http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 1 of 35  

PETITIONER: LAXMI KHANDSARI ETC. ETC.

       Vs.

RESPONDENT: STATE OF U.P. & ORS.

DATE OF JUDGMENT09/03/1981

BENCH: FAZALALI, SYED MURTAZA BENCH: FAZALALI, SYED MURTAZA KOSHAL, A.D.

CITATION:  1981 AIR  873            1981 SCR  (3)  92  1981 SCC  (2) 600        1981 SCALE  (1)455  CITATOR INFO :  F          1987 SC1867  (6)

ACT:      Essential Commodities  Act 1955,  S.  3  and  Sugarcane (Control)  Order   1966,  Clause   8-Notification  by   Cane Commissioner-Imposition of  a ban  for a  month and  half on operation of  power crushers  of Khandsari units in reserved area of  mill-Validity of-Exemption  in favour  of  vertical power crushers-Whether discriminatory and justified.

HEADNOTE:      In the  State of  Uttar Pradesh, sugarcane was produced by the  sugar mills  through the  ’hydraulic process’ and by the power  crushers through the ’open pan process’. Both the mills as  also the  crushers drew their raw material, namely sugarcane from  sugarcane growers.  In order  to  facilitate production by the sugar mills, most of which were controlled by the  State, reserved area of the fields growing sugarcane was fixed through out the State.      With a  view to removing nation-wide shortage of sugar, enhancing  sugar   production  and  achieving  an  equitable distribution of  the commodity so as to make it available to consumers at  reasonable rates,  the  Cane  Commissioner  in exercise of  the powers  conferred under  clause (8)  of the Sugarcane (Control)  Order, 1966 issued a notification dated 9th October, 1980 which directed that no power crusher other than vertical  power crushers  manufacturing gur or rab from sugarcane grown  on their  own fields or a Khandsari unit or any agent of such owner in the reserved area of a mill could be worked until December 1, 1980.      The petitioners  who were  owners of  power crushers of Khandsari units and had taken out regular licences under the Uttar Pradesh  Khandsari Sugar Manufacturers Licensing Order 1967, assailed  the notification  which limited  the ban  to work power  crushers for  a period  of one  month and a half i.e. from  October 9.  1980 to  December  1,  1980  in  writ petitions  to   this  Court.   They   contended:   (1)   The notification, as  also the  Control Order under which it was passed  are   violative  of   Article   19(1)(g)   and   the restrictions contained therein do not contain the quality of reasonableness. (2)  Clause 8  of the  Control  Order  under which the notification had been issued suffers from the vice

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 2 of 35  

of  excessive   delegation  of  powers  and  is,  therefore, violative  of   Article  14   of   the   Constitution.   The Notification seeks  to establish a monopoly in favour of the sugar mills  at the  cost of  the petitioners,  and must  be struck down  as being  violative of Article 14. (3) There is no rational  nexus between  the prohibition contained in the Notification preventing  the crushers  of  petitioners  from working them and the object sought to be achieved by it. (4) Clause 8  of  the  Control  Order  does  not  contemplate  a complete prohibition  of the  production of  an article  but envisages only  a regulation  of  the  period  of  hours  of working. (5)  The Notification  violates the  principles  of natural justice  inasmuch as  it was  passed without hearing the petitioners whose rights were curtailed as they were put completely out  of production. (6) The impugned Notification by imposing  a prohibition  against the working of the power crushers amounts  to a  partial revocation  of the  licences granted to the petitioners under clause 3 of the 93 Licensing Order  and is,  therefore violative  of clause 11. (7) The  impugned  Notification goes against the very spirit and object  of the  Act of  1955 and in fact, frustrates the equal distribution  and production  of sugar  which was  the objective of the Notification.      On behalf  of the  respondent-State  it  was  submitted that: (1)  An order  passed under  clause 8  of the  Control Order is  of  a  legislative  character  and  therefore  the question of  the application  of the  principles of  natural justice, does  not arise.  (2)  The  notification  does  not violate Article  14 or  Article 19  because it  is in public interest and  aimed at  maintaining and  securing proper and equitable distribution  of sugar.  (3) The  Notification  is justified by  the fact  that  the  recovery  of  sugar  from sugarcane in  case of  Khandsari units run by power crushers is between  4 to  6 per  cent whereas  in the  case of sugar factories it  ranges between  9-1/2 to  11-1/2 per  cent, so that utilisation of sugarcane in the case of mills is double of that  of the power crusher. (4) The Khandsari produced by the crushers  has got a very narrow sphere of consumption as it is  used mostly  by halwais  or villagers,  whereas sugar produced by  the sugar  mills  is  consumed  in  far  larger quantities by  the public.  The action  taken  in  order  to protect national  interest and  distribution of sugar to the entire country  on rational  basis cannot  be said  to be an unreasonable restriction.  (5) There  is a marked difference between the  quality of Khandsari and that of sugar produced by the mills in their character, specification, etc. (6) The question of  natural justice  does  not  arise  because  the crusher owners  were fully  aware of  the situation  and had also knowledge  of the  considerations which  prevailed with the Government  in stopping  crushers for  a short period in order to boost production by the sugar mills and fix support price for  the sugarcane supplied to the mills. (7) Clause 8 of the Control Order uses the words period or working hours’ which are  wide enough to embrace within their ambit a fixed period of  time covering  more than  a day  as also hours of work on any working day.      Dismissing the writ petitions and appeals, ^      HELD: The  impugned  Notification  cannot  be  said  to contain the  quality of  unreasonableness but is per se fair and reasonable. In so far as the word ’vertical’ used in the Notification is  concerned, it  must be struck down as being violative of  Article 14. This, however, does not render the entire Notification  void because  the  word  ’vertical’  is

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 3 of 35  

clearly  severable   from  the   other   portions   of   the Notification. All  that has  to  be  done  is  to  read  the Notification void because the word ’vertical’ as a result of which the exemptions from the ban will include all owners of power  crushers   whether  vertical   or  horizontal   which manufacture Gur or rab from sugarcane grown on their fields. As the  Notification has  already spent  its force,  if  any order is passed in future, the Government will see that such an invidious  discrimination is  not repeated.  [134F; 124H- 125B]      1(i) Where  a citizen  complains of  the  violation  of fundamental rights  contained in  any of  sub-clauses (a) to (g) of  Article 19  the onus  is on  the State  to prove  or justify that  the restraint  or restrictions  imposed on the fundamental rights  under clauses  2 to 6 of the Article are reasonable. [104 C]      Saghir Ahmed  v. The  State of  U.P. and  Ors. [1955] 1 S.C.R. 707 and Mohammed Faruk v. State of Madhya Pradesh and Ors. [1959] 1 S.C.C. 853. 94      (ii) Fundamental  rights enshrined  in Part  III of the Constitution are  neither absolute  nor  unlimited  but  are subject to  reasonable restrictions  which may be imposed by the State in public interest under clauses 2 to 6 of Article 19. What  are reasonable restrictions would naturally depend on the  nature and  circumstances of the case, the character of the  statute, the  object which  it seeks  to serve,  the existing circumstances,  the extent of the evil sought to be remedied as  also the  nature of  restraint  or  restriction placed on the rights of the citizen. No hard or fast rule of universal  application   can  be   laid  down,  but  if  the restriction  imposed   appear  to  be  consistent  with  the Directive Principles  of State  Policy they would have to be upheld  as   the  same  would  be  in  public  interest  and manifestly reasonable. [105D-E, G]      (iii) Restrictions  may be partial, complete, permanent or temporary  but they  must bear  a close  nexus  with  the object in  the interest of which they are imposed. Sometimes even a  complete prohibition  of the  fundamental  right  to trade may  be upheld  if the commodity in which the trade is carried on is essential to the life of the community and the said restriction  has been  imposed for  limited  period  in order to achieve the goal. Freezing of stocks of food-grains in order  to secure  equitable distribution and availability on  fair   prices  have   been  held   to  be  a  reasonable restriction. [105-106A, C]      Narendra Kumar  and Ors. v. The Union of India and Ors. [1960] 2  S.C.R. 375, M/s. Diwan Sugar and General Mills (P) Ltd. and  Ors.  v.  The  Union  of  India,  [1959]  2  Supp. S.C.R.123 and  The State  of Rajsthan  v. Nath Mal and Mitha Mal, [1954] S.C.R. 982 referred to.      (iv) In  determining the reasonableness of restrictions imposed by  law in the field of industry, trade or commerce, the mere  fact  that  some  of  the  persons  engaged  in  a particular trade  may incur  loss due  to the  imposition of restrictions will not render them unreasonable because it is manifest that  trade and  industry pass  through periods  of prosperity and  adversity on  account of economic, social or political factors.  In a  free economy,  controls have to be introduced to  ensure availability  of consumer  goods, like food-stuffs, cloth  or the  like at  a fair  price  and  the fixation  of   such  a   price  cannot  be  said  to  be  an unreasonable restriction. [107-A-B]      (v)  Where   restrictions  are  imposed  on  a  citizen carrying on  a trade  or commerce in an essential commodity,

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 4 of 35  

the aspect  of controlled  economy and  fair  and  equitable distribution to  the consumer  at a reasonable price leaving an  appreciable   margin  of   profit  to  the  producer  is undoubtedly  a   consideration  which   does  not  make  the restriction unreasonable. [107 C]      State of  Madras v.  V.G. Row,  [1960]  2  S.C.R.  375, Mineral Development  Ltd. v.  The State  of Bihar  and Anr., [1960]  2  S.C.R.  609,  Collector  of  Customs,  Madras  v. Nathella Sampathu  Chetty and  Anr. [1962]3  S.C.R. 786  and M/s. Diwan  Sugar and  General Mills  (P.) Ltd.  and Ors. v. U.O.I. [1959] 2 Supp. S.C.R. 123 referred to.      (vi) A  restriction on the right of a trader dealing in essential  commodities,  or  fixation  of  prices  aimed  at bringing about distribution of essential commodities keeping the consumers interests as the prime consideration cannot be regarded as unreasonable. [110 C]      In the  instant case,  the Petitioners  by  rushing  to Court the  moment the  Notification was issued, deprived the State as also themselves of the actual con- 95 sequences of  the notification  and the  prejudice which  it really may  have caused.  They  did  not  at  all  show  any patience  in  waiting  for  a  while  to  find  out  if  the experiment functioned  successfully and in the long run paid good dividends.  As the petitioners obtained stay orders the experiment  died   a  natural  death  and  the  Notification remained ineffective. [111D-E]      Prag Ice and Oil Mills and Anr. etc. v. Union of India, [1978] 3 S.C.R. 293, referred to.      (vii) In  the case  of essential commodities like sugar the question  of the  economic production  and  distribution thereof must  enter the verdict of the Court in deciding the reasonableness of  the restrictions.  In such  cases even if the margin  of profit  left to the procedure is slashed that would not  make the  restriction unreasonable. The reason is that such a trade or commerce is subject to rise and fall in prices and  other diverse  factors, and  if any  measure  is taken to  strike a just balance between the danger sought to be averted  and the  temporary deprivation of the right of a citizen to  carry on his trade, it will have to be upheld as reasonable restriction. [112 G-113A]      Shree Meenakshi  Mills Ltd.  v. U.O.I.  [1974] 2 S.C.R. 398 and  Saraswati Industrial Syndicate Ltd. v. U.O.I.[1975] 1 S.C.R. 956 referred to.      (viii) The  restriction imposed  by the Notification in stopping the  crushers for  the period  10th October  to 1st December, 1980  is in public interest and bears a reasonable nexus to  the object which is sought to be achieved, namely, to reduce  shortage of  sugar and  ensure a  more  equitable distribution of this commodity. Taking an overall picture of the history  of sugar  production it cannot be said that the stoppage of  sugar crushers  for  a  short  period  is  more excessive than the situation demanded.      Madhya Bharat Cotton Association Ltd. v. Union of India and Anr. A.I.R. 1954 S.C. 634 referred to.      2(i) The  Control  Order  has  been  passed  under  the authority of  section 3  of the  Act of  1955 which has been held to  be  constitutionally  valid  and  not  in  any  way discriminatory so  as to  attract Article  14.  The  Control Order itself  contains  sufficient  guidelines,  checks  and balances to  prevent any  misuse or  abuse of the power. The Central Government  under clause  8 on  whom  the  power  is conferred is  undoubtedly a  very high authority who must be presumed to act in a just and reasonable manner. [119 E-F]      Chinta Lingam  and Ors. v. Government of India and Ors.

