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

so as to make it fair. Hence the challenge to the validity of orders increasing the agreed tariff rate on the ground that they are outside the purview of Section 3(1) cannot be sustained."

In Jiyajeerao Cotton Mills Ltd. & Anr. v. Madhya Pradesh Electricity Board & Anr., (1989] Suppl 2 sec 52 the validity of the orders providing for higher charges/tariff for electricity consumed beyond legally fixed limit was upheld in view of Section 22(b) of the Electricity Act which permits the State Government to issue an appropriate order for regulating the supply, distribution and consumption of electricity. It was held that the Court while interpreting the expression "regulate" must necessarily keep in view the object to be achieved and the mischief sought to be remedied. The necessity for issuing the orders arose out of the scarcity of electricity available to the Board for supplying to its customers and, therefore, in this background the demand for higher charges/tariff was held to be a part of a regulatory measure. In Quarry Owners' Association v. State of Bihar, (20001 s sec 655 the question which required consideration was whether the State Government had the power to fix the rate of royalties in Mines and Minerals (Regulation and Development) Act, 1957. The Court after taking note of the fact that the words "regulation of mines and mineral development" are incorporated both in the Preamble and the Statement of Objects and Reasons of the Act held that the word "regulation" may have different meaning in different context but considering it in relation to the economic and social activities including the development and excavation of mine, the fixation of the rate of royalties would also be included within its meaning. In Deepak Theatre, Dhuri v. State of Punjab & Ors., (1992] Supp. I sec 684 while interpreting the Cinemas Regulations Act, 1952 F and having regard to the preamble thereto - an Act to make provision for regulating exhibition of cinematographs - it was held that classification of seats and fixation of rates of admission according to paying capacity of a cinegoer is also an integral power of regulation and, therefore, fixation of rates of admission became a legitimate ancillary or incidental power in furtherance of the regulation under the Act. G

23Copy pinpoint23. The 1953 Act, the Rules and 1954 Order substantially deal with sale and purchase of sugarcane. Section 16 (I) provides that the State Government may, for maintaining supplies, by order, regulate sale or purchase of cane in any reserved or assigned area .or purchase of cane in H

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A area other than a reserved or assigned area. Section 16(2)(b) of the Act lays down that the order may provide for the manner in which cane grown in a reserved or assigned area shall be purchased by the factory and the circumstances in which cane grown by canegrowers shall not be purchased eiccept through a canegrowers' cooperative society. Section 17 enjoins speedy payment of the price of cane purchased by occupier of a factory, payment of interest where default occurs for a period exceeding 15 days from the date of delivery and recovery of amount by the Collector as arrears of land revenue on a certificate issued by the Cane Commissioner. Rule 38"A requires weighment clerk to calculate the cane price correctly after weighment of cane and the clerk appointed by the society to examine that the weight and price are correctly recorded in the parchas. Rule 96 ml)ndates that cane shall not be purchased at the purchasing centre without preparing a parcha in quadruplicate mentioning amongst others the rate at which the cane is purchased and the price that has to be paid for the same and Rule I 00 casts a duty upon the occupier of the factory to maintain separately for each canegrower a complete account c.f several items including the rate per quintal paid for cane.

24Copy pinpoint24. Sugarcane supplied to sugar factory are "goods" within the meaning of Section 2(7) of Sale of Goods Act. Sub-section (I) of Section E 4 of Sale of Goods Act provides that a contract of sale of goods is a contract whereby the seller transfers or agrees to transfer the property in goods to the buyer fot a price. Sub-section (3) of the same Section provides that where under a contract of sale the property in the goods is transferred from the seller to the buyer, the contract is called a sale, but where the transfer F of property in the goods is to take place at a future time or subject to some conditions thereafter to be specified, the contract is called an agreement to sell. Section 5 provides that a contract of sale is made by an offer to buy or sell goods for a price Md the acceptance of such offer. These provisions show that price is an essential element of sale of goods.

25Copy pinpoint25. In Popat/al Shah v. State of Madras, (1953] SCR 677 it was held by a Constitution Bench that the expression "sale of goods" is a composite expression consisting of various ingredients or elements. There are the elements of a bargain or contract of sale, the payment or promise of payment of price, the delivery of goods and the actual passing of title and each one of them is essential to a transaction of sale though the sale is not

U.P. CO·OP. CANE UNION FEDERATION,.. WEST U.P. SUGAR MILL ASSON. [G.P. MATHUR, l.] 281

completed or concluded unless the purchaser becomes the owner of property. In State of Madras v. Gannon Dunkerley, (1958] SCR 379 (at page 397) it was observed that according to the law both of England and of India, in order to constitute a sale it is necessary that there should be an agreement between the parties for the purpose of transferring title to the goods which, of course, presupposes capacity to· contract, that it must be supported by money consideration and that as a result of the transaction property must actually pass in the goods. Unless all these elements are present, there can be no sale. The law is, therefore, well settled that in a matter relating to sale of movable property or goods, price is an essential element of the transaction. c

26Copy pinpoint26. The Preamble of the 1953 Act says "An Act to regulate the supply and purchase of sugarcane required for use in sugar factories ..." The provisions of the Act referred to above also 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 1954 Order to ensure that at the time of delivery of sugarcane by the canegrowers, its weight and price is 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 Rules in such a restrictive manner, whereby the provisions made for the benefit of the canegrowers become wholly illusory. G

27Copy pinpoint27. It has been urged by learned counsel for respondents that the expression "at the minimum price notified by Government" ·used in the proforma of the agreement which is to be executed between a canegrower and the occupier of the factory as given in Form B and that which is to H

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A be executed between a canegrowers' cooperative society and the occupier of the factory as given in Form C in the appendix to 1954 Order indicates that it is only the minimum price fixed by the Central Government which can be the consideration or price for the sale of sugarcane to the sugar factory. Strong reliance in support of this submission has been placed upon certain observations made by this Court in Ch. Tika Ramji & Ors. v. State of Uttar Pradesh & Ors., [ 1956] SCR 393. The proforma of agreement viz. Forms B and are contained in the appendix to U.P. Sugarcane Supply and Purchase Order, 1954. This Order has been made by U.P. Government in exercise of the power conferred by Section 16 of the 1953 Act, which provides that the State Government may for maintaining supplies by Order regulate the distribution, sale or purchase of cane in any reserved or assigned area, etc. The Order having been made by the State Government in exercise of a power conferred by an Act made by U.P. legislature, the only logical inference which can be drawn is that the word "Government" refers to State Government. There is no indication in the proforma of the agreement or in the 1954 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.

