U.P. COOPERATIVE CANE UNION FEDERATION v. WEST U.P. SUGAR MILL ASSOCIATION AND ORS.

A U.P. COOPERATIVE CANE UNION FEDERATION V.

WEST U.P. SUGAR MILL ASSOCIATION AND ORS.

MAY 5, 2004

B [RAJENDRA BABU CJ., K.G. BALAKRISHNAN, VENKATARAMA REDD!, B.N. SRIKRISHNA ANO G.P. MATHUR, JJ.]

Sugarcane Act, 1934; Sections 5 and 7/UP. Factories Act, 1938; C Sections 21 and 22-AIU.P. Sugarcane (Regulation of supply and Purchase) Act, 1953; Sections 16 & 17/U.P. Sugarcane (Supply and Purchase) Order, 1954/Sugarcane (Control) Order, 1955/Sugarcane (Control) Order, 1966; Clause 2(g). 3, and 5-A!Essential Commodities Act, 1956; Section 3 :

Per majority ·

The provincial Governments could fix price ofsugarcane taking into account local conditions and empowered to make rules thereof-Sugar f Control Order stipulates price could either be the minimum price as fixed by the Central Government or as agreed between the growers and the producers and includes additional price as well-Thus, there could be a price other than the minimum price fixed by the Central Government and it could be higher than the minimum price so fixed-Repugnancy would G arise if the State Government fixes a price lower than the minimum price- By fixing higher price the provisions of 1966 Order stood complied with by the State Government.

Regulator; of the State Government-State Government imposing statutory conditions on sugarcane growers for continuous supply offresh(v H hurvested sugarcane of mi//s--lmplications-State Government in exercise 238

U.P. CO-OP. CANE UNION FEDERAT!ON v. WEST U.P. SUGAR MILL ASSON. 239

of its regulato1y power could also fix higher price of the sugarcane for the A benefit ofthe cane growers-Fixation ofhigher price by the Sate Government by itself could not have any major or substantial impact on the fixation of price of the levy sugar by the Central Government-State Government frxed the prices uniformly and not factorywise as was the impact offixation of the statutory price of the sugarcane by the Central Government-Hence, B State Advised Price more just and equitable-Essential Commodities Act- Section 3; Constitution of India, 1950-Article 254.

Agreement between the sugarcane growers and sugar producers- Terms-Enforcing of-Agreement is the single composite transaction-It is not open to the producers to enforce the terms thereof to their advantage C and refuse the State Advised Price on the ground that their consent was not obtained voluntarily.

Words and Phrases D 'Price', 'minimum price', 'agreed price '-Meening of in the context of Sugarcane Supply and (Control) Order, 1966.

'goods '-Meaning of in the context of Sales of Goods Act.

'Regulate '-Meaning of in the context of UP. Sugarcane (Regulation E of Supply and Purchase) Act, 1953.

Per minority :

Central Government is empowered under the Essential Commodities F Act to regulate the production, supply and distribution of the essential commodities and provide for controlling the price thereof-Power to control includes power to fix the minimum price-Power of the Central Government under the Central Act and that of the State Government under 1953 Act are mutually exclusive-Since the State Legislation does not contain provisions even for fixation of minimum price of sugarcane, the G State Government cannot possess power to fix a price higher than the minimum-Fixation of price higher than the minimum price by the State executive. hit by Article 14 ofthe Constitution and renders its constitutionality open to challenge-Such fixation of price of sugarcane by the State amounts to violation of the fundamental right guaranteed under Article H

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A 19(1){3) of the Constiturion--Stute Advised Price unnounced by the State Government despite protest by the sugar producers--Hence. it cunnot be termed as consensual price between the purties-Constitution of India, 1950-Articles 1./ & 19.

Words and Phrases : B 'minimum price·. 'fair price', 'remunerative price' and 'maximum price '-Meaning of in the context of Essential Commodities Act, 1955.

'Advised Price '-Meaning of in the context of U.P. Sugarcane C (Regulation of Supply and Purchase) Act, 1953.

The questions which arose in these appeals and transfer petitions relate to the competence of the State Government to fix the State Advised Price for purchase of sugarcane by the manufacturer/occupier D of sugar factory over and above the minimum price fixed by the Central Government and validity of the procedure adopted for ensuring payment of the price to sugarcane growers.

It was contended by the appellant-U.P. Cooperative Cane Unions E Federation that since the Central Government fixed only the minimum price, it was op.en for the State Government to fix a higher price for sugarcane; that the State Government could not only fix a higher price but could also advise sugarcane growers/factories to agree and pay a higher price for sugar cane to the sugarcane growers; that the Central F Government while fixing the minimum statutory price of the sugarcane did not take into consideration various bye-products produced during the course of production of sugar; that the sugar mills make considerable amount of money/profit by selling them; that the State Government having regard to local conditions and profit earned by the sugar factories from the sale of the bye products could fix a fair/reasonable G and realistic price of the sugarcane; and that there is no repugnancy between the price fixed by the Central Government and State Advised price as fixed by the State Government.

It was submitted by the State Government that the Central H Government in pursuance of the provisions under the Essential

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commodities Act has made sugar cane (Control) Order; and since the purpose of the Sugarcane (Control) order was to ensure uninterrupted supplies of sugarcahe, it must be construed in the context of policy of the Central Government to appropriate a portion of the production of sugar and sell it as levy sugar at controlled price; that the statutory minimum price as fixed by the Central Government was basically linked to fixation of the price of levy sugar and not linked to fixation of the price of sugarcane; that the additional price could only be paid to the sugarcane growers when the sugar mills earn profit which is only a matter of chance; that the production of sugar from sugarcane needs large investment and price is the main incentive for the farmers, however, the price fixed by the Central Government was bare minimum and not a remunerative price; that the power to determine remunerative price vested with the State Government under the regulatory provisions of 1953 Act; that the State Government in exercise of its power under the 1953 Act could bring about an agreement between the sugarcane • growers, Sugarcane Growers Co-operative Society and occupiers of sugar factories whereby the sugarcane grower would be bound to supply certain quantity of freshly harvested sugarcane and in case of non-supply he would be liable to pay penalty; that since the sugarcane grower is liable to pay penalty by the same analogy the State Government is obliged to determine and pay the remunerative price to the sugarcane growers; and that the price so determined by the State Government represents the true price.

Respondent-Association submitted that there are no specific provisions under the 1966 Order which could empower the State F Government to fix the price of sugarcane over and above the price fixed by the Central Government; that there exists a clear repugnancy between the price· fixed by the Central Government and the price fixed by the State Government, thus, the price fixed by the Central Government would prevail; that the fixation of higher price by the State Government would completely dislocate the mechanism for G determination of the price of the levy sugar by the Central Government as provided under the Essential Commodities Act, that there was no agreement between the sugarcane growers/Sugarcane Growers Co- operative Society and the occupiers of the sugar factories for payment of the State Advised Price; and that levy could not be compelled to pay H

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A the State Advised Price since they had never given their consent thereto in the agreement.

Disposing of the appeals and transfer petitions, the Court

1.1. The Central Legislature enacted the Sugarcane Act, 1934 with the objective that the initiative in the matter of fixation of prices C for sugarcane must be left to Provincial Governments so as to suit local conditions. The purchase of sugarcane intended for use in factory in any controlled area at a price less than the minimum price notified was made an offence under the provisions of the Act, which conferred wide powers on the Provincial Government to make rules for the purpose of carrying into effect the objects of the Act. [265-H; 266-C] D 1.2. The Central Government exercising powers under Section 3 of the Essential Commodities Act made the Sugarcane Control Order, 1955. This order was repealed by the Sugarcane (Control) Order 1966. The definition of 'price' given in Clause 2(g) of the Sugarcane (Control) E Order, 1966 shows that it can either be the price or the minimum price fixed by the Central Government. So far as the power of the Central Government is concerned, under Clause 3(1) of the order it can fix only the "minimum price" of sugarcane to be paid by the producers of sugar for the sugarcane purchased by them. This is the lowest permissible rate. F The effect of Clause 3(2) of the order is that a producer of sugar can under no circumstances purchase sugarcane at a price lower than the minimum price fixed under Clause 3(1) and there is a similar prohibition on the cane grower and he cannot sell or agree to sell sugarcane to a producer of sugar below the said price. But the 1966 Order, in view of definition of "price" given in Clause 2(g) and also the language used in G Clauses 3 and 3-A, clearly contemplates that there can be a price other than the minimum price" ofsugarcane as agreed to between the producer and the sugarcane grower or the Sugarcane Growers' Co-operative Society'. The provision as laid down under sub-clause (5) of Clause S- A again contemplates payment of price higher than the minimum price H fixed under Clause 3(1 ). A whole reading of the 1966 Order, thus, would

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show that the Central Government shall fix the minimum price of A sugarcane but there can be a price higher than the minimum price which may be in the nature of agreed price between the producer of sugar and the sugarcane grower or the sugarcane growers co-operative society. So the field for a price higher than the minimum price is clearly left open in the 1966 Order by the Central Government. B [266-D, E; 268-C-D-E-F-G; 269-B-C]

