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PETITIONER: THE INDIA SUGARS & REFINERIES LTD.

       Vs.

RESPONDENT: AMRAVATHI SERVICE CO-OPERATIVE SOCIETY LTD.

DATE OF JUDGMENT19/11/1975

BENCH: RAY, A.N. (CJ) BENCH: RAY, A.N. (CJ) UNTWALIA, N.L.

CITATION:  1976 AIR  775            1976 SCR  (2) 740  1976 SCC  (1) 318  CITATOR INFO :  RF         1988 SC1737  (88)

ACT:      Natural Justice-Duly to act judicially and according to natural justice depends on nature of interest to be affected circumstances for  exercise of power and sanctions involved- Sugar Came  Control order,  1966 Clause 5(1), S(3) and 5(S)- [Sugar Cane  Control (Additional  Powers)Act 1962]-Sugarcane growers to  be heard both while fixing quantum of additional price as  well as  while granting  exemption from payment of additional price.

HEADNOTE:      The respondent are co-operative societies of growers of sugarcane who supplied sugarcane to the appellant which is a sugar manufacturing factory. The use and supply of sugarcane is  controlled   under  the   provisions  of  the  Essential Commodities Act,  1955. The  Sugarcane Control  order,  1955 empowers the  Government to fix the minimum price payable by the manufacturer  of sugar  to the  grower of  sugarcane. In 1962, the  Sugarcane Control  (Additional Powers)  Act  1962 came into existence. Pursuant to the Powers conferred by the 1962 Act,  the Central  Government amended  the 1955 Control order by  introducing clause  3A providing  for  payment  of additional price for sugarcane purchased by the producers of sugar. The  1955 Control  order was repealed and replaced by the  Sugarcane   Control  order  1966.  The  respondent  are recognised by  the Government of India and the appellant for the purpose  of 1966 Control order. Under the 1966 order the Government was  competent to  denote an area where sugarcane is grown as a reserved area for factory. The sugarcane grown in that area is required to be sold to the allotted factory. The Government  controls all aspects of the use of sugarcane grown in  the reserved  area. The  1966 order  provides  for fixation  of   minimum  price   of  sugarcane   payable   by manufacturers of  sugar to  the growers.  In determining the minimum price  the  Government  is  required  to  take  into account (i)  cost of production of sugarcane, (ii) return to the grower  from alternative  crops and the general trend of prices Of  agricultural commodities;  (iii) the availability of sugar  to the consumer at a fair price; (iv) the price at which sugar  is sold  by the producers; and (v) the recovery

