http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 1 of 7  

PETITIONER: LINGO SULPHATE CORPORATION OF INDIA LTD. & ORS.

       Vs.

RESPONDENT: U.P. STATE SUGAR CORPORATION LTD.,UNIT, BIJNOR & ORS.

DATE OF JUDGMENT27/01/1982

BENCH: MISRA, R.B. (J) BENCH: MISRA, R.B. (J) FAZALALI, SYED MURTAZA

CITATION:  1982 AIR  786            1982 SCR  (3)  66  1982 SCC  (1) 539        1982 SCALE  (1)34

ACT:      Uttar Pradesh  Sheera Niyantran  Adhiniyam, 1964  (U.P. Act No.  24 of  1964), sections 8 and 9 read with rule 22(1) and 22(2)  of the Uttar Pradesh Sheera Niyantran Niyamavali, 1974-Scope of-Classification  made with  regard to  molasses covered under  rule 22(1)  and 22(2)  is reasonable and docs not  offend  Article  14  of  the  Constitution-Estoppel  by conduct-Here, there  is no  question of  contracting out  of law.

HEADNOTE:      Molasses, the basic raw-material for the manufacture of lingo-sulphite, basic  refractories,  steel  plants,  cement factories, carbon  black plants  and  many  other  important industries and  also used  for distillation,  has  become  a valuable  commodity   on  account   of  its  multi-use.  The preservation, distribution  and prices of the molasses were, therefore, controlled  by the Uttar Pradesh Sheera Niyantran Adhiniyam, 1964  (U.P. Act  24 of  1964) and  also the rules made  thereunder   called  Uttar  Pradesh  Sheera  Niyantran Niyamavali, 1974.  Section  8  of  tho  Act  authorised  the Controller to  direct the  occupier of  any sugar factory to sell and  supply in  tho prescribed  manner such quantity of molasses to  such persons  as may  be specified in the order and the  occupier shall  notwithstanding any contract comply with the  order. Section  10 provided that the occupier of a sugar factory  shall sell  molasses in  respect of  which an order under section 8 has been made at a price not exceeding that prescribed in the schedule attached to section 10.      United   Commercial   Syndicate,   Allahabad   is   the purchasing agent of M/s. Lingo Sulphite Corporation and M/s. Audubon Trading  and Export  Corporation  of  Allahabad  and Calcutta, entered  into an  agreement with  the  U.P.  State Sugar Corporation  Ltd. whereunder the latter agreed to sell 28,300 quintals  of molasses  of 1977-78  production at  the statutory price  of  Rs.  9  per  quintal  and  duties  etc. provided the  former agreed to pay the total amount of Rs. 3 lacs being  the total  cost of  molasses as estimated at the said statutory price. It was further stipulated that in case the said  price was  not valid in law, The United Commercial Syndicate will  have to pay the price at the rate of Rs. 25- 10 por quintal inclusive of administrative charges and other

