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CASE NO.: Appeal (civil)  460 of 1997

PETITIONER: U.P. Cooperative Cane Union Federation

RESPONDENT: West U.P. Sugar Mill Association & Ors.

DATE OF JUDGMENT: 05/05/2004

BENCH: B.N. SRIKRISHNA.

JUDGMENT: J U D G M E N T

With

C.A. Nos. 461/1997, 4685/1997, 932/2001, 1639-1645/1999, 1727/1999, 4602/1999, 6065/2001, 8117-8122/2001, C.A. No.__________ @ SLP(C) No. 16851/2001, C.A.No.__________ @ SLP(C) No. 1363/2002, C.A.No.__________ @ SLP(C) No. 948/2003, Transferred Case Nos. 21-22/2003 @ T.P. (C) Nos.648-649 of 2000  Contempt Petition (C) No. 63/2003 in C.A. No. 932 of 2001 I.A. No. 3 in C.A. No. 460/1997 and I.A. Nos. 13-14 in C.A. No. 3512-13 of 1997

SRIKRISHNA, J.

       I have had the benefit of going through the erudite and well  considered opinion of Brother G.P. Mathur, J.  I regret, I am unable to  share the views expounded by him, which constrains me to write this  dissenting opinion.

       The facts have been succinctly reproduced in the opinion of  Brother G.P. Mathur, J. and hence need no repetition, except for certain  highlighting.  I have also treated C.A. No. 460 of 1997 as the leading  case, since most of the arguments were addressed by counsel appearing  for the contending parties in this appeal.

       By an Order made on 22.1.1997, a Bench of two learned Judges of  this Court [Hon’ble S.P. Bharucha and Hon’ble Faizan Uddin, JJ.] took  the prima facie view that under the provisions of the U.P. Sugarcane  (Regulation of Supply and Purchase) Act, 1953 and the Rules made  thereunder, it appeared that the State Government is not empowered to  fix the ’State Advised Cane Price’ which it had purported to do.  In view  thereof, special leave was granted.

       When this group of matters came up before another Bench of two  learned Judges of this Court [Hon’ble V.N. Khare (as His Lordship then  was) and Hon’ble K.G. Balakrishnan, JJ.], the Bench noticed a conflict in  the opinions of two judgments of this Court in State of M.P. v. Jaora  Sugar Mills Ltd., (1997) 9 SCC 207 and State of Tamil Nadu & Ors. v.  Kothari Sugar & Chemicals Ltd. & Ors., (1996) 7 SCC 751 and thereafter  referred the instant group of matters to a larger Bench of Three Judges.

       By an order dated 15.1.2003, a Bench of three learned Judges of  this Court took the view that one of the conflicting judgments had been  approved by the decision in S.K.G. Sugar Ltd. v. State of Bihar & Ors,  (1997) 9 SCC 362 by a Bench composed of three Judges and, therefore,  thought it would be appropriate to refer this matter to a larger Bench of

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Five Judges.  Hence, these matters have been placed before this Bench of  Five Judges.

       The crucial issue involved in this group of matters is: whether  under the provisions of the U.P. Sugarcane (Regulation of Supply and  Purchase) Act, 1953 read with the U.P. Sugarcane (Regulation of Supply  & Purchase) Rules, 1954 and the U.P. Sugarcane Supply & Purchase  Order, 1954 [hereinafter referred to as ’the U.P. Sugarcane Act of 1953’,   ’the U.P. Sugarcane Rules, 1954’ and ’the U.P. Sugarcane Order, 1954’  respectively], the State Government has the authority to stipulate a  purchase price known as ’State Advised Price’ (SAP) for supply of  sugarcane to sugar producers which is required to be paid over and  above the minimum price and additional price for purchase of  sugarcane payable under the provisions of the Sugarcane (Control)  Order, 1966.

Legislative Background :-         The legislative background against which this question has arisen  has been succinctly traced in the judgment of the Constitution Bench of  this Court in Ch. Tika Ramji & Ors. v. The State of Uttar Pradesh &  Ors, 1956 SCR 393.  Some excerpts, however, may be necessary.

       On 8th April, 1932, the Central Legislature, in then British India,  passed the Sugar Industry (Protection) Act, 1932 [Act XIII of 1932] to  provide for the fostering and development of Sugar Industry in India.   This led to a large number of farmers taking up sugarcane cultivation  and the establishment of a number of sugar factories coming up,  particularly in the then Province of U.P.   To protect the interest of the  sugarcane-growers’, and for the purpose of assuring them a fair price,  the Central Legislature enacted on 1st May, 1934 the Sugarcane Act, 1934  [Act XV of 1934] to regulate the price at which sugarcane intended for  manufacture of sugar could be purchased by or for the factories.  Since,  sugarcane was grown in various Provinces and the Sugarcane Act, 1934  left the declaration of controlled areas and the fixing of minimum price  for the purchase of sugarcane in any controlled area to the discretion of  the Provincial Governments, the Provincial Governments were also  empowered to make rules for the purpose of carrying into effect the  objects of the Act.

As a result of the Government of India Act, 1935, there was a  distribution of legislative powers between the Dominion Legislature  and the Provincial Legislatures.  Consequently, the entire subject matter  of Act XV of 1934 fell within the Provincial Legislative List.  It was felt  that Act XV of 1934 was not sufficiently comprehensive for dealing with  the problems of the sugar industry.  The Governments of U.P. and Bihar  decided to introduce legislation on similar lines in both the provinces  since, between them, they accounted for nearly 85 % of production of  sugar in India.

       The U.P. Legislature enacted on 10th February, 1938 the U.P. Sugar  Factories Control Act, 1938 [U.P. Act I of 1938].  This Act provided for (i)  licensing of sugar factories, (ii) regulation of the supply of sugarcane  intended for use in such factories, (iii) the minimum price for sugarcane,  (iv) the establishment of Sugar Control Board and Advisory Committee,  and (v) a tax on the sale of sugarcane intended for use in factories.   Though this Act was to remain in force initially until 30th June, 1947, its  life was extended from time to time and finally up to 30th June 1952.   Parallel developments during this period were the outbreak of the  Second World War and the legislative measures taken to meet the  situation by the then Government of India for controlling the  

production, regulation of distribution and supply of essential  commodities.  The Dominion Legislature acquired the power to make

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laws for the Provinces with respect to any of the matters enumerated in  the Provincial Legislative List.  Under the Defence of India Act, sugar  was made a controlled commodity in the year 1942 and its production  and distribution as well as the fixation of sugar prices were regulated by  the Sugar Controller. The proclamation of emergency was revoked by  the Governor General on 1st April 1946.  Simultaneously, the laws made  by the Dominion Legislature in the field of the Provincial Legislative  List were to cease to be effective after 30th September 1946.

       On 26th March 1946, the British Parliament enacted the India  (Central Government and Legislature) Act, 1946 [9 & 10 Geo.6, Chapter  39] which provided that, notwithstanding anything in the Government  of India Act, 1935, the Indian Legislature shall during the periods  specified  in  Section 4  of  the Act  have  the  power  to  make  laws  with  

respect, inter alia, to ’foodstuffs’.  Though the period provided in Section  4 was one year from the expiration of the declaration of the emergency  by the Governor General, this period was extended from time to time  and would have ended on 31st March 1948

       On 18th July 1947, the Indian Independence Act came to be passed  leading to the Indian (Central Government and Legislature) Act, 1946  which by way of adaptation provided that the powers of the Dominion  Legislature shall be exercised by the Constituent Assembly.  With the  Constitution coming into force on 26th January 1950, Article 369 invested  Parliament with the power for a period of 5 years from the  commencement of the Constitution to make laws with respect to some  of the matters as if they were enumerated in the Concurrent List.  One  such matter was "trade and commerce within a State in, and the  production, supply and distribution of, .....foodstuffs (including edible  oil seeds and oil), ......"

       On 7th October 1950, the Central Government, in exercise of the  powers conferred upon it by Section 3 of the Act, promulgated the Sugar  and Gur Control Order, 1950 which, inter alia, empowered it to prohibit  movement of sugarcane from any area and also to direct that no gur or  sugar should be manufactured from sugarcane except under and in  accordance with a licence issued by it.  Power was also given to the  Central Government to fix the minimum price of sugarcane and no  person was to sell or agree to sell sugarcane to a producer and no  producer was to purchase or agree to purchase sugarcane at a price  lower than that notified.  This power of fixing the price of sugarcane  was exercised by the Central Government from time to time by issuing  notifications which fixed the minimum price to be paid by the producer  of sugar by vacuum pan process.  An Act for similar purposes, by name,  Bihar Sugar Factories Control Act VII of 1937 came to be enacted in the  State of Bihar.  As a result of the recommendations of the Khaitan  Committee, the report of the Indian Tariff Board in the year 1938 and the  

U.P. Sugar Industry Enquiry Committee, 1951 [Swaminathan  Committee], it was desired that the U.P. Act I of 1938 should be  amended in order to make regulation of the supply of sugarcane  possible.