1.3. The provisions in the U.P. Sugarcane (Regulation of Supply and Purchase) Act, 1953, U.P. Sugarcane (Regulation of Supply and Purchase) Rules, 1954 and the U.P. Sugarcane Supply and Purchase Order, 1954, have been made for the benefit of the sugar factory so that it is assured ofand gets a continuous supply of freshly harvested sugarcane in quantity according to its crushing capacity and for the whole duration of the crushing season. No doubt the cane grower also gets some advantage in the sense that purchase of his yield is assured but at the same time many limitations and restrictions are imposed upon him. In view of the statutory provisions, the position of a cane grower becomes entirely different from that of a farmer producing any other kind of:;tgricultural crop where there arc absolutely no restrictions upon him. It is in this scenario, which is not the creation of the cane grower but of the statutory provisions operating in the field, that the question whether the State has any authority or power to fix the price of the sugarcane supplied to a producer of sugar (sugar factory) arose. [275-G-H; 276-A-BI

1.4. The various provisions of U.P. Sugarcane (Regulation of Supply and Purchase) Act, 1953 Act show in unmistakable terms that it regulates the supply and purchase of sugarcane required for use in sugar factories. 'Regulate' means to control or to adjust by rule or to subject to governing principles. It is a word of broad impact having wide meaning comprehending all facets not only specifically enumerated in the Act, but also embraces within its fold the powers incidental to the regulation envisaged in good faith and its meaning has to be ascertained in the context in which it has been used and the purpose of the statute. [276-C-D-El

VSR & Oil Mills v. State of A.P., AIR (1964) SC 1781; State of Tamilnadu v. Mis. Hindu Stone & Ors., [198112 SCC 205; K. Ramanathan H

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A v. State of Tamil Nadu & Anr., 11985] 2 sec 116 and Jiyajeerao Cotton Mills Ltd. & Anr. v. Madhya Pradesh Electricity Board & Anr, (1989] Suppl. 2 SCC 52, relied on.

1.5. The provisions of U.P. Sugarcane (Regulation of Supply and B Purchase) Act, 1953 show that the legislature has made very elaborate provisions regarding supply of sugarcane by canegrowers, its purchase by the sugar factories and payment of price thereof. In fact, very detailed and exhaustive provisions have been made in the Rules and the U.P. Sugarcane Supply Order, 1954 to ensure that at the time of delivery of sugarcane by the canegrowers, its weight and price are correctly recorded and the price is paid to them within 14 days, failing which sugar factory is liable to pay interest. In such circumstances, the irresistible conclusion which can be drawn is that the regulatory power possessed by the State Government shall also include the power to fix the price of the sugarcane. If it is held that the State under its power of regulation cannot fix the price, then the statutory provision contained in the 1953 Act, the Rules and 1954 Order will become completely one sided, operating entirely for the benefit of sugar factories giving them many advantages with no corresponding obligations and leaving the canegrower in a lurch with host of restrictions upon him. This can never be the intention of the Legislature. It will not be fair to read the Act and the Rul~s in such a restrictive manner. 1281-C-D-E-F-GI

1.6. There is no indication in the proforma of the agreement as contained in the appendix to U.P. Sugarcane (Supply and Purchase) F Order, 1954 or in the Order that the word "Government" would refer to Central Government. If the State Government is prescribing a proforma of an agreement which is to be executed by a canegrower or a canegrowers' cooperative society and the occupier of the factory regarding sale and purchase of sugarcane wherein the word "Government" is used, it can only mean the State Government and not the Central Government unless there is clear indication to the contrary. The only logical inference which can be drawn is that the word "Government" refers to State Government. 1282-D-EI

2.1. Sugarcane supplied to sugar factory are "goods" within the meaning of Section 2(7) of Sale of Goods Act. Th provisions under sub-

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sections (1) and (3) of Section 4 and Section 5 of the Act show that price A is an essential element of sale of goods. 1280-E-F]

Popatlal Shah v. State of Madras, 11953) SCR 677 and State of Madras v. Gannon Dunkerley, [1958) SCR 379, referred to. B 2.2. There is a difference between "the price" which is a fixed amount and "the minimum price" which only indicates the lowest permissible rate. The 1966 Order, which itself was made by the Central Government more than a decade ago and was amended in 1978 and Clauses 3(3) and 3-A thereof contemplate an "agreed price" which in C view of the mand~te of Clause 3(2) is bound to be higher than the "minimum price" fixed under Clause 3(1). Naturally it is this "agreed price" which' is to be mentioned in the agreements for sale and purchase of sugarcane in Forum B and C otherwise the very purpose of entering into agreements would be defeated. 1282-G-H; 283-A-B] D Ch. Tika Ram.Ji & Ors. v. State of Uttar Pradesh & Ors., [1956] SCR 393, distinguished.

2.3. The State Government in exercise of its regulatory power can fix the price of sugarcane. The mere fact that this price is not to the E liking of the sugar factory does not mean that it cannot form the basis for supply of sugarcane by the canegrowers or canegrowers cooperative society to the sugar factory. It is well settled that even a compulsory sale does not lose the character of a sale. [284-E]

Salar Jung Sugar Mills Ltd. v. State ofMysore & Ors., 11971] 1 SCC F 23, followed.

Indian Steel & Wire Products Ltd. v. State of Madras, [1968) 1 SCR 479; Andhra Sugar Mills Ltd. v. State of Andhra Pradesh, 11968] 1 SCR 705 and Sukhnandan Saran Dinesh Kumar v. Union of India & Ors., G 11982] 2 sec 150, relied on.

3. The reservation or assignment of area for growing of the sugarcane is made for the benefit of a sugar factory. The agreements executed by the canegrowers or canegrowers cooperative society in H

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A favour of occupier of a factory are also for the benefit of the sugar factory as by such agreements it gets an assurance of a continuous supply of freshly harvested sugarcane on the days indicated in the requisition slips issued by it so that there may not be any problem in getting optimum quantity of raw material throughout the crushing season. In absence of the agreements the sugar factory factory will also be a loser as it may face great problem in getting the supply of sugarcane according to its requirement. The occupiers of the factory are themselves keen for execution of the agreements but their only objection is to the mention of State Advised Price. The agreement is one composite transaction and it is not open to them to contend that the terms thereof which are to their advantage should be enforced but the term relating to price notified by the State Government should not be enforced as their consent in that regard was not a voluntary act. However, having regard to the advantages derived by the sugar factories, they are fully bound by the agreement wherein the State Advised Price may be mentioned and it is not open to them to assail the clause relating to price of sugarcane on the ground that their consent was not voluntary or was obtained under some kind of duress. 1289-B-C-D-EI

4. Under Sub-section (1) of Clause of the 1966 Order, the Central E Government can only fix a minimum price of sugarcane. This clause should be read along with sub-clause (2) which creates an embargo or prohibition that no person shall sell or agree to sell sugarcane to a producer of sugar and no such producer shall purchase or agree to purchase sugarcane at a price lower than that fixed under Sub-clause F (1). The inconsistency or repugnancy will arise ifthe State Government fixed a price which is lower than that fixed by the Central Government. But, if the price fixed by the State Government is higher than that fixed by the Central Government, ther<! will be no occasion for any inconsistency or repugnancy as it is possible for both the orders to operate simultaneously and to comply with both of them. A higher price fixed by G th~ State Government would automatically comply with the provisions of sub-clause (2) of Clause 3 oft 966 Order. Therefore, the price fixed by the State Government which is higher than that fixed by the Central Government cannot lead to any kind of repugnancy. 1292-C-D-EJ

H M. Karunanidhi v. Union of India, AIR (1979) SC 898; Mis. Hoechst

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5.1. One of the main reasons given by the High Court quashing the Order of fixation of State Advised Price was that the power to fix C sugarcane price had been given to the State Government under the Sugarcane Act, 1934 and hence it would be redundancy to say that the same power also flows from Section 16 of the 1953 Act. It appears that the correct legal position was not brought to the notice of the High Court. The Sugarcane Act, 1934 was repealed by U.P. Sugar Factories Control ,o\ct, 1938 (UP Act to No. l of 1938). Section 26 of D U.P. Sugarcane (Regulation of Supply & Purchase) Act, 1953 repealed the U.P. Sugar Factory Control Act, 1938. With the enforcement of the Government of India Act, 1935, there was distribution of legislative powers between the Dominion Legislature and the Provincial Legislature and the entire subject matter of Sugarcane Act, 1934 fell E within the Provincial Legislative list. It was in these circumstances that the U.P. Legislature enacted the U.P. Sugar Factories Control Act, 1938 which repealed the Sugarcane Act, 1934 in its application in the State of U.P. Thus, the reasoning given by the High Court has no legal basis. [298-D-E, H; 299-A-B-C] F Ch. Tika Ramji & Ors. v. State of Uttar Pradesh & Ors., [19561 SCR 393, referred to.