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 2 of 7  

taxes and  duties etc.  as agreed to by the Syndicate. A sum of Rs.  2 lacs  had been  paid in pursuance of the agreement and the balance of Rs: I lac was to be paid at the earliest. The Sugar  Corporation however sought to calculate the price of the  molasses in  question at  the rate  of Rs. 25-10 per quintal on  the ground that the molasses agreed upon was not covered by  an order  under section  8. Syndicate  filed two petitions in  the High  Court of  Allahabad for  a  writ  of mandamus or any other 67 appropriate writ or direction declaring that Corporation was not entitled to  charge the price for tho molasses in excess of the  price fixed  by the  Act, namely, Rs. 9 per quintal. Tho High  Court  by  its  order  dated  21st  October,  1979 dismissed the  petitions in  limine.  Hence  the  appeal  by special leave  by the Syndicate and the writ petition by tho principal M/s. Lingo Sulphite Corporation.      Dismissing tho appeal and tho writ petition, tho Court, ^      HELD: 1.  Sections 3  to 8  and 10 of tho Adhiniyam and Niyamavali 12,13,  22, 23  and 24  make it  clear  that  the occupier of  a sugar  factory can  sell molasses to a person specified in  the order  of the Controller at the controlled price. The  occupier of  every sugar  factory has to give an estimate of the molasses to be produced in tho sugar factory as  also   the  estimate  of  requirement  of  molasses  for distillation  and  industrial  purposes.  If  there  is  any surplus after  meeting the  requirements of  the persons  in whose favour  there is  an order of the Controller, the same will be released in favour of tho occupier. [71 H, 72 A-B]      2. Section  10 makes  it clear  that the  occupier of a sugar factory  is obliged  to sell molasses at the price not exceeding that prescribed in the schedule only in respect of which an order under section 8 has been made. But sub-clause (2) of  rule 22  authorises the  Controller to  release  any stock of  molasses in  favour of  an  occupier  of  a  sugar factory only  when the same is not required for distilleries or for  other  purposes  of  industrial  development.  If  a certain quantity  of molasses has been released in favour of tho  occupier,   because  the  same  was  not  required  for distilleries   or   for   other   purposes   of   industrial development, it  is  open  to  the  occupier  to  sell  that quantity of molasses in free market to any person at a price prevalent in  tho market.  Section 10 of tho Act requires an occupier of  a sugar factory to sell molasses at a price not exceeding that prescribed in the schedule only in respect of which an  order under section 8 has been made. No limitation or fetter has been put on the occupier of a sugar factory to sell molasses  which was  released in  his favour.  It  was, therefore,  open  to  the  occupier  to  sell  the  molasses released in his favour at the free market price. [73 B-E]      3. The  classification made  with  regard  to  molasses covered under  rule 22(1)  or rule  22(2)  is  a  reasonable classification. [73 B-E]      4. The  Syndicate entered  into an  agreement with  the Corporation and  agreed to  pay the price of the molasses at the rate  of Rs. 25-10 per quintal. Having entered into such an agreement  with its  eyes wide  open it  cannot now  turn turtle and  contend that  it was  liable to  pay only at the rate of Rs. 9 per quintal. tho statutory price. [73 P-G]      5. It  is true  that the  parties cannot  be allowed to contract themselves  out of  law. It  is not the law that no molasses released  in favour  of the  occupier of  the sugar factory could  be sold at a price higher than the controlled one.  The  controlled  price  was  applicable  only  to  the

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 3 of 7  

molasses  for   which  an  order  had  been  passed  by  the Controller in  favour of  a specified  person either for the purpose of  distillation or  for other  industrial purposes. But so  far as  the molasses  released i  n  favour  of  the occupier of  a sugar  factory  is  concerned,  there  is  no requirement of the law that the occupier should sell it only at the controlled price [73 G-H, 74 A-B] 68      6. The  terms of  the  agreement  between  the  parties entitles the  Corporation for administrative charges. [74 B- C]

JUDGMENT:      ORIGINAL JURISDICTION  ON: Writ  Petition  No.  391  of 1981.      (Under Article 32 of the Constitution of India)                             WITH                Civil Appeal No. 651 of 1980      (Appeal by  special leave  from the  judgment and order dated the  31st October, 1979 of the Allahabad High Court in Civil Misc. - Writ No. 8091 of 1979)      R.K. Garg,  Pramod Swarup  and  D.  R.  Gupta  for  the Petitioner in Writ Petition.      O. P.  Rana and P.K Pillai for Respondent Nos. 1 & 2 in      WP.      G. N. Dikshit and Miss A. Subhashini for Respondent No. 5 in W.P.      Mubarak Mazdoor Appellant in person in C.A.      G. N.  Dikshit, B. P. Maheshwari and Miss Asha Jain for the Respondent in Civil Appeal.      The Judgment of the Court was delivered by      MISRA, J.  Writ petition  No. 391 of 1980 under Article 32 of  the Constitution  and Civil Appeal No. 651 of 1980 by special leave  raise common  question of law and, therefore, we propose to dispose them of by a common judgment.      The circumstances  leading to the writ petition and the appeal lie  in  a  narrow  compass.  The  appellant,  United Commercial Syndicate,  is the purchasing agent of M/s. Lingo Sulphite Corporation,  the petitioner  in writ  petition No. 391 of  1980 and M/s. Audubon Trading and Export Corporation of Allahabad  and Calcutta,  who are  the  manufacturers  of lingo-sulphite in India.      Molasses is  the basic raw material for the manufacture of lingo-sulphite which is an essential raw material for all basic refractories,  steel plants, cement factories, carbon- black plants and many 69 Other  important   industries  Molasses  is  also  used  for distillation.  .  Over  the  years  molasses  has  become  a valuable  commodity   on  account   of  its  multi-use.  The preservation, distribution  and prices of the molasses were, therefore, controlled  by a  legislation, the  Uttar Pradesh Sheera Niyaatran  Adhiniyam, 1964 (U.P. Act No. 24 of 1964), hereinafter referred lo as the Act.      United Commercial  Syndicate used  to purchase molasses for their  principals from  the open  market.  Later  on  it decided to  make direct  purchase from  the U.P. State Sugar Corporation  Ltd.,   Unit   Bijnor   (A   State   Government Undertaking). It  entered into  an agreement with respondent No. 1,  the U.P.  State Sugar  Corporation Ltd.,  whereunder respondent No.  I agreed to sell 28,300 quintals of molasses of 1977.78  production at  the statutory price of Rs. 91 per quintal and duties etc. provided the appellant agreed to pay