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of sugar from sugarcane.      The 1966  Control order further provides for payment of additional price  in  addition  to  the  minimum  price.  On determination of  the price  the same  ‘ is  required to  be intimated in  writing to  the producers of sugar, growers Co operative  Societies   of  Growers  or  the  local  Growers’ Association. An  appeal is  provided to  the  Government  of India against  the determination  of the  additional  price. Clause 5(3)  of the  1966 Control order provides that if the Central Government  is satisfied  that  during  any  year  a factory has  made no  profit or  has made  inadequate profit that Government  may exempt  either wholly  or partially any producer of  sugar from payment of the additional price. The relevant  authority  under  the  1966  Control  order  fixed additional  price   payable  by   the  appellants   to   the respondent. No  appeal was preferred either by the appellant or the respondent.      The  appellants  did  not  pay  the  additional  price. appellant made  applications seeking exemption on the ground that  the   appellants  had  made  inadequate  profits.  The Government exempted  the appellants from paying whose of the additional price  for  the  year  1961-62  and  reduced  the additional price  for the  year 1960-61  without giving  any opportunity of being heard to the respondent The respondents challenged the  validity of the grant of exemption by filing a writ  petition in  the High  Court. The High Court allowed the said  writ petition  on the ground that the order of the Central Government  was violative  of principles  of natural justice, since  no opportunity  was given to the respondents to be heard in the matter. 741      Dismissing the appeal by certificate, ^      HELD: (1)  Clause 5(1)  provides  for  the  payment  of additional price  and II -clause 5(3) provides for exemption from the  payment of  additional price. Clause 5(5) provides for filing an appeal to the Central Government by any person feeling  aggrieved  by  the  decision  of  the  fixation  of additional price.  The power  to grant  exemption cannot  be said to  be independent of the provisions of clause 5 of tho order. The  object of 1966 control order is to promote sugar industry and  to eliminate  unnecessary impediments  in  The production of  sugar. It  also ensures  a fair  deal to  the growers of  the sugarcane.  The provisions  of  the  control order are  intended to  maintain harmony between the Growers of sugarcane  and the  producers of sugar and to enable both of them  to share  profits reasonably.  It. is  necessary to give opportunity  to be  heard both  to the  growers of  the sugarcane as  well  as  the  producers  of  sugar  when  the Government exercises  powers under  1966 Control  order  for determining the additional price and granting exemption from payment of additional price. [744 H, 745 A-E]      (2) The  grant  of  exemption  from  payment  of  price affects rights  and interests  of the  growers of sugarcane. The order  of exemption  takes away rights which had accrued in favour  of the  growers of  sugarcane. It  is,  therefore necessary for  the Government to consider the points of view or objections  of the growers on the application made by the factories producing  sugar seeking exemption from payment of additional price. [745F, G, 746A]      (3) The  situations in  which a  duty will arise to act judicially  according   to.  natural   justice   cannot   be exhaustively enumerated. A duty to act judicially will arise in the  exercise of  power to deprive a person of legitimate interest or expectation that additional price would be paid.

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The factors  which point  to an exercise of power judicially are the nature of interest to be affected. the circumstances in which  the power  falls to be exercised and the nature of the sanctions, if any, involved. [746 C]      (4) It  is clear  that the  purpose and  purport of the 1966 Control  order point to the inescapable conclusion that the  sugarcane  growers  are  to  be  heard  not  only  when additional price is fixed but also when exemption is granted to factories from payment of additional price. [746 D]

JUDGMENT:      CIVIL APPELLATE  JURISDICTION: Civil  Appeals Nos. 2070 to 2074 of 1970.      From the  Judgment and  order dated 4th day of May 1970 of the  Bangalore High  Court in  Writ Petitions  Nos. 3958, 4035/68, 18 and 19 of 1969.      V.S.Desai, P.  C. Bhartari,  J. B.  Dadachanji,  o.  c. Mathur and R. Narain for the appellant.      A. K.  Sen and S. S.Javali and B.P.Singh for Respondent No. 1.      S. N.  Prasad and  S. P.  Naydt for Respondent-Union of India.      The Judgment of the Court was delivered by      RAY, C.J.  These appeals  are by  certificate from  the judgment of  the High Court of Mysore dated 4 May, 1970. The several  respondent   Co-operative  Societies   filed   writ petitions in  the High  Court for  quashing orders  dated 11 September 11  1968 passed  by the  Government of  India. The impeached orders  granted exemption, partially or wholly, to the appellant  under clause  5(3) of  the Sugar Cane Control Order, 1966  (hereinafter referred  to as  the 1966  Control Order) 742      from the  payment of additional cane price fixed by the Price Fixation  Authority under  clause  5(4)  of  the  1566 Control order.  The High Court quashed the orders challenged by the respondents.      The use and supply of sugarcane is controlled under the provisions of  the  Essential  Commodities  Act,  1955.  The Government of India promulgated the Sugar Cane Control order on 27  August 1955.  The 1955  Control Order  empowered  the Government, inter  alia, to fix the minimum price payable by the manufacturer  of sugar  to the  grower of sugarcane. The Government was  competent to  fix different prices depending on the  areas and  qualities of sugarcane or on the basis of recovery of  sugar from  sugarcane. In  1966 the  Sugar Cane Control (Additional  Powers) Act, 1962 came in existence. In pursuance of  powers conferred  by the  1962 Act the Central Government amended  the 1955  Control order  by  introducing clause 3A  providing for  payment of  additional  price  for sugarcane purchased by producers of sugar during each of the four successive years beginning from 1 November 1958.      The 1955 Control order was repealed and replaced by the Sugar cane  Control  order,  1966  to  which  reference  has already been  made. The  1966 Control order saved all orders made and  actions taken  under  the  repealed  order.  Under clause 6  of the  1966  Control  order  the  Government  was competent to  denote an  area where  sugarcane is grown is a reserved area  for a  factory. The  sugarcane grown  in that area is  required to  be sold  to the  factory allotted. The Central Government  determines the  quantity of sugarcane to be supplied  by the  growers in  the reserved  area and  the quantity  of   sugarcane  which  the  factory  requires  for

