SHRI MALAPRABHA CO-OP. SUGAR FACTORY LTD. v. UNION OF INDIA AND ANR.

A X = R-I+2A+B RC

Explanation in this formula:

1. 'X' is the additional price in rupees per quintal of sugarcane B payable by the producer of sugar to the sugarcane grower.

2. 'R' in the amount in rupees of sugar produced during the sugar year excluding excise duty paid or payable.

3. 'L' is the amount in rupees of sugar required to be sold as c levy calculated on the basis of the levy price notified by Govern- ment as in force on 30th day of September of each sugar year for sugar produced during that year, excluding excise duty paid or payable.

D 4. 'A' 'is the amount found payable for the previous year but not actually paid (vide sub-clause (9) ).

5Copy pinpoint5. 'B' is the excess or shortfall in realisation from actual sales of the unsold stocks of sugar produced during the sugar year, as on 30th day of September (vide item 7 (ii) below) which is carried forward and adjusted in the sale realisations of the following year.

6Copy pinpoint6. 'C' is the quantity in quintals of sugarcane purchased by the producer of sugar during the sugar year.

7Copy pinpoint7. The amounts 'R' and 'L' referred to in items 2 and 3 shall be computed as under :-

(i) the actual amount realised during the sugar year; and

(ii) the estimate value of the unsold stocks of sugar held at the end of 30th September calculated in regard to free sugar stock at the average rate of sales made during the fortnight 16th to 30th September and at the notified levy prices "Prices as applicable to levy stocks as on 30th September.

Explanation: In this Schedule 'Sugar' means any form of sugar containing more than ninety per cent sucrose."

SUGARFACTORYLTD. v. U.0.1.[MOHAN,J.] 4SS

It is true that clause SA deals with additional price payable to the sugarcane grower. However, if the recommendations made by the Bhar- gava Commission and tbe method of computation are taken into considera- tion it will be clear the producer of sugar will be entitled to retain an amount equivalent to the amount paid to the cane grower under clause SA. That amount cannot be taken into consideration for determination of the price of levy sugar. This will be evident from paragraphs 2.17, 2.20, 2.21 and 2.39 of Chapter II of Bhargava Commission Report. They are extracted below:

"2.17. Statutory minimum prices for individual factories are fixed by the Government of India in accordance with the quality formula. We have incorporated the formula in the scheme to ensure that the incentive to cane growers for producing cane of better quality is retained. In discussing this formula earlier (in Part II), we have made certain recommendations which, in our opinion, will improve the effectiveness and usefulness of the formula. The D Scheme provides for a basic recovery of 8.S per cent and the payment of premium on proportionality basis. It also provides for the fixation of the minimum prices payable by individual factories on the basis of the average of the recovery of the previous normal crushing period of the factory. The reasons for using the average recovery of the normal crushing period in preference to the average recovery of the optimum period for this purpose have already been stated.

2.20. The provision of Clause (6) about the sale realisations being in respect of the sugar produced during the season is intended to ensure, as far as possible, that cane growers who supplied the cane from which the sugar was produced should benefit from the prices obtained for the sugar. The manner in which the sales realisations should be calculated, presented a problem. It is necessary that the additional price which may be payable to cane growers out of extra realisation should be an- G nounced in October so that it may influence sowings of cane and execution of agreements for supply of cane. Keeping this in view, it is necessary to calculate early in October the value of the sugar produced during the season. About 70 per cent of sugar produced in a season in ordinarily sold out by the end of September. For H

456 SUfREME COURT REPORTS [1993] SUPP. 2 S.C.R.

A such stocks, the figures of actual realisations would be available l::y the end of September.