28Copy pinpoint28. The observations made in Tika Ramji (supra), strong reliance on which is placed by learned counsel for the respondents, have to be understood in the context in which they were made. It may be noted that the writ petitions in the said case were filed in this Court in the year 1954 and the judgment was delivered on 24.4.1956. At the relevant time, it was the Sugarcane (Control) Order, 1955 which was in operation. Clause 3 of this Order empowered the Central Government to fix the price or the minimum price to be paid by a producer of sugar for sugarcane purchased by him. The 1955 Order has been repealed by Sugarcane (Control) Order, 1966 and Clause 3 of this Order provides that the Central Government may fix thf! minimum price of sugarcane to be paid by producers of sugar. 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 H Order which itself was made by the Cel'!tral Gov'!rnment more than a

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decade after the judgment was rendered in Tika Ramji was amended in A 1978 and Clauses 3(3) and 3-A thereof contemplate an "agreed price" which in view of the mandate 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 Forms B and C otherwise the very purpose of entering into B agreements would be defeated. The State Government had not fixed any price for the sugarcane under its regulatory power by the time Tika Ramji (supra) was decided by this Court in April, 1956 and only the Central Government had taken a step for fixing the price. It was in these circumstances that it was observ~d that the "price fixed by the Government" C would mean "the Central Government". The observations relied upon by the learned counsel for the respondents were made while considering the question whether there was any repugnancy between the provisions of the Sugarcane Control Order, 1955 and the 1953 Act, the Rules and 1954 Order and they should be understood in that context. The relevant portion D of the judgment on page 434 is being reproduced below :

"The price of cane fixed by Government here only meant the price fixed by the appropriate Government which would be the Central Government, under clause 3 of the Sugarcane Control Order, E 1955, because in fact the UP. State Government never fixed the price of sugarcane to be purchased by the factories. Even the provisions in behalf of the agreements contained in clauses 3 and 4 of the U.P. Sugarcane Regulation of Supply and Purchase Order, 1954, provided that the price was to be the minimum price to be notified by the Government subject to such deductions, if any, as F may be notified by the Government from time to time meaning thereby the Central Government, the State Government not having made any provision in that behalf at any time whatever. The provisions thus made by the Sugarcane Control Order, 1955, did not find their place either in the impugned Act or the Rules made G ; thereunder or the U.P. Sugarcane Regulation of Supply and Purchase Order, 1954; and the provision contained in Section I 7 of the impugned Act in regard to the payment of sugarcane price and recovery thereof as if it was an arrear ofland revenue did not find its place in the Sugarcane Control Order, 1955." H

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A Having regard to the factual situation then existing that U.P. Government had not fixed the price of the sugarcane, it was held that the price of the cane fixed by the Government could only mean "Central Government". It has not been laid down as a principle oflaw that the words "minimum price notified by Government" must necessarily mean the minimum price fixed by the Central Government or that under no circumstances it can mean the price fixed by the State Government.

29Copy pinpoint29. Learned counsel for the respondent has also submitted that in order to constitute a valid agreement, the consent of the parties thereto should be a voluntary consent and not a consent obtained under any kind of compulsion or duress. It has been submitted that after the State Government makes an announcement of a State Advised Price, the occupiers of the sugar factories are compelled to enter into agreements with the canegrowers and canegrowers' cooperative societies in Forms B and C, whei:ein the State Advised Price is mentioned. The same price is also mentioned in the parchas issued to the canegrowers. It has been urged that the sugar factories cannot be compelled to pay such State Advised Price even though it may have been mentioned in the Forms or in the parchas. It is not possible to ac,ept the contention raised. As discussed earlier, the State Government in ~.,ercise of its regulatory power can fix the price of the sugarcane. The mere fact that this price is not to the 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. This question has been examined in considerable detail by a Constitution Bench in Indian Steel & Wire Products Ltd. v. State of Madras, [I 968] I SCR 479. The appellant in this case supplied certain steel products to various persons at the instance of the Steel Controller, who exercised powers under the Iron and Steel (Control of Production & Distribution) Order, 1941, which was issued under the Defence of India Act, 1939. The appellant challenged the assessment of sales tax made on 0 its turnover under Madras General Sales Tax Act. The contention of the appellant was that it was the Controller who determined the persons to whom the goods were to be supplied, the price at which they were to be supplied, the manner in which they were to be transported and the mode in which payment of price was to be made. In short it was said that every facet of the transaction was prescribed by the Controller and, therefore,

U.P. CO-OP. CANE UNION FEDERATION v. WEST U.P. SUGAR MILL ASSON. [G.P. MATIIUR, J.) 285 they could not be considered as sales. Sub-clause (I) of Clause 11-8 of the Control Order provided that the Controller may, by notification in the Gazette, fix the maximum price at which any iron or steel may be sold and Sub-clause (3) of the same clause provided that no producer or stockholder shall sell or offer for sale (and no person shall acquire) any iron or steel at a price exceeding the maximum price fixed under Sub-clause (I) or (2). B .After review of number of authorities, the Court held as under :

"For the reasons already stated, we are unable to accept the contention that the transactions with which we are concerned in these cases are not sales. Out of the four elements mentioned earlier, .three were admittedly established, namely, the parties were competent to contract, the property in the goods was transferred from the seller to the buyer, and price in money was paid. The only controversy was whether there was mutual assent Our finding is that there was mutual assent in several respects. Hence, we agree with the High Court that the transactions before us are sales."

30Copy pinpoint30. In Andhra Sugar Mills Ltd. v. State of Andhra Pradesh, [1968] 1 SCR 705, the question of compulsion by law to enter into an agreement was considered by a Constitution Bench. Under the Andhra Pradesh (Regulation of Supply and Purchase) Act, 1961, the occupier of a sugar factory had to buy sugarcane from canegrowers in conformity with the directions from the Cane Commissioner. Under Section 21 of the aforesaid Act, the State Government had power by notification to tax purchasers of sugarcane for use, consumption or sale in a sugar factory and the tax was leviable subject to a maximum rate per metric ton. The petitioner sugar F ·factories filed writ petitions under Article 32 of the Constitution challenging the validity of Section 21 mainly on the ground that as the petitioners were compelled by law to buy cane from canegrowers, their purchases were not made under agreements and were not taxable under Entry 54 List II having regard to Gannon Dunkerley's case. The contention was repelled after a G thorough analysis of the legal position and the following observations on page 711 of the Report show that the challenge raised by the respondents here has no substance :

"Under Section 4(1) of the Indian Sale of Goods Act, 1930, a contract of sale of goods is a contract whereby the seller H

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A transfers or agrees to transfer the property in goods to the buyer for a price . By Section 3 of this Act, the provisions of the Indian Contract Act, 1872 apply to contracts of sale of goods save in so far as they are inconsistent with the express provisions of the later Act. Section 2 of the Indian Contract Act provides that when one B person signifies to another his willingness to do or to abstain from doing anything with a view to obtaining the assent of the other to such act or abstinence, he is said to make a proposal. When the person to whom the proposal is made signifies his assent thereto, the proposal is said to be accepted. A proposal when accepted becomes a promise. Every promise and every set of promises c forming the consideration for each other is an agreement. There is mutual assent to the proposal when the proposal is accepted and in the result an agreement is formed. Under Section I 0, all agreements are contracts if they are made by the free consent of parties competent to contract for a lawful consideration and with D a lawful object and are not by the Act expressly declared to be void. Section 13 defines consent. Two or more persons are said to consent when they agree upon the same thing in the same sense. Section 14 defines free consent. Consent is said to be free when it is not caused by coercion, undue influence, fraud, misrepresentation or mistake as defined in Sections 15 to 22. Now, under Act No.45 of 1961 and the Rules framed under it, the cane grower in the factory zone is free to make or not to make an offer of sale of cane to the occupier of the factory. But if he makes an offer, the occupier of the factory is bound to accept it. The resulting agreement is recorded in writing and is signed by the parties. The consent of the occupier of the factory to the agreement is not caused by coercion, undue influence, fraud, misrepresentation or mistake. His consent is free as defined in Section 14 of the Indian Contract Act though he is obliged by law to enter into the agreement. The compulsion of law is not coercion as defined in G Section 15 of the A.ct. In spite of the compulsion the agreement is neither void nor voidable. In the eye of the law, the agreement is freely made. The parties are competent to contract. The agreement is made for a lawful consideration and with a lawful object and is not void under any provisions oflaw. The agreements H are enforceable by law and are contracts of sale of sugarcane as

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defined in Section 4 of the Indian Sale of Goods Act. The A purchases of sugarcane under the agreement can be taxed by the State legislature under Entry 54 List II."