       Industries (Development and Regulation) Act, 1951 [Act LXV of  1951] was brought into effect from 8th May 1952.  In view of this Act  coming into force, certain provisions of the U.P. Act I of 1938 became

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inoperative.  The U.P. Legislature passed on 29th June, 1952, the U.P.  Sugar Factories Control (Amendment) Act, 1952, deleting those  provisions and putting the amended Act permanently on the Statute  Book.  The U.P. Act I of 1938, thus amended, continued in force till it  was repealed by the U.P. Sugarcane Act, 1953.  The object of the  enactment of the 1953 Act is stated thus : "With the promulgation of the  Industries (Development and Regulation) Act, 1951 with effect from 8th  May 1952, the regulation of the sugar industry has become exclusively a  Central subject.  The State Governments are now only concerned with  the supply of sugarcane to the sugar factories.  The Bill is being  introduced in order to provide for a rational distribution of sugarcane to  factories, for its development on organised scientific lines, to protect the  interests of the cane-growers and of the industry and to put the new Act  permanently on the Statute Book" [See - Statement of Objects and  Reasons published in the U.P. Gazette Extraordinary dated 15th July,  1953].  In exercise of the rule making power conferred by Section 28 of  the Act, the U.P. Government made the U.P. Sugarcane Rules, 1954 and  also in exercise of the powers conferred by Section 16 of the Act,  promulgated the U.P. Sugarcane Order, 1954.

       On 1st April 1955, Parliament enacted the Essential Commodities  Act, 1955 [Act X of 1955] to provide in the interests of the general public  "for the control of production, supply and distribution of, and trade and  commerce in, certain commodities".  This Act defines ’essential  commodity’ in Section 2(a)(v) to be any "foodstuffs, including edible  oilseeds and oils".  By clause (b), "food-crops" is defined to include  crops of sugarcane.  By clause (xi), the definition of ’essential  commodity’ extends to any other class of commodity which the Central  Government may declare to be an essential commodity for the purpose  of the Act, being a commodity with respect to which Parliament has  power to make laws by virtue of Entry 33 in List III in the Seventh  Schedule to the Constitution.

       Section 3(1) empowers the Central Government, if necessary or  expedient to do so "for maintaining or increasing the supplies of any  essential commodity or for securing their equitable distribution and  availability at fair prices", by an order to provide "for regulating or  prohibiting the production, supply and distribution thereof and trade  and commerce therein."  Under clause (c) of sub-section (2) of Section 3,  such an order may provide for controlling the price at which essential  commodity may be bought or sold.

       In exercise of the powers conferred by Section 3 of the Essential  Commodities Act, the Central Government promulgated on 27th August  1955, the Sugar Control Order, 1955 and the Sugarcane Control Order,  1955.  Clause 3(a) of the Sugarcane Control Order, 1955 empowers the  Central Government, after consultation with appropriate authorities, to  fix in respect of any area ’the price or the minimum price’ to be paid by  a producer of sugar for sugarcane purchased by him in that area.  It also  empowers fixation of different prices for different areas or different  qualities of sugarcane or on the basis of recovery of sugar from  sugarcane having regard to various factors enumerated therein.  Clause  3(2) provides that no person shall sell or agree to sell sugarcane to a  producer of sugar or factory and no producer or factory shall purchase  or agree to purchase sugarcane at a price lower than that notified under  this clause.  Clause (4) empowers the Central Government to prohibit or  restrict or otherwise regulate the export of sugarcane from any area for  supply to different factories and also to direct that no gur or sugar shall  be manufactured from sugarcane except under and in accordance with  the conditions specified in a licence issued in this behalf.  Clause (5)  requires every producer or factory to comply with the directions made  under the order.  By clause (7) of this order, the Sugar and Gur Control  Order, 1950 was repealed.

       On 16.7.1966, the Central Government notified the Sugarcane

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(Control) Order, 1966.  Clause 2(g) defines ’price’ to mean the price or  the minimum price fixed by the Central Government, from time to time,  for sugarcane delivered, inter alia, to a sugar factory.  Clauses 3 and 3-A  bear reproduction and read thus :-

Clause 3 : Minimum price of sugarcane payable by producer of sugar-  (1) The Central Government may, after consultation with such  authorities, bodies or associations as it may deem fit, by notification in  the official Gazette, from time to time, fix the minimum price of  sugarcane to be paid by producers of sugar or their agents for the  sugarcane purchased by them, having regard to -          (a)     the cost of production of sugarcane;         (b)     the return to the grower from alternative crops and the                          general trend of prices of agricultural commodities;

       (c)     the availability of sugar to the consumer at a fair price;         (d)     the price at which sugar produced from sugarcane is sold by                  producers of sugar; and  

       (e)     the recovery of sugar from sugarcane :

       [Provided that the Central Government or, with the approval of  the Central Government, the State Government, may, in such  circumstances and subject to such conditions as specified in Clause 3-A,  allow a suitable rebate in the price so fixed.]

Explanation - (1) Different prices may be fixed for different areas or  different qualities or varieties of sugarcane.

(2)     No person shall sell or agree to sell sugarcane to a producer of  sugar or his agent, and no such producer or agent shall purchase or  agree to purchase sugarcane, at a price lower than that fixed under sub- clause (1).

(3)     Where a producer of sugar purchases any sugarcane from a  grower of sugarcane or from a Sugarcane-grower’s Co-operative  Society, the producer shall, unless there is an agreement in writing to  the contrary between the parties, pay within fourteen days from the date  of delivery of the sugarcane to the seller or tender to him the price of the  cane sold at the rate agreed to between the producer and the sugarcane- grower or Sugarcane-growers’ Co-operative Society or that fixed under  sub-clause (1), as the case may be, either at the gate of the factory or at  the cane collection centre or transfer or deposit the necessary amount in  the bank account of the seller or the co-operative society, as the case  may be. [Subs. by G.S.R. 945, dated 18.5.1968]

(3-A)    Where a producer of sugar or his agent fails to make payment for  the sugarcane purchased within 14 days of the date of delivery, he shall  pay interest on the amount due at the rate of 15 per cent per annum for  the period of such delay beyond 14 days.  Where payment of interest on  delayed payment is made to a cane-growers’ society, the society shall  pass on the interest to the cane-growers concerned after deducting  administrative charges, if any, permitted by the rules of the said society.  [Ins. by G.S.R. 62(E) dated 2.2.1978].

(4)     Where sugarcane is purchased through an agent, the producer or  the agent shall pay or tender payment of such price within the period  and in the manner aforesaid and if neither of them has so paid or  tendered payment, each of them shall be deemed to have contravened  the provisions of this clause.

(5)     At the time of payment at the gate of the factory or at the cane  collection centre, receipts, if any, given by the purchaser, shall be  surrendered by the cane-grower or co-operative society.

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(6)     Where payment has been made by transfer or deposit of the  amount to the bank account of the seller or the co-operative society as  the case may be, the receipt given by the purchaser, if any, to the grower  or the co-operative society if not returned to the purchaser, shall become  invalid.

(7)     In case, the price of the sugarcane remains unpaid on the last day  of the sugar year in which cane supply was made to the factory on  account of the suppliers of cane not coming forward with their claims  therefore or for any other reason, it shall be deposited by the producer  of sugar with the Collector of the district in which the factory is situated,  within three months of the close of the sugar year.  The Collector shall  pay, out of the amount so deposited, all claims, considered payable by  him and preferred before him within three years of the close of the sugar  year in which the cane was supplied to the factory.  The amount still  remaining undisbursed with the Collector, after meeting the claims from  the suppliers, shall be credited by him to the Consolidated Fund of the  State, immediately after the expiry of the time limit of 3 years within  which claims therefore could be preferred by the suppliers.  The State  Government shall, as far as possible, utilise such amounts, for  development of sugarcane in the State.

Clause 3-A : Rebate that can be deducted from the price paid for  sugarcane - A producer of sugar or his agent shall pay, for the  sugarcane purchased by him, to the sugarcane-grower or the sugarcane- growers’ co-operative society, either the minimum price of sugarcane  fixed under Clause 3, or the price agreed to between the producer or his  agent and the sugarcane-grower or the sugarcane-growers’ co-operative  society, as the case may be (hereinafter referred to as the agreed  price).......... [Subs. by G.S.R. 815(E) dated 24.9.1976]

       Clause 4 empowers the Central Government ’or a State  Government, with the concurrence of the Central Government’, to fix  the minimum price or the price of sugarcane to be paid by producers of  the khandsari sugar for the sugarcane purchased by them with the  proviso that the minimum price or the price of sugarcane so fixed shall  not exceed the minimum price of sugarcane fixed by producers of sugar  in the region with a further proviso that no person shall sell or agree to  sell sugarcane to a producer of khandsari sugar or his agent, and no  such producer or his agent shall purchase or agree to purchase  sugarcane, ’at a price lower than that fixed under clause (4)’.

       Clause 5-A provides that where a producer of sugar purchases  sugarcane, from a sugarcane-grower during each sugar year, he shall be  liable to pay, in addition to the minimum sugarcane price fixed under  Clause 3, an additional price, if found due in accordance with the  formula enumerated in Second Schedule to the Order.   

       Under sub-clause (2) of Clause 5-A, an appropriate authority may  be authorised to determine the additional price payable under sub- clause (1) who shall intimate the same in writing to the producer of  sugar and the sugarcane-grower.   