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crushing during  any year. The growers are required to enter into agreements  with the factory to supply sugarcane of the quantity fixed  under the  provisions of  the  1966  Control order. Restrictions  are placed  on the  growers from  using sugarcane grown  by them  for other purposes. The Government thus controls  all aspects  of the use of sugarcane grown hl the reserved  area. It can prohibit or restrict or otherwise regulate export  of sugarcane from any area except under and in accordance with a permit issued in that behalf.      Clause  3  of  the  1966  Control  order  provides  for fixation  of   minimum  price   of  sugarcane   payable   by manufacturers of  sugar to  the growers.  In determining the minimum price,  the Government  is  required  to  take  into account (a)  cost of  production of sugarcane, (b) return to the grower  from alternative  crops and the general trend of prices of  agricultural commodities; (c) the availability of sugar to  the Consumer  at a  fair price;  (d) the  price at which sugar  produced from sugarcane is sold by producers of sugar; and (e) the recovery of sugar from sugarcane.      Clause 5 of the 1966 Control order provides for payment of additional  price. Sub-clause  (1) of  clause 5  provides that in  respect of  sugarcane purchased,  by  producers  of sugar during  each of  the four  successive years  beginning from 1 November 1958, the producer is 743 required to  pay an  additional price  in  addition  to  the minimum price A fixed’ under clause 3(1) of the 1966 Control Order. The  additional price  is fixed  accordance with  the provisions of  the Schedules  to the Order. On determination of the  price, the  same is  required  to  be  intimate,  in writing to  the  producer  of  sugar,  growers,  Cooperative Societies of  growers or  the local growers association. Sub clause (5)  of clause  5 of  the 1966 Control order provides for an  appeal to  the Government of India from the decision determining additional price.      The relevant  provision for  purposes  of  the  present appeals is  sub. clause (3) of clause 5 of the. 1966 control order. Sub clause (3) is as follows :           "If  the  Central  Government  is  satisfied  that      during any  year a  factory has  made no  profit or has      made inadequate  profit, that  Government, may by order      in writing,  exempt either  wholly  or  partially,  any      producer of  sugar from payment of the additional price      due  from  him  under  sub-clause  (1)  in  respect  of      sugarcane purchased for that factory during that year.      The appellant in Civil Appeals No. 2070-2074 of 1970 is the factory  situate at  Hospet manufacturing  sugar.    The appellant buys  sugarcane from  growers in the area reserved for the  said factory.  The  respondent  is  a  co-operative society  of   growers  of  sugarcane  who  k  have  supplied sugarcane to  the appellant  factory.  The  members  of  the societies entered  into agreement with the appellant factory through  the   respondent  societies   for  the   supply  of sugarcane. The  societies  advanced  monies  to  the  grower members for their agricultural operations. The societies are recognised both by the Government of India and the appellant factory for the purpose of the 1966 Control order.      The minimum  price fixed by the Government of India for the  seasons subsequent to 1958-59 was said by the sugarcane growers  to   be  inadequate.  The  growers  felt  that  the factories manufacturing   sugar were making profits from the sale of  sugar and  that the  minimum  price  fixed  by  the Government for supply of sugarcane did not bear any rational relation to  the market  price or to the profits made by the producers of  sugar. The  growers experienced  impact of  in