Again at page 712, the Court made the following observation :

B " ... It is now realised that in the public interest, persons exercising certain callings or having monopoly or near monopoly powers should sometimes be charged with the duty to serve the public and, if necessary, to enter into contracts. Thus, Section 66 of the Indian Railways Act, 1890 compels the railway administration to supply the public with tickets for travelling on the railway upon payment of the usual fare. Section 22 of the Indian Electricity Act, 1910 compels a licensee to supply electrical energy to every person in the area of supply on the usual terms and conditions. Cheshire and Fifoot in their Law of Contract, 6th Edn. p. 23 observe that for reasons of social security the State may compel persons to make contracts. One of the objects of Act No.45 of 1961 is to regulate the purchase of sugarcane by the factory owners from the canegrowers. The canegrowers scattered in the villages had no real bargaining power. The factory owners or their combines enjoyed a near monopoly of buying and could dictate their own terms. In this unequal contest between the canegrowers and the factory owners, the law stepped in and compelled the factory to enter into contracts of purchase of cane offered by the canegrowers on prescribed terms and conditions."

31Copy pinpoint31. A similar question was examined by a Bench of Seven Judges in F Safar Jung Sugar Mills Ltd. v. State of Mysore & Ors., [1971] 1 SCC 23. The contention was that there was no mutual assent by and between the sugar mills and the growers of the sugarcane and, therefore, there was no purchase or sale of sugarcane and consequently no tax under Mysore Sales Tax Act could be levied. It was held that Statutory Orders regulating the G supply and distribution of goods by and between the parties under Control Orders in a State do not absolutely impinge on the freedom to enter into contract. Legislative measures or statutory provisions fixing the price, delivery, supply, restricting areas for transactions are all within the realm of planning economic needs, ensuring production and distribution of H

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A essential commodities and basic necessities of community. The individual freedom is to be reconciled with adequate performance by the Government of its functions in a highly organized society. In para 44 of the Reports it was held as under :

"The parties choose the term of delivery. They have choice B of obtaining a supply exceeding 95% of the yield. They can stipulate for a price higher than the minimum. They can have terms for payment in advance as well as in cash. A grower may not cultivate and may not have any yield. A factory may be closed or wound up, and may not buy any sugarcane. A factory can reject c goods on inspection. A combination of all these features indicate that the parties entered into agreements with mutual assent and with volition for transfer of goods in consideration of price. The transactions amount to sales within the meaning of the Mysore Sales Tax Act." D

32Copy pinpoint32. In Sukhnandan Saran Dinesh Kumar v. Union of India & Ors., [I 982] 2 SCC 150, after considering the provisions of 1966 Order and 1953 Act made by U.P. Legislature the Court clearly ruled that in order to protect the sugarcane growers who are not in a position to negotiate, the E Government can prescribe terms in a contract which they have to enter into with the occupiers of sugar factories. After elaborate discussion of the relevant provisions, the Court expressed its view in following words in para 22 of the Reports:

" ........ The proposition is now beyond the pale of controversy that F the State can impose a restriction in the interest of general public on the right of a party to contract where in the opinion of the Government the contracting parties are unable to negotiate on the footing of equality. Constitutional validity of statutes prescribing minimum wages has been founded on this proposition. The G principle can be effectively extended to the powerful sugar industry and the cane growers because the cane growers admittedly are at a comparative disadvantage to the producers of sugar and khandsari sugar who were described in the course of arguments as sugar barons. It does not require an elaborate discussion to H reach an affirmative con cl us ion that sugarcane growers who are

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farmers cannot negotiate on the footing of the equality with the producers pf sugar and khandsari sugar. The State action for the protection of the weaker sections is not only justified but absolutely necessary unless the restriction imposed is excessive ........ "

33Copy pinpoint33. As discussed earlier, the reservation or assignment ofarea is made for the benefit of a sugar factory. The agreements executed by the canegrowers or canegrowers' cooperative society in 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 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. In our opinion, 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 the sugarcane on the ground that their consent was not voluntary or was obtained under some kind of duress.

34Copy pinpoint34. Learned senior counsel for the respondents has strenuously urged that the Central Government having made the 1966 Order which contains a specific provision for fixation of price of sugarcane, under Clause 3(1) thereof, the regulatory power under the 1953 Act cannot embrace within its fold the same power of fixation of price as this will be clearly repugnant to a law made by the Parliament and would be void in view of Article G 254(1) of the Constitution. In Ch. Tika Ramji (supra) it has been held that the E.C. Act under which the Central Government made the 1966 Order and the 1953 Act made by U.P. Legislature have been enacted with reference to Entry 33 of List III of the Seventh Schedule. The constitutional validity of the 1953 Act was upheld by the Constitution Bench in the said H

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A decision. On page 437 of the Reports the Court quoted with approval the following passage from the judgment of Sulaiman J. in Shyamakant Lal v. Rambhajan Singh, (1939) FCR 188 (at 212) for the principle of construction in regard to repugnancy :

"When the question is whether a Provincial legislation is repugnant B to an existing Indian law, the onus of showing its repugnancy and the extent to which it is repugnant should be on the party attacking its validity. There ought to be a presumption in favour of its validity, and every effort should be made to reconcile them and construe both so as to avoid their being repugnant to each other; c and care should be taken to see whether the two do not really operate in different fields without encroachment. Further, repugnancy must exist in fact, and not depend merely on a possibility....... "

D And then went to hold :

"In the instant case, there is no question of any inconsistency in the actual terms of the Acts enacted by Parliament and the impugned Act. The only questions that arise are whether Parliament and the State Legislature sought to exercise their powers over the E same subject-matter or whether the laws enacted by Parliament were intended to be a complete exhaustive code or, in other words, expressly or impliedly evinced an intention to cover the whole field."

F 35 . .In M Karunanidhi v. Union of India, AIR (1979) SC 898, the principles to be applied for determining repugnancy between a law made by Parliament and law made by State legislature were considered by a Constitution Bench. In pursuance of an FIR lodged against Shri M. Karunanidhi the CBI after investigation had submitted chargesheet against G him under Section 161, 468 and 471 !PC and Section 5(2) read with Section 5( I)( d) of the Prevention of Corruption Act. The Madras Legislature had passed an Act known as Tamil Nadu Public Men (Criminal Misconduct) Act, 1973 which had received the assent of the President. It was contended that by virtue of Article 254(2) of the Constitution, the provisions oflndian H Penal Code, Prevention of Corruption Act and Criminal Law Amendment

U.P. CO.OP. CANE UNION FEDERATION.-. WEST U.P. SUGAR MILL ASSON. [G.P. MATHUR, J.) 291

Act stood repealed. After review of all the earlier authorities Court laid down the following tests :

"I. That in order to decide the question of repugnancy it must be shown that the two enactments contain inconsistent and irreconcilable provisions, so that they cannot stand together or operate in the same field.