       Under sub-clause (4), the manner of payment of the additional  price may be prescribed as directed by the Central Government or the  State Government, from time to time.   

       Under sub-clause (5), no additional price determined under sub- clause (2) or sub-clause (3) is required to be paid by a producer of sugar  who pays a price higher than the minimum price fixed under Clause 3  to the sugarcane-grower, provided that, "the price so paid is not less  than the total price comprising the minimum sugarcane price fixed  under Clause 3 and the additional price determined under sub-clause (2)  or sub-clause (3)."

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       Under sub-clause (6), it is provided that any extra price paid by  the producer of sugar to the sugarcane-grower over and above the  minimum sugarcane price fixed under Clause 3, shall be adjusted  against the additional sugarcane price determined under sub-clause (2)  or sub-clause (3) and the balance, if any, shall be paid to the sugarcane- grower.

       Sub-clause (7) provides that, additional price shall be payable to  the sugarcane-grower if he, in performance of his agreement with a  producer of sugar, has supplied not less than 85% of the sugarcane so  agreed.

       Clause 6 empowers the Central Government to: (i) reserve areas  where sugarcane is grown to determine the quantity of sugarcane which  a factory will require for crushing during any year; (ii) to fix, with  respect to any specified sugarcane-grower or sugarcane-growers  generally in a reserved area, the quantity or percentage of sugarcane  which he by himself or as a member of a co-operative society of  sugarcane-growers operating in such area, shall supply to the factory  concerned; (iii) direct a sugarcane-grower or a sugarcane-growers’ co- operative society, supplying sugarcane to a factory, and the factory  concerned, to enter into an agreement to supply or purchase the  quantity of sugarcane fixed; (iv) direct that no gur or khandsari sugar  shall be manufactured from sugarcane except in accordance with the  conditions specified in the licence; and (v) "prohibit or restrict or  otherwise regulate" the export of sugarcane from any area (including a  reserved area) except under and in accordance with a permit issued in  his behalf.  Sub-clause (2) makes it obligatory on every sugarcane- grower,  Sugarcane-growers’ Co-operative Society and factory, to whom  an order is issued under sub-clause (1), to supply or purchase the  quantity of sugarcane covered by the agreement entered into.  Any  wilful failure on the part of the sugarcane-grower, sugarcane-growers’  co-operative society and factory to do so, is constituted a breach of the  provisions of the Order.

       Under Clause 11, the powers under the Order shall, subject to  specified conditions, be exercisable also by an officer or authority of the  Central Government and the State Government or any officer or  authority of the State Government.

       As a matter of practice, it has been found that in the States such as  U.P., A.P., Bihar, Tamil Nadu and Haryana, the State Governments have  been pressurising the sugar producers to enter into agreements for  payment of purchase price of sugarcane at a rate higher than that  decided under the Sugarcane (Control) Order, 1966.  In the case of Tamil  Nadu, it has been frankly conceded that there is no statutory basis and  that the State Advised Price was merely an executive act intended to  resolve a dispute between the contending parties.  As far as the States of  U.P., Haryana and Bihar are concerned, counsel for the respective States  and the sugarcane suppliers contend that the State is fully empowered  under the State Legislation to fix a price for sale/purchase of sugarcane  to sugar producers as a ’remunerative price’ which would take into  account several local factors.  This price is popularly described as ’State  Advised Price’ (SAP) and arrived at by calling for a meeting at the  highest level, and after hearing the representatives of the contending  parties.

       In order to appreciate the contentions urged at the bar, I would  take up the cases arising under the U.P. Sugarcane Act, 1953.

       Mr. Shanti Bhushan, learned Senior Counsel appearing on behalf  of the West U.P. Sugar Mills Association (the association of sugar  producers), questioned the power of the State Government under the  U.P. Sugarcane Act, 1953 and the subordinate legislation made  thereunder to fix any price for sale of sugarcane by the sugarcane-

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growers to the sugarcane factories.   

       Before we attempt a detailed analysis of the provisions of the Acts,  Rules and Orders, we straightaway notice that in none of them is there  any reference to the so-called ’State Advised Price’, which appears to be  a term coined for convenience, either by the State Government, or by the  parties, and popularised by usage.  Even if such an expression is to be  found absent in the concerned legislations, the question is whether there  is a statutory basis for the ’State Advised Price’.

       The U.P. Sugarcane Act, 1953, as its preamble indicates, is "an Act  to regulate the supply and purchase of sugarcane required for use in  sugar factories and Gur, Rab or Khandsari Sugar Manufacturing Units  and other connected matters’.  Chapter II of this Act establishes certain  administrative machinery called ’the Sugarcane Board and the  Development Council’.  The functions of the Sugarcane Board are  indicated in Section 4 and pertain to advising the State Government on  the following matters :- (a)     matters pertaining to the regulation of supply and purchase  of cane for sugar factories;

(b)     the varieties of cane which are suitable or unsuitable for use  in sugar factories;

(c)     the maintenance of healthy relations between occupiers or  managers of factories, cane-growers, Cane-growers’  Constitution-operative Societies, Cane Development  Council; and

(d)     such other matters as may be prescribed.

       The functions of the Development Council are indicated in Section  6(1) as under :- (a)     to consider and approve the programme of development for  the zone;

(b)     to devise ways and means for the execution of the  development plan in all its essentials such as cane varieties,  cane seed, sowing programme, fertilizers and manures;

(c)     to undertake the development of irrigation and other  agricultural facilities in the zone;

(d)     to take necessary steps for the prevention and control of  diseases and pests and to render all possible help in the soil  extension work;

(e)     to impart technical training to cultivators in matters relating  to the production of cane;

(f)     to administer the funds at its disposal for the execution of  the development scheme subject to the general or special  directions of the Cane Commissioner; and

(g)     to perform other prescribed functions pertaining and  conducive to the general development of the zone.

       Chapter III which deals with "Supply and Purchase of Cane"  contains the fasciculus of Sections 12 to 19.  Under Section 12, an officer  known as Cane Commissioner makes estimates of requirements of the  quantity of cane, which will be required by any factory after getting  appropriate information from the factory.  Sections 13 and 14 deal with  the manner of keeping information as to the cane-growers and Cane- growers’ Co-operative Society by registers and by surveys carried out  by the State Government.  Section 15 empowers the Cane Commissioner

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to reserve and assign any area for the purposes of supply of cane to a  factory in accordance with the provisions of Section 16 during one or  more crushing seasons as may be specified.  It also empowers him to  cancel such order or alter the boundaries of the area so reserved or  assigned.  Under sub-section (2) of Section 15, where any area has been  declared as reserved area for a factory, the occupier of such factory shall,  if so directed by the Cane Commissioner, purchase all the cane grown in  that area, ’which is offered for sale to the factory’.  According to sub- section (3), where any area has been declared as assigned area for a  factory, the occupier of such factory ’shall purchase such quantity of  cane grown in that area and offered for sale to the factory’ as may be  determined by the Cane Commissioner.  There is an appeal provided to  the State Government against the order of the Cane Commissioner  passed under sub-section (1).

       Then comes Section 16 on which most of the addressed arguments  turn.  It reads thus :-

"16.  Regulation of purchase and supply of cane in the  reserved and assigned areas -

(1)     The State Government may, for maintaining supplies,  by order, regulate -

(a)     the distribution, sale or purchase of any  cane in any reserved or assigned area; and  

(b)     purchase of cane in any area other than a  reserved or assigned area.

(2)     Without prejudice to the generality of the foregoing  powers such order may provide for -

(a)     the quantity of cane to be supplied by each  cane-grower or Cane-growers’ Co-operative  Society in such area to the factory for which  the area has so been reserved or assigned;

(b)     the manner in which cane grown in the  reserved area of the assigned area, shall be  purchased by the factory for which the area  has been so reserved or assigned and the  circumstance in which the cane grown by a  cane-grower shall not be purchased except  through Cane-growers’ Co-operative  Society;

(c)     the form and the terms and conditions of the  agreement to be executed by the occupier or  manager of the factory for which an area is  reserved or assigned for the purchase of  cane offered for sale;

(d)     the circumstances under which permission  may be granted -

(i)  for the purchase of cane grown in  reserved or assigned area by a Gur,  Rab or Khandsari Manufacturing Unit  or any person or factory other than the  factory for which area has been  reserved or assigned, and

(ii)    for the sale of cane grown in a  reserved or assigned area to a Gur,

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Rab or Khandsari Manufacturing Unit  or any person or factory other than the  factory for which the area is reserved  or assigned;

(e)     such incidental and consequential matters as  may appear to be necessary or desirable for this  purpose."

       The contention assiduously canvassed by the State Governments  and the counsel for the cane-growers is that the power of the State  Government under Section 16 is a wide power intended for maintenance  of supplies empowering the State Government by order to ’regulate,  inter alia, the distribution, sale or purchase of any cane in any reserved  or assigned area’.  The contention is that the power to regulate a sale or  a purchase of cane in a reserved or assigned area would necessarily take  within its scope the power to fix the price at which such sale or purchase  can be effected.