5.2. The second reasoning given by the High Court is that even ifthe State Government had the power to fix the minimum cane price G under Section 16 of the 1953 Act, this power came to an end in view of Article 254(1) of the Constitution on the enactment of the Essential Commodities Act and the promulgation of the sugarcane Control Order, 1955 (later replaced by the 1966 Order), which gives exclusive power to the Central Government to fix the minimum price. Under H

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A Section 3(3C) of the E.C. Act, the Central Government has to determine the price of the levy sugar having regard to several factors enumerated in the sub-section and the minimum price fixed under 1966 Order is only one of the factors. The manufacturing cost of sugar and securing of reasonable return on the capital employed in the business of B manufacturing sugar are also relevant factors under Clauses (b) and (d) of Section 3(3C) of the E.C. Act and the fixation of higher price for sugarcane by the State Government by itself can not have any major or substantial impact on the fixation of the price of the levy sugar by the Central Government. [299-C-D, F-GI

c 6. The order passed by the Central Government fixing the minimum price of sugarcane for the sugar year 2002-2003, shows that prices have been fixed for different factories keeping in view the minimum price of sugarcane linked to a basis recovery of 8.5. per cent sugar subject to a premium at certain rates with the increase in the recovery above that level. In the State of U.P. generally the price fixed for sugarcane for most of the sugar mills being run by the U.P. State Sugar Corporation or in cooperative sector (Sahkari) is much lower than the price fixed for the sugar mills being run by private sector. The prices fixed by the Central Government clearly indic:;te that a sugarcane grower who falls within the reserved area ofa sugar mill run by U.P. State Sugar Corporation or by cooperative sector gets much less while as one who falls within the reserved area of sugar mill run by private sector gets much higher. There is no justifiable reason why a sugarcane grower should suffer only on account of the fact that he happens to fall within the reserved area of F a mill run by the U.P. State Sugar Corporation or in the cooperative sector. The State Government fixes uniform prices and '1~t factory wise. Such a fixation of price is more just and equitable from the point of view ofa sugarcane grower. [301-G-H; 302-A; 303-A-B-CI

Report of the Sugar Industry Inquiry Commission, 1974, referred to. G Per SRIKRISHNA, J. (dissenting) :

I .I. The observations in Ch. Tika Ranl)i 's case though made in the context of Sugarcane (Control) Order, 1955, are equally applicable in H the context of the sugarcane (Control) Order, 1966. Two points of

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distinction were sought to be down as to why the ratio of Ch Tika A Ramji 's case would not apply to the present case; that it did not have the benefit of examining the Sugarcane (Control) Order, 1966; and that it 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 higher price. However, these distinctions are purely B chimerical. A comparison between the Sugarcane (Control) Order, 1955 and Sugarcane (Control) Order, 1966 brings out the hollowness of the first distinction. Under the 1955 Order, 'price' meant the price fixed by the Central Government from time to time, for sugarcane delivered at the factory gate. It empowered the Central Government C 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 factor. If the pa_rties 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 sugarca'ne grower or the Sugarcane-growers' Co- operative Society,_ as the case may be. The distinction that is sought to be drawn· has no basis. [327-H; 328-A-B-C-D-E-F-G]

Ch. Tika Ramji & Ors. v. The State of Uttar Pradesh & 01·s., [1956[ F SCR 393, relied on.

2.2. With regard to the second distinction, this Court examined the conflict becyveen the provisions of the Central Legislation, the Essential Commodities Act, 1955 and the U.P. Sugarcane Act, 1953 in Ch.• Tika Ranyi's case. Under Section 3 of the Essential Commodities Act, 1955, G the Central Government is specifically empowered, interalia, 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 wid,,st amplitude and takes into H

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A 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, the Court 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 r.u 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, the case 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 Ram.Ji case 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. 1329-C-D-E-F-G-Hl

Ch. Tika Ramji & Ors. v. The State of Uttar Pradesh & Ors., 119561 E SCR 393, relied on.

2.3. With regard to the 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 F the State seeks to fix is 'fair price' or 'remunerative price', 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 G Act, 1955 read with the Sugarcane (Control) Order, 1966. There exists 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 price H which when fixed has to be paid by all purchasers of cane. Anything

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higher than that would require adjudication of rival claims for which there exists no machinery under the I 953 Act 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, ifthe contention of the cane- growers is accepted, what is payable in the Sate would, in reality, be the minimum price payable for sugarcane. Calling it as the 'fair price' C or 'remunerative price' would merely be a matter of semantics and not of substance. Except the bald reference to 'regulation of sale and purchase of cane', there is nothing else in the 1953 Act 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. It cannot be inferred that such a power of fixation D of price higher than the minimum price in 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 in Ch. Tika Ramji case as the 'minimum price fixed by the Central Government'. E 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. 1330-B-C-D-E-F-H; 331-C-D; 332-A-Bl

Mis. Crown Aluminium Works v. Their Workmen, relied on. F

3. 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 G question before this Court was not as to what could be consensually done. The question was that 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; that fixing of a higher price of sugarcane, compulsorily payable, is a H

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A restriction on the fundamental right guaranteed under Article 19(l)(g) and cannot be legally done except under a law. 1333-D-E; 334-GI

State uf Madhya Pradesh & Anr. v. Thakur Bharat Singh, 11967) 2 SCR 454, relied on.

B Rai Sahib Ram Jawaya Kapur & Ors. v. The State of Puniab, [1955) 2 SCR 225, distinguished.

4.1. The construction of the 1953 Act has to be made against the legislative background. Under Section 3(2) of Sugarcane Act, 1934, the C 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 l 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 be paid by the occupier of the factories or purchasing agents for cane purchased in that area could be determined by a notification issued by the Government, after consultation with the Board. In contrast, the provisions of the U.P. Sugarcane Act, 1953 indicate total absence of such a power to fix a price. It the I 953 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 Section 16 and 17 of the Act. 1335-D-E-F)

4.2. The Statute lays down no guidelines for exercise of power, if any, by the State. Against the background of legislative history, and the observations made in Ch. Tika Ramji 's case, it is difficult to discern any such power in the State to fix the State Advised Price, ealled by whatever name, at a rate higher than the minimum rate fixed by the Central Government, which could be made binding on the parties. Since U.P. Sugar Mills Associations/factories strongly protested against the State Advised Price and filed writ petitions before the High Court challenged the State Advised Price, there ·.vas no occasion for the State Governme~t to exercise its diplomacy and bring out a consensual price between the. parties nor was there any occasion for

H basis of consensus. 1336-A-B, F-G-HI . the State Government of U.P. to declare a State Advised Price on the

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Ch. Tika Ramji & Ors. v. The State of Uttar Pradesh & Ors., (1956) A SCR 393, relied on.

Maharashtra Rajya Sahkari Sakkar Karkhana Sangh Ltd.& Ors. v. State ofMaharashtra & Ors., (1995) Supp. 3 SCC 475; S.K.G. Sugar Ltd. v. State of Bihar & Ors., (1997) 9 SCC 362; State of MP. v. Jaora Sugar B Mills Ltd., (19971 9 SCC 207 and State of Tamil Nadu and Ors. v. Kothari Sugar & Chemicals Ltd. & Ors., (1996) 7 SCC 751, distinguished-

Per P. Venkatarama Reddi, J_ (dissenting) :

I.I. There exists no statutory basis for the 'State advised cane price'. The very expression 'advised' connotes that the State advised price has no statutory flavour. If the fixation has been done in exercise of statutory power traceable to any provision in the U.P. Act, it would be most inapt to describe it as 'advised price'- The statutorily fixed price can never take the form of advice. It binds, enforces obedience by providing for punishment or penal consequences and does not look for volition of the persons concerned for its compliance. But, that is not the case here. From year to year, the State Government has been announcing the 'advised price' in the hope and expectation that the sugar factories in the private sector will also agree to pay that price- [344-B-C) E

1.2. The 'State advised price' cannot be said to have been fixed in purported exercise of any statutory power and it cannot be elevated to the level ofa statutory price fixation order. The decisions of this Court referred to did not hold that the State advised price is statutorily fixed and is legally binding on the sugar factories on its own force. (348-D-E)

State of MP. v. Jaora Sugar Mills Ltd., [1997) 9 SCC 207, distinguished.

1.3. The State advised price, though lacking the sanction of law and its compliance cannot be ensured against the will of the factory owner, it can still serve as a framework with which an agreed price over and above the minimum price fixed under the Central Order can be brought about. The law does not prohibit the concerned authorities of the State Government from advising or recommending a price for H

p. 254 Copy page pinpoint

A adoption by the sugar factories. The authorities entrusted with the various functions under the Act conceived in the interests of both growers and producers can certainly play a role. The very fixation of State advised price cannot be legally faulted so long as its compliance is ensured by a voluntary process by which the State advised price can very well become an agreed price. [349-A-B-CJ

2.1. Section 16 of U.P. Act carries the heading 'Regulation of purchase and supply of cane in the reserved and assigned areas'. Sub- section (I) lays down the broad parameters of regulatory power followed by sub-section (2) which spells out the specific areas to which such power can extend. The lhation of price of cane is not one of them. However, sub-section (2) does not exhaust the field of operation of the regulatory power. The price fixation could still come under the generality of the power reserved under sub-section (I) of Section 16 of the U.P. Act. The wide meaning given to the expression 'regulate' D in various cases coupled with the fact that price is an essential component of sale is harped upon to preserve the power of the State Government to fix the price. [349-F-G-h, 350-A-BI

2.2. The expression 'regulate' has no precise or fixed connotation and it has different shades of meaning. There is no doubt that it is a word of broad imp.ort. Its width and content may vary according to the contextual setting in which the expression occurs. The scheme and thrust of the provisions of the relevant statute, the objective of legislation, the legislative intent gathered from the legislative history and the run of the provisions contained in the enactment can all be taken into account while appreciating the correct meaning of the expression 'regulate' in a particular statute. [350-E-F-Gl

2.3. The decision in Tiku Rumji "s case is the main hurdle for giving an amplified meaning to the expression 'regulate' so as to cover price fixation. Though the Constitution Bench did not directly deal with the question of interpretation of Section 16 vis-a-vis the power of price fixation, going by the observations made therein and the basis of reasoning adopted to arrive at the conclusion that there was no repugnancy, it is fairly clear that the Constitution Bench negatived the existence of any provision empowering the State Government to fix the

p. 255 Copy page pinpoint

price; and that there was no fixation of minimum price by the State A Government. On a comparative analysis of the provisions, this Court found no repugnancy between the impugned Act (U.P. Act of 1953) and the Sugarcane Control Order of 1955. The provisions were held to be mutually exclusive and did not impinge upon each other. No doubt, the content of regulatory power under Section 16 was not discussed by the B Constitution Bench in Ramji 's case. But, the observations made by the Court necessarily suggest that the State Government was not invested with the power to fix the 'price of sugarcane. (350-G-H; 351-A-B-C-Dj

Ch. Tika Ramji & Ors. v. The State of Uttar Pradesh & Ors., [1956) C SCR 393, relied on.