2. That there can be no repeal by implication unless the inconsistency appears on the face of the two statutes.

3. That where the two statutes occupy a particular field, but there is room or possibility of both the statutes operating in the same field without coming into collision with each other, no repugnancy results.

4. That where there is no inconsistency but a statute occupying the same field seeks to create distinct and separate offences, no question of repugnancy arises and both the statutes continue to operate in the same field."

The same question was examined in considerable detail in Ml~ Hoechst Pharmaceuticals Ltd. v. State ofBihar, AIR (1983) SC 1019 and it was held that one of the occasion where inconsistency or repugnancy arose was when on the same subject matter one would be repugnant to the other and, therefore, in order to raise a question of repugnancy, two conditions must be fulfilled. The State law and the Union law must operate on the same field and one must be repugnant or inconsistent with the other and these are cumulative conditions. In National Engineering Industries Ltd. v. Sri Kishan Bhageria & Ors., AIR (1988) SC 329, Sabyasachi Mukharji, J. opined that the best test of repugnancy is that if one prevails, the other cannot prevail.

36Copy pinpoint36. In S. Satyapal Reddy & Ors. v. Govt. of A.P. & Ors., [1994] 4 G sec 391, the question was examined in the context of prescription of a higher qualification by the State Government. The service rule made by the Central Government prescribed a diploma in Mechanical Engineering as the minimum qualification for appointment on the post of Assistant Motor Vehicles Inspector while the rule made by the State Government H

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A required a degree in Mechanical Engineering or certain other alternative qualifications. The challenge made by the diploma holders was negatived and it was held that prescribing a higher qualification did not give rise to arty inconsistency or repugnancy as both the rules could operate harmoriiously and effect could be given to both of them. Similarly, in Dr. B Preeti Srivastava v. State of MP. & Ors, [1999] 7 SCC 120, it was held that laying down higher eligibility qualification by the State Government for admission to Post Graduate Medical Courses did not lead to any kind of repugnancy.

37Copy pinpoint37. Under Sub-section (1) of Clause 3 of the 1966 Order, the Central C 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 (1 ). The D inconsistency or repugnancy will arise if the State Government fixed a price which is lower than that fixed by the Central Government. But, if the price ~xed by the State Government is higher than that fixed by the Central Government, there will be no occasion for any inconsistency or repugnancy as it is possible for both the orders to operate simultaneoµsly E and to comply with both of them. A higher price fixed by the State Government would automatically comply with the provisions of Sub- clause (2) of Clause 3 of 1966 Order. Therefore, any price fixed by the State Government which is higher than that fixed by the Central Government cannot lead to any kind of repugnancy.

38Copy pinpoint38. The decisions of this Court touching the controversy in hand may now be examined. In Maharashtra Rajya Sahkari Sakkar Karkhana Sangh Ltd. & Ors. v. State ofMaharashtra & Ors., [1995] Supp. 3 SCC 475 (paras 11, 12, 21), R.M. Sahai, J. speaking for a Three Judge Bench held that the entire process of price fixation can be divided into three stages. The first G is the fixation of what is known as the minimum ex-factory price by the Certtral Government under 1966 Order for all the sugar factories in the country linking it with basic recovery of 8.5 per cent with a proportionate increase for every 0.1 per cent extra recovery. The second is the State Advised Price and every State has its own method to determine it. The H power is aswmed under the Acts of the State Legislature or Orders issued

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by the Government and in State ofU.P. it is done by Orders issued under A the U.P. Sugarcane (Regulation of Supply and Purchase) Act, 1953. The third is the price paid at the end of the season. The Bhargava Commission had recommended the payment of additional price at the end of the season on 50-50 profit sharing basis between growers and factories to be worked out in accordance with Second Schedule to the 1966 Order. In paragraph B 21, it was observed as under :

" ........ The price is fixed, may be, by the Board of Directors or by the State Government under bye-laws but the prices are for the reserved area. The Central Government did not fix any maximum price obviously because the conditions in the agricultural C sector differed from State to State. Therefore, it having fixed a minimum price expects the State to offer remunerative price to its cultivators. In a controlled economy the price fixation machinery is to be determined by the State Government or under the 1966 Order in the manner provided therein. Since in D Maharashtra 95% of the sugar factories are in the cooperative sector the price is fixed by the Government as it has substantial financial stake. But so long the price fixation does not suffer from any infirmity or it is held to be prejudicial to the cane-growers so as to benefit the State or the financial institution it cannot be held to be bad .......... " E The next is State of MP. v. Jaora Sugar Mills Ltd. & Ors., [1997] 9 SCC 207, which has been decided by a Bench of two judges. The dispute arose on account of fixation of price under the M.P. Sugar (Regulation of Supply and Purchase) Act, 1958. The contention on behalf of the sugar factories was that Clauses 3 and 5-A of the 1966 Order determine the liability to pay the price and additional price and the Central Government having determined the price of the sugarcane under the aforesaid Order, there is no power with the State Government de hors the Order to fix any agreed price. The concept of agreed price came into force on 19.9.1976 by virtue of Clause 3-A of the said Order and until then there was no power to fix an agreed price. It was also urged that the State Government has, therefore, no power under the Act to fix any price as the field was occupied by the 1966 Order. The contention was, however, not accepted and after noticing the provisions of Clauses 3(2) and 3(3), it was held as under in para 8 of the Reports : H

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A "8. This would clearly indicate that despite the fixation of minimum price under clause 3(1), by agreement between the sugarcane grower and the purchaser of the sugarcane, they would be at liberty to agree to sell or purchase the sugarcane at a higher price than that fixed by the Central Government under clause 3(1 ). Only for postponement of oayment beyond 14 days, there should B be an agreement in writing between the parties obviously with the concurrence of the Central Government or authorised authority in that behalf. Thus, there is no statutory prohibition in that behalf to pay higher price. That would be further clear by clause 3(2) which speaks of the contract between the parties for payment of c higher price of sugarcane fixed under sub-clause (I) of clause 3 pursuant to the agreement or pursuant to the minimum price fixed by the Central Government under clause 3(1) of the Order."

It was observed in paras 9 and I 0 that there was no prohibition for the cane growers and occupiers of the sugar factories in entering into oral agreement through the service of the Cane Commissioner, a statutory authority, who could effect such an agreement. The agreement would not be tainted with compulsion but in novation of the minimum price fixed under the 1966 Order. After noticing the provisions of the M.P. Act, which are some what similar to U.P. Act, it was held as under in para 13 of the Reports:

"13. It would thus be clear that the Cane Commissioner having power to compel the cane-growers to supply cane to the factory or khandsari unit, he has incidental power and is duty bound to ensure payment of the price of the sugarcane supplied by the sugarcane grower. The price fixed or agreed is a statutory price and bears the stamp of statutory first charge on the sugar and assets of the factory over any other contracted liabilities to recover the price of the sugarcane supplied to the factory or khandsari unit."

