar would be with reference  to the price fixed under the subsection  and  not the  agreed price or the market price in the absence of  any controlled  price  under sub-sec. 3A. The  sub-section  then lays  down  two things; firstly, that where  a  producer  is required by an order with reference to sub-sec. 2(f) to sell any kind of sugar, there shall be paid to that producer’  an amount  therefore,  that is for such stock of  sugar  as  is required to be sold, and secondly, that such amount shall be

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calculated  with  reference to such price of  sugar  as  the Central  Government may, by order, determine, having  regard to  the four factors set out in cls. (a), (b), (c) and  (d). Unlike  the  preceding three sub-sections  under  which  the amount payable is either the agreed price, or the controlled price, or where neither of these prices is applicable at the market  or  average market price, the amount in  respect  of sugar  required to be sold is to be calculated at the  price determined by th Central Government  ......  "     What is specially significant is that sub-section  (3-C) postulates payment of an amount to the producer who has been required to sell sugar in the circumstances mentioned there- in.  What is required to be paid to him is not the price  of sugar, but only an amount. That amount has to be  calculated with reference to the price of sugar. The "price" is  deter- mined by the Central Government by means of an order  which, as required by sub-sections (5) and (6), has to be  notified in  the  official  gazette and laid before  both  Houses  of Parliament.  The order notifying the "price of sugar" is  of general  application and it is the rate at which the  actual "amount" payable to each seller is calculated. The price of sugar must be determined by the Central Govern- 932 ment  having regard to the factors mentioned in clauses  (a) to (d) of sub-section (3˜C). This is done with reference  to the industry as a whole and not with reference to any  indi- vidual seller. In contradistinction to the "price of sugar", the "amount" is calculated with reference to the  particular seller.  The Central Government is authorised  to  determine different prices for different areas or for different facto- ries or for different kinds of sugar. Whether factories  are required to be grouped together for a rational determination of the prices according to their location or their size, age and capacity or by any other standard is a matter for  deci- sion  by  the Central Government on the  basis  of  relevant material.  What is contemplated by the legislature in  dele- gating  such  wide discretion to the Central  Government  is that it must apply its mind to the manifold questions  rele- vant  to the determination of prices and with due regard  to the norms laid down in the sub-section. What is required  by sub-section (3-C) is the adoption of a valid  classification of factories having a rational nexus to the object sought to be  achieved, viz., determination of a fair price  of  sugar with  reference to which the actual amounts payable  to  the producers, in the circumstances attracting the  sub-section, are calculated.     Referring  to the legislative background of  sub-section (3-C), this Court in Panipat (supra) observes: "In  order to appreciate the meaning of cls. (a),  (b),  (c) and  (d), it must be remembered that ever since  control  on sugar  was imposed, Government had set up expert  committees to  work out cost-schedules and fairprices. Starting in  the beginning with an All-India cost-schedule worked out on  the basis  of the total production of sugar, the factories  were later  grouped together into zones or regions and  different cost-schedules  for  different zones or  regions  were  con- structed  on the basis of which fair prices were worked  out at which sugar was distributed and sold. The Tariff  Commis- sion  in 1958 and the Sugar Enquiry Commission in  1965  had worked out the zonal cost-schedules on the basis of averaged recovery and duration, the minimum and not the actual  price of  cane,  the averaged conversion costs and  recommended  a reasonable return on the capital employed by the industry in the  business  of manufacturing sugar. This  experience  was before  the  legislature  at the time when  subsec.  3C  was

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inserted in the Act. The legislature therefore  incorporated the  same  formula in the new sub-section as the  basis  for working out the price. The purpose behind 933 enacting  the new sub-section was three-fold, to provide  an incentive to increase production of sugar, encourage  expan- sion  of the industry, to devise a means by  which the  cane producer  could get a share in the profits of  the  industry through  prices for his cane higher than the  minimum  price fixed and secure to the consumer distribution of at least  a reasonable quantity of sugar at a fair price. ’ ’ Clauses  (a) to (d) of sub-section (3-C) postulate that  the price  of  sugar  must be determined having  regard  to  the minimum  price, if any, fixed for sugarcane by  the  Central Government, the manufacturing cost of sugar, the duty or tax applicable  in  the zone, and the securing of  a  reasonable return  on the capital employed in the business of  manufac- turing sugar. Referring to clause (d) of sub-section  (3-C), this Court observes in Panipat (supra): "It is clear from the reports of the Tariff Commission  that a  reasonable  return recommended by that body  at  a  fixed amount  of Rs. 10.50 per quintal which worked out in  196667 at 12.5% per annum was not in respect of levy sugar only but on the whole, so that even if such a return was not  obtain- able on levy sugar but was obtainable on the whole, it would meet  the  requirement  of cl. (d). In  this  conclusion  we derive  a two-fold support, firstly, from the language  used in cl. (d) itself, viz., a reasonable return on the  capital employed in the business of manufacturing sugar, which  must mean  the business as a whole and not the business of  manu- facturing  levy sugar only, and secondly, from the  fact  of the  Commission having all along used the  same  phraseology while  recommending Rs. 10.50 per quintal as an addition  by way  of a reasonable return on the capital employed  in  the industry.  The cost-schedules prepared by these bodies  were for determining a fair price in relation to the entire sugar produced  by  the industry and the return  which  should  be granted  to it on the capital employed in the  industry  and not  with  respect to that stock only required  to  be  sold under sub-sec. 2(f). This is clear from the heading of Ch. 9 of the Tariff Commission’s report, 1969, "Cost Structure and Price Fixation"."     