Jiyajirao Cotton Mills v. MP. Electricity Board, 11989) Suppl. 2 sec 52, referred to. 2.4. No particular significance could be attached to the use of the expression 'minimum price' in the judgment of Constitution Bench because in one sense, the price ordained to be paid by the State Government, would become minimum price. In another sense, it may be a more remunerative or higher price than what is fixed by the Central Government. Thus, the Constitution Bench did not discern any power to fix the price under the Act. If under Section 16, the power to fix price was to be inferred, no doubt the Constitution Bench would have paused and considered the effect of it on repugnancy. It is only on the premise that there was no such provision, the Court recorded its conclusion on the issue o.f repugnancy. Even if the Constitution Bench recorded its conclusion on the question ofrepugnancy without specifically considering Section 16 and the power to regulate the price that could possibly flow therefrom, this coordinate Constitution Bench cannot express a contrary view at this distance of time. (353-C-D; 353-E-F-l

In any case, apart from what was held in Tika Ramji's case, there are certain features and indicators discernible from the scheme of the U.P. Act and the legislative history which lead to the irresistible conclusion that price regulation was not within the contemplation of the Act. In contrast to the preamble of the U.P. Sugar Factories Control Act, 1938 (as amended by Act 16 of 1952) the expression 'to H

p. 256 Copy page pinpoint

A regulate the price of the sugarcane' has been omitted. Then, the specific provision contained in the earlier Act (Section 21 of U.P. Act I of 1938) conferring power on the State Government to fix minimum price and Section 22A empowering the State Government to direct payment of additional price was omitted, the reason for such omission B being the promulgation of the Sugar and Gur Control Order, 1950 by the Central Government, as noticed by this Court in Tika Ramji 's case. Having omitted to reenact those provisions, if the U.P. legislature wanted to retain the power to fix higher price over and above the minimum fixed by the Central Government, it is reasonable to expect the legislature to make a specific provision to that effect rather than c leaving it to the general regulatory power under Section 16 to take care of it. (353-H; 354-A-B-C]

Ch. Tika Ramji & Ors. v. The State of Uttar Pradesh & Ors., 11956) SCR 393, relied on. D 2.5. When a parallel legislatioh in the Central field was in operation in regard to price fixation, the State legislature would not have omitted to enact the specific provision empowering the Government to fix the price higher than the minimum level prescribed by that legislation if that was th_e. intention of the legislature. Such provision would have E contained norms, criteria or guidelines governing the higher price fixation or at least left them to be prescribed by Rules. Hence, the price fixation in the guise of regulatory power under Section 16 was not within the contemplation of the ·u.P. State Legislature. The conspicuous absence of a specific provisions relating to price fixation must be viewed in the f back drop of legislative history and the parallel central legislation operating in the field. Both the external and internal aids to construction reasonably point to the conclusion that price regulation was not within the contemplation of State legislature. [354-D-E-F-G]

3. lfthere is no authority to fix the price, the fact that the Agreement G is entered into adopting the 'State advised price' does not impart statutory basis to such price. On the other hand, ifthere is power under the Statute and such power has been demonstrably exercised by the State, there is no need to have recourse to the Agreement to sustain the power. A fortiori, the Agreement giving effect to the State advised price is perfectly H valid and enforceable unless any vitiating factors under the law of contract

p. 257 Copy page pinpoint

are established. However, the State Government or its agents cannot A compel or coerce the sugar factories to enter into agreements to pay to the growers the 'State Advised Price', even though it has no statutory power to fix the price. In the absence of such statutory authority, the only course left open to it to ensure higher price to the farmers is to strive to evolve an agreement on price by way of consensus. In such a case, the B State•advised price can enter into the terms of agreement. Such mutual agreement should be the resultofnegotiations and voluntary acceptance. (355-C, H; 356-A-B]

Maharashtra Rajya Sahkari Sakkar Karkhana Sangh Ltd. & Ors. v. State ofMaharashtra & Ors., (1995] Supp. 3 SCC 475; S.K.G. Sugar Ltd. C v. State of Bihar & Ors., (1997] 9 SCC 362 and State of MP. v. Jaora Sugar Mills Ltd., [1997] 9 SCC 207, distinguished.

CIVIL APPELLATE JURISDICTION : Civil Appeal No. 460 of 1997. D From the Judgment and Ord~r dated 11.12.96 of the Allahabad High Court in C.M.W.P. No. 36889 of 1996.

WITH

C.A. Nos. 461, 4685/97, 1727, 4602/99, 6965/2001, 3023 and 3022/ E 2004, SLP(C) No. 948/2003, C.A. Nos. 8117-8122/2001, T.C.(C) Nos. 21- 22/2003, I.A. No. 3 in C.A. No: 460 of 1997.

Rakesh Dwivedi, Y.V. Giri, Shanti Bhushan, Jayant Bhushan, K.K. Venugopal, P. Chidambaram, A.T.M. Ranga Ramanujam, Mrs. K. F Amareswari, Prashant Kumar, Joseph Pookkatt, Manu Beri, Abhishek Choudhary, Ms. Pooja Dham, Praveen Kumar, Prateek Kumar, Achintya Dwevedi, Sudhir Kumar Gupta, Rohit Alex, P.H. Parekh, Ms. Seema Bengani, Vikas Pahwa, E.R. Kumar, S. Guru, Krishna Kumar, Mrs. Srikala, C.K.M. Singh, S.R. Setia, Ajay Bhalla, Ms. Abha, R. Sharma, Pramod Swarup, Ms. Pareena Swarup, Praveen Swarup, Saket Singh, Ms. Niranjana G Singh, Ms. Vimla Sinha, B.B. Singh, Ms. Pinky Anand, Ms. geeta Luthra, D.N. Goburdhun, B.S. Chahar, Mrs. Jyoti Chahar, Vinay Garg, Ms. Rani Jethmalani, Mrs. Gouri Kamna Das, Ms. Anu Gupta, Ms. Debjani Das Par Kayastha, Rakesh Uttamchandra Upadhyay, Jatinder K. Sethi, Achintya Dwivedi, Punit Dutt Tyagi, Pradeep Misra, S.S. Shinde, Mukesh K. Giri, H

p. 258 Copy page pinpoint

A Manoj Swamp, Ms. Lalita Kohli, Anubhav Kumar, K. Subbarao. T.V. Ratnam, K. Ram Kumar, B. Sridhar, P.S. Narasimha, P. Sridhar, Ananga Bhattacharya, G. Seshagiri. Nikhil Nayyar, Satinder S. Gulati, Ms. Kavita Wadia, K.K. Mohan, Ms. Geetanjali Mohan, Ms. Anusuya, Ms. Madhu Moolchandani. V.M. Singh-in-person, Mrs. Niranjana Singh, Ms. Naresh B Bakshi, R.S. Suri and Pravir Chaudhary, for the appearing parties.

The Judgments of the Com1 were delivered by

G.P. MATHUR, J. : I. The controversy raised in these appeals by special leave and Transfer Petitions basically relates to the competence of C the State Government to fix the State Advised Price for purchase of sugarcane by an occupier of a sugar factory over and above the minimum price fixed by the Central Government. The validity of the procedure adopted for ensuring the payment of the aforesaid price to a sugarcane grower is also under challenge.

2Copy pinpoint2. The power of the State Government to fix higher sugarcane price was recognised in Maharashtra Rajya Sahkari Sakkar Karkhana Sangh Ltd. v. State of Maharash1ra & Ors., [ 1995] Supp 3 SCC 475 and in State of MP. v. Jaora Sugar Afills Ltd. & Ors., (1997] 9 SCC 207 it was held that the State Government has an obligation to ensure payment of proper E price to the sugarcane growers by occupiers of the factory. However, some observations made in State of Tamilnadu & Ors. v. Kothari Sugar & Chemicals Ltd. & Ors., (1996] 7 SCC 751 apparently indicate that State Government has no power to fix the price. In view of this seeming conflict, the cases were initially referred for decision by a larger Bench of three F Judges and then to a Bench of five Judges.