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 4 of 7  

the total  amount of  Rs. 3  lakhs, being  the total cost of molasses as  estimated at  the above statutory price. It was further stipulated  that in  case the  above price  was  not valid in  law, the  appellant will  have to pay the price at the  rate   of  Rs.   25.10   per   quintal   inclusive   of administrative charges  and other  taxes and duties etc., as agreed to  by the  appellant. There  were other terms of the agreement but  it is  not  necessary  for  the  purposes  of disposal of  these cases  to refer  to them.  A sum of Rs. 2 lakks had  been paid  in pursuance  of the agreement and the balance of  Rs. 1  lakh was  to be paid at the earliest. The respondent No.  1, however, sought to calculate the price of the molasses  in question  at the  rate  of  Rs.  25.10  per quintal. The  appellant felt aggrieved and it took the stand that the  respondent No.  1 could  not charge  more than the statutory price  in spite of the fact that the appellant had offered the price of Rs. 25.10 per quintal to respondent No. 1. The appellant filed two petitions in the High Court for a writ of  mandamus or any other appropriate writ or direction declaring that  respondent No.  I was not entitled to charge the price  for the  molasses in excess of the price fixed by the Act.  The High Court by its order dated 31st of October, 1979 dismissed  the petitions  in limine.  The appellant has come up in appeal by special leave to challenge the order of the High Court. M/s. Lingo Sulphite Corporation of India Ltd has  also   filed  a   petition  under  Article  32  of  the Constitution for  the same  relief on the same grounds as in the aforesaid appeal.      In order  to appreciate the points involved in the case it would  be appropriate to refer to the material provisions of the Act and the rules framed thereunder, 70      Section 3 of the Act authorises the State Government to constitute an  Advisor-y  Committee  to  advise  on  matters relating to the control of storage, preservation, gradation, price, supply  and disposal  of molasses. Section 4 provides for the  appointment of  a person  as Controller of Molasses for the  purpose of exercising the powers and performing the duties of  the Controller  of Molasses.  - Section 5 enjoins every occupier  of a  sugar factory  to take precautions for preservation of  molasses. Section  6 prohibits the occupier of a  sugar factory to adulterate or allow to be adulterated any molasses  produced or  held in  stock by  him.  ’Section 7A(1) enjoins  any person,  who requires  molasses  for  his distillery or  for any  purpose of industrial development to apply in  the prescribed manner to the Controller specifying the purpose  for which  it is  required. Sub-section  (2) of section 7A authorises the Controller to make enquires in the matter as  he may  think fit  and to  pass  an  order  under section 8  with due regard to the factors enumerated in sub- section (3) of section 7A.      Section 8(1)  authorises the  Controller to  direct the occupier of  any sugar  factory to  sell and  supply in  the prescribed manner  such quantity of molasses to such persons as may  be specified  in the  order and  the occupier shall, notwithstanding any  contract, comply  with the  order. Sub- section (2) (a) of section 8 enjoins that the occupier shall supply, molasses  only to  a person  who requires it for his distillery or  for any purpose of industrial development and sub-  clause(aa)  of  sub-section  (2)  directs  the  person specified in  the order  of the  Controller to  utilise  the molasses supplied  to him  in pursuance  of an  order of the Controller for the purpose specified in the application made by him  under sub-section  (I) of  section 7A and to observe all the  restrictions and  conditions as  may be prescribed.