The petitioners contend that although the Government has the  discretion to fix different prices for different  areas or for different 934 factories,  or for different kinds of sugar, such wide  dis- cretion has to be reasonably exercised. It is, of course,  a well accepted principle that any discretion conferred on the executive  has to be reasonably exercised. Nevertheless,  it is a discretion which the Court will not curtail unless  the exercise of it is impeachable on well accepted grounds  such as ’ultra vires’ or ’unreasonableness’.     The  petitioners further contend that the  Act  requires the  Government  to have regard to clauses (a) to  (d)  and, therefore, it is mandatory on the part of the Government  to act  strictly  in compliance with the  provisions  of  those clauses  in  determining  the  prices.  According  to  them, "having  regard  to" is a  mandatory  requirement  demanding strict compliance with the provisions to which reference  is made  by the legislature. They say that the  ingredients  of clauses  (a) to (d) must be examined with reference to  each producer  as a condition precedent to the  determination  of the price of sugar.     We may in this connection point out that the petitioners

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have  not furnished any data to show that the prices  deter- mined  by the Government would have been different  had  the ingredients  of clauses (a) to (d) of the  sub-section  been examined with reference to each individual producer  instead of a representative cross section of manufacturing units. Be that  as it may, the expression "having regard to"  must  be understood  in the context in which it is used in the  stat- ute.  See Union of India v. Kamlabhai Harjiwandas  Parekh  & Ors., [1968] 1 SCR 463 at 471. These words do not mean  that the Government cannot, after taking into account the matters mentioned  in clauses (a) to (d), consider any other  matter which may be relevant. The expression is not "having  regard only  to"  but  "having regard to". These words  are  not  a fetter;  they  are not words of limitation, but  of  general guidance  to  make  an estimate.  The  Government  must,  of course,  address  itself to the questions to which  it  must have  regard, and, having done so, it is for the  Government to  determine what it is empowered to determine with  refer- ence  to what it reasonably consider to be relevant for  the purpose.  The Judicial Committee in Commissioner  of  Income Tax  v.  Williamson  Diamonds Ltd., L.R. 1958  A.C.  41,  49 observed  with  reference to the expression  "having  regard to": "The form of words used no doubt lends itself to the sugges- tion  that  regard should be paid only to  the  two  matters mentioned,  but  it appears to their Lordships  that  it  is impossible to arrive at a conclusion as to reasonableness by considering the two matters mentioned isolated from other 935 relevant factors. Moreover, the statute does not say "having regard  only" to losses previously incurred by  the  company and  to the smallness of the profits made. No answer,  which can  be said to be in any measure adequate, can be given  to the question of "unreasonableness" by considering these  two matters alone  ......  " See  Commissioner  of Income-tax, West Bengal,  Calcutta  v. Gungadhar  Banerjee  and Co. (P) Ltd., [1965] 3 SCR  439  at 444-45. See also Saraswati Industrial Syndicate Ltd. etc. v. Union of India, [1975] 1 SCR 956 at 959. In State of  Karna- taka  and  Anr. etc. v. Shri Ranganatha Reddy &  Anr.  etc., [1978] 1 SCR 641 at 657-58 this Court stated: "The  content and purport of the expressions "having  regard to" and "shall have regard to" have been the subject  matter of  consideration  in  various decisions of  the  Courts  in England as also in this country. We may refer only to a few. In Illingworth v. Welmsley, [1900] 2 Q.B. 142 it was held by the Court of Appeal, to quote a few words from the  judgment of Romer C.J. at page 144: "All that clause 2 means is  that the  tribunal assessing the compensation is to bear in  mind and  have regard to the average weekly wages  earned  before and after the accident respectively. Beating that in mind, a limit  is placed on the amount of compensation that  may  be awarded  .....  "In another decision of the Court of  Appeal in  Perry v. Wright (etc. etc.), [1908] 1 K.B.  441  Cozens- Hardy  M.R.  observed at page 451: "No mandatory  words  are there  used; the phrase is simply "regard may be  had".  The sentence  is  not grammatical, but I think  the  meaning  is this: Where you cannot compute you must estimate, as best as you  can, the rate per week at which the workman  was  being remunerated, and to assist you in making an estimate you may have regard to analogous cases." It is worthwhile to quote a few words from the judgment of Fletcher Moulton L.J. at page 458. Under the phrase "Regard may be had to" the facts which the  Court may thus take cognizance of are to be  "a  guide, and  not  a fetter". This Court speaking through one  of  us

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(Beg, J., as he then was), has expressed the same opinion in the  case  of Saraswati Industrial Syndicate  Ltd.  etc.  v. Union of India, [1975] 1 SCR 956. Says the learned Judge  at page  959: "The expression "having regard to"  only  obliges the  Government  to consider as relevant  data  material  to which it must have regard"." 936 In State of U.P. & Ors. v. Renusagar Power Co., [1988] 4 SCC 59, one of us (Mukharji, J., as he then was) observed: "The expression "having regard to" only obliges the  govern- ment to consider as relevant data material to which it  must have regard  .....  ". In O’May and Ors. v. City of London Real Property Co.  Ltd., [1982] 1 All E.R. 660 at 665 (H.L.), Lord Hailsham stated: "A certain amount of discussion took place in argument as to the meaning of ’having regard to’ in s. 35. Despite the fact that the phrase has only just been used by the draftsman  of s.  34  in an almost mandatory sense, I do not  in  any  way suggest  that  the court is intended or should  in  any  way attempt  to  bind the parties to the terms  of  the  current tenancy in any permanent form  .....  ".     