3Copy pinpoint3. We will first deal with Civil Appeal Nos. 460 of 1997, 461 of 1997, 1727 of 1999 and 4602 of 1999 which arise from State of U.P. and are directed against the judgment and orders of two benches of Allahabad High Cou11 wherein conflicting views have been taken. The Central Government G by the order dated 11.3.1996 fixed the statutory premium price of sugarcane payable by the sugar factories for 1996-97 sugar season at Rs.45 .90 per quintal linked to a basic recovery of 8.5 per cent sugar subject to a premium of Rs. 0.57 for every 0.1 percentage point increase in the recovery above that level. According to Sugar Mills Association the H average minimum statutory price for the whole of U.P. came to about

U.P. CO-OP. CANE UNION FEDERATION F. WESTU.P. SUGAR MILL ASSON. [G.P. MATHUR,!.] 259

Rs.50.33 per quintal and the additional price under Clause 5-A of A Sugarcane (Control) Order 1966 came to about Rs.7 per quintal and thus they were liable to pay Rs.57.33 per quintal. The State Government by the order dated 15.11.1996 fixed the State Advised Price at Rs.72 per quintal for ordinary quality and Rs.75 per quintal for fast ripening quality of sugarcane to be delivered at the gate of the factory. ln case the sugarcane B was delivered at the purchase centre the sugar mills were entitled to deduct about Rs.3 per quintal towards transpoI1ation cost. Writ Petition No.36889 of 1996 was filed by West U.P. Sugar Mills Association, Central U.P. Sugar Mills Association, East U.P. Sugar Mills Association and 32 sugar mills for quashing the order dated 15.11.1996 of U.P. Government whereby C State Advised Cane Price was fixed and for restraining the respondent authorities (State of U.P. and Cane Commissioner U.P.) from taking any coercive steps to enforce the payment of the said State Advised Price. A declaration was also sought that the writ petitioners are liable to pay only the minimum price fixed by the Central Government under Clause 3 of Sugarcane (Control) Order 1966 plus the additional cane price determined D under Clause 5-A of the said Order. A Division Bench of the High Court allowed the writ petition by the judgment and order dated 11.12.1996. The order of the State Government dated 15.11.1996 was quashed and the respondent authorities were restrained from enforcing the State Advised Price. It was, however, directed that where an agreement in Form B or E Form C of the Appendix to the U.P. Sugarcane Supply and Purchase Order, 1954 had been reached between occupiers of the factory and the cane growers or cane growers' cooperative society then the occupiers of the factory will have to pay the price in accordance with such agreement.

4Copy pinpoint4. The Cane Commissioner U.P. issued a recovery certificate on F 13.2.1997 for recovery of State Advised Sugarcane price from Agota Sugar and Chemicals Ltd. and on the basis of the aforesaid recovery certificate Tehsildar Bulandshahr sent a citation dated 21.2.1997 for recovery of the amount. Agota Sugar and Chemicals Ltd. then filed Writ Petition No. 775 (M/B) of 1997 before the Lucknow Bench of Allahabad High Court for G quashing of the aforesaid recovery certificate and the citation. It was also prayed that a writ of mandamus be issued commanding the Cane Commissioner and authorities of the State Government not to adopt any coercive method to recover any amount from it on the basis of the recovery certificate dated 13.2.1997 and the citation dated 21.2.1907. Writ Petition H

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A No. 2086 (M/B) 1997 was filed by Shri V.M. Singh, a sugarcane grower, claiming to represent the interest of all the sugarcane growers in the State, praying that the authorities be directed to enforce the payment of State Advised Price for the sugarcane purchased by the sugar mills. The writ petitions were disposed of by a common judgment and order dated B 1.2.1999. Writ Petition No. 775 (M/B) of 1997 filed by Agota Sugar and Chemicals Limited was dismissed but Writ Petition 2086 (M/B) of 1997 was allowed and a writ of mandamus was issued commanding the Cane Commissioner and State of U.P. to enforce the payment of State Advised Price for the sugarcane purchased by the sugar mills in the State. The State C Government was further directed to initiate recovery proceedings against the defaulting sugar mills for non-payment of the dues and in case sugar mills failed to pay the State Advised Price and the interest to the cane growers within six weeks, the Government was directed to recover the amount in accordance with law and thereafter pay the same to the, cane growers or cane growers' co-operative societies. D

5Copy pinpoint5. Civil Appeal No. 460 of 1997 has been preferred by U.P. Co- operative Cane Unions Federation and Civil Appeal No.461 of 1997 has been filed by State of U.P. and another against the judgment and order dated 11.12.1996 of Allahabad High Court by which Writ Petition No. E 36889 of 1996 was allowed .. Civil Appeal No.1727 of 1999 and Civil Appeal No.4602 of 1999 have been preferred against common judgment and order dated 1.2.1999 of Lucknow Bench of Allahabad High Court, whereby Writ Petition No.775 (M/B) of 1997 preferred by Agota Sugar and Chemicals was dismissed and Writ Petition No.2086 (M/B) of 1997 preferred by V.M. Singh was allowed. Civil Appeal No.460 of 1997 is being treated as the leading case.

6Copy pinpoint6. Shri Rakesh Dwivedi, learned senior counsel for the appellant U.P. Co-operative Cane Unions Federation has submitted that the Central Government fixes only the minimum price under Clause 3(1) of Sugarcane (Control) Order, 1966 (hereinafter referred to as 1966 Order) and such fixation of minimum price does not exhaust the field of determination of price of sugarcane. In the matter of fixation of price the concept of minimum price, fair price and maximum price are well known and, therefore, even after fixation of minimum price by the Central Government it is always open for the State Government to fix a higher price for the sugarcane. Learned counsel has submitted that the State Government can

U.P. CO-OP. CANE UNION FEDERATION v. WESTU.P. SUGAR MILL ASSON. [G.P. MATHUR, J.] 26 J

not only fix a higher price but can also advise sugarcane growers and sugar factories to agree at a higher price. The State Government can fix the higher price in exercise of its regulatory power under UP Sugarcane (Regulation of Supply and Purchase) Act, 1953 (hereinafter referred to as 1953 Act). The Sugarcane grower or the sugarcane growers' co-operative society and the occupiers of sugar factories have to compulsorily enter into an agreement in accordance with UP Sugarcane (Supply and Purchase) Order, 1954 (hereinafter referred ta as 1954 Order) and the State Government can issue directions for recording of State Advised Price in the agreements which have to be executed for supply of sugarcane. Shri Dwivedi has also urged that parchas are issued to the sugarcane growers and in exercise of the power conferred by 1953 Act, the State Government can direct that the State Advised Price be recorded in the parchas which are issued to sugarcane growers. Learned counsel has also submitted that the Central Government does not take into consideration the various bye-products like molasses, bagasse and press mud which are produced during the course of pt!oduction of sugar and the sugar mills rriake considerable amount of money from the sale of aforesaid bye-products especially since molasses has been decontrolled after 1991- The State Government, having regard to the local conditions and also the amount earned by the sugar factories from the aforesaid bye-prod,ucts, fixes the price oft.he sugarcane which is more realistic. Learned counsel has further submitted that there is no repugnancy E ' between the minimum· price fixed by the Central Governr~ent and the State Advised Price fixed by the State Government and the view to the contrary taken by the High Court is clearly erroneous in law.

7Copy pinpoint7. Shri P. Chidambaram, learned senior co~nsel appearing for t~e F State of U.P. has. submitted that there .are ·many facets of price like minimum price, minimum support price, fair price and maximum price. Section 3 of Essential Commodities Act, (hereinafter referred to as EC Act) empowers the Central Government to make orders for. maintaining or increasing supplies of any essential commodity or for securing their equitable distribution and availability at fair prices or for regulating or G prohibiting the production, supply and distribution thereof and trade and commerce therei.n. The Central Government has made Sugarcane (Control) Order, 1966 (hereinafter referred to '1966 Order') in exercise of the said power and Clause 3 of the Order provides for fixation of minimum price of sugarcane payable by the producer of sugar to the grower of sugarcane. H

p. 262 Copy page pinpoint

A The price is fixed having regard to, inter alia, (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; and (c) availability of sugar to the consumer at a fair price. Learned counsel has submitted that the main purpose of the 1966 Order, was to ensure that sugarcane supplies are maintained and sugar is available at fair price and, therefore. the order must be construed in the context of the policy of the Central Government to appropriate a part of the production of sugar mills as "levy sugar"' and sell levy sugar at controlled price through the public distribution system (ration shops). The statutory minimum price as fixed by the Central Government is basically linked to fixation of the price of levy sugar and is not linked with the actual price of the sugarcane. Hence deliberately the Central Government kept the minimum price of sugarcane at a low level. The additional price payable under clause 5-A of the 1966 Order is factory specific and has co-relation only with the profits of the sugar factory and, therefore it is only a matter of chance for a sugarcane grower to get some additional amount. If at all the factory makes profit. the amount paid to a sugarcane grower wilt be pitiably low or illusory. Learned counsel has also submitted that sugarcane occupies land for a longer period than any other crop and it needs larger investment in the inputs. The farmers can raise only one crop of sugarcane in a year. Price is the main incentive in any economy and the best incentive to the sugarcane grower is remunerative price for his produce. The minimum price fixed by the Central Government under Clause 3 of 1966 Order is not a remunerative price. as the definition shows that it is only a minimum price. It does not take into account higher costs and higher risks involved in raising sugarcane. If there is a higher investment and higher risk, the sugarcane grower is entitled to higher return but the said fact is not taken into consideration while fixing the minimum price by the Central Government. Learned counsel has submitted that power to fix remunerative price must reside in some authority and therefore such a power must vest with the State Government as the field for the same remains open and unoccupied. Shri Chidambaram has further submitted that 1953 Act hi!s been ern;,cted to regulate the distribution, sale and purchase of cane. Section 16 of this Act empowers the State Government to regulate the distribution, sale or purchase of cane in any reserved or assigned area. The power conferred under the Act on the State Government is of wide amplitude and takes within its fold the power to determine a H remunerative price to the cane grower. The Act not only confers power but

U.P. CO-OP. CANE UNION FEDERATION"· WEST U.P. SUGAR MILL ASSON. [G.P. MATHUR. J.] 263

also casts a duty upon the State Government to ensure that the sugarcane grower gets a remunerative price and he is incentivised to grow sugarcane because the economy of the State to a significant extent is dependent upon growing sugarcane and supplying the same to the sugar factories. Learned counsel has also urged that the State Government in exercise of its power under the 1953 Act can bring about an agreement between the sugarcane grower or sugarcane growers' co-operative society and occupiers of a factory satisfying certain terms and conditions and the price of the sugarcane will b~ one of the terms thereof. Under the agreements the sugarcane grower is reserved or assigned to a specified sugar mill and is bound to supply not less than 85 per cent of the agreed quantity of sugarcane. He is bound to cut the sugarcane on receipt of a cutting order and in case of non-supply he is liable to pay penalty. If these terms imposed by the Government are valid, then by the same logic the term regarding price is also valid and binding and sugar mills cannot approbate and reprobate the agreement. Learned counsel has made an alternative submission that even if it is assumed that 1953 Act does not confer such a power then D Article 162 read with Entry 33 List III of Seventh Schedule of the Constitution confers power upon the State Government to fix price by an executive order. In support of this submission reliance has been placed upon ce11ain decisions of this Court rendered in Rai Saheb, Ram Jawaya Kapoor v. State of Punjab, [1955) 2 SCR 225 Bishambhar Dayal Chandra E Mohan & Ors. v. State of UP., [1982] I SCC 39 and State of Andhra Pradesh v. Lavu Narendranath, [ 1971) 1 SCC 607. Lastly learned counsel has submitted that certain items like molasses, begasse and press mud which are bye-products of sugar industries and which contribute to the earning of the sugar mills have not been taken into consideration by the F Central Government and, therefore, the price fixed by the State Government which takes into consideration all the relevant factors and the local conditions represents the true price which should be upheld.