2.21 As regards the unsold stocks, the value thereof could be estimated in more than one way on the basis of the market prices prevailing at the end of September, on the basis of the average of B the sales of sugar upto the end of September, on the basis of the av~rage of the sales made during the last fortnight of September, etc. The scheme provides for an evaluation of the unsold stock on the last basis mentioned. The problem, however, remained of accounting for the difference between the ef'.imated price and the c actual subsequent realisations from the stocks which remain unsold on 30th September. This difficulty has been overcome by the provisions for the difference being carried forward to the next year for adjustment in the sugar sales realisations.

2.39. After considering all these facts we have decided that the extra realisations on the sale of sugar be divided between the growers and the industry in the ratio of 50:50. A provision of this effect has been made in clause (9) of the Scheme. It should be mentioned that after deducting the tax obligations to be borne by the industry, the actual accruals will be in the proportion of 70 to the cane growers and 30 to the industry. This share of cane growers approximates the share of the cost of cane in the ~ost of sugar."

For the regular production of sugar there must be regular supply of sugarcane.

F On this aspect of the matter, Justice E.S. Venkataramiah (as he then was) observed in Writ Petition No. 432 etc. filed in the High Court of Karnakata as follows:

"It is well-known that the availability of sugarcane for manufac- turing sugar depends on several factors such as the probable price which the sugarcane can fetch when it is ready for harvest, the price of other foodstuffs which can be grown on the land which has to be utilised for growing sugarcane, the period occupied in raising the sugarcane crop and the uncertain climatic conditions. In order to maintain regular supply of sugar it is necessary to have regular supply of sugarcane. The supply of sugarcane depends

SUGAR FACTORY LTD. v. U.0.1.[MOHAN,J.] 457

upon the total average brought under sugarcane cultivation. The A agriculturist should hfve the necessary incentive to grow sugarcane instead of some other crop and that is provided by the Sugarcane (Control) Order which authorises the Central Government to fix the minimum price which the producer of sugar should pay to the cane grower on a future date. This necessarily involves the deter- B mination of the minimum price payable under clause 3 of the Sugarcane (Control) Order at the commencement of the planting season. After the minimum price of sugarcane is so fixed, at the commencement of the sugar year (as defined in Clause SA of the Sugarcane (Control) Order). It is necessary for the Central Government to fix the price payable for levy sugar and also c determine the quantity of sugar which a producer should supply to the Central Government or its nominee to enable the producer to arrange his programme of production well in advance and also to pay extra price to the sugarcane grower over and above the price fixed under Clause 3 of the Sugarcane (Control) Order to attract supply of sufficient quantity of sugarcane to his factory, which of course he would be able to adjust against the additional price payable under Clause SA after the close of the sugar year. After the sugar year is over, the authority which is empowered to determine the additional price would determine it in accordance with the formula found in the Second Schedule and payment of additional price would be made to the cane grower accordingly. At this stage the amount which the producer can retain out of the extra realisation made by him would also be known.

It is significant that the Bhargava Commission recommended that the factory owner should share the extra realisation with the cane grower. The expression "to share" means 'to particulate in'. It, therefore, follows that a sum equivalent to the amount paid by way of additional price would go to the benefit of the producer. If that is the true legal position, the method adopted by the Central G Government in determining the price of levy sugar under the 197S order would have to be treated as faulty. No part of the extra realisation can be taken into consideration while determining t_he price of levy sugar. It is no doubt true that in Panipat's case the Supreme Court having regard to t.he law as it stood then observed that it would be open to the C~ntral Government to take into H

458 SUPREME COURT REPORTS [ 1993) SUPP. 2 S.C.R.

A consideration the extra realisation of a producer by the sale of levy sugar Jlso while determining the price that has to be determined under clause 3(3C). I am of the view that the above view of the Supreme Court stands superseded by clauses SA of the Sugarcane (Control) Order which was introduced subsequently. It is the duty of the Court to give effect to clause 5A of the Sugarcane (Control) B Order without being influenced by any observations made by the Supreme Court earlier when a similar clause was not in force. The case put forward on behalf of the Central Government that even after the promulgation of clause 5A it would be open to the Central Government to take into consideration the extra realisation for the c purpose of determining the price of levy sugar under clause 3(3C), would be impracticable, because the determination of price under clause 3(3C) cannot be postponed to a date subsequent to the close of the sugar year. If that is allowed to be done, the producer of sugar would be compelled to carry on production of sugar without having an idea of the price that is likely to be determined by the D Central Government under clause 3(3C)."