The words "having regard to" in the sub-section are  the legislative  instruction  for the general  guidance  of  the Government  in determining the price of sugar. They are  not strictly  mandatory, but in essence directory. The  reasona- bleness  of the order made by the Government in exercise  of its power under sub-section (3-C) will, of course, be tested by asking the question whether or not the matters  mentioned in clauses (a) to (d) have been generally considered by  the Government  in  making its estimate of the  price,  but  the Court will not strictly scrutinise the extent to which those matters  or any other matters have been taken into  account. There is sufficient compliance with the sub-section, if  the Government  has addressed its mind to the factors  mentioned in  clauses  (a)  to (d), amongst other  factors  which  the Government  may reasonably consider to be relevant  and  has come to a conclusion, which any reasonable person, placed in the position of the Government, would have come to. On  such determination  of  the price of sugar, which, as  stated  in Panipat  (supra) is the fair price, the  sub-section  postu- lates  the calculation of an amount, with reference to  such price, for payment to each producer who has complied with an order made with reference to sub-section (2)(f). The  "price of sugar", unlike the "amount" is arrived at by a process of costing  in  respect of a representative  cross  section  of manufacturing units, beating, of course, in mind the  legis- lative instruction contained in clauses (a) to (d). The Attorney General submits that orders determining the 937 prices  of sugar in terms of the sub-section are of  general application and, therefore, legislative in character.  Omis- sion, if any, to consider the peculiar problems of individu- al producers is not a ground for judicial review. The  peti- tioners’ counsel as well as Mr. Venugopal appearing for  the intervener  (ISMA), do not agree. They submit that the  sub- section  contemplates only administrative or  quasi-judicial orders of particular application and the impugned orders are not  legislative.  They rely upon a certain  observation  of this Court in Union of India & Anr. v. Cynamide India Ltd. & Anr.,  [1987] 2 SCC 720. Mr. Venugopal, however, hastens  to add  that his client does not seek personal  heating  before prices  are determined. Mr. B.R.L. Iyengar,  supporting  the contentions of the petitioners, points out that the  expres- sion  ’determine’ used in sub-section (3-C)  indicates  that the order to which that expression refers is quasi-judicial.

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   Judicial  decisions  are  made according  to  law  while administrative decisions emanate from administrative policy. Quasi-judicial decisions are also administrative  decisions, but they are subject to some measure of judicial  procedure, such  as  rules of natural justice. To  distinguish  clearly legislative  and administrative functions is  "difficult  in theory and impossible in practice".3 Referring to these  two functions, Wade says: ’They  are easy enough to distinguish at the extremities  of the  .spectrum:  an Act of Parliament is legislative  and  a deportation  order  is administrative. But in between  is  a wide  area  where either label could be  used  according  to taste,  for example where ministers make orders  or  regula- tions affecting large numbers of people  .....  ,, .4 Wade  points  out  that legislative power is  the  power  to prescribe  the law for people in general, while  administra- tive  power is the power to prescribe the law for  them,  or apply  the law to them, in particular situations.  A  scheme for centralising the electricity supply undertakings may  be called administrative, but it might be just as well legisla- tive. Same is the case with ministerial orders  establishing new towns or airports etc. He asks: "And what of ’directions of  a general character’ given by a minister to  a  nationa- lised  industry?  Are these various  orders  legislative  or administrative?" Wade says that the correct     (3)  Comd. 4060 (1932), p. 73; see H.W.R.  Wade-Adminis- trative Law, 6th ed., p. 47 (4) Ibid p. 848. 938 answer would be that they are both. He says:"  .....   there is  an infinite series of gradations, with a large  area  of overlap,  between  what is plainly legislation and  what  is plainly administration".5 Courts, nevertheless, for  practi- cal reasons, have distinguished legislative orders from  the rest  of the orders by reference to the principle  that  the former is of general application. They are made formally  by publication and for general guidance with reference to which individual decisions are taken in particular situations.     According to Griffith and Street, an instruction may  be treated as legislative even when they are not issued formal- ly),,  but by a circular or a letter or the like. What  mat- ters  is  the substance and not the form, or the  name.  The learned  authors say: ".  ....  where a Minister  (or  other authority)  is given power in a statute or an instrument  to exercise  executive, as opposed to legislative,  powers--as, for   example,  to  requisition  property  or  to  issue   a licence--and  delegates  those powers  generally,  then  any instructions which he gives to his delegates may be legisla- tive".6  Where  an authority to whom power is  delegated  is entitled  to  sub-delegate  his power,  be  it  legislative, executive  or  judicial, then such authority may  also  give instructions to his delegates and these instructions may  be regarded as legislative. However, as pointed out by Denning, L.J.,  (as he then was) a judicial tribunal cannot  delegate its functions except when it is authorised to do so express- ly  or  by necessary implication’ see Bernard  and  Ors.  v. National Dock Labour Board and Ors., [1953] 2 Q.B. 18 at 40.     Kenneth Culp Davis says: "What distinguishes legislation from  adjudication is that the former affects the rights  of individuals in the abstract and must be applied in a further proceeding  before  the  legal position  of  any  particular individual will be definitely touched by it; while adjudica- tion operates concretely upon individuals in their individu- al capacity".7 Justice Holmes’ definition, which is what  is called  the  "time test" and which Davis  describes  as  one