8Copy pinpoint8. Shri Shanti Bhushan, learned senior counsel appearing for the respondents (sugar factories), .has submitted that the main question to be G examined is whether the State Government has any statutory power to fix the State Advised Price for sugarcane and to compel the sugar factories to pay the said price. Learned counsel has .submitted that in exercise of power conferred by Section 3 of E.C. Act the Central Government has made the 1966 Order. and the Central Government fixes the price of the H

p. 264 Copy page pinpoint

A sugarcane under Clause 3 (I) of the said Order. There is no specific provision under the 1966 Order, which may empower the State Governmellt to fix the price of sugarcane over and above what has been fixed by the Central Government. Similarly there is no specific provision in 1953 Act and the Rules made thereunder which may empower the State Government B to fix the price of the sugarcane. Learned counsel has further submitted that there is clear repugnancy between the price fixed by the Central Government and the price fixed by the State Government and, therefore, 0

it is the price which has been fixed by the Central Government whic h has to prevail. It has also been contended that under Section 3 (3-C) of E.C. C Ac~, the Central Government has to determine the price oflevy sugar which a sugar facto1y is compelled to sell to the Central Government or the State Government under an order made with reference to Section 3(2)(f) E.C. Act and while determining price of such levy sugar it is only the minimum price of sugarcane fixed by the Central Government which can be taken into consideration. The fixation of higher price of sugarcane by the State D Goverrtment ·Would completely dislocate the mechanism provided under the E.C. Act for determination of the price of the levy sugar. Learned counsel has further submitted that the respondents (Sugar Mills Association) had sent several letters requesting the State Government not to announce any State Advised P.rice and within three days of the announcement of the E State Advised Price the writ petition was filed. It has thus been urged that in fact there was no. agreement between the svgarcane growers or the sugarcane growers' co-operative society and the occupiers of the sugar factories for payment of State Advised Price·. It has also been contended that even if the price fixed by the State Governments is mentioned in the agreements or in the parchas, the respondents (sugar factories) cannot be compelled to pay the said price as they had never given their consent for recording the State Advised Price in the agreements or in the parchas. In order to constitute a valici agreement, it is ,submitted, the consent of the parties must be voluntarily and must not have been obtained under any duress or compulsion and since the sugar mills had never voluntarily agreed to pay the State Advised Price, the agreements wherein such a price is recorded is not binding upon them.

9Copy pinpoint9. Shri Sudhir Chandra, learned senior counsel, appearing for the appellant Agota Sugar and Chemicals Ltd. in CA No. 4602 of 1999 has adopted the argument ofShri Shanti Bhushan. In addition he has submitted

U.P. CO-OP. CANE UNION FEDERATION r. WEST U.P. SUGAR MILL ASSON. [G.P. MATHUR, I.] 265

that there cannot be any oral agreement regarding the price of the sugarcane between a sugarcane grower or a sugarcane growers' co-operative society and the occupier of the sugar factory as Forms B and C given in Appendix to U.P. Sugarcane Supply and Purchase Order, 1954 clearly contemplate an agreement in writing. He has further submitted that in the agreements which had been executed between the sugar factory and the sugarcane growers co-operative society the State Advised Price had not been recorded and the High Court had misread the same.

I 0. Before adverting to the contentions raised at the Bar it is necessary to keep in mind that sugarcane is the main raw material for manufacture of sugar as it is the sugarcane juice which is ultimately converted into crystals which becomes a marketable commodity. Sugarcane, unlike coal or ore of minerals is not available under the surface of the earth which may be extracted and stored and may be used as and when required. It is a product of agriculture which has to be grown in fields like any other agricultural crop and requires inputs and hard labour for its production and it dries within a sh01i time of its harvesting and becomes virtually useless. The sugar factories do not have an unlimited capacity to crush sugarcane but have a fixed capacity and, therefore, they require fresh sugarcane in a limited quantity everyday during the entire crushing season. Sugar factories in the State of U.P. generally commence crushing in the month of November and continue upto the end of April or sometimes middle of May i.e. for about six months. In order to ensure proper and continuous supply of sugarcane to sugar factory throughout the crushing season, the harvesting of crop has to be done in limited quantity (according to crushing capacity and requirement of the sugar factory) everyday and not in one stretch. In view of this peculiar requirement of sugar factory the position of sugarcane growers becomes entirely different from those who grow other crops like wheat or paddy which can be harvested in one go and can be sold later on at the convenience of the farmer at the oppo1tune time. In order to achieve the proper balance viz. to ensure a cor;tinuous supply of adequate quantity of sugarcane to the sugar factory and proper remuneration to the cane grower for the cane supplied by him, various enactments have been made which we will presently refer to.

11Copy pinpoint11. The Central Legislature initially enacted Sugarcane Act, 1934 and the Statement of Objects and Reasons, amongst others, said that the H

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A initiative in the matter of fixing prices for cane must be left to Provincial Governments so as to suit local conditions. Section 3 of this Act empowered the Provincial Government, by notification in the official gazette, to declare any area as controlled area, to fix a minimum price or minimum prices for the purchase in any controlled area of sugarcane intended for use in any B factory and to prohibit in any controlled area the purchase of sugarcane intended for use in any factory otherwise than from the grower of the sugarcane or from a person licensed to act as a purchasing agent. The purchase of sugarcane intended for use in factory in any controlled area at a price less than the minimum price notified was made an offence under C Section 5. Section 7 of the Act conferred wide powers on the Provincial Government to make rules for the purpose of carrying into effect the objects of the Act. The U.P. Legislature thereafter enacted the U.P. Sugar Factories Control Act, 1938 (U.P. Act No. I of 1938) which repealed the Sugarcane Act, 1934 in its application in the province of U.P. Section 2 (a) ofE.C. Act defines essential commodities and in view of Section 2(b) D of the said Act ·'food crops" includes crops of sugarcane. The Central Government exercising powers under Section 3 of the E.C. Act made the Sugarcane Control Order, 1955. Clause 3(a) of !his Order laid down that the Central Government may, after consultation with such authorities, bodies or associations as it may deem fit, by notification in the Official E Gazette, fix in respect of an area the price or the minimum price to be paid by producers of sugar for sugarcane purchased by him. This order was repealed by the Sugarcane (Control) Order, 1966 (for short' 1966 Order') and Clause 2(g) and (i) and sub-clauses (J),(2),(3) of Clause 3 thereof are being reproduced below:

F 2(g) "price" means the price or the minimum price fixed by the Central Government, from time to time, for sugarcane delivered

( i) to a sugar factory at the gate of the factory or at a sugarcane purchasing center; or G (ii) to a khansari unit;

(i) ·'producer of sugar" means a person carrying on the business of manufacturing sugar by vacuum pan process

H 3. Minimum price of sugarcane payable by producer of sugar-

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(I) The Central Government may, after consultation with the A 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 -

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

D (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 E Clause 3-A, allow a suitable rebate in the price so fixed,

Explanation - (I) 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 F 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 G 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 sugarcane to the seller or tender to him the price of the cane sold at the rate agreed to between the producer H

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A and the sugarcane grower or sugarcane growers' co-operative society or that fixed under sub-clause (I), as the case may be, either at the gate of factory or at the cane collection center or transfer or deposit the necessary amount in the Bank account of the seller or the co-operative society, as the case may be. B