       The contention is sought to be buttressed by highlighting that the  object of reservation of sugarcane area is to ensure that there is no  interruption to the supply of sugarcane leading to disruption of the  production of sugar, which has been declared to be an essential  commodity.  Unlike other raw-materials, sugarcane needs to be grown  for a specific period and harvested at a specific time to maintain its  sugar content so that it will yield the maximum sugar when crushed.   This determines the imperative necessity for continuous supply of  sugarcane to the sugar factories depending on their crushing capacity  and crushing program.  It is contended that the economy of the U.P.  State and its revenues depend, to a very great extent, on the crushing of  sugarcane and production of sugar.  Molasses, which is the bye-product,  is utilised by distilleries for manufacturing rectified spirit, which in turn  is used for the manufacture of potable liquor and other chemical  products.   It is also urged that crushing of sugarcane results in the bye- product of bagasse, which is used as fuel or by paper mills.  Hence, the  counsel contended that, in view of the crucial importance of timely  supply and crushing of sugarcane, the 1953 Act has conferred upon the  State Government the power of regulation of sale and purchase of  sugarcane under Section 16 and the power under Section 17 to ensure  speedy payment of cane price.  This power the Government exercises by  calling for a tripartite meeting wherein conflicting points of view are put  forward and ultimately a decision is arrived at as to what should be the  higher price payable which is termed as the ’State Advised Cane Price’.   It is contended, that this power of the State Government to fix a price  higher than the minimum price fixed by the Central Government is  discernible in the State’s power to ’regulate the sale and purchase of  sugarcane’ with a view to maintaining supplies.  It is also contended  that the word ’regulate’ has been held to be a very wide power even  empowering fixation of royalty, higher tariff for electricity, fixing rates  for cinema and so on as evidenced in the following judgments :-

1.      Adoni Cotton Mills Ltd. & Ors. v. A.P. State Electricity Board & Ors.         (1976) 4 SCC 68         [para 7]

2.      State of Tamil Nadu v. M/s. Hind Stone & Ors.         (1981) 2 SCC 205                [para 10]

3.      K. Ramanathan v. State of Tamil Nadu & Anr.         (1985) 2 SCC 116                [paras 11, 15, 18-20 & 23]

4.      D.K. Trivedi & Sons and Ors. v. State of Gujarat & Ors.         1986 (Supp) SCC 20      [paras 30 & 31]

5.      Jiyajeerao Cotton Mills Ltd. & Anr. v. M.P. Electricity Board & Anr.         1989 Supp (2) SCC 52    [para 32]

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6.      Deepak Theatre, Dhuri v. State of Punjab & Ors.         1992 Supp (1) SCC 684   [paras 3-10]

7.      Quarry Owners’ Association v. State of Bihar & Ors.         (2000) 8 SCC 655                [paras 25, 26, 31 & 61(c)]

       Counsel for the sugarcane-growers’ and the State also contended  that the expression ’regulate’ is used in Section 16 in the context of  maintaining supplies and "sale or purchase".  The expression ’sale or  purchase’ would necessarily include all aspects or ingredients of sale as  it cannot be gainsaid that price is certainly an important ingredient of  sale.  The provisions of the Sale of Goods Act, Contract Act, Transfer of  Property Act, Article 366(29) of the Constitution of India and a number  of authorities were relied upon to contend that price is an essential  ingredient of sale and that the State could regulate it.

       That the power to regulate production, supply and distribution of  a commodity may, in an appropriate context, be wide enough to include  the power to fix the price, is incontestable.  However, the background  against and the context in which the power of regulation has been given  and the scheme of the Statute determine the content of such power.  The  counsel for the sugar factories urge that the background, context and  evolution of the Statute belie such a construction.  From the Sugarcane  Act of 1934 down to the U.P. Sugarcane Act, 1953, it would appear that  after 1938 there has been a distinct shift and the power of price fixation  of sugarcane was taken over by the Central Government for larger  reasons of policy. They point out that in Ch. Tika Ramji & Ors., etc. v.  The State of Uttar Pradesh & Ors., 1956 SCR 393, the very Act, namely,  the U.P. Sugarcane Act, 1953, was challenged as unconstitutional on  several grounds including the ground that it was inconsistent with the  provisions of the Essential Commodities Act, 1955.  After elaborate  consideration of the legislative history of the Act and an analytical  contrast of the provisions of the Essential Commodities Act with the  U.P. Sugarcane Act, 1953, the Constitution Bench of this Court came to  the specific finding that the power to fix minimum price of sugarcane,  which existed under the U.P. Act I of 1938 had been deleted from the  U.P. Sugarcane Act, 1953 since it was being exercised by the Centre  under Clause 3 of the Sugar and Gur (Control) Order, 1950.  In fact, the  Constitution Bench of this Court in Ch. Tika Ramji’s case (supra) came  to the conclusion that there was no repugnancy between the Essential  Commodities Act, 1955 and the U.P. Sugarcane Act, 1953 as they  operated in different spheres, there being no conflict or overlapping in  the matter of price fixation.  Counsel rely heavily on the following  observations from Ch. Tika Ramji’s case (supra) :- (a)     "Even the power reserved to the State Government to fix  minimum prices of sugarcane under Chapter V of the U.P.  act of I of 1938 was deleted from the impugned Act the  same being exercised by the Centre under clause 3 of sugar  and Gur Control Order, 1950, issued by it in exercise of the  powers conferred under Section 3 of Act XXIV of 1946.  The prices fixed by the Centre were adopted by the State  Government and the only thing which the State  Government required under rule 94 was that the occupier of  a factory or the purchasing agent should cause to be put up  at each purchasing centre a notice showing the minimum  price of cane fixed by the Government meaning thereby the  Centre.  The State Government also incorporated these  prices which were notified by the Centre from time to time  in the forms of the agreements which were to be entered  between the cane growers, the cane-growers’ co-operative  societies, the factories and their purchasing agents for the  supply and purchase of sugarcane as provided in the U.P.  Sugarcane Supply and Purchase Order, 1954.

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The only provision which was retained by the State  Government in the impugned Act for the protection of the  sugarcane growers was that contained in Section 17 which  provided for the payment of price of sugarcane by the  occupier of a factory to the sugarcane growers.  It could be  recovered from such occupier as if it were an arrear of land  revenue.  This comparison goes to show that the impugned  Act merely confined itself to the regulation of the supply  and purchase of sugarcane required for use in sugar  factories and did not concern itself at all with the  controlling or licensing of the sugar factories, with the  production or manufacture of sugar or with the trade and  commerce in, and the production, supply and distribution  of, sugar.   If that was so, there was no question whatever of its  trenching upon the jurisdiction of the Centre in regard to  sugar industry which was a controlled industry within  Entry 52 of List I and the U.P. Legislature had jurisdiction to  enact the law with regard to sugarcane and had legislative  competence to enact the impugned Act." (pp. 422-423)

(b)     ".......the only question which remained to be considered  was whether there was any repugnancy between the  provisions of the Central legislation and the U.P. State  legislation in this behalf.  As we have noted above, the U.P.  State Government did not at all provide for the fixation of  minimum prices for sugarcane nor did it provide for the  regulation of movement of sugarcane as was done by the  Central Government in clauses (3) and (4) of the Sugarcane  Control Order, 1955.   The impugned Act did not make any provision for the same  and the only provision in regard to the price of sugarcane  which was to be found in the U.P. Sugarcane Rules, 1954,  was contained in Rule 94 which provided that a notice of  suitable size in clear bold lines showing the minimum price  of cane fixed by the Government and the rates at which the  cane is being purchased by the centre was to be put up by  an occupier of a factory or the purchasing agent as the case  may be at each purchasing centre.  The price of cane fixed  by Government here only meant the price fixed by the  appropriate Government which would be the Central  Government, under clause 3 of the Sugarcane Control  Order, 1955, because in fact the U.P. State Government  never fixed the price of sugarcane to be purchased by the  factories.  Even the provisions in behalf of the agreements  contained in clauses 3 and 4 of the U.P. Sugarcane  Regulation of Supply and Purchase Order, 1954, provided  that the price was to be the minimum price to be notified by  the Government subject to such deductions, if any, as may  be notified by the Government from time to time meaning  thereby the Central Government, the State Government not  having made any provision in that behalf at any time  whatever.  The provisions thus made by the Sugarcane  Control Order, 1955, did not find their place either in the  impugned Act or the Rules made thereunder or the U.P.  Sugarcane Regulation of Supply and Purchase Order, 1954,  and the provision contained in Section 17 of the impugned  Act in regard to the payment of sugarcane price and  recovery thereof as if it was an arrear of land revenue did  not find its place in the Sugarcane Control Order, 1955.   These provisions, therefore, were mutually exclusive and  did not impinge upon each other there being thus no  trenching upon the field of one Legislature by the other." (vide 433-434)

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(c)     "Suffice it to say that none of these provisions do overlap,  the Centre being silent with regard to some of the  provisions which have been enacted by the State and the  State being silent with regard to some of the provisions  which have been enacted by the Centre.  There is no  repugnancy whatever between these provisions and the  impugned Act and the Rules framed thereunder as also the  U.P. Sugarcane Regulation of Supply and Purchase Order,  1954 do not trench upon the field covered by Act X of 1955.   There being no repugnancy at all, therefore, no question  arises of the operation of Article 254(2) of the Constitution  and no provision of the impugned Act and the Rules made  thereunder is invalidated by any provision contained in Act  LXV of 1951 as amended by Act XXVI of 1953 or Act X of  1955 and the Sugarcane Control Order, 1955 issued  thereunder." (p. 435)