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 5 of 35  

[1971] 2  S.C.R. 871 and V.C. Shukla v. State (Delhi Admn.), [1980] 3 S.C.R. 500.      (ii) There  was no question of creating any monopoly to benefit the  mills. A  very large majority of the mills were controlled by the State or co-operative societies and only a small fraction  of them  were working in the private sector. In view  of the low working cost of the crushers they sought to outcompete  the mills  and deprive  them of the requisite amount of  sugarcane which  they should have got. It was not only just  but also essential to boost the production of the factories so  that while  sugar may  be produced  on a large scale and  sugarcane may not be wasted which would have been the case if most of the sugarcane went 96 to the crusher. The recovery of sugarcane juice by the mills is double  that by  the crushers  and  if  the  latter  were allowed to operate the wastage would have been almost 50 per cent which  could have been avoided if sugarcane was allowed to be utilised by the mills. [121 E-G]      (iii) If  in the  larger  public  interest  it  becomes necessary  to   compel  the   sugarcane  growers  to  supply sugarcane to the mills at a particular rate in order to meet a national  crisis, no  person can  be heard to say that his rights  are  taken  away  in  an  unjust  or  discriminatory fashion. Personal  or individual interests must yield to the larger interests  of  community.  This  was  the  philosophy behind the passing of the Act of 1955. [123 F-G]      3. It  has not  been proved  that  there  is  any  real distinction  between  a  vertical  and  a  horizontal  power crusher. Both are regarded as falling in the same class. The Notification  by   exempting  vertical  power  crushers  and prohibiting   horizontal    power   crushers    is   clearly discriminatory and  the discrimination  is not  justified by any rational  nexus between  the prohibition  and the object sought to be achieved. [124 G]      4. (i)  Clause 8  used the words ’period or hours to be worked’. A plain reading of this expression reveals that the words ’period’  and ’hours’  have been  used to  connote  to different  aspects.  Clause  8  contemplates  regulation  of working of  the sugar by two separate methods-(1) Where only hours of  work per day are to be regulated or fixed, and (2) the word  ’period’ which has nothing to do with the hours to be worked  but it  refers to another category of regulation, namely, whether  a crusher is to run or not for a particular period of time. [125 D-E]      In the  instant case,  the Notification has resorted to the first  category, viz. the ’period’ of the working of the crushers, that is about one and a half month, and has not at all touched  or impinged  upon  the  working  hours  of  the crushers. If,  however, the  notification had  fixed certain hours of  the day during which only the crushers could work, then the Notification would have resorted to the alternative mode of  regulation, which  obviously has not been done. The impugned Notification  is, therefore, wholly consistent with the provisions  contained in  clause 8 of the Control Order. [125 G-126A]      5. (i)  Two prominent  features exclude  the  rules  of natural justice in the instant case. Section 3 of the Act of 1955 under  which the Control Order was passed really covers an emergent  situation so  as to  meet  a  national  crisis, involving the  availability or distribution of any essential commodity which may make it necessary to restrict or control the business  carried on  by a  citizen. There  was an acute shortage of  sugar which was not made available to consumers at  reasonable   rates  and  the  situation  caused  serious

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 6 of 35  

dissatisfaction among the people. Nothing short of immediate and emergent  measures taken to solve this crisis would have eased out  the situation.  If hearing  was to be given to so may owners  of power  crushers,  it  would  have  completely defeated and  frustrated the  very object  not only  of  the Notification but  also  of  the  Act  of  1955  and  created complications  which   may  have   resulted  in   a  further deterioration of  an already serious situation. If the rules of natural  justice were  not applied  in such  an  emergent case, the petitioners cannot be heard to complain. Afterall, the Notification  directed stoppage  of operation only for a very short  period and  the petitioners  would have  had  an opportunity of  recouping their loss after they were allowed to  function   because  the  proportion  of  consumption  of Khandsari Sugar was limited. 97 The petitioners  were, therefore,  not seriously  prejudiced but have  rushed to this Court rather prematurely. [128 B-C; F-129 A]      Mohinder Singh  Gill and  Anr. v.  The  Chief  Election Commissioner, New Delhi and Ors. [1978] 2 S.C.R. 272, Maneka Gandhi v.  U.O.I.  [1978]  2  S.C.R.  621,  S.L.  Kapoor  v. Jagmohan, [1980] 4 S.C.C. 379 and Prag Ice and Oil Mills and Anr. v. U.O.I. [1978] 3 S.C.R. 293, referred to.      (ii)  The   impugned  Notification   is  a  legislative measure.  The  rules  of  natural  justice  therefore  stand completely excluded  and no  question of hearing arises. The passing of  the notification  was a  trial and  error method adopted to  deal with  a very serious problem. [129 G-H, 130 F]      Chairman, Board  of  Mining  Examination  and  Anr.  v. Ramjee, [1977] 2 S.C.R. 904, Joseph Beauhernais v. People of the State of Illinois, 96 L.ed. 919 at 930 and Bates v. Lord Hailsham of St. Marylebone and Ors. [1972] 1 W.L.R. 1373; at 1378 referred to.      6. A  revocation of  licence means that the licence has not been  suspended but  cancelled for  all  times  to  come entailing civil  consequences and  complete abolition of the right for  the exercise  of which the licence was granted. A temporary suspension of the working of the crushers owned by the  petitioners  cannot  amount  to  a  revocation,  either complete or partial. The proviso to sub-clause (2) of clause 11 of  the Control  Order does not at all envisage a partial or periodical  revocation of  a licence.  The proviso  comes into play only if a licence is revoked or cancelled once for all. The  proviso is wholly inapplicable to the facts of the instant case. [132 C-D]      State of Maharashtra v. Mumbai Upnagar Gramodyog Sangh, [1969] 2 S.C.R. 392.      7. The  Notification ex-facie  cannot be  said to  have been passed  without due care and deliberation. The impugned Notification having  been passed  under section 3 of the Act it fulfils  all the conditions contained therein, viz. it is expedient for  maintaining or  increasing the  supply of  an essential commodity,  namely  sugar  which  is  included  in clause (e)  of the  section 3  of the  Act of  1955  and  it regulates the  supply  and  distribution  of  the  essential commodities of  the trade  and commerce. Neither the Control Order nor the impugned Notification is against the tenor and spirit of  section  3.  It  is  manifestly  clear  from  the circumstances disclosed  that it  is in pursuance of the aim and object  for which  section 3 was enshrined in the Act of 1955 that  the  Control  Order  and  the  Notification  were promulgated. [133E; H-134 C]      8. In case Government decides to impose a ban in future

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 7 of 35  

on the power crushers or other units, a bare minimum hearing not to  all the  owners of  Khandsari units  but to only one representative of  the Association  representing  them,  and getting  their   views,  would   help  the   Government   in formulating  its  policy.  Even  if  an  emergent  situation arises, a  representation against the proposed action may be called for from such Association and considered after giving the shortest possible notice. [135A-B]      9. Whenever  any steps for banning production is taken, the Government  has to  evolve some  procedure to detect the defaulters and  ensure compliance  of the baning order. [136 C] 98

JUDGMENT:      ORIGINAL  JURISDICTION:   Writ  Petitions   Nos.  5637- 41,5643-45,  5646-47,5649-51,  5597-98,5553-67,5609-11,5516- 20,5623-28,5657, 5673-74,5702-23,5668,  5659-67,5733,  5740- 42, 5782-84, 5763-64, 5762,5747-52,5779-81,5745, 5785, 5737- 39, 5841-43, 5786-5797, 5861-62 and 5863-64 of 1980.           (Under Article 32 of the Constitution.)                             AND                Civil Appeal No. 2734 of 1980.      Appeal by  special leave  from the  Judgment and  Order dated 12.11.1980  of the  Allahabad High  Court  in  W.P.No. 3115/80.      R.A.  Gupta  for  the  Petitioners  in  WPs.5637-41/80, 5797,5733/80 and CA No.2734/80.      A.P.S. Chauhan,  Roopendra Singh Gajraj Singh, and C.K. Ratnaparkhi for the Petitioners in WP 5762/80.      B.S.  Chauhan,   Birj  Bihari  Singh  Sridhar  for  the Petitioner in WP 5745/80.      Rameshwar Dial  and Sarwa Mitter for the Petitioners in WPs 5782-84/80      R.K. Garg,  S.N. Kacker,  R.K. Jain  and R.P. Singh for the Petitioners  in WPs  5553-5567, 5616-5620,  5646,  5647, 5750-52, 5779-81,5623-28,5646-47,  5649-5651,5643-45,5702 to 5723, 5673-5674,5659  to  5667,5740-42,  5737-39  and  5841- 43/80.      R.P. Singh  for the  Petitioners in WPs 5609-11 & 5597- 98/80.      Soli J.Sorabjee,  Arvind Minocha and Mrs. Veena Minocha for the Petitioners in WP 5661/70.      Mohan Behari  Lal for  the Petitioners  in WPs 5785/80, 5786/80, and 5657/80.      A.K. Gupta for the Petitioners in WPs 5763-64/80.      Lal Narain  Sinha Att.  Genl.,  S.C.  Maheshwari  Addl. Advocate General  (U.P.), O.P.  Rana, Mrs.Shobha Dikshit for the Respondents in all the matters.      The Judgment of the Court was delivered by,      FAZAL ALI,  J. Inspired  by the  objective of  removing nation-wide  shortage  of  sugar  and  for  the  purpose  of enhancing sugar production 99 in  order  to  achieve  an  equitable  distribution  of  the commodity so  as  to  make  it  available  to  consumers  at reasonable rates and thereby relieving the sugar famine, the Cane Commissioner,  Government of Uttar Pradesh by virtue of a Notification  dated 9th October, 1980, acting under clause 8  of  the  Sugarcane  (Control)  Order,  1966  (hereinafter referred to  as the  ’Control Order’) directed that no power crusher, with certain exceptions, of a khandsari unit or any agent of  such owner in the reserved area of a mill could be

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 8 of 35  

worked until  December 1,  1980. The  exact contents  of the Notification may be extracted thus:           "Lucknow, Thursday 9th October 1980           In exercise  of the  powers under  clause 8 of the      Sugarcane (Control)  Order, 1966  read with the Central      Government, Ministry  of Food  & Agriculture, Community      Development  and   Cooperation  (Department  of  Food),      Government   of    India   Order   No.   GSR   122/Ess.      Comm/Sugarcane dated  July  16,  1966,  I,  Bhola  Nath      Tiwari, Cane  Commissioner, Uttar Pradesh hereby direct      that no  owner  of  power  Crusher  (other  than  those      vertical power  crushers which  manufacture Gur  or Rab      from  Sugarcane   grown  on  their  own  fields)  or  a      Khandsari Unit  or any agent of such owner shall in any      reserved  area,  of  any  Sugar  Mill  work  the  Power      Crusher, or  the Khandsari  Unit prior  to December  1,      1980 during the Year 1980-81.                                               By Order                                           Bhola Nath Tiwari                                           Cane Commissioner                                           Uttar Pradesh"      The Control  Order was passed by the Central Government in exercise  of the  powers conferred  on it  by s.3  of the Essential Commodities  Act, 1955 (hereinafter referred to as the ’Act  of 1955’).  In order to understand the contentions raised by  the parties  it may  be necessary  to analyse the prominent features  of the above Notification with reference to the situation it was intended to meet.      It is not disputed that sugar was being produced in the State of  U.P. by  the sugar mills through hydraulic process and by the power crushers through what is known as the ’open pan process’. Both the mills as also the crushers drew their raw material, namely, sugarcane, from the sugarcane growers. In order  to facilitate  production by the sugar mills, most of whom were controlled by the State, a reserved area of the fields growing sugarcane was fixed throughout the State 100 The Notification  applied only  to the  reserved areas  of a mill and  not to  any other  areas. In other words, any area which fell outside the reserved area was not affected by the Notification and  the power  crushers situated  in that area could still  manufacture Khandsari  by the open pan process. Thus,  it  would  be  seen  that  the  ban  imposed  by  the notification was  confined only  to a particular area in the State of U.P.      Secondly, the  Notification limited  the  ban  to  work power crushers  only to  a short  period of  one month and a half i.e.,  from  October  9,  1980  to  December  1,  1980. Thirdly, (and  it has  also not been disputed) the owners of power crushers  of khandsari  units, who are the petitioners in these  cases, had  taken out  regular licences  under the U.P. Khandsari  Sugar Manufacturers  Licensing Order of 1967 (hereinafter referred  to as  the  ’Licensing  Order’).  It, therefore, logically  follows that  the power crushers owned or worked by the conditions of the licences under which they were working  the crushers. Fourthly, what was prohibited by the Notification was only the manufacture of khandsari while the production  of gur  or rab  from sugarcane  grown in the fields belonging  to the owners of the crushers was left out of the ambit of the Notification.      We have  mentioned  these  essential  features  of  the Notification because the most important argument put forward before us  by the  counsel for the petitioners has been that it imposes  unreasonable restrictions  on the  right of  the petitioners under Art. 19(1)(g) of the Constitution to carry