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which  has produced many unsatisfactory  practical  results, reads: "A  judicial  inquiry investigates, declares,  and  enforces liabilities as they stand on present or past facts and under laws supposed already to exist. That is its purpose and end. Legislation, on the other hand, looks to the future and (5) Ibid. (6) Principles of Administrative Law, 5th ed., p. 65 (7) Administrative Law Text, 3rd ed., p. 123-24. 939 changes  existing  conditions by making a new  rule,  to  be applied  thereafter to all or some part of those subject  to its  power. The establishment of a rate is the making  of  a rule  for the future, and therefore is an  act  legislative, not judicial  ...... Prentis v. Atlantic Cost Line Co., 211 US 210,226.     The  element of general application is often cited as  a distinct  feature of legislative activity. In the  words  of Chief  Justice  Burger, "rule-making  is  normally  directed toward  the  formulation of requirements  having  a  general application to all members of a broadly identifiable class"? Bernard Schwarts says: "an adjudication, on the other  hand, applies  to specific individuals or situations.  Rule-making affects  the fights of individuals in the abstract and  must be applied in a further proceeding before the legal position of  any particular individual will be  definitely  affected; adjudication  operates concretely upon individuals in  their individual  capacity’’9  According to  Schwartz,  the  "time test"  and  the "applicability test" are  workable  in  most cases although in certain situations distinctions are indeed difficult to draw.     A statutory instrument (such as a rule, order or regula- tion)  emanates from the exercise of  delegated  legislative power which is the part of the administrative process resem- bling enactment of law by the legislature. A quasi  judicial order  emanates from adjudication which is the part  of  the administrative  process resembling a judicial decision by  a court of law. This analogy is imperfect and perhaps  unhelp- ful  in  classifying  borderline or mixed  cases  which  are better left unclassified .10     If  a particular function is termed  legislative  rather than  judicial, practical results may follow as far  as  the parties  are  concerned.  When the function  is  treated  as legislative,  a party affected by the order has no fight  to notice  and heating, unless, of course, the statute  so  re- quires.  It  being of general application engulfing  a  wide sweep of powers, applicable to all persons and situations of a broadly identifiable class, the legislative order may  not be vulnerable to challenge merely by reason of its  omission to  take into account individual peculiarities  and  differ- ences amongst those falling within the class. (8)  Quoted  by  Bernard Schwartz  in  ’Administrative  Law’ (1976), p. 144. (9) Ibid (10) See Davis, Administrative Law Text, p. 123 940     In Union of India & Anr. v. Cynamide India Ltd. &  Anr., [1987] 2 SCC 720 at 734-35, Chinnappa Reddy, J. referring to the earlier decisions of this Court states: "  .....  legislative action, plenary or subordinate, is not subject to .rules of natural justice. In the case of Parlia- mentary legislation, the proposition is self-evident. In the case of subordinate legislation, it may happen that  Parlia- ment   may   itself  provide  for  a  notice   and   for   a hearing ..........  But where the legislature has not chosen

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to provide for any notice or hearing, no one can insist upon it  and it will not be permissible to read  natural  justice into such legislative activity  ..........  It is true that, with the proliferation of delegated legislation, there is  a tendency for the line between legislation and administration to  vanish into an illusion. Administrative,  quasi-judicial decisions  tend to merge in legislative activity  and,  con- versely, legislative activity tends to fade into and present an appearance of an administrative or quasi-judicial activi- ty". Stating  that rule-making is of general application  to  all members  of a broadly identifiable class while  adjudication is  applicable  to specific individuals or  situations,  the learned Judge observes: "A  price fixation measure does not concern itself with  the interests  of an individual manufacturer or producer. It  is generally in relation to a particular commodity or class  of commodities or transactions. It is a direction of a  general character,  not directed against a particular situation.  It is intended to operate in the future. It is conceived in the interests  of the general consumer public. The right of  the citizen to obtain essential articles at fair prices and  the duty  of the State to so provide them are  transformed  into the power of the State to fix prices and the obligations  of the producer to charge no more than the price fixed.  Viewed from  whatever angle, the angle of general application,  the prospectiveness  of its effect, the public interest  served, and the rights and obligations flowing therefrom, there  can be no question that price fixation is ordinarily a  legisla- tive activity". The learned Judge emphasises: 941 "Price fixation may occasionally assume an administrative or quasi-judicial  character when it relates to acquisition  or requisition  of  goods or property from individuals  and  it becomes necessary to fix the price separately in relation to such  individuals. Such situations may arise when the  owner of  property or goods is compelled to sell his  property  or goods  to the government or its nominee and the price to  be paid is directed by the legislature to be determined accord- ing  to  the statutory guidelines laid down by it.  In  such situations the determination of price may acquire a quasiju- dicial character".     These observations have been cited with approval by  one of uS (Sabyasachi Mukharji, J., as he then was) in Renusagar (supra).     In Saraswati Industrial Syndicate Ltd. etc. v. Union  of India, [1975] 1 SCR 956 at 961, this Court states: "Price  fixation  is  more in the nature  of  a  legislative measure even though it may be based upon objective  criteria found  in a report or other material. It could  not,  there- fore,  give rise to a complaint that a rule of natural  jus- tice has not been followed in fixing the price". In  Prag  Ice  & Oil Mills & Anr. etc. v.  Union  of  India, [1978]  3 SCR 293 at 317, Chandrachud, J., as he  then  was, speaks for the majority: "We think that unless, by the terms of a particular statute, or  order. price fixation is made a quasi-judicial  function for specified purposes or cases, it is really legislative in character  in the type of control order which is now  before us because it satisfies the tests of legislation. A legisla- tive  measure does not concern itself with the facts  of  an individual  case.  It is meant to lay down  a  general  rule applicable  to all persons or objects or transactions  of  a particular kind or class".