SKG Sugar Ltd. v. State of Bihar, [ 1997] 9 SCC 362 is a decision by the Bench of three judges and deals with the effect of 1966 Control Order and the Bihar Sugarcane (Regulation of Supply and Purchase) Act, H 198,J. It was clearly ruled that the provisions of 1966 Order do not show

p. 295 Copy page pinpoint

that there is any prohibition on the factory or the association of factories A entering into an agreement to pay higher price than the minimum price prescribed under the Order and the object of the Order is to ensure that the canegrowers should not be compelled to sell their sugarcane at a price lower than the minimum price fixed by the Central Government under Clause 3. In this case an agreement had been arrived at between Sugar B Factories Owners Association and sugarcane growers, wherein a higher price was agreed to be paid but this was sought to be resiled by the appellant on the ground that it was a Company, which was an independent entity in the eye of law and was, therefore, not bound by any such agreement. After noticing the provisions of the Act and the earlier decision rendered in State of MP. v. Jaora Sugar Mills Ltd. (supra) it was held as under in para 6 of the reports :

"It is not in dispute that under Section 31 of the Supply Act, the State Government has power to fix the reserved area, in other words, zone was carved out for the appellant for the supply of sugarcane to the factory. All the farmers who are cultivating sugarcane within that zone are bound by the State action to supply sugarcane to the factories within that reserved area. Consequently, the factory also is bound by the actions of the State Government. Obviously, pursuant to the obligation had by the State under the E Supply Act, the meeting was convened by the State Government where at the Factory Owners' Association and farmers participated and agreed to fix the price at Rs. 20.50 per quintal of sugarcane. As a consequence, both the cane growers as well as the owners of the factory are bound by the decision. This having been F agreed upon, the price fixed by the State Government in excess of the minimum price fixed by the Central Government under clause 3 of the Order would be the price fixed for mpply of sugarcane and the Government would be entitled to enforce the liability ...." G It was also observed in the same paragraph that the State Government acted in their statutory capacity to fix the higher price of the sugarcane.

39Copy pinpoint39. These cases clearly lay down that under the 1966 Order the Central Government only fixes the minimum price and It is always open H

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A to the State Government to fix a higher price. Under the enactments made by the State Legislatures areas are reserved for the sugar factories and the canegrowers therein are compelled to supply sugarcane to them and therefore the State Government has incidental power to fix the price of sugarcane which will also be statutory ~rice. They further lay down that the Cane Commissioner can direct the canegrowers and the sugar factories to enter into agreements for purchase of sugarcane at a price fixed by the State Government and such agreements cannot be branded as having been obtained by force or compulsion.

40Copy pinpoint40. Learned senior counsel for the respondents has placed strong reliance on certain observations made in State of Tamil Nadu v. Kothari Sugars and Chemicals Ltd., [1996] 7 SCC 751, which is a decision by a Bench of two judges. In our opinion, this decision can be of no assistance to the respondents as the point for consideration here was entirely different, which will be evident from paras I and 3 of the judgment which read as under:

"Para I. The question for decision is :Whether for the purchase of sugarcane from the canegrowers, a purchaser is liable to pay purchase tax under the State Sales Tax Act on the amount paid by the purchaser to the canegrower over and above the price fixed under clauses 3 and 5-A of the Sugarcane (Control) Order, 1966?

Para 3. The occasion for payment by the purchaser of the amount in excess of the aggregate of the minimum cane price and the additional cane price so fixed, arises on account of an order of the State Government dated 15.11.1980 purporting to fix a higher revised minimum cane price and directing the sugar factories in Tamil Nadu to pay that price to the canegrowers. Pursuant to the direction, each sugar factory was directed to make that payment and in compliance thereof this sugar factory paid the excess amount as an 'advance' described as under :

" ..... being advance payment towards cane supply during 1980-8 l season, against probable additional cane price under Section 5-A of the Sugarcane (Control) Order, 1966."

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41Copy pinpoint41. It is important to note that in Tamil Nadu there is no statutory provision for regulating the supply and purchase of sugarcane for use in sugar factories or khandsari sugar manufacturing units. Therefore, the order of the State Government dated 15.11.1980 fixing higher revised minimum cane price had not been issued in exercise of any statutory power. In para 6 of the Reports, the Court observed that unless there be an agreement between the grower and the purchaser for purchase of the sugarcane at higher price, the obi igation of the purchaser is to pay the grower only the aggregate of the amounts fixed under clauses 3 and 5-A. It was further observed that without any contractual or statutory basis fixing the sale price of sugarcane at an amount higher than the minimum cane price fixed under Clause 3 and the additional cane. price fixed under Clause 5-A, any sum paid by the purchaser to the grower as advance prior to fixation of the additional cane price under Clause 5-A cannot form part of the price of sugarcane. It was pointed out in para 7 that the State advice to the purchasers to pay certain amount in addition to the minimum price fixed under Clause 3 in anticipation of fixation of the additional cane price under Clause 5-A, does not have any statutory basis. The amount of advance was paid in anticipation of fixation of additional cane price under Clause 5-A, which means that in case the fixation under Clause 5-A was at a higher amount than the amount paid as advance, then the purchaser would have to pay the deficit amount. Similarly, when the amount of advance was in excess, the purchaser would be entitled to refund of the excess amount, irrespective of the fact that whether the refund was actually made or not. Any amount paid by way of advance towards a probable additional price to be worked out in accordance with the formula given in the 1966 Order could not be treated as price of sugarcane for the purpose of levy of sales tax. In fact in para 9 of the reports it was observed that for treating the entire amount paid by the purchaser as the price of the sugarcane supplied, it must be found proved as a fact that the higher price including the excess amount was paid as the price of sugarcane under an agreement between the grower and the purchaser irrespective of a lower amount being fixed as an aggregate of the price fixed under Clauses 3 and 5-A of the 1966 Order. It was further held that unless a clear finding to that effect is recorded, the amount paid by the purchaser in excess of the aggregate of the minimum price fixed under Clause 3 and the additional price fixed under Clause 5-A, as paii of the amount paid in advance prior H

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A to the fixation of the additional price under Clause 5-A, cannot be treated automatically as a part of the total price of the sugarcane.