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 9 of 35  

on their trade namely, production of khandsari. A subsidiary argument  buttressing  the  main  contention  was  that  the Notification intends  to create  a monopoly in favour of the sugar mills  at the  cost  of  the  crushers  owned  by  the petitioners and is, therefore, clearly violative not only of Art. 19(1)(g)  but also  of Art.  14 of the Constitution. We would, however,  deal with this aspect of the matter when we examine the  contentions  raised  by  the  counsel  for  the parties.      The Attorney-General, appearing for the Union of India, and Mr.  Maheshwari, Additional  Advocate-General  appearing for the  State of  U.P., contended that, decision to ban the power crushers  of the  petitioners was taken as a part of a high powered  policy to  boost the production of sugar which had fallen  during the  year 1979-80 with the result that in the current  year the country faced a great sugar famine. As the situation  called for  some positive  action to increase the production, the matter having been discussed at the 34th Annual Convention of 101 Sugar Technologists  of India,  it was  decided to  ban  the production of  khandsari by the power crushers for a limited period.      A  large   number  of   documents  in   the  nature  of affidavits, counter- affidavits, reports and books have been filed by  the counsel  for both  the parties  in support  of their respective  contentions. We  might also  mention  here that the  Notification has  since spent  its force  and,  in fact, was  not carried into effect because immediately after it was  issued the present writ petitions were filed in this Court and  the petitioners obtained stay of the operation of the Notification  from  this  Court.  The  Attorney-General, however, insisted  that the matter should be finally decided so that if the Central Government wants to take any steps of this  kind  in  future  it  may  be  aware  of  the  correct constitutional  or  legal  position.  The  petitioners  also insisted  that   the  constitutional   and  legal  questions involved in  these cases  may be  decided  even  though  our decision may be more or less of an academic value.      This brings us now to the various contentions raised by counsel for  the petitioners  and the  respondents.  As  the Notification has already spent its force, we propose to deal only with  the important  and relevant contentions that have been advanced before us.      The counsel for the petitioners headed by Mr. Garg, Mr. Mridul and others raised the following constitutional points before us :-           (1) The  Notification, as  also the  Control Order      under which  it was  passed are clearly violative of of      Art. 19(1)(g)  and the  restrictions  purported  to  be      placed on  the right  of the petitioners not do contain      the quality of reasonableness.           (2) Clause  8 of the Control Order under which the      impugned Notification  has been issued suffers from the      vice  of   excessive  delegation   of  powers  and  is,      therefore, violative of Article 14 of the Constitution.      By the  same token,  as the impugned Notification seeks      to establish a monopoly in favour of the sugar mills at      the cost  of the  petitioners, invidious discrimination      is writ  large on  the very  face of  the  Notification      which must  be struck  down as  being violative of Art.      14.           (3) There  is absolutely no rational nexus between      the   prohibition   contained   in   the   Notification      preventing the crushers of the petitioners from working

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 10 of 35  

    them and  the object sought to be achieved by it. Thus,      the State  had selected  the  petitioners  for  hostile      discrimination between one segment 102      and another  of persons  engaged  in  the  purchase  of      sugarcane, its  sale and  production of  sugar  without      striking a  just balance  between the  manufacturers of      gur, khandsari  and sugar.  India lives in villages and      it was  not understandable  why the  Central Government      was bent  on reducing  the support  price of  sugarcane      which was  adversely affecting  the  sugarcane  growers      because  while  the  mills  were  not  able  to  pay  a      reasonable price  the  crushers  were  able  to  pay  a      handsome price  for the  sugarcane supplied  to them by      the growers. When tested for reasonableness, therefore,      the Notification completely fails.           (4)  Clause  8  of  the  Control  Order  does  not      contemplate a complete prohibition of the production of      an article  but envisages  only  a  regulation  of  the      period or hours of working.           (5) The  Notification violates  the principles  of      natural justice  inasmuch  as  it  was  passed  without      hearing the  petitioners  whose  valuable  rights  were      curtailed as they were put completely out of production      even though for a short period.           (6) The  impugned Notification violative of clause      11  of   the  Control  Order  itself  inasmuch  as  the      prohibition against  the working  of the power crushers      amounts to  partial revocation  of the  licences of the      petitioners granted  to them  under  clause  3  of  the      Licensing Order. Clause 11 of the Control Order clearly      provides that no adverse orders could be passed against      any manufacturer without hearing him.           (7) Even though the impugned Notification purports      to have  been passed  under  the  Control  Order  which      itself was  passed under s. 3 of the Act of 1955 yet if      the  notification   is  properly   considered  and  the      mischief it  causes is  borne in  mind, it goes against      the very  spirt and  object of  the Act of 1955 and, in      fact, frustrates  the equal distribution and production      of sugar  which apparently seems to be the objective of      the impugned notification.      The  Attorney-General   and  the   Additional  Advocate General appearing  for the  Union of  India and the State of U.P. respectively  countered the  submissions  made  by  the petitioners on the following grounds:           (1) An  order passed under clause 8 of the Control      Order is  of a  legislative character and therefore the      question of the 103      application of  the principles of natural justice to it      does not arise.           (2) The  Notification does  not violate Art. 14 or      19 because  it is in great public interest and is aimed      at  maintaining   and  securing  proper  and  equitable      distribution of  sugar  in  view  of  the  nation  wide      shortage of the commodity.           (3) The Notification is justified by the fact that      recovery of  sugar from  sugarcane in case of khandsari      units run  by power crushers is between 4 to 6 per cent      whereas in  the  case  of  sugar  factories  it  ranges      between 9  1/2 to  11 1/2 per cent, so that utilisation      of sugarcane in the case of mills is double that of the      power crushers. In these circumstances, khandsari units      and mills  belong to two different classes which cannot

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 11 of 35  

    be said  to be  similarly situate so as to attract Art.      14 (vide  pp. 69-70  of W.P .5565-5567 of 1980 Bhagwati      Sugar Industry’s case).           (4) The khandsari produced by the crushers has got      a very  narrow sphere  of consumption  as  it  is  used      mostly by  halwais or villagers, whereas sugar produced      by the sugar mills is consumed in far larger quantities      by  the  public  in  India  generally  and  in  foreign      countries after export. Therefore, the sugar mills fall      within a  special class  and the  question  of  hostile      discrimination does  not arise.  Similarly, the  action      taken  in  order  to  protect  national  interests  and      distribution of  sugar  to  the  entire  country  on  a      rational basis  cannot be  said to  be an  unreasonable      restriction.           (5) There  is  a  marked  difference  between  the      quality of  khandsari and that of sugar produced by the      mills in their character, specification, etc., which is      evident from the various reports filed by the State.           (6) The question of natural justice does not arise      because the  crusher owners  were fully  aware  of  the      situation and  had also knowledge of the considerations      which  prevailed   with  the   Government  in  stopping      crushers  for   a  short   period  in  order  to  boost      production by the sugar mills and fix support price for      the sugarcane  supplied to  the mills.  However, as the      Notification has expired, if proper guidelines are laid      down by  the Court,  before passing  a fresh  order the      State will  certainly hear  the petitioners in order to      know their point of view. 104           (7) Clause  8 of  the Control Order uses the words      ‘period’ or  working hours’  which are  wide enough  to      embrace within  their ambit  a  fixed  period  of  time      covering more  than a  day as also hours of work on any      working day.      We might  also  mention  that  some  of  the  sugarcane growers  have   supported  the  arguments  advanced  by  the petitioners. We  now proceed  to scrutinise  and examine the contentions of the counsel for the petitioners.      On the  contention  according  to  which  the  impugned notification is  violative  of  Art.  19(1)(g),  it  may  be necessary to  dwell in  some detail.  It is  no  doubt  well settled that  where a  citizen complains of the violation of fundamental rights contained in sub-clause (g) of clause (1) of Art  19 or  for that  matter in any of sub clauses (a) to (g) thereof,  the onus  is on  the State to prove or justify that  the   restraint  or   restrictions  imposed   on   the fundamental rights  under clauses  2 to 6 of the Article are reasonable. In  the instant  case, we  are mainly  concerned with sub-clauses  4, 5  and 6 of Art.19. As far back as 1955 this Court  in Saghir Ahmad v. The State of U.P, and Ors.(1) made this position very clear and observed as follows :-           "There is  undoubtedly a  presumption in favour of      the constitutionality  of a  legislation. But  when the      enactment on  the face  of it  is found  to  violate  a      fundamental right guaranteed under article 19(1) (g) of      the Constitution,  it must be held to be invalid unless      those who  support the  legislation can bring it within      the purview of the exception laid down in clause (5) of      the article.  If  the  respondents  do  not  place  any      materials  before  the  Court  to  establish  that  the      legislation comes  within  the  permissible  limits  of      clause (6),  it is  surely not  for the  appellants  to      prove  negatively   that  the   legislation   was   not

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 12 of 35  

    reasonable and  was not conducive to the welfare of the      community."      A similar  view was taken in Mohammed Faruk v. State of Madhya  Pradesh  and  Ors.(2)  where  this  Court,  speaking through Shah,  J. reiterated the position mentioned above in the following words:           "When the  validity of  a law  placing restriction      upon the  exercise of  fundamental  rights  in  Article      19(1)  is  challenged,  the  onus  of  proving  to  the      satisfaction of  the  Court  that  the  restriction  is      reasonable lies upon the State." 105      We, therefore  fully agree with the contention advanced by the  petitioners that where there is a clear violation of Art. 19(1)(g),  the  State  has  to  justify  by  acceptable evidence, inevitable  consequences or  sufficient  materials that the  restriction, whether  partial or  complete, is  in public interest  and contains the quality of reasonableness. This proposition  has not  been disputed  by the counsel for the respondents,  who have, however, submitted that from the circumstances and  materials produced  by them  the onus  of proving that the restrictions are in public interest and are reasonable has been amply discharged by them.      This  brings   us  to  the  main  question  as  to  the circumstances under  which restriction  imposed by the State can be  said to  contain the  quality of reasonableness. For this purpose,  almost all the decisions of this Court on the subject have  been placed  before us and it may be necessary to notice  those of  them which  have a close bearing on the point at issue.      It  is   abundantly  clear   that  fundamental   rights enshrined in  Part  III  of  the  Constitution  are  neither absolute  nor   unlimited  but  are  subject  to  reasonable restrictions which  may be  imposed by  the State  in public interest under  clauses 2  to 6  of Art.19.  As to  what are reasonable restrictions would naturally depend on the nature and circumstances of the case, the character of the statute, the  object   which  it   seeks  to   serve,  the   existing circumstances, the  extent of the evil sought to be remedied as also the nature of restraint or restriction placed on the rights of  the citizen. It is difficult to lay down any hard or fast  rule of  universal application  but this  Court has consistently held  that in  imposing such  restrictions  the State must adopt an objective standard amounting to a social control by  restricting the rights of the citizens where the necessities of  the situation demand. It is manifest that in adopting   the   social   control   one   of   the   primary considerations which  should weigh with the Court is that as the directive  principles contained  in the Constitution aim at the  establishment of  an egalitarian  society so  as  to bring about  a welfare  state within  the frame-work  of the Constitution, these  principles also  should be kept in mind in  judging   the  question   as  to   whether  or  not  the restrictions are  reasonable. If  the  restrictions  imposed appear to  be consistent  with the  directive principles  of State policy  they would have to be upheld as the same would be in public interest and manifestly reasonable.      Further,  restrictions   may  by   partial,   complete, permanent or temporary but they must bear a close nexus with the object in the 106 interest  of  which  they  are  imposed.  Sometimes  even  a complete prohibition  of the  fundamental right to trade may be upheld  if the commodity in which the trade is carried on is essential  to the  life of  the community  and  the  said

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 13 of 35  

restriction has  been imposed  for a limited period in order to achieve the desired goal.      Another   important    consideration   is    that   the restrictions must  be in  public interest and are imposed by striking a just balance between the deprivation of right and the danger  or evil  sought to  be avoided. Thus freezing of stocks  of   food-grains  in   order  to   secure  equitable distribution and  availability on fair prices have been held to be  a reasonable  restriction in  the cases  of  Narendra Kumar and  Ors. v. The Union of India and Ors.(1) M/s. Diwan Sugar and  General Mills  (P) Ltd.  and Ors  v. The Union of India and  The State  of Rajasthan  v. Nath  Mal  and  Mitha Mal(3).      These are  some of  the general principles on the basis of which  the quality  of  reasonableness  of  a  particular restriction can  be judged  and have been lucidly adumbrated in State  of Madras v. V.G. Row’s(4) case. Another important test  that  has  been  laid  down  by  this  Court  is  that restrictions should  not be  excessive or  arbitrary and the Court must  examine the  direct and  immediate impact of the restrictions on  the rights of the citizens and determine if the  restrictions   are  in  larger  public  interest  while deciding the  question that  they  contain  the  quality  of reasonableness.      In such cases a doctrinaire approach should not be made but care  should be taken to see that the real purpose which is sought  to be  achieved by  restricting the rights of the citizens is  subserved. This  can be  done only by examining the nature  of the  social  control,  the  interest  of  the general public  which is  subserved by the restrictions, the existing circumstances  which necessitated the imposition of the restrictions,  the degree and urgency of the evil sought to be  mitigated by  the restrictions  and the period during which the  restrictions are  to remain in force. At the same time the  possibility of  an alternative  scheme which might have been  but has  not been  enforced would  not expose the restrictions to  challenge on  the ground  that they are not reasonable. 107      Finally,   in   determining   the   reasonableness   of restrictions imposed  by law in the field of industry, trade or commerce,  the mere fact that some of the persons engaged in a  particular trade  may incur loss due to the imposition of restrictions will not render them unreasonable because it is manifest  that trade and industry pass through periods of prosperity and  adversity on  account of economic, social or political factors.  In  a  free  economy  controls  have  be introduced to  ensure availability  of consumer  goods  like food-stuffs, cloth  or the  like at  a fair  price  and  the fixation  of   such  a   price  cannot  be  said  to  be  an unreasonable restriction in the circumstances.      Thus, apart  from the  various other  factors which  we have referred  to above  where restrictions are imposed on a citizen carrying  on a  trade or  commerce in  an  essential commodity, the  aspect of  controlled economy  and fair  and equitable distribution to the consumer at a reasonable price leaving an  appreciable margin  of profit to the producer is undoubtedly  a   consideration  which   does  not  make  the restriction unreasonable.      In fact,  the leading  case decided by this Court which may justly  be  regarded  as  the  locus  classicus  on  the questions as  to what  are reasonable  restrictions is  V.G. Row’s case  (supra) where  Patanjali Sastri,  C.J., speaking for the Court observed as follows:      "It is  important in  this context to bear in mind that