12Copy pinpoint12. The 1966 Order has been amended several times by the Central Government. Sub-clause 3 of Clause 3 was substituted on 18.5.1968, Clause 3-A rdating to rebate that can be deducted from the price paid for the sugarcane was inserted on 24.9.1976 and Clause 5-A was inserted on C 25.9.1974. The definition of 'price' given in Clause 2(g) shows that it can either be the price or the minimum price fixed by the Central Government. Clause 3(3) deals with payment of 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 (I) as the case D may be. Clause 3-A which deals with rebate that can be deducted from the price paid for sugarcane also refers to either the minimum price of sugarcane fixed under Clause 3 or the price agreed to between the producer and the sugarcane grower or the sugarcane growers' co-operative society. So far as the power of the Central Government is concerned, under Clause E 3(1) it can fix only the "minimum price" of sugarcane to be paid by producers of sugar for the sugarcarie purchased by them. This is the lowest permissible rate. The effect of Clause 3(2) is that a producer of sugar can under no circumstances purchase sugarcane at a price lower than the minimum price fixed under Clause 3( I) and there is a similar proh;bition on the cane grower and he cannot sell or agree to sell sugarcane to a producer of a sugar below the said price. But the 1966 Order, in view of definition of "price" given in Clause 2(g) and also the language used in Clauses 3 and 3-A, clearly contemplates that there can be a price other than the ''minimum price" of sugarcane fixed under Clause 3( I), namely, the "price agreed to between the producer and the sugarcane grower or the sugarcane growers' co-operative society". Clause 5-A lays down that where a producer of sugar purchases sugarcane from a grower of sugarcane during each sugar year, he shall in addition to the minimum sugarcane price fixed under Clause 3 pay to the sugarcane grower an additional price, if found due in accordance with the provisions of the Second Schedule. This H additional price is to be calculated in accordance with the formula given

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in Second Schedule and is dependent upon the value of the sugar produced and the profits made and in effect it is a sharing of profits. Sub-clause (5) of Clause 5-A lays down that no additional price determined under sub- clause (2) shall become payable by a producer of sugar who pays a price higher than the "minimum sugarcane price" fixed under Clause 3 to the sugarcane grower, if the same is not less than the total of the price fixed under Clause 3(1) and additional price determined under Clause 5-A (2). This provision again contemplates payment of price higher than the minimum price fixed under Clause 3 (I). A whole reading of the 1966. Order would, therefore, show that the Central Government shall fix the minimum price of sugarcane but there can be a price higher than the minimum price which may be in the nature of agreed price between the producer of sugar and the sugarcane grower or the sugarcane growers' co-operative society. So the field for a price higher than the minimum price is clearly left open in the 1966 Order made by the Central Government. D

13Copy pinpoint13. The U.P. legislature enacted the U.P .. Sugarcane (Regulation of Supply and Purchase) Act, 1953 (for short 'the 1953 Act') which was published in Gazette on 9.10.1953. Sections 2(a), 2(n), 15 and 16 of this Act read as under:-

Section 2(a) "assigned area" means an area assigned to a factory under Section 15;

Section 2(n) "Reserved area" shall mean the area reserved for a factory under an Order for reservation of Sugarcane areas made under Rule 125-B of the Defence oflndia Rules, 1962, and when no such order is in force, the area specified in an order made under Section 15.

"15. Declaration of reserved area and assigned area - (I) Without prejudice to any order made under Clause (d) of sub- G section (2) of Section 16, the Cane Commissioner may, after • consulting the Factory and Cane-growers Co-operative Society in the manner to be prescribed -

(a) reserve any area (hereinafter called the reserved area), and H

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A (b) assign ·any area (hereinafter called an assigned area),

for the purposes of the supply of cane to a factory in accordance with the provisions of Section 16 during one or more crushing seasons as may be specified and may likewise at any time cancel such order or alter the boundaries of an area so reserved or B assigned.

(2) 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, c which is offered for sale to the factory.

(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. D (4) An appeal shall lie to the State Government against the order of the Cane Commissioner passed under sub-section (1).

16. Regulation of purchase and supply of cane in the reserved E and assigned areas- (I) 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

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

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

G (a) the quantity of cane to be supplied by each Cane-grower or Cane-growers' Cooperative 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 or the assigned area, shall be purchased by the factory for which

U.P. CO.OP. CANE UNION FEDERATION, .. WESTU.P. SUGAR MILL ASSON. [G.P. MATHUR, J.] 271

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 a 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- c (i) for the purchase of cane grown in reserved or assigned area by a Gur, Rab or Khandsari Manufacturing Units or any person or factory other than the factory for which area has been reserved or assigned; and D (ii) for the sale of cane grown in a reserved or assigned area to a Gur, Rab or Khandsari Manufacturing Unit or any person or factory other than the factory for which the area is reserved or assigned; E (e) such incidental and consequential matters as may appear to be necessary or desirable for this purposes."

14Copy pinpoint14. In exercise of the power conferred by Section 28 of the 1953 Act, the State Government has made U.P. (Regulation of Supply and Purchase) F Rules, 1954 (for short 'the Rules'). Rule 21 lays down that the occupier of a factory shall by August 31, each year, apply to the Cane Commissioner in Form I, Appendix III, for the reservation or assignment of an area for supply of cane to the factory during the ensuing crushing season. There is a specific column viz. Item No.6 in Fonn I Appendix III wherein details of purchases, if any, made at more than the minimum cane price during G the last crushing season have to be given. Here the occupier has to fill in the quantity of sugarcane which was purchased at a price more than the minimum price and also the amount of increase over and above the minimum price. Thus payment of higher price and quantum of sugarcane so purchased is a factor which is taken into consideration while reserving H

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A or assigning an area in favour of a sugar factory. Rule 38-A enjoins that at every purchasing centre at least one weighment clerk shall be appointed and deputed by the occupier of a factory who is required to weigh the sugarcane and calculate the cane price correctly. Similarly under sub-rule (4) of this Rule the cane growers co-operative society is required to appoint one society clerk at every purchasing centre who has to carefully watch and check the wieghment of cane and also examine the parcha in which weight and price of cane are recorded. Rule 94(b) requires occupier of a factory to put up at each purchasing centre a notice in Devnagri script, showing the minimum price of cane fixed by Government and also the rates at which cane is being purchased at the centre. Rule 96 (I )(i) (j) lays down that no occupier of a factory shall purchase cane without preparing or causing to be prepared at the purchasing centre a parcha in quadruplicate showing correctly the rate at which the sugarcane is purchased and the price that has to be paid for the sugarcane at that rate. Rule I 00 requires an occupier of a factory to maintain in respect of each sugarcane grower D (except in respect of cane purchased through a cane growers' co-operative society) a detailed account containing several items including the net weight of cane purchased and the rate per quintal paid for sugarcane.

15Copy pinpoint15. In exercise of power conferred by Section 16 of the Act, the State E Government has made UP Sugarcane (Regulation of Supply and Purchase) Order, 1954 (hereinafter referred to as 1954 Order). Clause 3-A of this Order provides for purchase of cane in reserved area and Clause 4 provides for purchase of cane in an assigned area. Clause 3(2) lays down that a cane grower or a cane growers' co-operative society may within 14 days of the F issue of an order reserving an area for a factory, offer to supply cane grown in the reserved area to the occupier of the factory in Form A of the Appendix. Clause 3(3) and Clause 4 (I) lay down that the occupier of the factory for which an area has been reserved or assigned shall within fourteen days of the receipt of the order enter into an agreement in Form B or Form C of the Appendix, with the cane grower or the cane growers' G co-operative society, as the case may be, in respect of the cane offered. Clause 5 (l) lays down that cane grown in the reserved or assigned area shall not, except with the permission of the Cane Commissioner, be purchased by any person without the previous issue of requisition slips and identification cards to the growers by the occupier of the factory. Sub- H clauses (2) and (3) of Clause 5 mandate that the requisition slips and

U.P. CO-OP. CANE UNION FEDERATION,.. WEST U.P. SUGAR MILL ASS01'{. [G.P. MATHUR, J.] 273

identification cards to the members of cane growers' co-operative society shall not be issued except by such society and records of the _same have to be maintained by the occupier of the factory and also by the cane growers' co-operative society. Clause 5(4) lays down that purchase of cane shall be spread over the entire crushing season in an equitable manner and Clause 5(7) lays down that no person shall transfer or abet the transfer of requisition slips for the cane of a grower to another person.

16Copy pinpoint16. The proforma of the agreement regarding sale and purchase of cane which is to be executed between a cane grower and the occupier of a factory is given in Form B and that between cane growers' co-operative society and the occupier of a factory is given in Form C and they mention the terms thereof. Para 1 of Form B contains the agreement of the sugarcane grower to sell his sugarcane crop (giving details of area and approximate yield) to the occupier of the factory at the minimum price notified by the Government and on such dates as may be specified in requisition slips issued by the said occupier. Para 2 provides that the cane shall be taken by the factory in installments equitably spread over the whole working period of factory. Para 3 provides that in the event of willful failure to supply at least 85 per cent of the agreed quantity of sugarcane, the cane grower shall be liable to pay the factory compensation at the rate not exceeding thirty-three naya paise per quintal on such deficit. Para 4 E provides that in case the cane grower willfully fails to supply sugarcane to the factory on three consecutive occasions according to the requisition made by the factory, he shall cease to have a claim to sell cane to the factory. Para 6 is important and it provides that in the event of a break down at the factory or of other circumstances due to natural causes, calamities, F accident beyond human control arising to show that the factory will not be able to purchase the cane it has agreed to purchase, the cane grower, after giving a week's notice to the occupier of the factory and with the previous permission of the Cane Commissioner shall have the option of making other arrangements for the disposal of the cane and in such case no compensation shall be payable by either party to the other. G

17Copy pinpoint17. Form C is the proforma of the agreement which has to be executed between the cane growers' co-operative society and the occupier of a factory regarding sale and purchase of sugarcane. Para I of this proforma contains the agreement of the society to sell sugarcane (giving details of H

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A the area and the quality) to the factory at the minimum price notified by the Government and the supply has to be made in such quantities and on such dates as may be specified in the requisition slips issued by the occupier. It also contains a proviso that the price payable by the factory to the society shall not in any case be lower than that paid generally by the factory to other growers of the villages in which co-operative society operates. The remaining paragraphs of the agreement are almost similar to that of proforma in Form B regarding supply of cane being taken by the factory in installments equitable spread over the whole working period of the factory, compensation to be paid by society to the factory in the event of deficit and the right of the society to make other arrangements for the disposal of the cane with the previous permission of the Cane Commissioner in the event of break down or happening of other circumstances where under factory is unable to purchase the sugarcane.