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 5 of 7  

Section 10  provides that  the occupier  of a  sugar factory shall sell  molasses in  respect of  which  an  order  under section 8  has been  made at  a  price  not  exceeding  that prescribed in the schedule attached to section 10.      Rule 12  of the  U.P. Sheera Niyantran Niyamavali, 1974 enjoins the occupier of every sugar factory to submit to the Controller by  August 31  each molasses  year a statement in form M.F.  9  specifying  an  approximate  estimate  of  the quantity of  molasses to  be produced  in  a  sugar  factory during the  molasses year  following, along  with such other information as  is required  under  that  form.  Rule  13(1) provides that  every distillery  in U.P.  shall by August 31 each year  submit to the Controller a statement in form M.F. 8 specifying  its estimated  requirement of molasses for the purposes of  distillation during the molasses year following along with such 71 Other information  as  may  be  required  under  that  form. Likewise, A  rule 13(2)  requires the Director of Industries to furnish  the  Controller  by  August  31  each  year  the estimated requirement  of molasses  for industrial  purposes within the State relating to the molasses year following :      Rule 23 provides:           "(I) All  stock of  molasses produced  in a  sugar      factory shall  be deemed  to  have  been  reserved  for      supply to  distilleries or  other persons  requiring it      for purposes  of industrial development and no stock of      molasses produced  in a  sugar factory shall be sold or      otherwise disposed  of by  the occupier  of  any  sugar      factory except  in accordance  with an order in writing      from the Controller.      (2) The  Controller shall release any stock of molasses      in favour  of occupier of a sugar factory only when the      same is  not required  for distilleries  or  for  other      purposes of industrial development."      Rule 23(1) provides:           "(I) The  State Government may levy administrative      charges exclusive  of the  price  payable  to  a  sugar      factory on  the  molasses  released  for  sale  by  the      Controller towards  meeting the  cost of  establishment      for supervision  of control  over molasses at such rate      or rates as may be notified from time to time."      Rule 24(1) provides           "(I)  Save   in  pursuance  of  an  order  of  the      Controller, no  person shall purchase any molasses from      any sugar factory, or transport or possess any molasses      purchased from  such sugar  factory,  unless  the  said      molasses has  been released  by order of the Controller      as not  required for  distilleries or other purposes of      industrial development and a declaration to that effect      in form  M.F. 13 has been obtained from the occupier of      the sugar factory concerned."      A perusal  of the  relevant provisions  of the  Act and rules aforesaid  makes it clear that the occupier of a sugar factory can 72 sell molasses  to a  person specified  in the  order of  the Controller at  the controlled  price. The  occupier of every sugar factory  has to give an estimate of the molasses to be produced in  the sugar  factory  as  also  the  estimate  of requirement of  molasses  for  distillation  and  industrial purposes.  If   there  is  any  surplus  after  meeting  the requirements of  the persons  in whose  favour there  is  an order of the Controller, the same will be released in favour of the occupier.