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See also the observation of Megarry, J., as he then was,  in Bates  v. Lord Hailsham of St. Marylebone & Ors.,  [1972]  3 All ER 1019 at 1024.     The  impugned  orders, duly published  in  the  official gazettes  notifying the prices determined for sugar of  var- ious grades and pro- 942 duced  in various zones, and applicable to all producers  of such sugar, can, in our view, be legitimately  characterised as legislative. These orders are required by Sub-section (6) to  be laid before both Houses of Parliament.  The  notified prices  are  applicable  without exception  to  all  persons falling  within well defined groups. The prices  are  deter- mined  in accordance with the norms postulated in  the  sub- section.  It is with reference to such predetermined  prices of sugar that the "amount" payable to each producer, who has sold  sugar in compliance with an order made with  reference to clause (f) of sub-section (2), is calculated. The  calcu- lation of such amount is, in contradistinction to the deter- mination of "price of sugar", a non-legislative act.     Thus, while individual consideration is relevant to  the calculation of the "amount", it is not so for the determina- tion of the "price of sugar" which is the rate at which  the amount  is  calculated.  That price, as  stated  in  Panipat (supra)  is  to be arrived at by a process of  costing  with reference to a reasonably efficient and economic representa- tive cross section of manufacturing units.     In  this  connection, we must point out  that  at  first blush a certain observation of Chinnappa Reddy, J. in  Cyna- mide,  [1987]  2 SCC 720 at 741, on which much  reliance  is placed by the petitioners’ counsel, appears to be inconsist- ent with what we have now stated. The learned Judge says: "The  Order  made  under Section 3(2)(c), which  is  not  in respect of a single transaction, nor directed to a  particu- lar individual is clearly a legislative act, while an  Order made under Section 3(3-C) which is in respect of a  particu- lar transaction of compulsory sale from a specific individu- al is a non-legislative act". It would appear that what the learned Judge had in mind  was an  order by which the "amount" was calculated in  terms  of sub-section (3-C) in respect of each individual producer and not  an  order determining the "price of sugar".  While  the former  is  non-legislative, the latter, by  the  very  test adopted  by the learned Judge, is legislative in  character. We,  therefore,  understand the observation of  the  learned Judge  on  this point as applicable only to  the  individual order  fixing the "amount" in terms of the  sub-section  and not  to  orders determining the "price of sugar"  which  are what the impugned orders are. Any other construction of  the sub-section  would  conflict with what was  adopted  by  the Constitution Bench in Panipat (supra) and would,  therefore, be unsustainable. 943     The individual orders, calculating the "amounts" payable to  the individual producers, being  administrative,  orders rounded  on  the machanics of price fixation, they  must  be left to the better instructed judgment of the executive, and in  regard to them the principle of audi alteram  partem  is not  applicable. All that is required is reasonableness  and fair play which are in essence emanations from the  doctrine of natural justice as explained by this Court in A.K.  Krai- pak & Ors. etc. v. Union of India & Ors., [1970] 1 SCR  457. See also the observation of Mukharji, J., as he then was, in Renusagar, [1988] 4 SCC 103, 105.     Price fixation is in the nature of a legislative  action

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even  when  it  is based on objective  criteria  rounded  on relevant material. No rule at natural justice is  applicable to  any such order. It is nevertheless imperative  that  the action of the authority should be inspired by reason. Saras- wati Industrial Syndicate Ltd., [1975] 1 SCR 956, 961,  962. The Government cannot fix any arbitrary price. It cannot fix prices on extraneous considerations: Renusagar, (supra).     Any arbitrary action, whether in the nature of a  legis- lative  or  administrative  or  quasi-judicial  exercise  of power, is liable to attract the prohibition of Article 14 of the  Constitution.  As stated in E.P. Royappa  v.  State  of Tamil  Nadu  & Anr., [1974] 2 SCR 348, "equality  and  arbi- trariness are sworn enemies; one belongs to the rule of  law in a republic while the other, to the whim and caprice of an absolute  monarch." Unguided and unrestricted power  is  af- fected by the vice of discrimination: Mrs. Maneka Gandhi  v. Union  of  India & Anr., [1978] 1 SCC 248  at  293-294.  The principle  of  equality enshrined in Article 14  must  guide every state action, whether it be legislative, executive, or quasi-judicial: Ramana Dayaram ’Shetty v. The  International Airport  Authority  of India & Ors., [1979] 3  SCR  1014  at 1042;  Ajay Hasia & Ors. v. Khalid Mujib Sehravardi &  Ors.. [1981]  1 SCC 722 and D.S. Nakara & Ors. v. Union of  India, [1983] 1 SCC 305.     Power  delegated by statute is limited by its terms  and subordinate  to its objects. The delegate must act  in  good faith,  reasonably,  intra vires the power granted,  and  on relevant consideration of material facts. All his decisions, whether  characterised as legislative or  administrative  or quasi-judicial, must be in harmony with the Constitution and other laws of the land. They must be "reasonably related  to the purposes of the enabling legislation". See Leila  Mourn- ing v. Family Publications Service, 411 US 356, 36 L Ed.  2d 318.  