18Copy pinpoint18. A sugar factory normally runs in shifts for the whole day during the crushing season and it needs a continuous supply of freshly harvested sugarcane according to its daily crushing capacity which should be spread over the entire crushing season of about ~ix months. The U.P. Sugarcane (Regulation of Supply and Purchase) Act, 1953, U.P. Sugarcane (Regulation of Supply and Purchase) Rules, 1954 and the U.P. Sugarcane Supply and E Purchase Order, 1954, have been made to achieve that object. Any shortfall in supply of sugarcane to sugar factory will seriously affect its production resulting in huge losses. Therefore, the first and foremost requirement for the profitable ninning of the sugar factory is that it should get adequate quantity of sugarcane everyday throughout the crushing season and for F ensuring this, a system of reserving or assigning an area in favour of sugar factory has been evolved under Section 15 of the Act. The reservation of an area ensures the supply of the entire sugarcane grown therein to the factory in whose favour it has been reserved. Similarly the assignment of an area ensures the supply of such quantity of sugarcane to the factory in whose favour it has been assigned as may be determined by the Cane G Commissioner. Another advantage to the sugar factory is that sugarcane from its reserved or assigned area cannot be sold to any other factory in the vicinity even if it offers a higher price to a grower. This arrangement does not allow the market forces to operate and thereby completely avoids competition amongst the sugar factories which could lead to escalation in prices. It is common knowledge that every sugar factory is keen to have

U.P. CO-OP. CANE UNION FEOERATION •·.WEST U.P. SUGAR MILL ASSON. [G.P. MATHUR, J.] 275

the maximum area reserved or assigned for it so that it may get adequate raw material. Sugarcane requires a particular type of soil and climatic condition and cannot be grown everywhere. The sugar factories are established in the sugar producing belt in close proximity with each other . and very often there are competing claims for reservation or assignment of an area in their favour. It is for this reason that an appeal is provided under Section 15(4) of the Act against an order made under Section 15(1) of the Act by the Cane Commissioner reserving or assigning an area in favour of sugar factory. Once an area is reserved in favour of a factory the cane grower in the said area or the cane growers' co-operative society operating therein gets tied to that factory and has to compulsorily enter into an agreement in prescribed proforma (Form B or Form C) given in the Appendix to 1954 Order. In view of Clause 5 of the said Order cane grown in the reserved or assigned area cannot be purchased by anyone without the previous issue of requisition slips and identification cards to the growers by the occupier of the factory and in the case of members of the cane growers co-operative society by such society. Since the requisition slips are non-transferable and they are issued by the sugar factory according to its requirement of sugarcane, it thereby completely controls the purchase of sugarcane from a reserved or assigned area. The terms of the agreement in Form B and Form C are also quite stringent as in the event of failure to supply at least eighty-five per cent of the agreed quantity of sugarcane the cane grower or the cane growers' co-operatLve society has to pay compensation. Even in the event of a break down in the factory or its inability to purchase due to calamities or circumstances beyond human control, the cane grower or the cane growers' co-operative society is not at liberty to make any other arrangement for disposal of cane except after giving a week's notice to the factory and obtaining prior permission of the Cane Commissioner. Here too no compensation is payable by the factory to the cane grower or the cane growers' co-operative society for the loss which may be suffered on this account.

19Copy pinpoint19. The provisions referred to above have been made for the benefit of the sugar factory so that it is assured of and gets a continuous supply of freshly harvested sugarcane in quantity according to its crushing capacity and for the whole duration of the crushing season. No doubt the cane grower also gets some advantage in the sense that purchase of his yield is assured but at the same time many limitations and restrictions are H

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A imposed upon him. In view of the aforesaid statutory provisions, the position of a cane grower becomes entirely different from that of a farmer producing any other kind of agricultural crop where there are absolutely no restrictions upon him. He is at absolute liberty to harvest his crop at his convenience without being dictated by a third party, to sell it to anyone B whomsoever he likes and whenever he wants. It is in this scenario, which is not the creation of the cane grower but of the statutory provisions operating in the field, that we have to examine the question whether the State has any authority or power to fix the price of the sugarcane supplied to a producer of sugar (sugar factory).

c 20. The preamble of U.P. Sugarcane (Regulation of Supply and Purchase) Act, 1953 is-an Act to regulate the supply and purchase of sugarcane for use in sugar factories, gur, rab or khandsari sugar manufacturing units. The various provisions of the Act show in unmistakable terms that it regulates the supply and purchase of sugarcane required for use in sugar factories. 'Regulate' means to control or to adjust by rule or to subject to governing principles. It is a word of broad impact having wide meaning comprehending all facets not only specifically enumerated in the Act, but also embraces within its fold the powers incidental to the regulation envisaged in good faith and its meaning has to be ascertained in the context in which it has been used and the purpose of the statute.

21Copy pinpoint21. In State of Tami/nadu v. Mis. Hindu Stone & Ors., [1981] 2 SCC 205 it was held that regulation must receive so wide an amp! itude so as to impute prohibition within its fold. It will be useful to reproduce the relevant part of para IO of the Report wherein this principle was succinctly stated by Chinappa Reddy, J. in following words:-

" ... We do not think that 'regulation' has that rigidity of meaning as never to take in 'prohibition'. Much depends on the context in which the expression is used in the statute and the object sought to be achieved by the contemplated regulation. It was observed by Mathew, J. in G.K. Krishnan v. State of Tamil Nadu, [1975] I SCC 375 : "The word 'regulation' has no fixed connotation. Its meaning differs according to the nature of the thing to which it is applied''. In modern statutes concerned as they are with economic and social activities, 'regulation' must, of necessity,

U.P. CO·OP. CANE UNION FEDERATION v. WEST U.P. SUGAR MILL ASSON. [G.P. MATHUR,!.] 277

receive so wide an interpretation that in certain situations, it must exclude competition to the public sector from the private sector. More so in a welfare State. It was pointed out by the Privy Council in Commonwealth of Australia v. Bank of New South Wales, (1949] 2 All ER 755 (PC)-and we agree with what was sated therein-that the problem whether an enactment was regulatory or something more or whether a restriction was direct or only remote or only incidental involved, not so much legal as political, social or economic consideration and that it could not be laid down that in no circumstances could the exclusion of competition so as to create a monopoly, either in a State or Commonwealth agency, be justified. Each case, it was said, must be judged on its own facts and in its own setting of time and circumstances and it might be that in regard to some economic activities and at some stage of social development, prohibition with a view to State monopoly was the only practical and reasonable manner of regulation. The statute with which we are concerned, the Mines D and Minerals (Development and Regulation) Act, is aimed, as we have already said more than once, at the conservation and the prudent and discriminating exploitation of minerals. Surely, in the case of a scarce mineral, to permit exploitation by the State or its agency and to prohibit exploitation by private agencies is the most E effective method of conservation and prudent exploitation. If you want to conserve for the future, you must prohibit in the present. We have no doubt that the prohibiting of leases in certain cases is part of the regulation contemplated by Section 15 of the Act."

Again in K. Ramanathan V, State of Tamilnadu & Anr., (1985] 2 sec F 116 it was held that the word 'regulation' cannot have any rigid or inflexible meaning so as to exclude prohibition. It is a word of broad import, having a broad meaning and is very comprehensive in scope. It was further held that the power to regulate carries with it full power over the thing subject to regulation and in absence of restrictive words, the power G must be regarded as plenary over the entire subject. It implies the power to rule, direct and control, and involves the adoption of a rule or guiding principle to be followed or the making of a rule with respect to the subject to be regulated. It has different shades of meaning and must take its colour from the context in which it is used having regard to the purpose and object H

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A of the legislation.

22Copy pinpoint22. In VSR & Oil Mills v. State of A.P., AIR (1964) SC 1781 agreements for a period of ten years had been executed for supply of electricity and the same did not contain any provision authorising the B Government to increase the rates during their operation. However, the State Government issued orders enhancing the agreed rates exercising power under Section 3( 1) of Madras Essential Articies Control & Requisitioning (Temporary Powers) Act, 1949 which reads as under:

" ......... The State Government so far as it appears to them to be c necessary or expedient for maintaining, increasing or securing supplies of essential articles or for arranging for their equitable distribution and availability at fair prices may, by notified order, provide for regulating or prohibiting the supply, distribution and transport of essential articles and trade and commerce therein." D The enhancement in rates was challenged on the ground that any increase in agreed tariff was out of the purview of Section 3(1 ). Chief Justice Gajendragadkar, speaking for the Constitution Bench, held as under: E "The word regulate is wide enough to confer power on the State to regulate either by increasing the rate or decreasing the rate, the test being what is it that is necessary or expedient to be done to maintain, increase, or secure supply of the essential articles in question and to arrange for its equitable distribution and its availability at fair prices. The concept of fair prices to which Section 3 (I) expressly refers does not mean that the price once fixed must either remain stationary, or must be reduced in order to attract the power to regulate. The power to regulate can be exercised for ensuring the payment of a fair price, and the fixation of a fair price would inevitably depend upon a consideration of all relevant and economic factors which contribute to the determination of such a fair price. If the fair price indicated on a dispassionate consideration of all relevant factors turns out to be higher than the price fixed and prevailing, then the power to regulate the price must necessarily include the power to increase

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