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 14 of 35  

    the test  of  reasonableness,  where  ever  prescribed,      should be  applied to each individual statute impugned,      and  no  abstract  standard,  or  general  pattern,  of      reasonableness can  be laid  down as  applicable to all      cases. The  nature of  the right  alleged to  have been      infringed, the  underlying purpose  of the restrictions      imposed, the  extent and  urgency of the evil sought to      be remedied thereby the disproportion of the imposition      the prevailing conditions at the time, should all enter      into the  judicial verdict.  In evaluating such elusive      factors and  forming their  own conception  of what  is      reasonable, in  all the  circumstances of a given case,      it is  inevitable that  the social  philosophy and  the      scale of  values of  the judges  participating  in  the      decision should  play an  important part, and the limit      to their interference with legislative judgment in such      cases  can   only  be   dictated  by   their  sense  of      responsibility  and  self-restraint  and  the  sobering      reflection that  the Constitution is meant not only for      people of  their way  of thinking but for all, and that      the majority  of the  elected  representatives  of  the      people have, in 108      authorising  the   imposition  of   the   restrictions,      considered them to be reasonable."      This case  was followed  in a  later decision  of  this Court in  Mineral Development Ltd. v. The State of Bihar and Anr.(1) where  after quoting  the observations  of Patanjali Sastri, C.J.,  as extracted  above, Subba  Rao, J., speaking for the Court observed as follows:-           "These observations,  if we  may say so with great      respect, lay  down the  correct principle.  It  follows      that it  is the  duty of  this Court  to decide, having      regard to  the aforesaid considerations and such others      whether a  particular statute  satisfies the  objective      test of ‘reasonableness’."      In the case of Collector of Customs, Madras v. Nathella Sampathu Chetty  and Anr.(2)  the observations  of Patanjali Sastri, C.J., were endorsed by this Court when Ayyangar, J., speaking for the Court, made the following observations:           "There are  several decisions  of  this  Court  in      which the  relevant criteria have been laid down but we      consider it  sufficient to  refer to  a passage  in the      judgment of  Patanjali Sastri, C.J., in State of Madras      v. V.G. Row."      In M/s.  Diwan Sugar  and General  Mills (Private) Ltd. and Ors.  v. U.O.I.(3)  which was also a case arising out of the Act  of  1955  and  the  Sugar  Control  Order  of  1955 promulgated by the Central Government under s. 3 of the said Act, a  Constitution Bench of this Court while examining the nature of  the restrictions  imposed in  that case took into account the various circumstances and observed :           "Clause 5 of the Order lays down the factors which      have to  be taken  into consideration in fixing prices.      These factors  include among  other things a reasonable      margin of  profit for the producer and/or trade and any      incidential charges.  This was kept in mind when prices      were fixed  by the  impugned notification... The prices      were prevalent  in the  free market  and must certainly      have taken  account of  a fair margin of profit for the      producer, though  in the  case of an individual factory      due to factors for which the producer might 109      himself be  responsible, the  cost of  production might      have been a little more. Therefore, the prices fixed by

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 15 of 35  

    the Government  by the  impugned notification can on no      circumstances be  said to  have been proved to be below      the cost of production."        ...     ...     ...           "In these  circumstances if price is fixed in this      area, price all over India is practically fixed, and it      is not  necessary to  fix prices  separately so  far as      factories in  other States  which are said to be mainly      deficit, are  concerned... There  is, therefore, in our      opinion, no discrimination in effect by the fixation of      prices in these three regions."      It will  be noticed that even though clause 5 had fixed prices,  the   Court  upheld   the  restrictions  because  a reasonable margin  of profit  for the  producer was left and did not  insist that  the producer should be allowed to have full sway in the production of sugar to the maximum capacity possible. Similarly  one of the important tests laid down by this Court  was that the price prevailing in the free market must be  taken into  account in  the formula  of fixation of price for  essential commodities secondly while dealing with the price  control imposed  on factories  in various States, this Court  held that  the policy of fixation of price could not be  challenged because States where they were fixed were deficit areas.  We might  mention here that the sheet anchor of the argument of the Attorney-General is that the impugned Notification was passed in order to relieve the sugar famine by boosting  the production of sugar by mills. Similarly, in Nath Mal and Mitha Mal’s case (supra), which was also a case dealing with  food-grains, an  order freezing  the stocks of the commodity  in order to secure its equitable distribution so as  to make it available at a fair price to consumers was upheld by the Court with the following observations:           "The  clause   authorises  the   Commissioner  and      various others  authorities mentioned  therein and such      other officers as may be authorised by the Commissioner      to frreeze  any stock of foodgrains held by a person...      Nor do we think that the  power to freeze the stocks of      foodgrains is  arbitrary  or  based  on  no  reasonable      basis.      ...                      ...                        ...           We are  clear, therefore,  that  the  freezing  of      stocks of  food-grains is  reasonably  related  to  the      object which the Act was in- 110      tended to  achieve, namely,  to  secure  the  equitable      distribution and  availability at  fair prices  and  to      regulate   transport,    distribution,   disposal   and      acquisition  of   an  essential   commodity   such   as      foodgrains."      The most  material ratio  of this case is that even the freezing of  stocks of  foodgrains, with  a view to securing their equitable distribution and availability was held to be a reasonable restriction. Even if by seizing the food stocks the right of a citizen to trade in food grains was seriously impaired and  hampered yet such a State action was justified on the ground of public interest.      On a  parity of reasoning, therefore, a restriction (on the right of a trader dealing in essential commodities) like the ban  in the  instant case or fixation of prices aimed at bringing about distribution of essential commodities keeping the consumers  interests as  the prime consideration, cannot be regarded as unreasonable.      We are  fortified in  our view  by a  decision of  this Court in  Prag Ice  and Oil  Mills and Anr. etc. v. Union of India(1) where Beg, C.J. observed as follows :-

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 16 of 35  

         "All the  tests of  validity of the impugned price      control or  fixation order  are, therefore, to be found      in section  3 of  the Act. Section 3 makes necessity or      expediency of  a  control  order  for  the  purpose  of      maintaining or  increasing  supplies  of  an  Essential      Commodity or for securing its equitable distribution at      fair prices  the criteria  of validity.  It is  evident      that an  assessment of  either the expediency necessity      of a  measure, in  the  light  of  all  the  facts  and      circumstances which  have a bearings on the subjects of      price fixation, is essentially a subjectives matter. It      is  true   that  objective   criteria  may  enter  into      determinations of  particular selling  prices  of  each      kilogram of  mustard oil at various time. But, there is      no obligation to have to fix the price in such a way as      to  ensure   reasonable  profits  to  the  producer  or      manufacturer. It  has also  to be  remembered that  the      objective  is  to  secure  equitable  distribution  and      availability at  fair prices so that it is the interest      of the  consumer and  not of  the producer which is the      determining factor  in applying  any objective tests at      any particular time."      The observations  extracted above,  furnish a  complete answer to  the contentions  raised  by  the  petitioners  on contention No. 1. 111 Furthermore, we  would like  to reiterate  what Chandrachud, C.J,, observed  in that  case regarding  the history and the manner in which the petitioners rushed to this Court :-      "Before closing,  we would  like to  mention  that  the      petitioners rushed  to this  Court too precipitately on      the heels  of the  Price Control  Order.  Thereby  they      deprived themselves  of an  opportunity to show that in      actual  fact,   the  Order   causes  them   irreparable      prejudice. Instead  they were driven through their ill-      thought haste  to rely  on  speculative  hypotheses  in      order to  buttress their  grievance that their right to      property and  the right  to do  trade was  gone or  was      substantially affected.  A little  more patience, which      could have  been utilised to observe how the experiment      functioned, might have paid better dividends."      This is  exactly what the petitioners have done in this case by  rushing to  this Court  the moment the notification was issued  and thus  depriving the State as also themselves of  the   actual  consequences   of  the   issuing  of   the notification and  the prejudice  which it  really  may  have caused. They did not at all show any patience in waiting for a  while   to  find   out  if   the  experiment   functioned successfully and in the long run paid good dividends. As the petitioners obtained  stay orders  from this Court on filing these petitions, the experiment died a natural death and the notification remained ineffective.      It was  vehemently  contended  by  Mr.  Garg  that  the Notification or the Control Order is in direct contravention of the  Directive Principles  of State  policy contained  in Art. 39  in part  IV of the Constitution inasmuch as instead of developing  small-scale industries  like the crushers the Notification has  curbed the rights of their owners in order to benefit  the mills.  It is true that one of the important considerations  which   must  weigh   with  the   Court   in determining the  reasonableness of  a restriction is that it should not  contravene the Directive Principles contained in Part IV  of the  Constitution which undoubtedly has a direct bearing on  the question  as held by this Court in the cases of Saghir  Ahmad v.  State of U.P. and Ors.(1) and The State

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 17 of 35  

of Bombay and Anr. v. F. N. Balsara(2) where this Court made the following observations : 112      "The new  clause in  Article 19(6)  has no  doubt  been      introduced with  a view  to provide  that a  State  can      create a  monopoly in  its own favour in respect of any      trade or  business, but the amendment does not make the      establishment of such monopoly a reasonable restriction      within the  meaning of  the  first  clause  of  Article      19(6). The  result of  the amendment  is that the State      would not  have to justify such action as reasonable at      all in  a Court  of law and no objection could be taken      to it  on the  ground that it is an infringement of the      right  guaranteed   under  Article  19(1)  (g)  of  the      Constitution"                                      (Saghir Ahmed’s case)      "In judging  the  reasonableness  of  the  restrictions      imposed by  the Act,  one  has  to  bear  in  mind  the      directive principles  of  State  policy  set  forth  in      Article 47 of the Constitution."                                           (Balsara’s case)      In the  instant case,  however, if  the argument of the Attorney General is to be accepted, there is no violation of the Directive  Principles because  the main object sought to be achieved by a temporary suspension of the business of the petitioners is  to ensure  large-scale production  of  white sugar  and   to  make  it  available  to  the  consumers  at reasonable rates  which is  an implementation  rather than a contravention  of   the  Directive  Principles  particularly clauses (b)  and (c)  of Art. 39. Whether the State has been able to  prove this  fact or not would be considered when we deal with  the facts  and materials  placed before us by the parties.      Another important aspect to which we may advert at this stage is the test which should be laid down to determine the reasonableness of a restriction involving a citizen carrying on trade  or business  in an  essential commodity.  We  have already seen that this Court has held that fixation of price of sugar  or freezing of stock of foodgrains does not amount to an  unreasonable restriction  on the fundamental right to trade enshrined  under Art.  19(1)(g). There are other cases in which  this Court  has clearly  held that  in the case of essential  commodities   like  sugar  the  question  of  the economic production  and distribution thereof must enter the verdict of  the Courts in deciding the reasonableness of the restrictions. In  such cases  even if  the margin  of profit left to  the producer  is slashed  that would  not make  the restriction unreasonable.  The reason  for this view is that such a  trade or  commerce is  subject to  rise and  fall in prices and  other  diverse  factors  which  may  destroy  or prohibit one  industry or  the other  so as  to  affect  the general body of the consumers and if any measure is taken to strike a just 113 balance between  the danger  sought to  be averted  and  the temporary deprivation  of the right of a citizen to carry on his trade,  it will  have  to  be  upheld  as  a  reasonable restriction. In  Shree Meenakshi  Mills v.  U.O.I.  (1)  Ray C.J., speaking for the Court observed as follows:           "If fair price is to be fixed leaving a reasonable      margin of  profit,  there  is  never  any  question  of      infringement of  fundamental right to carry on business      by imposing  reasonable restrictions.  The question  of      fair price  to  the  consumer  with  reference  to  the      dominant object and purpose of the legislation claiming