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crease in the cost of growing sugarcane and the restrictions placed  by  the  Government  preventing  them  from  selling sugarcane to  persons or  at prices  of  their  choice.  The growers were  also prevented  from   converting sugarcane to "gur" except  in accordance  with the terms  of a license to be obtained.  In partial  redress of  the hardship caused to the sugarcane growers Parliament introduced clause 3A to the Sugar-Cane  Control   (Additional  Powers)   Act,  1962  for fixation  of   additional  prices  for  sugarcane  for  four successive years  commencing 1 November, 1958. The provision was thereafter incorporated in the 1966 Control Order.      The relevant  Authority under the 1966 Control order on 3 July,  1968 fixed  the additional  price  payable  by  the appellant to the cane 744 growers for  sugarcane supplied  during the  seasons 1960-61 and 1961 62 at Rs. 4.16 and Rs. 6.09 respectively per metric ton. This was  made payable in addition to the payments made by the  factory to  the growers  during the said seasons. No appeal was  preferred either  by the appellant factory or by the respondent  Cooperative Societies  under clause 5 of the 1966 Control  order.  The  additional  price  faced  by  the Authority thereby became final.      The appellant,  however, did  not  pay  the  additional price. The   respondent  received  copies  of  communication dated 11  September 1968  sent by the Government of India to the appellant  exempting it,  from  making  payment  of  the aforesaid additional  price. It  appears that the said order was made  pursuant to  applications made  on behalf  of  the appellant on  or about 11 July 1968 seeking exemption on the ground that  the appellant  had made inadequate profits. The Government communication dated 11 September 1968 stated that it was satisfied that the profits made by the appellant were inadequate. The  Government wholly  exempted  the  appellant from paying the additional price form the season 1961-62 and reduced the  additional price  for the  season 1960-61  from 4.16 to 0.70 NP per metric ton.      The respondent  challenged the validity of the order of the Government granting exemption wholly or partially to the appellant. The  High Court  accepted the  contention of  the respondent  on  the  ground  that  the  impugned  order  was violative of  principles of  natural  justice,  because  the Government failed  to afford  any opportunity to the growers to be heard in the matter.      The respondent  contended that  the power  of exemption affected the  right of  growers to  get additional price for sugarcane supplied  by them  and that the Central Government was  required  to  exercise  the  power  judicially  and  in conformity with the principles of natural justice.      Two questions arise for determination in these appeals. First, whether in view of the 1966 Control order opportunity should have been given to the respondent when the Government wanted to  grant   exemption, wholly  or partially,  to  the appellant from  paying additional price. Second, whether the High Court  was right  in giving direction to the Government to consider giving of an opportunity to the respondent.      The appellant  sugar factory  contends  that  the  cane growers were  not required  to be  heard when the Government grantee  exemption   to  the   factories  from   payment  of additional price. The respondent cane growers contend to the contrary.      Clause  5   of  the   1966  Control  order  relates  to additional price  for sugarcane.  Clause 5  (1) of the order speaks  of   payment  of   additional  price  found  due  in accordance, with the provisions of the Schedule. Clause S(3)