       These observations of the Constitution Bench in Ch. Tika Ramji’s  case (supra) do support the arguments of the respondents-sugar  producers.  A distinction is sought to be made that Ch. Tika Ramji’s  case (supra) does not decide the issue as to the content of the regulatory  power under the U.P. Sugarcane Act, 1953 and, therefore, these  observations are not of any avail.  This argument cannot be accepted.   The question posed before the Constitution Bench was one of  inconsistency between Central Legislation and State Legislation, the  State Legislation being the U.P. Sugarcane Act, 1953.  The basis for the  decision in  Tika Ramji (supra) is that the two operated on separate  planes and that the provisions "were mutually exclusive and did not  impinge on each other" there being no trenching upon the field of one  legislature by the other.  I cannot impute to the Constitution Bench an  incomplete analysis of the provisions of the U.P. Sugarcane Act, 1953  when it made these observations.  The observations necessarily suggest  to me that the full extent of the State’s power under the 1953 Act was  reckoned with and compared against the power of the Central  Government under the Central Legislation after which only the  Constitution Bench arrived at its finding that there was no conflict and  upheld the constitutional validity of the U.P. Sugarcane Act, 1953.  There  was no tentativeness or ad hocism in the observations; nor were they  made only pro tem.

       The very Statute (U.P. Sugarcane Act, 1953) having the subject  matter of construction and interpretation by the Constitution Bench, it is  not open, for this Bench at least, to take a different view with regard to  its construction.         The respondents seek to counter these arguments by seeking to  read Ch. Tika Ramji’s case (supra) in a different manner.  According to  them, the contrast made by Ch. Tika Ramji’s case (supra) between the  Central Legislation and the U.P. State Legislation was not on the general  issue of price, but only with regard to ’minimum price’ on which, there  being no provision in the State Act, no conflict was discovered.  The   counsel for growers contend that Ch. Tika Ramji’s case (supra) had no  occasion to examine repugnance from the stand point of higher price,  nor was there an examination of the scope of Section 16 of the 1953 Act  and the ambit of State’s regulatory power in Ch. Tika Ramji’s case  (supra).

       A number of arguments were addressed to impress upon us that  there is no repugnance between the Essential Commodities Act, 1953  read with Sugarcane (Control) Order, 1966 and the U.P. Sugarcane Act,  1953.  It was argued that the Central Act does not occupy the whole  gamut of price fixing and as the field of ’price’ was not fully occupied,  leaving plenty of room available for exercise of legislative power by the  State.  In my view, it is unnecessary to go into this question.  Even

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assuming that the field of price is not fully covered by the Essential  Commodities Act, 1955, the question is whether the Statute before us  empowers the State government to fix a price of sale/purchase of  sugarcane  at  a  price higher than the  price  fixed  under  the  Sugarcane  

(Control) Order, 1966?  The only legislation upon which the sugarcane- growers’ rely is the U.P. Sugarcane Act, 1953.  This very Act was the  subject matter of consideration and interpretation by the Constitution  Bench of this Court in Ch. Tika Ramji’s case (supra).  After comparing  this with the provisions of the Essential Commodities Act of 1955 and  the Sugarcane (Control) Order, 1966 made thereunder, the Constitution  Bench found that the two did not operate on a collision course because  the provisions dealt with subjects which are "mutually exclusive and  did not impinge on each other" there being no trenching upon the field  of one legislature by the other.  Whether the State Legislature has the  power at all of fixing a purchase price for sugarcane at a price higher  than the minimum price fixed under the Sugarcane (Control) Order,  1966, is a question that need not detain me.  As and when such an issue  arises before some court, it will be considered by the court.  For the  nonce, I am concerned with the interpretation of Section 16 and 17 of the  U.P. Sugarcane Act, 1953 which must necessarily proceed on the basis of  what has been found in Ch. Tika Ramji’s case (supra) after an  examination of its provisions and the Statement of Objects and Reasons  appended to the Bill which preceded the said Act of 1953.

       Two further points of distinction were sought to be drawn as to  why the ratio of Ch. Tika Ramji’s case (supra) would not apply to the  present case.  First, that Ch. Tika Ramji’s case (supra) did not have the  benefit of examining the Sugarcane (Control) Order, 1966.  Second, that  Ch. Tika Ramji’s case (supra) was only concerned with comparing the  power to fix the minimum price and did not concern itself with the  power of the State Government to fix any higher price.  In my view,  these distinctions are purely chimerical.

       A comparison between the Sugarcane (Control) Order, 1955 and  Sugarcane (Control) Order, 1966 brings out the hollowness of the first  distinction.  Under the Sugarcane (Control) Order, 1955, clause (1)(2)(c)  defined ’price’ to mean the price fixed by the Central Government from  time to time, for sugarcane delivered at the factory gate.  It then  empowered the Central Government vide clause (3) to fix in respect of  any area ’the price’ or  ’the minimum price’ to be paid for the  sale/purchase of sugar.  The only change made in the Sugarcane  (Control) Order, 1966 is that the expression ’price’ has been defined in  clause (2)(g) to mean "the price or the minimum price fixed by the  Central Government from time to time", for sugarcane delivered, inter  alia, to a sugar factory.  Clause (3) empowers the fixation of minimum  price of sugarcane.  Sub-clause (2) of clause (3) prohibits the  sale/purchase or agreement to sell/purchase sugarcane at a price lower  than fixed under sub-clause (1).  Sub-clause (3), however, requires the  producer of sugar who purchases sugarcane from a grower, unless there  is an agreement in writing to the contrary, to pay within 14 days from  the date of delivery of the sugarcane or tender within the same period  the price of the cane sold "at the rate agreed to between the producer  and the sugarcane-grower or Sugarcane-growers’ Co-operative Society  or that fixed under sub-clause (1), as the case may be".  Consequently, if  the parties have agreed upon a higher price, the Sugarcane (Control)  Order, 1966 recognises that and obligates such amount to be paid.  This  is also recognised by clause (3-A) dealing with the rebate that can be  deducted.  Under this clause, the producer of sugar is required to pay  "either the minimum price of sugarcane fixed under clause (3) or the  price agreed to between the producer or his agent or the sugarcane  grower or the Sugarcane-growers’ Co-operative Society, as the case may  be (hereinafter referred to as ’the agreed price’)".

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       In addition, Section 5 and 5-A deal with the additional amount to  be paid by the producer of the sugar ’in addition to the minimum  sugarcane price fixed under clause (3)’.  The distinction that is sought to  be drawn, therefore, has no basis in my view.  The Sugarcane (Control)  Order of 1955 talked only in terms of minimum price and did not deal  with additional price.  The Sugarcane (Control) Order, 1966, after  enumerating the mechanism for fixation of minimum price, goes on to  indicate that, if the parties agree upon it, a rate higher than that  minimum rate would become payable and deals with the matter of  enforcement of such payment, calculation of the rebate under           clause (3-A), set-off available of the additional amounts against  advances and such other issues.

       I am, therefore, unable to accept the first distinction made for and I  think that the observations in Ch. Tika Ramji’s case (supra), though  made in the context of Sugarcane (Control) Order, 1955, are equally  applicable in the context of the Sugarcane (Control) Order, 1966.  Now  to the second distinction.  Ch. Tika Ramji’s case (supra) was considering  the conflict between the provisions of the Central Legislation, namely,  the Essential Commodities Act, 1955 and the U.P. Sugarcane Act, 1953.   Under Section 3 of the Essential Commodities Act, 1955, the Central  Government is specifically empowered, inter alia, to ’regulate’ the  production supply and distribution of the essential commodity or trade  and commerce therein and also may provide for controlling the ’price’ at  which the essential commodity may be bought or sold.  The power to  ’control the price’ is of the widest amplitude and takes into its fold the  power to fix the minimum price, the fair price, the remunerative price or  even the maximum price.  It was this power which was contrasted with  the power of the State Government under the U.P. Sugarcane Act, 1953.  After making such a contrast, Ch. Tika Ramji’s case (supra) came to the  specific conclusion that the State Act did not, in any way, impinge upon  the area covered by the Central Act as the provisions of the two Acts are  "mutually exclusive and did not impinge on each other" there being no  trenching upon the field of one legislature by the other.  While  contrasting this power of the Central Government and its exercise under  the Sugarcane (Control) Order, 1955, as against the powers of the State  Government under the provisions of the U.P. Sugarcane Act, 1953, Ch.  Tika Ramji’s case (supra) discerned no power for price fixation in the  State Government under the provisions of 1953 Act and that is why its  constitutional validity was upheld.  In fact, when Ch. Tika Ramji’s case  (supra) fails to discover any provision in the State Legislation for  minimum price fixation with regard to sale/purchase of sugarcane, and  upholds its constitutional validity on that very ground, it would be  futile to attempt to discover in the State Act a power to fix a price higher  than the minimum price.