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 18 of 35  

    equitable distribution  and availability  at fair price      is  completely   lost  sight   of  if  profit  and  the      producer’s return are kept in the fore-front......           In determining the reasonableness of a restriction      imposed by  law in  the field  of  industry,  trade  or      commerce, it  has to  be remembered  that the mere fact      that some  of  those  who  are  engaged  in  these  are      alleging loss  after the  imposition of  law  will  not      render  the  law  unreasonable.  By  its  very  nature,      industry or  trade or  commerce goes through periods of      prosperity and  adversity on  account of  economic  and      sometimes social  and political  factors. In  a largely      free economy  when control  have to  be  introduced  to      ensure availability  of consumer  goods like foodstuff,      cloth  and   the  like   at  a  fair  price  it  is  an      impracticable proposition  to require the Government to      go through  the exercise  like that  of a Commission to      fix the prices."      According to  the Attorney  General by  virtue  of  the impugned Notification  this  is  exactly  what  the  Central Government wants  to achieve by banning the working of power crushers for  a short  period. This  case  was  followed  in another decision  of  this  Court  in  Saraswati  Industrial Syndicate Ltd.  v. U.O.I.(2)  which was  also a  case  of  a notification issued  under clause  7 of the Control Order of 1966, where the following observations were made:      "It  is  a  well-known  fact  that  rationalisation  of      industry by  the use  of modern  methods,  reduces  the      amount of  labour needed  in more  mechanised modes  of      manufacture. Therefore,  we do  not  think  that  these      assertions could  prove any inequitable treatment meted      out to  the Haryana manufacturers of sugar. In any case      no breach  of a mandatory duty, which could justify the      issue of writ of mandamus, was established.’ 114      In the  light of  the  principles  enunciated  and  the decisions discused  above, we  now proceed  to  examine  the facts and  circumstances placed  before us  by the  Union of India to  prove that  the  restrictions  imposed  under  the impugned Notification  contain the quality of reasonableness and are  not violative  of Art.  19(1)(g). The main pleas of the State  of U.P.  which have  been adopted by the Union of India, are  to be found in paragraphs 6 to 11 of the counter affidavit filed  by the  respondents in  writ petition  Nos. 5565-5567 of 1980. The respondents have taken the stand that there has  been a  very steep  rise in  the prices  of sugar which is  doubtless an  essential commodity.  It has further been alleged  that one  of the major factors responsible for the present  rise in  the prices of sugar is that there is a sharp rise  in the  demand for  consumption of sugar whereas its production  has slumped to a very low level. In order to illustrate the  point it has been averred that the demand of sugar in  the country  has increased  to over 60 lakh tonnes whereas production  of the  commodity in  the preceding year (1979-80) was  only about 39.5 lakh tonnes. In order to meet the demand  the Central  Government had  to import  for  the first time  after several  years 2 lakh tonnes of sugar at a cost of  about one  hundred crores of rupees. One reason for the shortfall  in production  during 1979-80  was  the  poor availability of  cane to  the sugar  factories. This in turn resulted from  the worst  drought conditions  faced  by  our country particularly  the State  of U.P. which is one of the main suppliers  of  sugarcane.  Yet  another  cause  of  the shortage was  that the  sugar famine  led to the large scale diversion of  cane to  gur and  khandsari manufacturers. The

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 19 of 35  

counter-affidavit then  proceeds to  give  a  chart  of  the production of sugar by the crushers and the mills.      It was further averred that unless the position was set right the  stocks  of  1979-80  would  have  been  exhausted completely by  the middle  of November  1980. To  meet  this national crisis,  the Government of India took various steps to increase  the production  of sugar  in the country during the current  season  (1980-81).  In  the  first  place,  the Government of  India allowed rebate in the basic excise duty on excess sugar production in order to serve as an incentive to the  sugar mills  to start early cane crushing operation. This step  however, could  not  possibly  have  the  desired effect unless  the sugar  factories got  the  raw  material, viz., constant  supply of  sugarcane. Indisputably sugarcane is utilised for manufacture of sugar, gur, rab and khandsari and some of the quantity is also utilised for seed, feed and chewing.  It   was  further   alleged  that   the   crushers particularly those  producing gur  were in  an  advantageous position so  as to  be able  to purchase cane at a very high rate and outcompete the sugar 115 factories. It  was possible for the crushers to pay a higher price because  no excise duty or compulsory levy was imposed on them,  on the  other hand,  the factories  suffered  from certain disabilities,  namely, sixty  five per  cent of  the sugar production  was taken  by the  Government of  India on levy process  and excise  duty on  free sale  sugar was very high as compared to khandsari sugar. Further, the Government required distribution of molasses at a fixed price of Rs.6/- per  quintal   to  the  mills  whereas  there  was  no  such obligation on  the power  crushers. Finally,  because of the monthly  release   system  the  factories  could  sell  only released quantity  during a  particular month  whereas there was no  such restriction  on khandsari  units owned  by  the petitioners.  These  steps  taken  by  the  then  Government resulted in  an unhealthy  competition causing  diversion of cane from  the sugar  factories with  the result  that sugar factories could  get only  61.5% of  the bonded cane. It was further pointed out in the counter-affidavit that keeping in view the  fact that  the sugar stocks of 1979-80 were likely to be  exhausted by  the middle  of November  1980,  it  was considered necessary  to  maintain  an  adequate  supply  of sugarcane to  the sugar  factories which  would have started production earlier  because of  the incentives given to them by the Government of India.      In an  additional affidavit  filed by  the respondents, sworn by Karan Singh, Joint Cane Commissioner, Government of U.P, it  was pointed out that khandsari sugar could never be a substitute  for sugar  produced  by  sugar  mills  because khandsari  sugar   is  not  used  for  domestic  purpose  in preference to  mill sugar  as the former has higher molasses content and  has unpleasant  smell and taste. Further, there is no  gradation of  khandsari sugar  as its  grain  is  not regular and  bold. It  was further  alleged that  in  public distribution it  is only the mill sugar which is supplied at fair price  to the  consumers at  large and which also forms the bulk  of the  export. The  khandsari sugar, according to the respondents,  was generally  consumed for preparation of sweets, boora  and batasha  and was  consumed mostly  by the halwais.  There   is  no  reliable  evidence  to  rebut  the aforesaid facts  detailed in  the counter-affidavit  of  the respondents.      Thus, in  view of  the factors  detailed above,  it was contended by  the Union  of India  that  it  was  in  public interest that  with a  view to  remove shortage of sugar and

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 20 of 35  

achieve equal  distribution of  sugarcane to  the mills  the impugned notification  was passed  which seems  to strike  a just balance  between the  requirements of  the country  and those of the khandsari units. The Attorney General contended that since  the ban was imposed only for a very short period of about 116 one month  and a half, there could be no appreciable loss to the khandsari  units, and  even if  there was  some loss  it could be  recouped after  the ban  was  lifted  because  the working cost  of the khandsari units was much less than that of the  mills. In  other words,  by  virtue  of  the  policy adopted  by   the  Government   in  passing   the   impugned notification, a  fair margin  of  profit  was  left  to  the khandsari units  which were  not completely  closed. It  was further stated  that out  of 89  sugar mills  in the  entire State of  U.P., 18  sugar mills  are owned by the U.P. State Sugar  Corporation   which  is   a  Government  company  and controlled by  the State.  Sixteen sugar mills are under the cooperative sector  in which  the Government  Investment  is considerable and these mill are run by cooperative societies of which  cane growers  are shareholders. Thus, the ultimate benefit did  undoubtedly go  to the  sugarcane growers  also through the  profits made  by the cooperative societies. The learned counsel,  Mr. Garg,  appearing for  the  petitioners countered the  inferences drawn  by the respondents with the submission that although the above facts may not be disputed yet it  was not  correct to say that the khandsari units had put  the   mills  completely  out  of  competition.  It  was suggested that  the khandsari  units were  also, apart  from paying a  higher price to the sugarcane growers, prepared to be subjected  to compulsory  levies or excise duty levied on the mills or to such terms as the Government may like to put on the  owners of  the crushers.  The argument is, no doubt, attractive but  we are  not sure  if and  when these harsher terms are  imposed on  the petitioners, it would be possible for them to run the crushers and make the huge profits which they are  making without  the aforesaid  impositions. At any rate, since  the  impugned  notification  has  expired,  the Government will  certainly consider  the desirability  of  a reappraisal of  the situation after taking into account this aspect of  the matter.  It was  further pointed  out by  the Union of  India that  only 39 sugar mills are in the private sector  and   ensuring  actual   availability  of  sugar  at reasonable  rates   to  the   sugar  mills   was  the  prime consideration   which   formed   the   basis   of   impugned notification in  conformity with  the object  of the  Act of 1955 and  the Control  Order so  as to maintain a fair price for  the   general  public.   Learning  a  lesson  from  the performance of  the sugar  market in the preceding year, the Government thought  it  more  desirable  to  channelise  the production of sugarcane so that the interests of neither the sugar mill  owners nor  of the  khandsari units nor those of the cane-growers suffered.      It was  then contended  that the  impugned notification far from  causing any  appreciable damage  or  loss  to  the petitioners serve a 117 two-fold purpose  which  ensures  equitable  production  and distribution of sugar.      Another important  argument advanced  by the  Attorney- General which  has impressed  us most  is one resulting from the  use   by  the   mills  of   the  hydraulic  process  as distinguished  from   the  open   pan  process  employed  by khandsari units for the production of sugar. The consequence

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 21 of 35  

is the  recovery of  sugar from  sugarcane in  the  case  of khandsari units  run by power crushers is between 4 to 6 per cent whereas  in the  case  of  sugar  factories  it  ranges between 9 1/2 to 11 1/2 per cent. Thus, the overall position is that  the utilisation of sugarcane by the mills is double that by  the crushers  and if  the crushers  are not able to produce more  than the existing 4 to 6 per cent, half of the total quantity  of sugarcane  supplied to  them  goes  waste which, if  utilised by  the factories, would have served for production of more sugar.      This solid  distinction between  the two  processes  of manufacture followed  by the  mills and  the crushers is, in our opinion,  a very  rational distinction  which  puts  the mills in  a  different  class  and  which  also  provides  a reasonable nexus  between the  restrictions imposed  on  the crushers  and   the  object   sought  to  be  achieved.  The petitioner sought to falsify the figures quoted by the Union of India  regarding the  percentage of  recovery of sugar by reference to  a  book  written  by  Mr.  Bepin  Behari,  and entitled ‘Rural  Industrialization in India’. On page 100 of the book, the author has observed as follows :      "Originally, the  percentage of recovery in traditional      khandsari units  did not  go beyond  6.5 per  cent, but      recent innovations  have raised  the recovery  ratio to      almost 9.5  per cent.  Thereby the  two processes  have      become almost  commutative. In inversion loss, however,      there is  some difference.  In  the  large-scale  sugar      mills, only  ten per cent of the sugar is lost while in      small khandsari  plants the  loss can  be as much as 30      per cent." and great  reliance has been placed on these observations of the author.  It may  be noted,  however, that the author has not cited  any expert  opinion as  the  foundation  for  his conclusion nor has he referred to any experiment carried out by him  personally. In  fact he  has not  even disclosed the source of  his information.  Apart from  that the book fully supports  the   averments  of   the  respondents   that  the percentage of  recovery in  traditional khandsari  units did not go beyond 6.5 per cent. Besides, there is no evidence or allegation in any of the affidavits filed by the petitioners to the effect that any new methodo- 118 logy or innovation was adopted by any of the petitioners. In these circumstances,  the extract  from the  book  does  not appear to be of any assistance to the petitioners.      On  the   other  hand,   the  facts   detailed  by  the respondents in  the various counter-affidavits filed by them are based  on the  statistics maintained  by the  Government from year  to year  and reports  of experts. One such report entitled ‘studies  on Specific Conductances of Indian Sugar’ has been  filed by  the State  before us  and it  gives  the entire history and economics of sugar production.      After a  careful consideration  of  the  arguments  and documents produced by both the parties we are satisfied that the restriction  imposed by  the  impugned  notification  in stopping the  crushers for  the period  10th October  to 1st December 1980  is in  public interest and bears a reasonable nexus to  the object which is sought to be achieved, namely, to reduce  shortage of  sugar and  ensure a  more  equitable distribution of this commodity.      One of  the tests  that has been laid down to determine the reasonableness  of a  restriction is  to find out if the restraint is  more excessive  than  that  warranted  by  the situation. In  the instant case, taken an overall picture of the history  of sugar  production it cannot be said that the