42Copy pinpoint42. The question in issue here did not come up for consideration before the Bench and some general observations made in the course of the reasoning given in a matter dealing with liability to pay tax on some amount which was paid by sugar factory as "advance" towards the probable additional cane price under Clause 5-A cannot be construed as an expression of opinion on the merits of the matter. It is well settled that a decision is an authority for what it actually decides and not what logically flows from it. Every observation of Court are not to be interpreted or used like provisions of Statute as if they were part of an Act. It is, therefore, not possible to hold that the Court laid down any principle of law that it is not open to the State to fix higher price or that there could be no agreement between the canegrowers and the occupier of the factory for payment of higher price. D

43Copy pinpoint43. One of the main reasons given by the High Court for allowing the writ petition and quashing the order of fixation of State Advised Price is that power to fix sugarcane price had been given to the State Government under the Sug<l!cane Act, 1934 and hence it would be redundancy to say E that the same power to fix cane price also flows from Section 16 of the 1953 Act. The High Court has also held that when the 1953 Act was enacted there was already a law, viz., the Sugarcane Act, 1934, which enabled the State Government to fix the minimum cane price and hence, it could not have been the intention of the U.P. Legislature while enacting F 1953 Act that Section 16 thereof would include the power to fix the minimum cane price as such a power was already there with the State Government under Section 3(2) of the Sugarcane Act, 1934. The High Court, therefore, concluded that Section 16 of the 1953 Act only gave power to the State Government to regulate the supply and purchase of sugarcane in the narrower sense and not in the wider sense so as to include G the power to fix the minimum price. This reasoning of the High Court proceeds on the footing that the Sugarcane Act, 1934 was in existence and was in operation when the 1953 Act was enacted by U.P. Legislature. It appears that the correct legal position was not brought to the notice of the learned judges. The Sugarcane Act, 1934 was repealed by U.P. Sugar H Factories Control Act, 1938 (UP Act No. I of 1938). Section 26 of U.P.

U.P. CO-OP. CANE UNION FEDERATION•·. WEST U.P. SUGAR MILL ASSON. [G.P. MATHUR, J.] 299

Sugarcane (Regulation of Supply & Purchase) Act, 1953 repealed the U.P. A Sugar Factories 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 ~ubject matter of Sugarcane Act, 1934 fell within the Provincial Legislative list. It was in these circumstances that the U.P. Legislature enacted the U.P. B Sugar Factories Control Act, 1938 which repealed the Sugarcane Act, 1934 in its application in the State of U.P. This position has been noticed in Ch. Tika Ramji & Ors. v. State of Uttar Pradesh & Ors., [1956] SCR 393 at page 400, 401 and 417. Therefore, the aforesaid reasoning given by the High Court has no legal basis. c

44Copy pinpoint44. The second reasoning given by the High Court is that even if the State Government had the power to fix the minimum cane price 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 E.C. Act and the promulgation of the Sugarcane Control Order, 1955 (later replaced by the D 1966 Order), which now gives exclusive power to the Central Government to fix the minimum price. As discussed earlier we are not in agreement with the aforesaid reasoning as the question of repugnancy does not arise. The High Court has also held that the Central Government, while fixing the price of the sugar under Section 3(3C) of the E.C. Act, takes into consideration the minimum price of sugarcane fixed under 1966 Order and if the sugar mills are compelled to pay a higher price than that fixed by the Central Government, it will disturb the price of the levy sugar and such an eventuality could not have been contemplated by the legislature. Over a period of time, the quota of levy sugar has gone down from 40 per cent to I 0 per cent of the total production of sugar and the sugar mills are now free to sell 90 per cent of their production in open market. Under 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 manufacturing sugar are also relevant factors under Clauses (b) and (d) of Section 3(3C) E.C. Act and, therefore, the fixation of higher price for sugarcane by the State Government by itself cannot have any major or substantial impact on the fixation of the price of the levy sugar by the Central Government. H

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45Copy pinpoint45. Shri Shanti Bhushan, learned senior counsel, has strenuously urged that the fixation of higher price by the State Government will seriously affect the economy of the sugar factories inasmuch as the price of the sugarcane is a very major factor and contributes to the extent of 70 per cent of the price of sugar. Learned counsel has submitted that any increase in the price of sugarcane by the State Government is bound to result in a serious financial crisis for the sugar factories which are already passing through a bad phase and are suffering huge losses. He has also placed before the Court some facts and data to show that the sugar mills being run by U.P. State Sugar Corporation and those under the cooperative sector, which pay the State Advised Price for sugarcane, are running on huge losses. Reports have also been placed to show that the State Government has given heavy amounts by way of subsidy to these sugar factories in order to sustain the loss. The contention is that the payment of State Advised Price by the sugar factories will result in a virtual closure of the sugar industry. Shri Rakcsh Dwivedi, learned senior counsel for appellant, has seriously disputed the aforesaid submission and has urged that the respondent sugar factories have not produced their balance sheets to show that they aie in fact running on losses. He has submitted that virtually all the factories being run by the U.P. State Sugar Corporation were established in Nineteen Thirties, have very old machinery and technology and are over-staffed and the main reason for the losses suffered by them is their poor performance on account of the frequent breakdowns, the machinery being old and employment of excessive 'llanpower and not the price of sugarcane. The U.P. State Sugar Corporation, it is urged, could not invest money in order to improve the technology or install new machinery due to financial crunch. Shri Dwivedi has also placed before the Court data relating to some of the factories being run under cooperative sector which have made profits.

46Copy pinpoint46. Learned counsel for both the sides have also placed reliance on the Report of the Sugar Industry Inquiry Commission, 1974, also known as 'Bhargava Commission', which was given on 27.2.1974. Shri Chidambaram has referred to paragraphs 1.20, 1.23 and 1.24 of the Report, wherein it is said that there is need not only to intensify cane development work to increase the sugarcane yield, but also to bring more area under sugarcane. Sugarcane occupies land for a longer period than any other crop, its period of growth extending from I0 months to 18 months and

U.P. CO-OP. CANE UNION FEDERATION'· WESTU.P. SUGAR MILL ASSON. [G.P. MATHUR, J.] 301

during this period, two.or more other crops can be grown, which give the farmer a quicker return for his investment. Sugarcane also needs larger investment in the inputs. It, therefore, recommended that the statutory minimum cane price be so fixed that the return from the sugarcane has an edge over the return from other alternative crops, in which technological breakthrough had already been achieved, and should be varied from year to year in future in proportion to the changes in return from other competitive crops and that it wholly covered the cost of cultivation in all major cane growing regions. Shri Chidamabaram has also urged that para 2.22 of Chapter II of the Report shows that the Central Government, while fixing the minimum price of sugarcane, does not take into consideration extra realization from molasses. Molasses, which is a bye product of sugar industry, is the main raw material for production of rectified spirit, potable and industrial alcohol and ethnol. Learned counsel has submitted that on accqunt of decontrol of molasses and its heavy demand, the sugar mills ·' earn considerable amount of money from the sale of this bye product. Besides molasses, bagasse and press mud are also produced in the manufacture of sugar which are again not taken into consideration . Bagasse is used in co-generation and also for manufacture of paper and press mud is used in manufacture of manure. According to learned counsel, since these three items from which sugar factories earn considerable amount of money are not taken into consideration by the Central Government, E the minimum price fixed under the 1966 Order is not realistic. The State Government is aware of the local conditions like cost of the inputs and labour etc. and as it also takes into consideration "the aforesaid factors (molasses, bagasse and press mud) the price of the sugarcane fixed by it reflects the correct price. F

47Copy pinpoint47. Shri Shanti Bhushan has also placed before the Court a copy of the order passed by the Central Government under Clause 3 of the 1966 Order on 9.1.2003 fixing the minimum price of sugarcane for the sugar year 2002-2003, which shows that prices have been fixed for different factories keeping in view the minimum price of sugarcane at Rs.69 .50 per G quintal linked to a basic recovery of8.5 per cent sugar subject to a premium of Rs.0.82 for every 0.1 per cent point increase in the recovery above that level. The chart shows that 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 H