       Another interesting contention advanced on behalf of the  sugarcane-growers’ is that there is a distinction between ’minimum  price’ fixed, which is exclusively within the province of the Central  Government under the provisions of the Essential Commodities Act,  1955 and what the State seeks to fix is ’fair price’ or ’remunerative price’.   It is contended that the two are not repugnant, there being no conflict  between the Centre’s power to fix ’minimum price’ and the State’s  power to fix the ’remunerative price’ or the ’fair price’.  In my view, the  question is not one of repugnancy.  The question is one of tracing the  source of the power, if, at all, it exists.  By merely calling it ’fair price’ or  ’remunerative price’, one cannot wish away the consequences of non- payment thereof.  The consequence of not paying the minimum price is  penal liability incurred under the provisions of the Essential  Commodities Act, 1955 read with the Sugarcane (Control) Order, 1966.    I see no corresponding legislative provision for non-payment of the so- called ’fair price’ or ’remunerative price’ under the U.P. Act of 1953.

       Even assuming that such a power of higher price fixation exists,  the power can only be adjudicatory in nature.  The minimum price is the

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price which when fixed has to be paid by all purchasers of cane.   Anything higher than that would require adjudication of rival claims for  which I see no machinery under the U.P. Sugarcane Act of 1953 or under  the delegated legislation made thereunder.  There are also no guidelines  indicated in the 1953 Act as to the basis on which the so-called fair price,  remunerative price or State Advised Price is to be arrived at.  To fix the  State Advised Price much above the centrally fixed minimum price, and  that too by an executive fiat, may render the constitutionality of such  power open to challenge as arbitrary and hit by Article 14 of the  Constitution.

       Looked at from the practical point of view, if the contention of the  cane-growers is accepted, what is payable in the State would, in reality,  be the minimum price payable for sugarcane.  Calling it as the ’fair  price’ or ’remunerative price’ would merely be a matter of semantics  and not substance.  An illustration from the field of industrial  adjudication may be considered.  A minimum wage is payable under  the Minimum Wages Act, 1948.  All industries are required to pay this;  or else, they have no right to exist and must necessarily close down [See  in this connection Messrs. Crown Aluminium Works v. Their Workmen].   Employers are not precluded from voluntarily paying wages higher  than minimum wages to the workmen.  However, if the workmen want  to enforce a fair wage, a rate of wage higher than the minimum wage, it  can only be done by an elaborate process of adjudication envisaged  under the Industrial Disputes Act, 1947.  It is only by such an award  adjudicated by that process which can fix a rate higher than the  minimum rate of wages.  In my view, this principle would equally apply  to a situation of fixing of the fair price for purchase of cane.  I see no  adjudicatory machinery, nor guidelines, under the U.P. Sugarcane Act  of 1953 for doing it.  Except the bald reference to ’regulation of sale and  purchase of cane’, there is nothing else therein to indicate the mode,  conditions under which, or the guidelines subject to which such an  exercise of fixing the fair price can be exercised, and that too by a mere  executive fiat.  I find it extremely difficult to infer such a power of  fixation of price higher than the minimum price from a Statute which is  utterly bereft of any adjudicatory mechanism or guidelines, particularly  when the subordinate legislation is replete with references to the  ’minimum price fixed by the Government’, which too was interpreted  by Ch. Tika Ramji’s case (supra) as the ’minimum price fixed by the  Central Government’.  I am, therefore, unable to accept this argument.

       Based on the doctrine of contemporanea expositio , counsel for the  sugarcane-growers’ attempted to read the State’s power by reference to  some provisions of the subordinate legislation made under the U.P.  Sugarcane Act, 1953.

       Clause 3 of the U.P. Sugarcane Order, 1956 was referred to.  Under  this clause, the occupier of a factory is required to estimate by 31st of  October every year the quantity of cane which each grower enrolled is  required to offer in Form A to supply cane grown in the reserved area to  the occupier of the factory.  Correspondingly, the occupier of the  factory, for which the area has been reserved, is required within 14 days  of the receipt of the offer to enter into an agreement in Form B or Form  C of the Appendix, with the cane-grower or the Cane-growers’ Co- operative Society.  A reference to Form B and Form C indicate that what  is contemplated therein is only an agreement by the first party cane- grower to sell cane to the second party ’at the minimum price notified  by Government subject to deductions, if any, as may be notified by the  Government from time to time’.  There is hardly anything in this which  supports the contention advanced.  Thus, it would appear that the U.P.  Sugarcane Order, 1954 did not contemplate anything more than the  minimum price fixed by the Government to be stipulated in the form of  a statutory contract.

       In the U.P. Sugarcane Rules, 1954, Chapter IX deals with

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payments.  The only reference made in the Rules to the price, as  indicated in Ch. Tika Ramji’s case (supra), is in Rule 94.  Rule 94(b)  requires a notice to be put up by the occupier of a factory in suitable size  in clear bold letters showing the ’minimum price’ of cane fixed by the  Government and the rates at which cane is being purchased at the  centre.  It is not the ’cane-growers’ case before us that the State  Government ever fixes the ’minimum price’.  As observed in Ch. Tika  Ramji’s case (supra), the reference here is obviously is to the minimum  price of cane fixed by the Central Government.  The reference to the  rates at which the cane is purchased in a particular factory could be  conceivably to the agreed price between the cane-grower and the  producer of sugar.

       There is no doubt that the provisions of the Sugarcane (Control)  Order, 1966, the U.P. Sugarcane Act, 1953 and the subordinate  legislation thereto permit the sugarcane-grower and the sugar producer  to agree upon a price at a rate higher than the rate fixed by the Central  Government statutorily.  What may be permissible consensually  between the parties does not empower the State to fix a price higher  than the statutory minimum price on pain of sanction for disobedience.

       It is contended for the cane-growers that the Sugarcane (Control)  Order, 1966 itself recognises that the parties may, by an agreement, pay  a rate higher than that fixed by the Central Government and, if there is  such an agreement, the agreed rate would be substituted for the  minimum rate fixed by the Central Government; such an agreement  need not be evidenced by any writing as it can be an oral agreement  also, since oral agreements are permitted under Section 10 of the Indian  Contract Act, 1872 in the absence of a law to the contrary.  Such oral  agreements are also capable of enforcement as much as an agreement in  writing.  Section 16(2)(c) of the U.P. Sugarcane Act, 1953 confers powers  to prescribe forms and terms of the agreement to be executed by the  occupier or manager of the factory for purchase of sugarcane.  Chapter  IX of the Rules prescribed thereunder deals with payment of cane price  and issuance of parchas.  By reason of the Rules and the U.P. Sugarcane  Order, 1954, vide clause 3(3) requiring agreements to be entered into by  prescribed forms, requisition, slips/parchas are issued which would  indicate the cane price, total quantity of cane supplied and the total  amount payable.  Once such a parcha has been issued indicating the  quantity of cane supplied, the rate at which the cane is supplied and the  total amount payable, the agreed rate indicated becomes payable in lieu  of the minimum rate fixed by the Central Government and would have  the same legal efficacy as the minimum rate fixed by the Central  Government.

       That there is sufficient leeway for consensual payment of a rate  higher than the minimum rate is beyond doubt.  If such a rate has been  agreed upon, orally or in writing, then that higher rate substitutes itself  in the place of the minimum rate fixed by the Central Government.  The  question before us is not as to what can be consensually done.  The  question is, in the absence of consensus, does the State have the power  under the 1953 Statute concerned to determine a higher rate than the  minimum rate as the rate payable for the cane supplied?  I am afraid, the  argument begs the question and does not indicate the manner in which  such a power, if it exists, can be discovered.

       It is not necessary for me to notice or discuss in detail the  authorities relied upon by the parties to show that there is no conflict  between the provisions of the U.P. Sugarcane Act, 1953, the provisions  of the Essential Commodities Act, 1955 and the subordinate legislation  thereunder.  This exercise has already been done by the Constitution  Bench of this Court in Ch. Tika Ramji’s case (supra) and it is only after  this exercise was done that the constitutional validity of the Act was  upheld.  I, therefore, decline to go into the question of ’occupied field’,  on which much stress has been laid.

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       Another contention urged on behalf of the cane-growers’ is that,  under Article 162 of the Constitution, as expounded by the decision of  this Court in Rai Sahib Ram Jawaya Kapur & Ors. v. The State of  Punjab, (1955) 2 SCR 225, it is open to the State to issue executive orders  even if there is no legislation in support thereof, provided the State had  the power to legislate on the subject in respect of which action is taken.   It is contended that the instant legislation falls within Entries 33 and 34  of List III - Concurrent List and, therefore, the State Legislature is fully  competent to legislate with reference to these entries.  Consequently, the  executive is equally empowered to issue an order to the same extent by  reason of Article 162 of the Constitution.  Hence, even if there is no  statutory basis for the State Advised Price, it is legal and valid by reason  of the exercise of executive powers within the meaning of Article 162.

       The contention is unsound and cannot be accepted.  A  Constitution Bench of this Court in State of Madhya Pradesh & Anr. v.  Thakur Bharat Singh, (1967) 2 SCR 454, was presented with the same  argument and rejected it in the following words :-  "In our judgment, this argument involves a grave fallacy.   All executive action which operates to the prejudice of any  person must have the authority of law to support it, and the  terms of Article 358 do not detract from that rule.  Article  358 expressly authorises the State to take legislative or  executive action provided such action was competent for  the State to make or take, but for the provisions contained in  Part III of the Constitution.  Article 358 does not purport to  invest the State with arbitrary authority to take action to the  prejudice of citizens and others".