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 22 of 35  

stoppage of  sugar crushers  for  a  short  period  is  more excessive than the situation demanded.      In Madhya  Bharat Cotton  Association Ltd.  v. Union of India &  Anr.(1) while considering a restriction imposed for a short time, this Court observed as follows :-      "Further, cotton  being a  commodity essential  to  the      life  of  the  community,  it  is  reasonable  to  have      restriction which may, in certain circumstances, extend      to total  prohibition for a time, of all normal trading      in the  commodity. Accordingly,  we are of opinion that      Clause 4  of the  Cotton Control Order of 1950 does not      offend Art. 19 (1) (g) of the Constitution because sub-      clause (5) validates it."                                        (Emphasis supplied)      In that  case the restriction imposed on cotton was for a short period of one month in February 1954 and for another month in  May 1954;  and was  held to  be  justified  and  a reasonable restraint so 119 as not to be violative of Art 19 (1) (g). The situation here is similar.  Afterall, the  petitioners were  working  their crushers under a licence granted to them under the Licensing Order and the impugned notification merely seeks to regulate the right and not to abolish the same.      For the  above reasons the first contention put forward by the  petitioners that  the restrictions  imposed  by  the impugned notification  are unreasonable  is hereby overruled and it  is held  that such  restrictions clearly contain the quality of  reasonableness and when tested on the touchstone of the  principles laid  down  by  the  various  authorities referred to  above, they  fully satisfy all the requirements of a reasonable restriction.      This takes  us  to  contention  No.  2  raised  by  the petitioners. It was submitted before us that clause 8 of the Control Order under which the impugned notification has been issued suffers  from the  vice of  excessive  delegation  of powers and  is, therefore,  violative  of  Art.  14  of  the Constitution. It  was argued  that as the notification seeks to establish  a monopoly in favour of the sugar mills at the cost of the petitioners it seeks to make per se an invidious discrimination which  is writ  large on the very face of the notification which is, therefore violative of Art. 14.      As regards  first  limb  of  the  argument  it  may  be necessary to  state that  the Control  Order itself has been passed under  the authority  of s.3 of the Act of 1955 which has been held by this Court to be constitutionally valid and is not  in any  way discriminatory so as to attract Art. 14. The Control  Order  itself  having  been  passed  under  s.3 contains  sufficient  guidelines,  checks  and  balances  to prevent any  misuse or  abuse of  the power conferred on the authorities concerned under clause 8. Clause 8 runs thus:-      "8.  Power   to  issue   directions  to   producers  of      khandsari,  sugar,   power-crushers,  khandsari  units,      crushers   and   cooperative   societies.-The   Central      Government may,  from  time  to  time,  by  general  or      special order,  issue directions  to  any  producer  of      khandsari sugar  or owner of a power-crusher, khandsari      unit or  crusher or the agent of such producer or owner      or a  cooperative society  regarding  the  purchase  of      sugar or  sugarcane juice,  production, maintenance  of      stocks,  storage,  price,  packing,  payment  disposal,      delivery  and  distribution  of  sugar-cane,  gur  gul,      jaggery and  rab or  khandsari sugar  or the  period or      hours to be worked." 120

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 23 of 35  

    To begin with it may be noticed that the power to issue orders or  directions from  time to time is conferred on the Central  Government   which  is   undoubtedly  a  very  high authority and  must  be  presumed  to  act  in  a  just  and reasonable manner.  This point is well settled and concluded by several  decisions of  this Court  as detailed  below. In Chinta Lingam  & Ors.  v. Government of India Ors., (1) this Court made the following observations:      "At any  rate, it has been pointed out in more than one      decision of  this Court  that when  the  power  has  to      exercised by  one of  the of  the highest  officers the      fact that  no appeal  has been provided for is a matter      of no  moment.....It was said that though the power was      discretionary but it was not necessarily discriminatory      and abuse  of power  could not be easily assumed. There      was moreover  a presumption that public officials would      discharge their  duties honestly and in accordance with      rules of law." This case  was followed  in V.  C. Shukla  v.  State  (Delhi Admn.)(2) where  one of  us (Fazal Ali, J.) speaking for the Court observed as follows :           "Furthermore, as  the power  is vested  in a  very      high authority,  it cannot be assumed that it is likely      to be  abused. On  the other  hand, where  the power is      conferred on  such a  high  authority  as  the  Central      Government, the presumption will be that the power will      be exercised  in a  bona fide  manner and  according to      law."      Moreover, the  power cannot  be said to be arbitrary or unguided  because  the  impugned  notification  derives  its source from  s. 3 of the Act of 1955 which clearly lays down sufficient  guidelines   and  the   existence   of   certain conditions  for   proper  distribution   of   an   essential commodity.  The   said  guidelines   therefore,  govern  the authority passing the impugned notification.      Secondly, clause  8 merely  seeks to regulate and guide the  conditions   and  the  circumstances  under  which  the manufacturers may exercise their rights. In other words, any order passed  under clause  8 is  prima facie  purely  of  a regulatory nature.  It  was,  however,  submitted  that  the Notification has  been  passed  by  the  Cane  Commissioner, Government of U.P. and it does not contain any materials 121 or reasons  why the ban was imposed on the crushers owned by the  petitioners. As the Notification itself has been passed under clause  8 of the Control Order read with Government of India G.S.R.  No. 1122  dated July  16, 1966  and under  the Essential Commodities  Act it was not necessary for the Cane Commissioner to  have stated or detailed the reasons why the Notification was  issued. In  fact, the Notification and the Control Order  have to be read in the light of the main Act, viz., the  Act of  1955, which itself provides the necessary guide lines, namely, that it is essential in public interest and to  secure proper distribution of an essential commodity to pass  orders by  various authorities  from time  to time. This is  the scheme of s. 3 of the Act of 1955 which has not been challenged before us by the petitioners.      It was  further argued  in  the  same  token  that  the impugned notification  seeks  to  establish  a  monopoly  in favour of the sugar mills at the cost of the petitioners who have been selected for hostile discrimination as against the mills. While  detailing and  narrating  the  facts  and  the history of  sugar production  we have already shown that the State has  placed cogent materials before us to show why the sugar  mills   had  to  be  given  a  special  treatment  by

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 24 of 35  

temporarily  stopping   the  production   of  sugar  by  the crushers. We  have already  dealt with  the various  factors while examining  contention No.  1 of the petitioners and it is not  necessary for  us to repeat the same here. There was no question  of creating  any monopoly  to benefit the mills particularly when  a very  large majority  of the mills were controlled by  the State or cooperative societies and only a small fraction  of them  were working in the private sector. In view  of the low working cost of the crushers they sought to outcompete  the mills  and deprive  them of the requisite amount of  sugarcane which  they should have got. It was not only just  but also essential to boost the production of the factories so  that white  sugar may  be produced  on a large scale and  sugarcane may not be wasted which would have been the case  if most of the sugar-cane went to the crushers. We have pointed out that the recovery of sugarcane juice by the mills is  double that  by crushers,  and if  the latter were allowed to  operate the  wastage of the sugarcane would have been almost  50 per  cent which  could have  been avoided if sugar cane was allowed to be utilised by the mills.      The third  limb of  the argument on this point was that there was  was no  rational nexus  between  the  prohibition contained in  the Notification  preventing  the  petitioners from working their crushers, even though for a short period, and the  object sought to be achieved by it. This contention also must  necessarily fail  as we  have already  shown that such nexus existed. 122      It was  argued by  Mr. Garg  that  as  India  lives  in villages  it   was  not   understandable  why   the  Central Government  was  bent  on  reducing  the  support  price  of sugarcane and thus causing loss to the sugarcane growers. It was true  that the  mills were  not in  a position to pay as high a  price for sugarcane as the crushers but that was for so many  reasons which  we have discussed above, namely, the various liabilities  which were  imposed on the mills, e.g., the excise  duties, the  levy, etc. Once a certain amount of stability  was  achieved  in  the  sugarcane  industry,  the ultimate benefit  would  undoubtedly  go  to  the  sugarcane grower even  though he  may have to be paid a lesser support for supply  of sugarcane to the mills. It was, therefore, in public interest  that a  lesser support  price for sugarcane had been  fixed. Moreover, it was for the Central Government who was  in the  know of the circumstances prevailing in the State or  for that  matter in  the country  to determine the support price  of sugarcane.  Even though  the crushers  may have paid  a higher  price, in  the long  run, the sufferers would be  the sugarcane  growers as  also the  consumers who would be  deprived of  the sugar produced by the mills which was undoubtedly  superior to  the khandsari  sugar and has a vaster area  of consumption in the country and is also meant for purposes of export.      The report  entitled ’Studies  on Specific Conductances of Indian  Sugar’ referred to above, details the distinctive features of  the white  sugar produced  by the mills and the khandsari sugar where the various features of the nature and character of sugar are pointed out thus.           "This  plantation   sugar  is  crystalline,  white      lustrous and has a purity of 99.8 per cent. The size of      the crystal  of this  sugar varies  from 0.3  to 2.5mm.      This sugar  is graded  according to  the  Indian  sugar      standards: Sugar  corresponding to  30A is  very  white      sugar with grain size of about 2.5mm. While 27 E refers      to less  white sugar  with grain  size of about 0.4 mm.      The numeral 30, 29 and 27 indicate the decreasing order

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 25 of 35  

    of the  whiteness of the sugars and the letters A  E to      the grade  of the  grain size  Apart from  these sugars      produced in  well established commercial factories, the      similar type  of which  are known  in other  countries,      another kind  of sugar  produced perhaps  only in India      and nowhere else, is the khandsari sugar which is being      manufactured in  small scale industrial units While, in      the sulphitation  factories the classified sugar syrups      are boiled under vacuum, in Khandsari units the same is      carried out  in the  open pans.  This sugar  used to be      palish yellow in colour 123      Nagaranjars and his co-workers studied the conductivity      of plantation white sugars and refined sugars and found      distinctive difference  in conductivity  of  plantation      white sugar and refined sugar."      It has  been clearly  averred in para 15 of the counter affidavit filed by Mr. Bhola Nath Tiwari, Cane Commissioner, Government of  U.P. (who  issued the  impugned notification) that in  year 1978-79  the production  in the reserved areas was 578.78  lakh tonnes  out of which the percentage of cane utilised by  the sugar  mills was 27.24 whereas it was 9.73% in the case of the khandsari manufactured by power crushers. It is  also  stated  that  out  of  the  total  quantity  of sugarcane  only   45.23  per   cent  was   utilised  by  gur manufacturers and  the remaining  17.5 per cent was used for seed, feed  and chewing purposes etc. Similarly, in the year 1979-80  there  was  a  steep  fall  in  the  production  of sugarcane from  578.78 lakh  tonnes in  the previous year to 471.11 lakh  tonnes. Owing to this loss of production, there was keen  competition for  purchase of sugarcane between the sugar mill  owners and  the khandsari  units. As a result of this unhealthy  competition sugar  mills had  to close  down prematurely resulting in the loss of production of sugar.      A very  attractive argument  was submitted before us by Mr. Gupta,  appearing  for  some  of  the  owners  of  power crushers. It  was submitted  that so  far as the petitioners represented  by   him  were  concerned,  they  were  growing sugarcane in  their  own  fields  and  had  installed  power crushers in  their own land though the said land fell within the reserved area. It was argued that these petitioners fell in a  separate category  and the Government could not compel them to  supply sugarcane  to the mills instead of using the sugarcane grown  by them  in their own crushers. An apparent snag in  this argument  is that  if  in  the  larger  public interest  it  becomes  necessary  to  compel  the  sugarcane growers to  supply sugarcane  to the  mills at  a particular rate in  order to  meet a  national crisis, no person can be heard to  say that his rights are taken away in an unjust or discriminatory fashion...Personal  or  individual  interests must yield to the larger interests of the community. This is exactly the  philosophy behind  the passing  of the  Act  of 1955.      Merely because the petitioners are growing sugarcane in their own  fields and  own power  crushers, therefore,  they cannot be treated as a class separate from the others owners of power  crushers situated  within the reserved area of the the mills. 124      Secondly, it  was argued  by  Mr.  Gupta  and,  in  our opinion, rightly  that the impugned notification is ex-facie discriminatory  inasmuch   as  it   differentiates   between vertical and  horizontal power crushers without any rhyme or reason.  He  submitted  that  no  rational  basis  has  been suggested by  the State for making the distinction when both