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A fixed for the sugar mills being run by private sector. The price of sugarcane fixed for some of the sugar mills, which will illustrate the situation, is given below:

S.No. Name of Sugar Factory Minimum Sugarcane Price (Rupees per quintal) B

1. U.P. State Sugar Corporation Ltd. 71.96 Panninagar, Distt. Bulandshahr.

2. U.P. State Sugar Corporation Ltd. 73.60 Rohana Kalan, Distt. Muzaffarnagar. c

3. Daurala Sugar Works, 89.18 Daurala, Distt. Meerut.

4. The Upper India Sugar Mills 84.26 Khatauli, Distt. Muzaffarnagar. D

5. The Upper Doab Sugar Mills Ltd. 86.72 Shamli, Distt. Muzaffarnagar.

6. Siel Ltd. 87.54 E Titawi, Distt. Muzaffarnagar.

7. Bisalpur Kisan Sahakari Chini 71.14 Mills Ltd. Bisalpur, Distt. Pilibhit.

F 8. L.H. Sugar Factories Ltd. 78.52 Pilibhit, Distt. Pilibhit.

9. Ghaghara Sugar Ltd. 86.72 Ajbapur, Distt. Lakhimpur Kheri.

48Copy pinpoint48. Bulandshahr, Meerut and Muzaffarnagar are adjoining districts in Western U.P. but the prices of sugarcane range from Rs.71.96 to Rs.89.18. The Sugar mills at serial nos. 2 and 6 are situate within the same district ofMuzaffarnagar, but the difference in prices is almost Rs.14.00. Similarly, sugar mills at serial nos. 7 and 8 are situate within the same district of H Pilibhit and serial no.9 is in adjoining district of Lakhimpur but the

U.P. CO·OP. CANE UNION FEDERATION v. WEST U.P. SUGAR MILL AS SON. [G.P. MATHUR, J.] 303

difference in prices is quite substantiah It is not likely that there would be any substantial difference in the quality of cane grown within the same district or in the same area. The prices fixed by the Central Government clearly indicate that a sugarcane grower who falls within the reserved area of a 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. This is possibly due to the reason that the sugar mills. of U.P. State Sugar Corporation are very old having obsolete technology due to which recovery is poor. 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 a mill run by the U.P. State Sugar Corporation or in the cooperative sector. The State C Government fixes uniform prices and not factory wise. Such a fixation of price is, therefore, more just and equitable from the point of view of a sugarcane grower.

49Copy pinpoint49. It is, however, difficult to form any definite opinion on the factual D aspect of the matter only on the basis of the statistical data placed before us by the learned counsel for the parties as a correct or true assessment of the situation cannot be had from the same. Moreover, we are more concerned with the legal aspect of the matter. E

50Copy pinpoint50. Jn view of the discussions made above, Civil Appeals No.460 of 1997 and 461 of 1997 are allowed and the judgment and order dated 11.12. 1996 of the High Court is set aside. Civil Appeals No.1727 of 1999 and 4602 of 1999 are dismissed and the judgment and order dated 1.2.1999 of the High Court is affirmed. F Civil Appeal No. 4685 of 1997: The State of Bihar v. Bihar Sugar Mills Association

State of Bihar has pr~ferred this appeal by special leave against the judgment and order dated 4.2.1997 of the Patna High Court by which the G writ petition preferred by Bihar Sugar Mills Association was allowed and the order dated 29.11.1996 passed by the Sugarcane Commissioner, Bihar, fixing the price of sugarcane for crushing season 1996-97 was quashed. For doing so, the High Court basically relied upon the provisions of Sugarcane (Control) Order, 1966 issued by the Central Government and H

p. 304 Copy page pinpoint

A also the judgment and order dated 11.12.1996 of Allahabad High Court in CMWP no. 36889of1996 (West UP. Sugar Mills Association v. State of U.P.). The High Court did not examine the provisions ofBihar Sugarcane (Regulation of Supply anid Purchase) Act, 1981 in order to ascertain whether under the said Act the State Government has any power to fix the price of sugarcane. We have set aside the judgment of the Allahabad High Court dated 11.12.1996. We are, therefore, of the opinion that the matter requires fresh consideration in the light of our decision in CA No. 460 of 1997 (UP. Co-operative Cane Unions Federation v. West UP. Sugar Mills Association). The appeal is accordingly allowed and the judgment and order dated 4.2.1997 of the High Court is set aside and the writ petition is remitted back to the High Court for fresh consideration in accordance with law.

Civil Appeal No.6065of2001: State ofPunjab & Ors. v. Saraya Industries Ltd. & Ors. and SLP (CJ No. 1363 of 2002 : State of Haryana & Ors. v. D The Saraswati Industrial Syndicate Ltd. & Anr.

State of Punjab and State of Haryana have preferred these appeal and special leave petition against the common judgment and order dated 23.12.1998 of Punjab & Haryana High Court by which a bunch of writ petitions preferred by the respondent Sugar Mills were allowed and the direction given by the State Government to the writ petitioners to pay the State Advised Price for the sugarcane purchased by them during the year 1996-97 was declared illegal and it was held that the writ petitioners cannot be compelled to pay any price over and above the statutory minimum price fixed by the Central Government for the sugarcane purchased by them. For doing so, the High Court basically relied upon the provisions of Sugarcane (Control) Order, 1966 issued by the Central Government and also the judgment and order dated 11.12.1996 of Allahabad High Court in CMWP no. 36889 of 1996 (West UP. Sugar Mills Association v. State of UP.). The High Court did not examine the provisions of Punjab Sugarcane G (Regulation of Supply and Purchase) Act, 1953 in order to ascertain whether under the said Act the State Government has any power to fix the price of sugarcane. We have also set aside the judgment of the Allahabad High Court dated 11.12.1996. We are, therefore, of the opinion that the matter requires fresh consideration in the light of our decision in CA No. H 460 of 1997 (UP. Co-operative Cane Unions Federation v. West U.P.

U.P. CO-OP. CANE UNION FEDERATION v. W~ST U.P. SUGAR MILL ASSON. [G.P. MATHUR, J.] 305

Sugar Mills Association). The appeal and the special leave petition are A accordingly allo'Yed and the judgment and order of High.Court is set aside and the writ petitions are remitted back to the High Court for fresh consideration in accordance with law.

CA Nos. 8117-22 of 2001 and SLP(C) No. 16851 of 2001 : Government B ofAndhra Pradesh & Anr. v. KCP Sugar & Industries Corpn. Ltd. & Ors.

Leave granted in SLP(C) No.16851 of2001. These appeals by special leave have been preferred by Government of Andhra Pradesh against the judgment and order dated 8.5.2001 of the High Court of Andhra Pradesh C by which the writ petition preferred by respondent KCP Sugar Mills was allowed and order passed by the State Government on 4.12.1998 fixing the price of sugarcane was set aside. For doing so, the High Court basically relied upon the provisions of Sugarcane (Control) Order, 1966. The High Court did not examine the provisions of the Andhra Pradesh Sugarcane D (Regulation of Supply and Purchase) Act, 1961 in order to ascertain whether under the said Act the State Government has any power to fix the price of sugarcane. We are, therefore, of the opinion that the matter requires fresh consideration in the light of our decision in CA No. 460of1997 (U.P. Co-operative Cane Unions Federation v. West U.P. Sugar Mills Association). E The appeals are accordingly allowed and the judgment and order dated 8.5.2001 of the High Court is set aside and the writ petition is remitted back to the High Court for fresh consideration in accordance with law.