       The observations in Rai Sahib Ram’s case (supra) were also  explained away in Thakur Bharat Singh’s case (supra)  by pointing out  that the action taken there did not amount to infraction of the guarantee  under Article 19(1)(g) of the Constitution, since no fundamental rights of  the petitioners were violated by the executive act of the Government  done in furtherance of their policy of nationalisation of text-books for  students.  This judgment in effect rejects this contention.  It is obvious  that fixing of a higher price of sugar, compulsorily payable, is a  restriction on the fundamental right guaranteed under Article 19(1)(g)  and cannot be legally done except under a law.

       Much debate was carried out with regard to realisations made by  the States by sale of molasses and bagasse and as to how the fixing of  State Advised Price by the States at rates higher than the minimum  prescribed by the Central Government had resulted in financial loses to  the sugar producers.  Certain amount of data was also placed on record  with a view to persuading us to take the particular view which was  canvassed.  After scrutiny of the data on record, I am of the view that  the data on record is insufficient to draw any conclusions as urged by  both sides.  In any event, according to me, the discovery of the State’s  power is a question of law, which turns upon the construction of statute  in question, and not upon the consequences that may have flowed from  the exercise of such power.  If there is such power, then the  consequences are justified; conversely, if there is none, the consequences  are not justified.  It is needless, therefore, to be drawn into this  controversy with regard to the economic consequences of the State  Advised Price.

       The construction of the U.P. Sugarcane Act, 1953 has to be made  against the legislative background.  Under Section 3(2) of the Sugarcane  Act, 1934, the State Governments were empowered to fix a minimum  price or minimum prices for the purchase of sugarcane in a controlled  area intended for use in any factory.  In Section 21 of the U.P. Act I of  1938, there was a specific power vested with the Provincial Government  to fix the minimum price.  In respect of any area, the minimum price to

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be paid by the occupier of the factories or purchasing agents for cane  purchased in that area could be determined by a notification by the  Governor, after consultation with the Board.  A contrast with the  provisions of the U.P. Sugarcane Act, 1953 indicates total absence of  such a power to fix a price.  If the 1953 Act intended to grant to the State  the power to fix any price - State Advised Price, remunerative price or  fair price as is called - the Statute would have in terms indicated it and  not left it to guesswork or inference from the general words used in  Sections 16 & 17 of the Act.  A reference to the Statement of Objects and  Reasons attached to the Bill which was moved supports this  construction of the U.P. Sugarcane Act, 1953.         Much was urged before us as to whether the fixation of State  Advised Price was merely a populist measure intended to pacify the  clamour of one section of the society, namely, the cane-growers’.   Despite the vehemence with which each side presented its view, it  appears to me that this debate is wholly unnecessary, and misplaced, in  a court of law where the provisions of the Statute have to be construed  to ascertain the State’s power.  It was contended that the State exercises  its powers by taking into account various factors as to what they are and  what they ought to be.  There is no indication whatsoever of these in the  Statute.  As far as the Statute is concerned, it lays down no guidelines  for exercise of such power, if any.   Against the background of legislative  history, and the observations made in Ch. Tika Ramji’s case (supra), I  am of the view that it is difficult to discern any such power in the State  to fix the State Advised Price, called by whatever name, at a rate higher  than the minimum rate fixed by the Central Government, which could  be made binding on the parties.

       Learned counsel for the sugar producers urged that given the  Central Legislation on the subject, namely, the Essential Commodities  Act, 1955 and the statutory orders made thereunder, the State  Government had no legislative power at all to fix the price of sugarcane.   In my view, it is not necessary to consider this larger question or to  answer it presently.  We are, for the present, concerned with the U.P.  Sugarcane Act, 1953.  I see no basis for exercise of such power by the  State Government in that Statute.  As to whether any other suitably  worded Statute investing such a power in the State Government would  conflict with the Essential Commodities Act, 1953 or not, is not the  question that needs to be answered presently.  Hence, I refrain from  expressing any opinion thereupon.

       In the judgments in S.K.G. Sugar Ltd.’s case (supra)  and Jaora  Sugar Mill’s case (supra), it was found, as a matter of fact, that there  existed valid consensual agreements between the factories and the  sugarcane-growers.  Hence, it was held that higher price which had  been agreed had to be paid by the sugar factories.  In the present case  before us, it is pointed out that U.P. Sugar Mills Association had written  detailed letters to the Government of U.P. in September 1996 to refrain  from fixing any State Advised price which, the Association declared,  would not be binding on the sugar mills [see pages 109-116, Vol. II of  C.A. No. 460 of 1997].  Despite such strong protest, the State Advised  Price was announced by the U.P. Government on 15th November 1996.   Immediately thereafter, the associations and the factories have filed their  writ petitions before the High Court challenging the State Advised Price  on 18th November 1996.  Consequently, there was no occasion for the  State Government to exercise its diplomacy and bring out a consensual  price between the parties; nor was there any occasion for the State  Government in U.P. to declare a State Advised Price on the basis of  consensus.  The Division Bench of the Allahabad High Court in the  judgment impugned in C.A. No. 460 of 1997, while allowing the writ  petition, has held that there was no agreement for paying the State  Advised Price.

       The judgment of this Court in Maharashtra Rajya Sahkari Sakkar  Karkhana Sangh Ltd. & Ors. v. State of Maharashtra & Ors., 1995

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Supp. (3) SCC 475, is distinguishable, since it was decided on its peculiar  facts.  The distinguishing feature in that case was that the bye-laws  under which the co-operative society was formed, empowered the State  Government to determine the price for supply of sugarcane to be paid to  the members as long as the loans advanced to the co-operative society  were not fully paid.  It is in exercise of the power under this bye-law  that the State Government fixed what it called the ’State Advised Price’.   The power of the State was thus upheld because of the peculiar  provision in the bye-laws under which the sugar producer co-operative  society was formed.  The Bench further took the view that if the price  fixed by the Government is good for members of co-operative society,  who are as much cane-growers as non-members, then there is no reason  to hold that such price was bad or it operated unreasonably for non- members.  In view of the fact that zoning or reservation or fixation of  price for each zone were interlinked, the Bench expressed its view as  under :- "It is difficult to visualise that they would opt or fix a price  for the sugarcane which would be unremunerative.  As  explained earlier, the price fixed by the Cabinet  Committee in exercise of power under the bye-law is the  State Advised Price.  It applies uniformly to all cane- growers irrespective of whether they are members of non- members and whether they are in reserved area of outside  it.  To confine it to the members as they having entered  into agreement and being members of the cooperative  societies are bound by it is ignoring the entire price  mechanism.  Nowhere in the country the State Advised  Price is fixed for one class of growers only.  In absence of  any material to show that the fixation by the Government  was one-sided or with a view to exploit the cane-growers  the submission that it did not apply to non-members  cannot be accepted.  The order does not make any  distinction between members and non-members.  Nor  does it visualise separate mechanism for price fixation for  the two.   The price is fixed, may be, by the Board of  Directors or by the State Government under bye-laws but  the prices are for the reserved area."

       The decision of the Division Bench of this Court in Jaora Sugar  Mill’s case (supra), does not address the question with which we are  concerned.  The finding was that there was consensus ad idem to pay  higher price of the sugarcane than the minimum price fixed by the  Central Government and the parties acted thereupon.  It was not in  dispute that the sugarcane-growers had supplied the sugarcane to the  sugar factories who had the utilised the sugarcane for the production of  sugar.  In the circumstances, it was held that the said higher price was  the price payable in lieu of the minimum price fixed under the  Sugarcane (Control) Order, 1966.

       In Kothari Sugar & Chemicals Co. Ltd.’s case (supra), the issue  arose in the context of imposition of the cane purchased tax on the  additional price paid over and above what was payable under clause 3  and 5-A of the Sugarcane (Control) Order, 1966.  In this context, it was  observed as under :-  "Thus, unless there be an agreement between the grower  and the producer for purchase of the sugarcane at a higher  rate, the obligation of the purchaser is to pay to the grower  only the aggregate of the amounts fixed under clauses 3  and 5-A.  In other words, under the Statute there is no  liability of the purchaser to pay to the grower any amount  in excess of this aggregate amount.  Thus, without any  contractual or statutory basis fixing the sale price of  sugarcane at an amount higher than the minimum cane  price fixed under clause 3 and the additional cane price  fixed under clause 5-A, any sum paid by the purchaser to

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the grower as advance prior to fixation of the additional  cane price under clause 5-A cannot form part of the price  of cane sugar"[See vide para 5].

       Further, it was held that :- "However, as indicated earlier, for treating the entire  amount paid by the purchaser as the price of sugarcane  supplied, it must be found proved as a fact that the higher  price including the excess amount was paid as the price of  sugarcane under an agreement between the grower and  the purchaser irrespective of a lower amount being fixed as  the aggregate of the price fixation under clauses 3 and 5-A  of the Control Order.  Unless a clear finding to that effect is  recorded, the amount paid by the purchaser in excess of  the aggregate of the minimum price fixed under clause 3  and the additional price fixed under clause 5-A , as a part  of the amount paid as advance prior to fixation of the  additional price under clause 5-A, cannot be treated  automatically as a part of the total price of sugarcane."