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 26 of 35  

types of  crushers  produce  almost  the  same  quantity  of khandsari and  apply the  same mechanical  process (open pan process). What difference does it make, says Mr. Gupta, if a power crusher  is vertical  or horizontal ? In the case of a horizontal power  crusher rollers  are in  a horizontal line situated on  the  surface  whereas  in  the  vertical  power crusher the rollers instead of being on the surface are in a vertical position  without there being any difference in the working of the two crushers. We are of the opinion that this argument of  Mr.  Gupta  is  sound  and  must  prevail.  The Additional Advocate-General,  U.P. sought  to  draw  several distinctions  between   a  vertical   power  crusher  and  a horizontal one,  namely, (1)  a vertical  power crusher  can crush  1500  quintals  of  sugarcane  per  month  whereas  a horizontal one crushes 5600 quintals of the commodity in the same period;  (2) vertical power crushers are non commercial and fall  within the  category of  cottage industry  whereas horizontal power  crushers are  included in  the category of small-scale industry; (3) vertical power crushers are run by their owners  them selves  and draw  supplies from sugarcane growers and  (4) vertical  power crusher  do not require any licence. So  far as  the last  part of  the argument  of the Additional Advocate-General  of  U.P.  that  vertical  power crushers do  not require  a  licence  is  concerned,  it  is factually wrong  because all such crushers require a licence by virtue  of the  Orders passed  by the  Central Government under  s.3   of  the   Act  of  1955.  Regarding  the  other distinctive features  the mere  ipse dixit of deponent Gupta who  has   sworn  an   affidavit,  there  is  absolutely  no documentary evidence  to support the features pointed out or relied upon  by the  Additional Advocate  General. In  these circumstances, it  has not  been proved  to our satisfaction that there  is any real distinction between a vertical and a horizontal power  crusher, and  we regard both as falling in the same class. The notification by exempting vertical power crushers  and   prohibiting  horizontal  power  crushers  is clearly  discriminatory   and  the   discrimination  is  not justified by  any rational nexus between the prohibition and the object sought to de achieved.      In these  circumstances, therefore,  we hold that in so far as the word ’vertical’ used in the impugned Notification is concerned  it must  be struck  down as being violative of Art. 14. This, however, 125 does not  render the  entire notification  void because  the word  ’vertical’   used  in   the  notification  is  clearly severable from  the other  portions of the notification. All that has  to be done is to read the notification without the the word ’Vertical’ as a result of which the exemptions from ban will  include all  owners  of  power  crushers  (whether vertical or  horizontal) which  manufacture gur  or rab from sugarcane grown  on their fields. Again, as the notification has al-  ready spent  its force,  if any  order is passed in future, the Government will see to it that such an invidious discrimination is not repeated.      We now  come to  contention No.4  by which it was urged that the  express language  of clause 8 of the Control Order does  not   contemplate  a   complete  prohibition   of  the production of  an article  but envisages  mere regulation of the period or hours of working. It was argued that the words ’period or hours’ used in clause 8 are relatable only to the number of  actual hours  in a day for which the crushers may be permitted  to work  from time  to time and not a complete stoppage or  prohibition of  the crushers  for a period of a month or  two. Clause  8, as extracted supra, uses the words

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 27 of 35  

’period or  hours to  be worked.’  A plain  reading of  this expression clearly  reveals  that  the  words  ’period’  and ’hours’ have  been used  to connote two different aspects of the matter. In other words, clause 8 contemplates regulation of working  of the  sugar by  two separate methods (1) where only hours of work per day are to be regulated or fixed, for instance, where  a crusher  normally works  for 10  hours, a notification under  this clause  may provide  that it should work only  for 8 hours or 6 hours or 10 hours a day or for a number of  days. (2)  The word ’period’ however, has nothing to do  with the  hours to be worked but it refers to another category of  regulation viz., whether a crusher is to run or not for  a particular period of time. We are unable to agree with the  contention of  Mr. Garg that the two words must be taken to  have been  used in  clause 8 in the same sense. In fact, this  interpretation of  the words will cause violence to the  language of  the statutory  provision and instead of advancing its  object it  would frustrate  the purpose which clause 8  seeks  to  subserve.  In  the  instant  case,  the notification has  resorted to  the first category, viz., the period of the working of the crushers, that is to say, about one and a half month, and has not at all touched or impinged upon the  working hours  of the  crushers. If,  however, the notification had fixed certain hours of the day during which only the  crushers could  work, then  the notification would have resorted  to the  alternative mode of regulation, which obviously has  not been  done in  this case We are unable to agree with the contention put forward by Mr. 126 Garg and  hold that  the  impugned  notification  is  wholly consistent with  the provisions contained in clause 8 of the Control Order.      Contention Nos.  5, 6  and 7  relate to  the  objection taken by  the petitioners  to the  validity of  the impugned notification on several grounds. In regard to contention No. 5, the notification has been attacked on the ground that the Central Order  violates the  principles of  natural  justice inasmuch as  it was  passed without  hearing the petitioners whose valuable  rights were  involved and  their  trade  was stopped and  they were put completely out of production even though for  a short period of about one and a half month. It was contended  that  though  clause  8  does  not  expressly provide for  a hearing yet even if it be considered to be an administrative order,  the rule of audi alteram partem fully applies and  the Cane  Commissioner should  have passed  the impugned notification  only after  hearing the  petitioners. Reliance was  placed for  this proposition on a large number of authorities.  It is  true that  with the growth of law in our country,  this Court  has consistently held for the last few years  that the rules of natural justice must apply even to an  administrative order  unless the  same are  expressly excluded. Mr. Garg as also other counsel for the petitioners submitted that  the mere  fact  that  there  is  no  express provision in  clause 8  for hearing  the petitioners  before imposing any  restrictions on  their business  provides good reason to  hold that  the right  to be heard was inherent in the very  act of  prohibition  since  the  stoppage  of  the business of the petitioners would entail civil consequences. Thus,  they   argued,  as   no  hearing  was  given  to  the petitioners, the  notification  was  void  and  inoperative. Reliance was placed on the observations of Krishna Iyer, J., in  Mohinder  Singh  Gill  &  Anr.  v.  The  Chief  Election Commissioner, New  Delhi &  Ors.(’) which  may be  extracted thus:-           "Indeed, natural  justice is  a pervasive facet of

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 28 of 35  

    secular  law   where   a   spiritual   touch   enlivens      legislation administration  and adjudication,  to  make      fairness a  creed of  life. It  has  many  colours  and      shades, many forms and shapes and, save where valid law      excludes, it  applies when  people are affected by acts      of Authority.  It is  the bone  of healthy  government,      recognised  from   earliest  times  and  not  a  mystic      testament of judge-made law           The dichotomy  between administrative  and  quasi-      judicial functions  vis-a-vis the  doctrine of  natural      justice is presumably 127           Obsolescent after  Kraipak 1970 1 SCR 457 in India      and Schmidt (1969 (2) Ch.. 149) in England.      ...                  ...                ...           The  procedural  pre-condition  of  fair  hearing,      however minimal, even post-decisional, has relevance to      administrative  and   judicial   gentlemanliness.   The      Election  Commission   is  an  institution  of  central      importance  and  enjoys  far-reaching  powers  and  the      greater  the   power  to   affect  others’   right   or      liabilities the more necessary the need to hear.      ...                   ...               ...           We  consider   it  a  valid  point  to  insist  on      observance  of   natural  justice   in  the   area   of      administrative  decision-making  so  as  to  avoid  the      devaluation of this principle by administrators already      alarmingly insensitive to the rationale of audi alteram      partem !"      Strong reliance  was also placed on the observations of this Court  in Maneka  Gandhi v. U. O. I.(’) where Bhagwati, J., after  full discussion  of the  entire subject, observed thus:-      "The law  must, therefore  now  be  taken  to  be  well      settled that even in an administrative proceeding which      involves civil  consequences, the  doctrine of  natural      justice must be held to be applicable."           Similarly, in  a very  recent case S. L. Kapoor v. Jagmohan(2) this  Court had taken an opportunity to emphasis the importance of rules of natural justice and reiterated as follows:      "The old  distinction between  a judicial  act  and  an      administrative act  has withered  away and we have been      liberated   from    the   psittacine   incantation   of      "administrative action".  Now  from  the  time  of  the      decision of this Court in State of Orissa v. Dr. (Miss)      Binapani   Dei   [1967]   2   S.C.R.   625,   even   an      administrative    order     which    involves     civil      consequences...must be made consistently with the rules      of natural justice."      A number  of other  decisions were  also cited  on  the question  of   natural  justice   and  we   agree  with  the propositions adumbrated by 128 Mr.  Garg   that  normally  where  an  administrative  order adversely affects the valuable rights of the party affected, a reasonable  opportunity of  hearing must  be given  to the person affected.  The instant  case, however,  contains  two prominent  features  which  exclude  the  rules  of  natural justice. Section  3 of  the Act  of  1955  under  which  the Control Order was passed really covers an emergent situation so as  to meet  a national crisis involving the availability or distribution of any essential commodity which may make it necessary to  restrict or control the business carried on by a citizen.  It has  already been  pointed out  by  us  while

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 29 of 35  

discussing the  case of  the respondent  that there  was  an acute shortage  of sugar  which was  not made  available  to consumers at  reasonable  rates  and  the  situation  caused serious dissatisfaction  among the  people. Nothing short of immediate and  emergent measures  taken to solve this crisis would have eased out the situation. We are fortified in this opinion by  a Constitution  Bench decision  of this Court in Prag Ice  and Oil  Mills and  Anr.  v.  U.  O.  I.(’)  where Chandrachud, C. J.. observed as follows:-      "The dominant  purpose of these provisions is to ensure      the  availability   of  essential  commodities  to  the      consumers at  a fair price. And though patent injustice      to the  producer is  not to be encouraged, a reasonable      return on  investment or a reasonable rate of profit is      not the sine qua non of the validity of action taken in      furtherance of  the powers  conferred by  section 3 (1)      and section 3 (2) (c) of the Essential Commodities Act.      The interest  of the  consumer has  to be  kept in  the      forefront and the prime consideration that an essential      commodity ought  to be made available to the common man      at a  fair price must rank in priority over every other      consideration."      If hearing  was to  be given to so many owners of power crushers, it  would have  completely defeated and frustrated the very object not only of the Notification but also of the Act  of  1955  and  created  complications  which  may  have resulted in  a further  deterioration of  an already serious situation. If  the rules of natural justice were not applied in such an emergent case, the petitioners cannot be heard to complain. Afterall  the notification  directed  stoppage  of operation of the petitioners’ crushers only for a very short period and  they would  have had an opportunity of recouping their loss  after they  were allowed to function because the proportion of  consumption of khandsari sugar was limited as indicated 129 above.  The   petitioners  were,  therefore,  not  seriously prejudiced and have rushed to this Court rather prematurely.      The  Attorney   General  had,   however,  a  much  more effective answer  to the  contention raised  by Mr.  Garg on this point.  It was  submitted by  the Attorney General that having regard  to the  circumstances, the background and the situation in  which the  impugned  notification  was  issued under clause  8 of  the Control  Order, it  had a  statutory complexion and  should be  regarded as purely legislative in character. He  added that no one had ever argued that before passing  a   legislation,  the   persons  affected   by  the legislation  should   he  heard,  and  that  therefore,  the question of  hearing or  complying with the rules of natural justice  would   not  arise.  The  Attorney  General  placed reliance on a decision of this Court in Saraswati Industrial Syndicate  Ltd.   etc.  (supra)   and  particularly  on  the following observations made by Beg, J.,-      "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, therefore, give rise to a complaint that a rule of      natural justice  has not  been followed  in fixing  the      price. Nevertheless,  the  criterion  adopted  must  be      reasonable. Reasonableness,  for  purposes  of  judging      whether  there   was  an   "excess  of   power"  or  an      "arbitrary" exercise of it, is really the demonstration      of a  reasonable nexus  between the  matters which  are      taken into  account  in  exercising  a  power  and  the      purposes of exercise of that power.