If they are manifestly unjust or oppressive or  outra- geous  or directed to an unauthorised end or do not tend  in some degree to the accomplishment of 944 the  objects of delegation, courts might well say,  "Parlia- ment  never intended to give authority to make  such  rules; they  are unreasonable and ultra vires". per Lord Russel  of Killowen, C.J. in Kruse v. Johnson, [1988] 2 Q.B. 91, 99.     The doctrine of judicial review implies that the reposi- tory of power acts within the bounds of the power  delegated and he does not abuse his power. He must act reasonably  and in good faith. It is not only sufficient that an  instrument is intra vires the parent Act, but it must also be  consist- ent  with  the constitutional principles: Maneka  Gandhi  v. Union of India, [1978] 1 SCC 248, 314-315.     Where  a  question  of law is at issue,  the  Court  may determine the rightness of the impugned decision on its  own independent judgment. If the decision of the authority  does not  agree  with that which the Court considers  to  be  the right one, the finding of law by the authority is liable  to be upset. Where it is a finding of fact, the Court  examines only the reasonableness of the finding. When that finding is found  to be rational and reasonably based on  evidence,  in the  sense  that all relevant material has been  taken  into account and no irrelevant material has influenced the  deci- sion,  and the decision is one which any  reasonably  minded person  acting  on such evidence, would have come  to,  then judicial review is exhausted even though the finding may not necessarily be what the Court would have come to as a  trier of fact. Whether an order is characterised as legislative or administrative or quasi-judicial, or, whether it is a deter- mination  or law or fact, the judgment of the  expert  body,

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entrusted with power, is generally treated as final and  the judicial  function  is exhausted when it is  found  to  have "wanant  in  the record" and a rational basis  in  law:  See Rochester Tel. Corp. v. United States, [1939] 307 U.S.  125, 83  L.  Ed.  1147. See also  Associated  Provincial  Picture Houses Ltd. v. Wednesbury Corporation, [1948] 1 K.B. 223.     As  stated  by  Lord Hailsham of  St.  Marylebone  L.C., (H.L.)  in  Chief  Constable of the North  Wales  Police  v. Evans, [1982] 1 WLR 1155 at 1160-61: "The  function of the court is to see that lawful  authority is not abused by unfair treatment and not tO attempt  itself the task entrusted to that authority by the law   .......... The  purpose of judicial review is to ensure that the  indi- vidual  receives fair treatment, and not to ensure that  the authority,  after  according fair treatment,  reaches  on  a matter 945 which it is authorised by law to decide for itself a conclu- sion which is correct in the eyes of the court". In the same case Lord Brightman says: "Judicial review, as the words imply, is not an appeal  from a decision, but a review of the manner in which the decision was made".     A  repository of power acts ultra vires either  when  he acts  in excess of his power in the narrow sense or when  he abuses his power by acting in bad faith or for an inadmissi- ble  purpose or on irrelevant grounds or without  regard  to relevant considerations or with gross unreasonableness.  See Associated  Provincial  Picture Houses  Ltd.  v.  Wednesbury Corporation,  [1948] 1 K.B. 223. In the words of  Lord  Mac- naghten  in  Westminster  Corporation v.  London  and  North Western ’ Railway, [1905] AC 426, 430: "   .....   It is well settled that a public  body  invested with  statutory  powers  such as those  conferred  upon  the Corporation  must take care not to exceed or abuse its  pow- ers. It must keep within the limits of the authority commit- ted  to it. It must act in good faith. And it must act  rea- sonably. The last proposition is involved in the second,  if not in the first.....". In The Barium Chemicals Ltd. & Anr. v. The Company Law Board & Ors., [1966] Supp. SCR 311, this Court states: "   .....  Even if (the statutory order) is passed  in  good faith and with the best of intention to further the  purpose of  the  legislation  which confers the  powers,  since  the Authority  has  to  act in accordance with  and  within  the limits of that legislation, its order can also be challenged if it is beyond those limits or is passed on grounds  extra- neous  to the legislation or if there are no grounds at  all for  passing it or if the grounds are such that no  one  can reasonably  arrive at the opinion or satisfaction  requisite under the legislation. In any one of these situations it can well  be said that the authority did not honestly  form  its opinion or that in forming it, it did not apply its mind  to the relevant facts".. In Renusagar, [1988] 4 SCC 59, 104, Mukharji, J., as he then was, states: 946 "The exercise of power whether legislative or administrative will be set aside if there is manifest error in the exercise of  such  power or the exercise of the power  is  manifestly arbitrary.  Similarly, if the power has been exercised on  a non-consideration  or  non-application of mind  to  relevant factors the exercise of power will be regarded as manifestly erroneous.  If a power (whether legislative  or  administra- tive) is exercised on the oasis of facts which do not  exist