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of the  1966 Control  order speaks of exemption from payment of additional  price. Clause  5(4) speaks  of appointment by the  Central  Government  of  persons  for  determining  the additional   price under  clause 5(1)  of the  1966  Control order. Clause 745 5(5)  states  that  any  producer  of  sugar  or  grower  of sugarcane  or   growers’  cooperative   society  who   feels aggrieved  by  any  decision  of  the  person  or  authority referred to  in sub-clause  (4) may  appeal  to  he  Central Government.      In the  background of  these provisions,  the appellant contends that  the power  to grant  exemption is  where  the Government is  satisfied that in any year a factory has made no profit  or has made inadequate profit and the same should be determined  from the  balance sheet  and profit  and loss accounts of a company and there is no obligation to hear any party.  It   is  also   said  by   the  appellant  that  the determination of  additional price  and the  exemption  from payment  of   the  additional  price  are  separate  matters independent of  each other.  The appellant further contended that right  to additional  price could  not vest in the cane growers until the manner of payment had been decided upon by the Central Government under clause 5(6) of the 1966 Control order, These contentions are unacceptable.      The provision  for granting  exemption is  part of  the procedure prescribed  by clause $ of the 1966 Control order. The  power   to  grant   exemption  cannot  be  said  to  be independent of  the provisions  under clause 5 of the order. The object  of the  1966 Control  order is  to promote sugar industry and  to eliminate  unnecessary impediments  in  the production of  sugar. It  also ensures  a fair  deal to  the growers of  sugarcane. The  provisions of  the Control order are intended  to maintain  harmony between  the  growers  of sugarcane and  the producers  of sugar and to enable both of them to  share  profits  reasonably.  Therefore,  the  power conferred on  the Government  is required  to  be  exercised having regard  to the viewpoints of the growers of sugarcane as well  as the  producers of sugar. It is necessary to give opportunity to  the growers  of sugarcane  as  well  as  the producers of sugar to be heard when the Government exercises powers  under   1966  Control   order  for  determining  the additional price  and granting  exemption  from  payment  of additional price.      The grant,  of exemption  from payment of price affects rights and  interests  of  the  growers  of  sugarcane.  The Control order  contains elaborate  machinery for fixation of additional price  having regard to all relevant factors. The additional price  fixation authority afforded opportunity to both the  growers of  sugarcane as  well as the producers of sugar to  be heard  in the  determination of  the additional price. The  subsequent  order  by  the  Government  granting exemption to  the factories  for payment of additional price takes away  rights which  had a  accrued in  favour  of  the growers of sugarcane.      The manner  of payment of additional price under clause S(6) of the 1966 Control order does not affect the right and interest of  growers. ln providing for payment of additional price, the  additional price  fixation authority  takes into account  the   relevant  considerations   relating  to   the conditions of  sugarcane growers as well as the promotion of the  sugar   industry  during   the  relevant   period.  The additional price  fixation  authority’  also  considers  the conditions  and  circumstances  relating  to  the  appellant factory in determining the additional

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746 price  payable.   It,  is,   therefore,  necessary  for  the Government to invite the points of view or objections of the growers on  the application  made by the factories producing sugar seeking exemption from payment of additional price. It is equally  necessary for the Government to hear the growers of sugarcane  in order to satisfy itself as to the bona fide and accuracy  of the  appellant’s claim  for exemption.  The growers should  be given  an opportunity to show whether the claim  by  the  appellant  for  exemption  from  payment  of additional price should or should not be granted.      The power  to grant exemption to factories from payment of additional  price is  ultimately connected with the right of  sugarcane   growers  to   claim  additional  price.  The situations in  which a  duty will  arise to  act  judicially according  to   natural  justice   cannot  be   exhaustively enumerated. A  duty to  act judicially  will  arise  in  the exercise of  a power  to  deprive  a  person  of  legitimate interest or expectation that additional price would be paid. The factors  which power to an exercise of powers judicially are  the   nature  of  the  interest  to  be  affected,  the circumstances in  which the  power falls to be exercised and the nature of the sanction, if any, involved.      It is  clear that  the purpose  and purport of the 1966 Control order,  the scheme of having sugarcane growing areas reserved for  factories and  in particular,  the payment  of additional price  point to  the inescapable  conclusion that the  sugarcane  growers  are  to  be  heard  not  only  when additional price  is filed  but also  when any  exemption is granted to factories from payment of additional price.      For these  reasons, the  judgment of  the High Court is affirmed. The appeals are dismissed. Each party will pay and bear its own costs. P.H.P.                                    Appeals dismissed. 747