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 30 of 35  

                                            (Emphasis ours) Having regard  to the facts in the instant case, a temporary ban on  power crushers  of a  particular type  was a measure governed by  same, if not higher, considerations as an order of fixation of price.      The  las  tmentioned  case  is  an  authority  for  the proposition that  an order like the impugned notification is a legislative measure. That being the position, the rules of natural justice stand completely excluded and no question of hearing arises.  Mr. Garg,  however, submitted  that in that case the  petitioner did  not urge  that the  price fixation required a  quasi-judicial procedure.  Even  so,  the  Court clearly decided  that a  measure like the one we have in the instant case  is purely of a legislative character and there is no  question of  complying  with  the  rules  of  natural justice in such cases. 130      In Chairman  Board of  Mining Examination  and Anr.  v. Ramjee(’) Krishna  Iyer, J.  speaking for the Court, pointed out that  there may  be cases where rules of natural justice can be  dispensed with.  In this  connection he  observed as follows:      "Natural justice  is no  unruly horse,  no lurking land      mine nor  a judicial  cure-all. If fairness is shown by      the decision-maker  to the  man proceeded  against, the      form, features  and the  fundamentals of such essential      processual propriety being conditioned by the facts and      circumstances of  each situation,  no breach of natural      justice, can  be complained  of. Unnatural expansion of      natural   justice,    without    reference    to    the      administrative realities  and other  factors of a given      case, can be exasperating."                                          (Emphasis supplied)      In  Joseph  Beauharnais  v.  People  of  the  State  of IIIinois(2) the  following observations  were made which are apposite to the facts of the present case :-      "This being  so, it  would be  out of  bounds  for  the      judiciary to  deny the  legislature a choice of policy,      provided it  is not  unrelated to  the problem  and not      forbidden by  some explicit  limitation on  the State’s      power.  That   the  legislative  remedy  might  not  in      practice mitigate  the evil,  or might itself raise new      problems, would  only manifest once more the paradox of      reform. It  is the  price to be paid for the trial-and-      error inherent  in legislative  efforts  to  deal  with      obstinate social issues."      The passing of the notification in the instant case was an act  of a  legislative character  and was really a trial- and-error method  adopted to deal with a very serious social problem.      In Bates  v. Lord  Halsham of St. Marlebone and Ors.(3) under similar  circumstances a  statutory committee had made an order in relation to powers to licence hackney carriages. Commenting  on   this  provision  Megarry,  J.  Observed  as follows:-      "In the  present case, the committee in question has an      entirely different  function: it  is legislative rather      than administrative  or executive.  The function of the      committee is to make or refuse 131      to  make   a  legislative  instrument  under  delegated      powers.  The  order,  when  made,  will  lay  down  the      remuneration for solicitors generally; and the terms of      the order  will have to be considered and construed and      applied in  number-less cases  in the future... Many of

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 31 of 35  

    those affected  by delegated  legislation, and affected      very substantially  are never  consulted in the process      of enacting  that legislation,  and yet  they  have  no      remedy."      For the reasons aforesaid we find ourselves in complete agreement with the argument of the Attorney General that the impugned notification  having been  passed to effectuate the object or  ideal to be achieved in order to solve a national crisis cannot  but be considered a legislative measure so as to exclude  rules of  natural justice. The contention raised by the petitioners on this ground is, therefore, overruled.      In contention  No. 6  another infirmity  pointed out by the  learned  counsel  for  the  petitioners  was  that  the impugned notification  is clearly  violative of clause 11 of the Control Order itself because the prohibition against the working of  the power  crushers  even  for  a  short  period amounted to  a partial revocation of the licences granted to the petitioners  under clause  3 of  the Licensing Order. In order to  appreciate this  contention  it  is  necessary  to extract clause 11 (2) of the Control Order which runs:-      "(2) Where  all or any of the powers conferred upon the      Central Government by this Order have been delegated in      pursuance of  sub-clause (I)  (b) to any officer or any      authority  of   a  State  Government,  every  Order  or      direction  issued  by  such  officer  or  authority  in      exercise of  that  power  may  be  amended,  varied  or      rescinded by  the State  Government to whom the officer      or authority  is subordinate  either suo motu, or on an      application made  within a  period of  thirty days from      the date of the order or direction.           Provided that  no  order  revoking  a  licence  or      permit issued  to a person shall be made without giving      such person an opportunity to make representation."      Reliance  was   particularly  placed   on  the  proviso extracted above.  It was  contended that  even  a  temporary suspension of  the operation of power crushers amounted to a partial revocation of the licence granted to the petitioners and that  therefore it  was  incumbent  on  the  authorities concerned to give the petitioners an opportunity of being 132 heard and  making a  representation before  such  revocation took effect.  The Attorney  General rightly pointed out that neither subclause  (2) nor  the proviso thereto is attracted in the  instant case.  It is  true that  the petitioners got licences under  the Licensing  Order which  was also  passed under the  Act of 1955. A revocation of a licence means that the licence  has not  been suspended  but cancelled  for all times to  come entailing  civil  consequences  and  complete abolition of the right for the exercise of which the licence was granted.  A temporary  suspension of  the working of the crushers  owned  by  the  petitioners  cannot  amount  to  a revocation, either  complete or  partial. In  fact,  in  our opinion, the  proviso to  sub-clause (2) of clause 11 of the Control  Order  does  not  at  all  envisage  a  partial  or periodical revocation  of a  licence. The proviso would come into play only if a licence is revoked or cancelled once for all. Since a revocation or cancellation of the licence would operate to  the serious prejudice of the licensee and affect him adversely,  it was considered necessary and expedient to give him a hearing. We are fully satisfied that the impugned notification does  not attract  the conditions  laid down in the proviso  so as to confer upon the petitioners a right of hearing. The  proviso is,  therefore, wholly inapplicable to the facts of the present case.      It  was  further  submitted  by  the  counsel  for  the

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 32 of 35  

petitioners that even if clause 11 did not apply because the notification is  of a  legislative character a hearing would have removed  the apprehensions  of  the  petitioners.  This argument has  no substance  because once it is held that the notification is  impressed with a legislative character, the question of  hearing does  not arise.  It may  be true  that despite the  fact that there is no necessity of hearing, the Government could  have evolved  some method of giving a very short notice  to the  Association and  taking its views. But the omission  to do  so would  not vitiate  the notification impugned.  It   is  well  settled  that  possibility  of  an alternative scheme  which might  have been  but has not been designed, would  not be  sufficient to  make  a  restriction unreasonable. In  State of  Maharashtra  v.  Mumbai  Upnagar Gramodyog Sangh(1) this Court observed as follows:-           "The legislature  has designed  a scheme  by which      reasonable restrictions  are placed upon the right of a      citizen to  dispose of  his property: possibility of an      alternative scheme  which might  have been  but has not      been designed, will not justifiably expose 133      the  first   scheme  to  the  attack  that  it  imposes      unreasonable  restrictions."      Lastly, on  contention No.  7 it  was  urged  that  the impugned notification,  which purports  to have  been passed under the  Control Order  (which itself  was  a  subordinate legislation passed under s.3 of the Act of 1955) if properly considered along with the serious mis-chief it causes to the citizens, goes against the very spirit and object of the Act of  1955  and  frustrates  the  equitable  distribution  and production of  sugar which  apparently seems  to be the main object sought to be achieved. This argument has already been considered by  us when  we dealt  with the various facts and materials  produced   before  us  to  justify  the  impugned notification. We have already pointed out that in view of an extraordinary situation  viz.,  the  sugar  famine  and  the increasing demand  of sugar  by the consumers, the interests of the  consumers had  to rank above all considerations. The notification, as stated by us earlier strikes a just balance between the needs of the consumers and the harm which may be done to  the owners  of the crushers. The degree and urgency of the evil sought to be remedied by a social control is the purport and  the central theme of the impugned notification. Having regard to the various aspects which we have indicated above, it  cannot be  argued with any show of force that the remedy sought by the notification is in any way arbitrary or excessive. On  the other  hand, the  report of  the experts, stoppage of  the production  of sugar  by the factories, the drought conditions  and other factors have to enter into the decision  of   the  Government   in  passing   the  impugned notification. The  notification ex  facie cannot  be said to have been passed without due care and deliberation. Relevant portion of Section 3 of the Act of 1955 runs thus:-      "3. (1) If the Central Government 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  regulating or  prohibiting the production,      supply and  distribution thereof and trade and commerce      therein."      The impugned  notification having been passed under s.3 of the Act, it fulfils all the conditions contained therein,

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 33 of 35  

viz., it  is expedient  for maintaining  or  increasing  the supply of  an essential  commodity namely,  sugar, which  is included in clause (e) of s.2 of the Act of 134 1955 and  it regulates  the supply  and distribution of that essential commodity and the trade and commerce therein.      Having   regard,    therefore,   to   the   facts   and circumstances proved  in this  case, it  cannot be said that either the Control Order or the the impugned notification is against the  tenor and  spirit of  section 3.  On the  other hand,  it   is  manifestly   clear  from  the  circumstances disclosed above  that it  is in  pursuance of  the  aim  and object for  which s.3  was enshrined in the Act of 1955 that the Control Order and the notification were promulgated. The contention of  the learned  counsel for  the petitioners  on this score is accordingly overruled.      Mr.  Rameshwar   Dayal,  appearing   for  some  of  the petitioners raised  a novel argument which was to the effect that not only the notification impugned but also the Control Order was  violative of  Art. 14 of the Constitution. It was contended that  since the  State had  already fixed reserved areas for  the factories,  the selection  of khandsari units for banning  or stopping their production amounted to a mini classification without  any rational basis. We are, however, unable to  accept this  contention because  in view  of  the various circumstances  discussed above,  the classification, if at  all, was  based on a reasonable nexus with the object sought to  be achieved  by the  notification. Certain  other aspects were also raised by Mr. Dayal which amount to almost a repetition  of the  main arguments placed before us by Mr. Garg and the counsel following him.      Thus,  on  an  overall  consideration  of  the  various aspects of  the matter  we are fully satisfied that applying the well  established tests  of reasonableness, the impugned notification cannot  be  said  to  contain  the  quality  of unreasonableness but is per se fair and reasonable and fully satisfies  the   conditions  laid  down  by  this  Court  in determining whether or not a restriction is reasonable.      Before closing  the judgment  we would like to lay down certain guidelines for any future policy that the Government may consider  fit to shape in the light of the discussion on the points  raised before  us in  this case.  In fact,  both counsel for  the petitioners  and the  Attorney General  had requested us  to lay  down certain  guidelines so  that  the Government may  benefit from  the  same.  Although  we  have upheld the  impugned notification  but having  regard to the special features  of the  present  case  we  are  not  quite satisfied that  a better policy to control sugar or increase its production  could not  be followed which may satisfy the parties  concerned,  viz.,  the  crushers,  the  mills,  the sugarcane growers and the consumers. 135      In case  the Government  decides to  impose  a  ban  in future on the power crushers or other units, it may consider the desirability of giving a bare minimum hearing not to all the owners of khandsari units but to only one representative of the  Association representing them all, and getting their views on  the subject.  It is  possible that they might give some  suggestions   which  the   Government  would  like  to incorporate  in   formulating  its   policy.  Even   if  the Government thinks  that an emergent situation has arisen and it may  not  be  possible  to  give  a  hearing,  atleast  a representation against the proposed action may be called for from  such  Association  and  considered  after  giving  the shortest possible  notice. Not  that such  action is a legal

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 34 of 35  

requirement but  it will  generate greater confidence of the persons who  may be  affected by  any  order  to  be  passed against them. In the same token, we may mention that when in passing an  order like  the impugned one, the Government has adopted the  trial-and-error method,  it  would  be  in  the fitness of  things if  the matter  is carried to its logical end so  that any future order passed contains the colour and quality of objectivity.      Secondly, could  it not  be possible for the Government to allow  the crushers to function by regulating the working hours or  to fix a quota of sugarcane to be delivered to the mills and  the crushers  in the  ratio of 60:40 or 70:30, as may be  advised by  the experts  and to insist that both the crushers and  the mills  should pay  a uniform  price to the cane growers  ? The counsel for the petitioners have brought to our  notice a disturbing element in the entire case which is that  in the past although the sugarcane growers supplied sugarcane on  condition of  payment to  them of  the support price fixed. by the Government yet the mills did not pay the price to  the cane  growers for  a long time with the result that arrears  accumulate running  into lakhs  of rupees.  It would indeed  be extremely  desirable for  the Government to take steps  to see that payment of the price of the quantity of the  cane supplied  to the  mills or the crushers is paid against delivery  or, at  any rate, within a reasonable time thereafter so  as to  provide  a  strong  incentive  to  the farmers to  increase their  production and  earn substantial profits by  supplying the  sugarcane to  mills  or  crushers during the crushing season (October to May).      Lastly, it  was represented  to us  by the  petitioners that  the   crushers  are  used  for  the  twin  purpose  of production of khandsari sugar and gur, rab, etc., but as the crushers are  sealed by  the officers of the Government, the owners are not in a position to produce 136 even gur  or rab  on the production of which not only no ban has been  imposed by  the impugned notification but the same has  been  completely  exempted  from  the  purview  of  the notification. Thus  it  was  asserted  that  the  owners  of crushers who  want to  switch over  to production  of gur or rab, because  of the  ban imposed  by the  Government on the production of  khandsari  may  be  allowed  to  do  so.  The Attorney General,  however, pointed  out that if this course is adopted  it will  be difficult  to detect  as to how many crushers are producing khandsari sugar in the garb of gur or rab. Wherever  any step for banning production is taken, the Government has  to  evolve  some  procedure  to  detect  the defaulters and  with the resources at its command, we cannot understand why  a special  staff cannot  be appointed  on  a temporary basis  for looking  after the  compliance  of  the order  by   the  "crushers   and  making   surprise   checks periodically. Another  method to  prevent the  abuse of  the privilege of production of gur or rab by producing khandsari in a clandestine fashion may be to insert a condition in the licences of  the manufacturers  of khandsari  sugar that  if they produce  khandsari during  the period  of the ban their licences would be cancelled.      The result  is that  all the  contentions raised by the petitioners except  the one  raised by  Mr. Gupta  that  the introduction of the word ’vertical’ was violative of Art. 14 of the  Constitution are  rejected. The word ’vertical’ must be  considered  to  have  been  deleted  from  the  impugned notification. Since  the impugned  notification has  already spent its  force.  no  relief  can  be  given  even  to  the petitioners represented  by Mr.  Gupta. But,  in future  the

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 35 of 35  

Government will  bear in mind the infirmity pointed out. The petitions, along  with the  Civil  Appeal,  are  accordingly dismissed but  in the  circumstances without any order as to costs. N.V.K.                       Petitions and Appeal dismissed. 137