We are in agreement with the above observations since the approach to price determination is in the proper perspective. It may also be added that the ruling in Sita Ram case (supra) is silent as to be impact of clause E SA of the Sugarcane (Control) Order since what came up for decision in that case was the correctness of the zonal fixation of prices. Therefore, we uphold the contention of Mr. Nariman that the changed methodology adopted from 11.7.75 was directly contrary to the recommendations of Bhargava Commission which have come to be accepted by the Govern- F ment. Accordingly, we hold that the government could not, in law, proceed to a determination of the levy price by mopping up 100 per cent of the excess realisation of free sale sugar. This overlooks the fact that the producer had become statutorily entitled to 50 per cent of such excess realisation from 1.10.74. G We are unable to agree with the submissions advanced on behalf of the Government that clause 5A deals only with the amount payable to the cane grower and that it cannot have any relevance for determination of levy sugar. If the determination of minimum price of sugar and fixation of the price of levy sugar under quantity of sugar to be supplied by the producer

SUGAR FACTORY LTD. v. U.O.I. [MOHAN, J.) 4S9

are inter-connected, then must be read, as a whole and not separately as though each is distinct. While fixing the price of levy sugar regard is had only to the minimum cane price as spoken to under Section 3(3C). This minimum cane price is referable to clause (3) or Sugarcane (Control) Order. The additional price payable to the cane grower under clause SA will arise after the expiry of the sugar year. Such price will have to be met only from the extra realisation made by the producer by the sale of sugar in free market which will naturally be more than the levy price.

In view of the above discussion, the impugned notifications except the one dated 28.11.74 cannot be upheld. The reason why we leave out the notification dated 28.11.74 is that the same came to be issued before the new pricing policy was introduced. We hereby direct The Union of India to amend the notifications taking into account the liability of the manufac- turers under clause SA of the Sugarcane (Control) Order as regards cane price and refix the price of levy sugar having regard to the factors men- tioned in Section 3(3C) of the Act. The Government will have time to issue the amended notifications as directed above till 31st of December, 1993.

Though normally we would have quashed the notifications mere quashing of the notifications would lead to nebulous situation during the interregnum till the refixation of price we are obliged to give the above direction. In this connection we may usefully quote the following passage occurring at page 294 of Judicial Remedies in Public Law by Clive Lewis:

"The courts now recognise that the impact on the administra- tion is relevant in the exercise of their remedial jurisdiction. Quash- ing decisions may impose heavy administrative burdens on the administration, divert resources towards re-opening decision, and lead to increased and unbudgeted expenditure. Earlier cases took the robust line that the law had to be observed, and the decision invalidated Whatever the administrative inconvenience caused. The courts nowadays recognise that such an approach is not always appropriate and may not be in the wider public interest. The effect on the administrative process is relevant to the courts' remedial discretion and may prove decisive."

We may also add that the interests of the appellants will have to be measured agaliist the needs of good administration which include: the need H

460 SUPREME COURT REPORTS (1993) SUPP. 2 S.C.R.

A for speedy finality in decision making, the public interest, the purpose of administrative process and the need to consider substance not form.

Pursuant to out interim orders bank guarantees have been furnished by the appellants. 50 per cent of the same could be encashed by the respondents. The other 50 per cent shall remain and the liabilities could B be adjusted after the determination of price as directed above.

Accordingly, all the civil appeals, special leave petitions, writ peti- tions, transfer petitions, transferred cases, interlocutory applications and CMPs will stand ordered.

R.P. Matters disposed of.