       In S.K.G. Sugar Ltd.’s case (supra), it was merely observed that  there was no prohibition under clause 3 of the Sugarcane (Control)  Order, 1966 read with clauses 3 and 5-A for "factories entering into an  agreement to pay higher price than the minimum price prescribed  under the order, the object of the order is to ensure that the cane- growers should not be compelled to sell their sugarcane at a price lower  than the minimum price prescribed by the Central Government under  clause 3 of the Order".  As a matter of fact, it was found that there was  an agreement by the Sugar Factory Owners’ Association with  sugarcane-growers regarding fixing of the price of sugarcane at a rate  higher than the centrally fixed minimum price.  In view thereof, it was  held that the State Government was justified in fixing the price of cane  at 20.50 per quintal, since this was agreed to in the tripartite meeting  convened by the State Government in which representatives of both  growers and the sugar producers participated.  Hence, the Bench held  that this price would be the price payable in lieu of the minimum price  fixed by the Central Government.

       None of these decisions is of help in deciding the question before  us today.

       In the result, I would summarise my conclusions as under :-

(1)     It is not necessary to opine on the question as to whether the entire  field of price is occupied by the Central Legislation, namely, the  Essential Commodities Act, 1955.

(2)     The source of the State’s power claimed in C.A. No. 460 of 1997 is  the U.P. Sugarcane Act, 1953 which has been the subject matter of  careful analysis by the Constitution Bench of this Court in Ch.  Tika Ramji’s case (supra).  Its constitutional validity was upheld  on the footing that the said Act did not trench upon the field of  pricing.

(3)     There is no power discernible in the provisions of the U.P.  Sugarcane Act, 1953 with the State Government to fix a price for  sale/purchase of sugarcane so as to make it binding on the parties  or legally enforce its payment.

(4)     The Sugarcane (Control) Order, 1966 itself enables parties to  consensually agree to a rate higher than the rate prescribed  therein.  If such higher rate is agreed, then that would become the  rate which the sugar producers would be obliged to pay and  would also become substituted for the minimum rate so as to  enable the State Government under the provisions of the U.P.

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Sugarcane Act, 1953 to enforce it in case of default by treating it as  arrears of land revenue. Hence, the following Order:- O R D E R STATE OF UTTAR PRADESH         In C.A. No. 460 of 1997, the Division Bench of the Allahabad High  Court allowed the writ petition No. 36889/96 by its judgment dated  11.12.1996 and quashed the Government’s Order fixing the State  Advised Price.   

       I would dismiss C.A. 460 of 1997.       Consequently, C.A. No. 461 of  1997 filed by the State of Uttar Pradesh and I.A. No. 3 in C.A. No. 460 of  1997 shall also stand dismissed.

C.A. No. 932 of 2001 stands dismissed.         C.A. No. 1727 of 1999 is allowed and the judgment of the Division  Bench appealed against in W.P. No. 2086 (M/B) of 1997 is set aside.         C.A. No. 4602 of 1999 rendered in writ petition No. 775 of 1997  dated 1.2.1999 by Lucknow Bench of the High Court of Allahabad is  allowed and the judgment of the Division Bench appealed against is set  aside.         C.A. Nos. 3512-3513 of 1997 are directed against an interim orders  dated 27.2.1997 and 21.3.1997 made by the Division Bench of the  Allahabad High Court (Lucknow Bench) in C.W.P No. 775 (M/B) of  1997 pending before it.  In view of the fact that the law has been  declared by this Court, the High Court shall decide the pending writ  petition in accordance therewith.  There is no reason to interfere with  the interlocutory orders.  Hence, C.A. Nos. 3512 and 3513 of 1997 are  dismissed.

       C.P. No. 63 of 2003 in C.A. No. 932 of 2001 alleges contempt of the  interim order dated 31.01.2001 made by this Court in Civil Appeal No.  460 of 1997.  It may be placed before an appropriate Bench for hearing  on merits.

STATE OF BIHAR         The applicable Statute in the State of Bihar is the Bihar Sugarcane  (Regulation of Supply and Purchase) Act, 1981.  Sections 42 and 43 deal  with the question of ’minimum price’ of cane supplied to a unit.  Section  42 deals with the payment of price of cane supplied to a unit.  Although  this Section empowers the State Government, after consulting the Board,  to determine by notification the minimum price of cane payable by  owners of units to the cane-growers’ or co-operative societies for cane  supplied, the proviso to Section 42 clearly says that ’the minimum price  so determined shall not exceed the minimum price payable by the  occupier of a factory under any law for the time being in force’ in  respect of the cane supplied.  Thus, it is clear that this Section does not  contemplate payment of any price more than the one paid under the  Sugarcane (Control) Order, 1966.  There is no other provision in the Act  empowering the State Government to fix higher price for sugarcane.

       The High Court was, therefore, justified in allowing the writ  petition filed by the sugar producers.                    C.A. No. 4685 of 1997 filed by the State of Bihar is hereby  dismissed.

STATE OF ANDHRA PRADESH         The State Government’s power was sought to be traced to the  provisions of the Andhra Pradesh Sugarcane (Regulation of Supply and  Purchase) Act, 1961 which appears to be pari materia with the legislation  in U.P.  Following the judgment in Ch. Tika Ramji’s case (supra), the  Division Bench of the Andhra Pradesh High Court in its judgment dated  8.5.2001 in writ appeal No. 902 of 1999 held that no such power of fixing  a higher rate for purchase of sugarcane was discerned in the State

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Government under the said Act.  I agree with this view.         C.A. Nos. 8117-8122 of 2001 and the Civil Appeal @ SLP (C) No.  16851 of 2001 are dismissed.

STATE OF PUNJAB         In this State, the corresponding legislation is the Punjab Sugarcane  (Regulation of Purchase and Supply) Act, 1953 together with the Rules  made thereunder.  The power of the State Government to fix the price is  sought to be derived from Section 3.  Upon interpretation of this  provision of the State Legislation, the Division Bench of the High Court  of Punjab & Haryana, by its judgment dated 23.12.1998 in CWP No.  19816 of 1996, held that there was no such power in the State  Government and struck down the orders for payment under the State  Advised Price holding that the sugar producers cannot be compelled to  pay a price for the sugarcane over and above the minimum price fixed  by the Central Government.  The Division Bench also took the view that  this did not preclude the parties from entering into agreement for  payment of higher price.  The State Government, being aggrieved, is in  appeal.   

       I would agree with the view expressed by the High Court and  dismiss Civil Appeal No. 6065 of 2001.

STATE OF HARYANA         The Civil Appeal arising out of SLP (C) No. 948 of 2003 is directed  only against an order in Writ Petition No. 11702 of 2002 dated 20.12.2002  by which the Division Bench of the High Court of Punjab & Haryana  vacated the interim orders which had been passed in favour of the  petitioner.  The said writ petition is presumably pending before the  High Court.  The instant appeal  is, therefore, dismissed. The High  Court shall decide the pending writ petition in accordance with the law  declared by this Court.

       The Civil Appeal arising out of SLP (C) No. 1363 of 2002 is  directed against the judgment of the Division Bench of the High Court  of Punjab & Haryana in writ petition CWP No. 19816 of 1996 dated  23.12.1998.  Here, the High Court has allowed the writ petition of the  sugar producers by holding that the State Government had no power to  fix the State Advised Price at a rate higher than the centrally fixed  minimum price for purchase of sugarcane and that the purchasers  cannot be compelled to pay such higher price except when there is an  agreement between the purchasers and the cane-growers to pay such  higher price.

       I would dismiss the appeal arising out of  SLP (C) No. 1363 of  2002.         Civil Appeal Nos.1639-45/99 are directed against the common  judgment of the Punjab and Haryana High Court in C.W.P.Nos. 558/97,  3847/97,  3921/97, 16035/97,15316/97, 14761/97 and 6802/97.  The  High Court had in these judgments held that the appellants before us  had not made full payment along with interest  towards the purchase  price of sugarcane supplied to the appellant by relying on the provisions  of section 15A of the Punjab Sugarcane (Regulation of Purchase and  Supply) Act, 1953. The High Court rightly dismissed the writ petitions.   I see no reason to interfere with the judgment of the High Court. I  would, therefore, dismiss Civil Appeal Nos.1639-45 of 1999.

STATE OF TAMIL NADU         In T.C. Nos. 21-22 of 2002 arising out of T.P. (C) Nos. 648-649 of  2000, the sugar producers filed writ petitions before the High Court of  Madras challenging the fixation of the State Advised Price by the State  Government.  In the counter-affidavits filed by the State, it is expressly  admitted before the High Court that there is no statutory provision for  fixation of any State Advised Price at a rate higher than the centrally  fixed minimum rate for purchase of sugarcane.  

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       The two transferred cases are remitted back to the High Court  which shall dispose of the pending writ petitions in accordance with the  law declared by this Court.