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and  which  are patently erroneous, such exercise  of  power will stand vitiated".     The  true  position, therefore, is that any act  of  the repository  of power, whether legislative or  administrative or quasi-judicial, is open to challenge if it is in conflict with  the Constitution or the governing Act or  the  general principles  of the law of the land or it is so arbitrary  or unreasonable  that no fair minded authority could ever  have made it     The impugned orders are undoubtedly based on an  exhaus- tive  study  by  experts. They are fully  supported  by  the recommendations  of the Tariff Commission in 1969 and  1973. It is true that these recommendations in some respects  were the subject matter of criticism by a subsequently  appointed expert  body, viz., the BICP. Apart from the fact  that  the BICP’s  criticism has not been accepted by  the  Government, that  criticism  is not relevant in so far as  the  impugned orders are concerned because the latter are in regard to  an earlier  period.  These orders are fully  supported  by  the relevant material on record. The conclusions reached by  the Central  Government in exercise of its statutory  power  are expert conclusions which are not shown to be either discrim- inatory or unreasonable or arbitrary or ultra vires. The     (11)  See  the observation of Lord Russel  in  Kruse  v. Johnson,  [1898] 2 Q.B. 91 and that of Lord Greene, M.R.  in Associated  Provincial  Picture Houses  Ltd.  v.  Wednesbury Corporation,  [1948] 1 K.B. 223; See also Mixnam  Properties Ltd.  v.  Chertsey U.D.C., [1965] AC 735;  Commissioners  of Customs  and  Excise v. Cure and DeeIcy Ltd. [1962]  1  Q.B. 340;  McEldowney  v. Forde, [1971] AC 632  (H.L.);  Carltona Ltd.  v. Commissioners of Works, [1943] 2 All ER  560,  564; Point of Ayr. Collieries Ltd. v. Lloyd George, [1943] 2  All ER  546; Scott v. Glasgow Corporation, [1899] AC  470,  492; Robert  Baird  L.D.v.  City of Glasgow, [1936]  AC  32,  42; Manhattan General Equipment Co. v. Commissioner, [1935]  297 US  129,  134; Yates (Arthur) & Co. Pty. Ltd.  v.  Vegetable Seeds  Committee,  [1945-46] 72 CLR 37;  Bailey  v.  Conole, [1931]  34  WALR 18; Boyd Builders Ltd. v. City  of  Ottawa, [1964] 45 DLR (2d) 211; Re Burns and Township of  Haldimand, [1966] 52 DLR (2d) 10 14 and Lynch v. Tilden Produce Co. 265 US 3 15,320-322. 947 material  brought to our notice by the petitioners does  not support the arguments at the bar that the Central Government has not applied its mind to the relevant questions to  which they  are expected to have regard in terms of  the  statute. That the sugar factories for the purpose of determining  the price  of  sugar  in terms of sub-section  (3-C)  should  be grouped  on  the basis of their geographical location  is  a policy decision based on exhaustive expert conclusions.     Factories  are classified with due regard to  geographi- cal-cumagro-economic considerations. Fair prices for differ- ent grades of sugar are determined for each zone with refer- ence  to a reasonably efficient and economic  representative cross-section  of the manufacturing units. Such  classifica- tion,  as  held in Panipat (supra)  and  Anakapalle  (supra) cannot,  in  the  absence of evidence to  the  contrary,  be characterised as arbitrary or unreasonable or not rounded on an intelligible differentia having a rational nexus with the object sought to be achieved by subsection (3-C). The person assailing  such classification "carries the heavy burden  of making a convincing showing that it is invalid because it is unjust  and unreasonable in its consequences" Federal  Power Commission  v. Hope Gas Co., 320 US 591, 602 (1944). If  the petitioners nevertheless incur losses, such losses need  not

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necessarily  have arisen by reason of  geographical  zoning, but  for  reasons totally unconnected with it, such  as  the condition of the plant and machinery, quality of management, investment policy, labour relations, etc. These are  matters on  which the petitioners have not furnished data,  and,  in any  event judicial review is hardly appropriate  for  their consideration.     In  this connection we would recall the observations  of Chinnappa  Reddy, J. in Union of India and Anr. v.  Cynamide India Ltd. andAnr., [1987] 2 SCC 720 at p. 736: "We do not agree with the basic premises that price fixation primarily affects manufacturers and producers. Those who are most  vitally  affected are the consumer public. It  is  for their protection that price fixation is resorted to and  any increase in price affects them as seriously as any  decrease does a manufacturer, if not more." In M/s. Gupta Sugar Works v. State of U.P. and Ors.,  [1987] Supp. SCC 476 at p. 48 1 one of us (Jagannatha Shetty, J  .) stated: "In  this view of the matter, the primary  consideration  in the fixation of price would be the interest of consumers 948 rather than that of the producers."     The  Court  has neither the means nor the  knowledge  to reevaluate  the  factual basis of the impugned  orders.  The Court, in exercise of judicial review, is not concerned with the  correctness  of the findings of fact on  the  basis  of which  the  orders are made so long as  those  findings  are reasonably  supported by evidence. In the words  of  Justice Frankfurter of the U.S. Supreme Court in Railroad Commission of Texas v. Rowan & Nichols Oil Company, 311 US 570-577,  85 L. ed. 358,362: "Nothing  in the Constitution warrants a rejection of  these expert  conclusions. Nor, on the basis of  intrinsic  skills and equipment, are the federal courts qualified to set their independent  judgment  on such matters against that  of  the chosen state authorities  .....  