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 6 of 7  

    The question  for consideration  in the instant case is whether the  molasses released  in favour of the occupier by the Controller  is also to be sold at the controlled rate or it can be sold at the market price as a free commodity.      Shri Garg, senior counsel contends that from the scheme of the  Act and  the rules  it is  evident that  the  entire production of molasses is to be controlled by the Controller appointed under  the Act, at every stage. He is to take into account the estimated supply and the estimated demand of the commodity. Thereafter,  he is  to allot  the commodity  to a particular person for a particular purpose at the controlled statutory price  fixed by  the schedule  to the Act. The Act and the  rules further provide that nobody will store, sell, transport or use the said commodity without the order of the Controller and  the price  and distribution of molasses both are controlled  by the  Act and  the  contravention  of  the provisions of  the Act  have been  made penal  and the  High Court has  gone wrong  in assuming  that certain quantity of molasses which are covered by rule 22(2) are immune from the restrictions and  fetters of  the Act  and the  said  rules, which is  erroneous and indefensible in law inasmuch as such a construction as has been put by the High Court will defeat the very  purpose and  object of the said Act and the rules. As a  second limb to this argument it was contended that the classification made  between molasses  covered by rule 22(1) on the  one hand  and rule  22(2) on  the  other  is  wholly irrational and  the very  purpose of  the  Act  is  defeated According to  the learned  counsel, it  makes no  difference whether the  molasses are  covered by  rule 22(1)  or  22(2) inasmuch as  the object  of the  present legislation  is  to ensure that  the sale  and the  distribution of  molasses is controlled in  an equitable  manner and,  therefore, to hold that section  8 is  applicable to rule 22(1) and not to rule 22(2) is arbitrary and violative of Article 14. 3      Shri Rana  appearing for  respondent No. 1 on the other hand has  contended that  on a correct interpretation of the relevant pro 73 visions of  the Act  and the rules the interpretation put by the High Court is ’fully warranted.      Section 10  of the Act which has been referred to above enjoins the  occupier of a sugar factory to sell molasses in respect of which an order under section 8 has been made at a price not exceeding that prescribed in the schedule. A plain reading of the section makes it clear that the occupier of a sugar factory  is obliged  to sell molasses at the price not exceeding that prescribed in the schedule only in respect of which an order under section 8 has been made. But sub-clause (2) of  rule 22  authorises the  Controller to  release  any stock of  molasses in  favour of  an  occupier  of  a  sugar factory only  when the same is not required for distilleries or for  other  purposes  of  industrial  development.  If  a certain quantity  of molasses has been released in favour of the  occupier,   because  the  same  was  not  required  for distilleries   or   for   other   purposes   of   industrial development, it  is  open  to  the  occupier  to  sell  that quantity of molasses in free market to any person at a price prevalent in  the market.  Section 10 of the Act requires an occupier of  a sugar factory to sell molasses at a price not exceeding that prescribed in the schedule only in respect of which an  order under section 8 has been made. No limitation or fetter has been put on the occupier of a sugar factory to sell molasses  which was  released in  his favour.  It  was, therefore, open  to him to sell the molasses released in his favour at the free market price.

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

    The contention that the classification made with regard to molasses  covered under  rule 22(1)  or rule  22(2) is an unreasonable classification  cannot be  accepted There  have been other  enactments in  which similar  provision has been made, for example, the levy sugar was to be sold only at the controlled rate  but free  sugar  was  to  be  sold  by  the factories at  a free  market price  and that has been always accepted as  a valid  classification. The  appellant entered into an  agreement with  respondent No.  I and agreed to pay the price  of the  molasses at  the rate  of Rs.  25.10  per quintal Having  entered into such an agreement with its eyes wide open  it cannot now turn turtle and contend that it was liable to  pay only  at the rate of Rs. 9/- per quintal, the statutory price.  It is  true that  the  parties  cannot  be allowed to  contract themselves  out of  law. If the law was that no  molasses released  in favour of the occupier of the sugar factory  could be  sold at  a price  higher  than  the controlled one,  than the  contention of the appellant would be correct. On an analysis of the relevant provisions of the Act we are quite clear that 74 the controlled price was applicable only to the molasses for which an  order had  been passed by the Controller in favour of a specified person either for the purpose of distillation or for other industrial purposes. But so far as the molasses released in  favour of  the occupier  of a  sugar factory is concerned, there  is no  requirement or  the  law  that  the occupier should sell it only at the controlled price.      It was  further contended  that the  respondent was not entitled to  administrative charges.  This contention  loses sight of  the terms  of the  agreement between  the  parties which includes administrative charges also.      For the foregoing discussion we find no force either in the appeal  or in  the writ  petition under Article 32. They are accordingly dismissed. There shall, however, be no order as to costs. S.R.                          Appeal and Petition dismissed. 75