When we consider the limit- ing conditions of litigation--the adaptability of the  judi- cial  process  only to issues definitely  circumscribed  and susceptible  of being judged by the techniques and  criteria within  the special competence of lawyers--it is clear  that the  Due  Process Clause does not require the  feel  of  the expert to be supplanted by an independent view of judges  on the conflicting testimony and prophecies and impressions  of expert witnesses". This  observation  is of even greater  significance  in  the absence of a Due Process Clause.     Judicial review is not concerned with matters of econom- ic  policy. The Court does not substitute its  judgment  for that  of the legislature or its agents as to matters  within the  province  of either. The Court does  not  supplant  the "feel of the expert" by its own views. When the  legislature acts within the sphere of its authority and delegates  power to  an agent, it may empower the agent to make  findings  of fact which are conclusive provided such findings satisfy the test  of reasonable˜ ness. In all such cases,  judicial  in- quiry  is confined to the question whether the  findings  of fact  are  reasonably  based on evidence  and  whether  such findings are consistent with the laws of the land. As  rated by Jagannatha Shetty, J. in M/s. Gupta Sugar Works, (supra): "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 949 only  examines  whether the price determined  was  with  due

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regard to considerations provided by the statute. And wheth- er    extraneous   matters   have   been    excluded    from determination."     Price fixation is not within the province of the courts. Judicial  function in respect of such matters  is  exhausted when  there is found to be a rational basis for the  conclu- sions  reached  by  the concerned authority.  As  stated  by Justice Cardozo in Mississippi Valley Barge Line Company  v. United States of America, 292 US 282-290, 78 Led 1260, 1265: "The structure of a rate schedule calls in peculiar  measure for  the use of that enlightened judgment which the  Commis- sion  by training and experience is qualified to form  ..... It is not the province of a court to absorb this function to itself  .....  The judicial function is exhausted when there is found to be a rational basis for the conclusions approved by the administrative body".     It  is a matter of policy and planning for  the  Central Government  to decide whether it would be on adoption  of  a system of partial control, in the best economic interest  of the  sugar  industry and the general public that  the  sugar factories are grouped together with reference to  geographi- cal-cum-agro-economic factors for the purpose of determining the price of levy sugar. Sufficient power has been delegated to  the  Central Government to formulate and  implement  its policy decision by means of statutory instruments and execu- tive orders. Whether the policy should be altered to  divide the  sugar industry into groups of units with  similar  cost characteristics  with  particular  reference  to   recovery, duration,  size  and age of the units and capital  cost  per tonne of output, without regard to their location, as recom- mended  by the BICP, is again a matter for the Central  Gov- ernment  to decide. What is best for the sugar industry  and in  what manner the policy should be formulated  and  imple- mented, bearing in mind the fundamental object of the  stat- ute,  viz., supply and equitable distribution  of  essential commodity at fair prices in the best interest of the general public,  is  a matter for decision  exclusively  within  the province  of  the Central Government. Such  matters  do  not ordinarily attract the power of judicial review.     We  would, in this connection, recall the words of  Jus- tice  Frankfurter in Secretary of Agriculture, etc. v.  Cen- tral Roig Refining Com- 950 pany, etc., 338 US 615-617, 94 Led 391-392:           "Congress was  .....  confronted with the formula- tion of policy peculiarly with its wide swath of discretion. It  would be a singular intrusion of the judiciary into  the legislative  process  to extrapolate restrictions  upon  the formulation  of  such an economic policy from  those  deeply rooted  notions  of  justice which the  Due  Process  Clause expresses  .....  ".           "Suffice  it to say that since Congress fixed  the quotas  on  a historical basis it is not for this  Court  to reweigh the relevant factors and, perchance, substitute  its notion of expediency and fairness for that of Congress. This is so even though the quotas thus fixed may demonstrably  be disadvantageous  to certain areas or persons. This Court  is not a tribunal for relief from the crudities and  inequities of complicated experimental economic legislation".     It  is  important to remember that the division  of  the industry on a zonal basis for the purpose of price  determi- nation has been accepted without question by almost all  the producers with the exception of a few like the  petitioners. Even  if it is true that the petitioners as individuals  are at a disadvantage and have suffered losses on account of the

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present system--an assertion which has not been  established and  which by its very nature is incapable of  determination by judicial review--that is not sufficient ground for inter- ference with the impugned orders. We are not satisfied  that the decisions of this Court in Anakapalle, [1973] 2 SCR  882 and Panipat, [1973] 2 SCR 860 require reconsideration in any respect.  We see no merit in the challenge against  the  im- pugned orders. The civil writ petitions are, in the  circum- stances, dismissed. However, we do not make any order as  to costs. P.S.S.                                             Petitions dismissed. 951