Transfer Case Nos. 21 and 22 of 2003 : The South Indian Sugar Mills Association, Tamil Nadu v. Government of Tamil Nadu & Ors. F

The South Indian Sugar Mills Association, Tamil Nadu filed writ petition praying that a writ of mandamus or any other appropriate writ, order or direction may be issued forbearing the Government of Tamil Nadu and the Commissioner of Sugar and Cane Commissioner, Chennai, from G· fixing and announcing or notifying any price for sugarcane except the additional price under Clause SA of the Sugar (Control) Order, 1966, to be paid by the sugar mills in Tamil Nadu to the sugarcane growers for the sugar season 1999-2000. The writ petitions were transferred to this Court and were heard along with CA No. 460 of 1997. H

p. 306 Copy page pinpoint

A The State of Tamil Nadu has not made any statutory enactment for regulation of supply and purchase of sugarcane. In the counter-affidavit filed on behalf of the respondents it is admitted that the State Government is not fixing State Advised Price for sugarcane in exercise of any statutory power. In fact in para 9 of the counter-affidavit it is stated that the State B Government will not make any unilateral announcement of State Advised Price as apprehended by the petitioner. It is further stated that the Government will follow the past practice of consultation with the sugar mill owners and cane growers and only after ascertaining their respective views and making them to come to an agreement on fixation of price, the State C Advised Price, as an agreed price, will be recommended by the State Government. In view of the fact that there is no statutory enactment regarding regulation of supply and purchase of sugarcane, it is obvious that the State Government has no power to fix the price of the sugarcane. However, it is always open for the sugar mills to enter into agreements with the sugarcane growers to purchase sugarcane at a price higher than the D statutory minimum price fixed by the Central Government. The Transfer Petitions are accordingly disposed of in the aforesaid terms.

SLP (C) No. 948 of 2003: Mis. Naraingarh Sugar Mills Ltd. v. State of Haryana & Ors. E This Special Leave Petition has been preferred against the judgment and order dated 20.12.2002 ofa Division Bench of the Punjab & Haryana High Court by which interim orders passed in favour of petitioner were vacated. The main ground which weighed with the High Court for vacating F the stay order was that the writ petitioner had not even paid the statutory minimum price of sugarcane to the farmers and a sum of Rs.5 crores was due from it. In the facts and circumstances of the case, we do not find any ground to interfere with the order passed by the High Court. The Special Leave Petition is accordingly dismissed.

G IA No.3 of 2002 in CA No. 460of1997: New Horizon Sugar Mills Ltd. Ariyur. Kandamangalam P.O., Pondicherry

This application has been moved in CA No.460 of 1997 ( U.P. Co- operative Cane Union Federation v. West U.P. Sugar Mills Association & H Ors.). Since the main relief claimed in the application is against Government

p. 307 Copy page pinpoint

of Pondicherry which is not party to the civil appeal, it is not possible to A grant the prayers made in the application. The application is accordingly dismissed.

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

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

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

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

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

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

Legislative Background :-

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

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

As a result of the Government of India Act, 1935, there was a distribution of legislative powers between the Dominion Legislature and H the Provincial Legislatures. Consequently, the entire subject matter of Act

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XV of 1934 fell within the Provincial Legislative List. It was felt that Act A XV of 1934 was not sufficiently comprehensive for dealing with the problems of the sugar industry. The Governments of U.P. and Bihar decided to introduce legislation on similar lines in both the provinces since, between them, they accounted for nearly 85% of production of sugar in India. B The U.P. Legislature enacted on 10th February, 1938 the U.P. Sugar Factories Control Act, 1938 [U.P. Act I of 1938]. This Act provided for (i) licensing of sugar factories, (ii) regulation of the supply of sugarcane intended for use in such factories, (iii) the minimum price for sugarcane, C (iv) the establishment of Sugar Control Board and Advisory Committee, and (v) a tax on the sale of sugarcane intended for use in factories. Though this Act was to remain in force initially until 30th June, 1947, its life was extended from time to time and finally up to 30th June 1952. Parallel developments during this period were the outbreak of the Second World War and the legislative measures taken to meet the situation by the then D Government oflndia for controlling the production, regulation of distribution and supply of essential commodities. The Dominion Legislature acquired the power to make laws for the Provinces with respect to any of the matters enumerated in the Provincial Legislative List. Under the Defence of India Act, sugar was made a controlled commodity in the year 1942 E and its production and distribution as well as the fixation of sugar prices were. regulated by the Sugar Controller. The proclamation of emergency was revoked by the Governor General on !st April 1946. Simultaneously, the laws made by the Dominion Legislature in the field of the Provincial Legislative List were to cease to be effective after 30th F September 1946.

On 26th March 1946, the British ParliamePt enacted the India (Central Government and Legislature) Act, 1946 [9 & 10 Geo.6, Chapter 39] which provided that, notwithstanding anything in the Government of India Act, 1935, the Indian Legislature shall during the periods specified G in Section 4 of the Act have the power to make laws with respect, inter alia, to 'foodstuffs'. Though the period provided in Section 4 was one year from the expiration of the declaration of the emergency by the Governor General, this period was extended from time to time and would have ended on 31st March 1948. H

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

c On 7th October 1950, the Central Government, in exercise of the powers conferred upon it by Section 3 of the Act, promulgated the Sugar and Gur Control Order, 1950 which, inter alia, empowered it to prohibit movement of sugarcane from any area and also to direct that no gur or sugar should be manufactured from sugarcane except under and in D accordance with a licence issued by it. Power was also given to the Central Government to fix the minimum price of sugarcane and no person was to sell or agree to sell sugarcane to a producer and no producer was to purchase or agree to purchase sugarcane at a price lower than that notified. This power of fixing the price of sugarcane was exercised by the Central E Government from time to time by issuing notifications which fixed the minimum price to be paid by the prodt•cer of sugar by vacuum pan process. An Act for similar purposes, by name, Bihar Sugar Factories Control Act VII of 1937 came to be enacted in the State of Bihar. As a result of the recommendations of the Khaitan Committee, the report of the Indian Tariff F Board in the year 1938 and the U.P. Sugar Industry Enquiry Committee, 1951 [Swaminathan Committee], it was desired that the U.P. Act I of 1938 should be amended in order to make regulation of the supply of sugarcane possible.

Industries (Development and Regulation) Act, 1951 [Act LXV of G I 951] was brought into effect from 8th May 1952. In view of this Act coming into force, certain provisions of the U.P. Act I of 1938 became inoperative. The U.P. Legislature passed on 29th June, 1952, the U.P. Sugar Factories Control (Amendment) Act, 1952, deleting those provisions and putting the amended Act permanently on the Statute Book. The U.P. H Act I of 1938, thus amended, continued in force till it was repealed by the

U.P. CO-OP. CANE UNION FEDERATION>'. WEST U.P. SUGAR MILL ASSON. [SRIKRISHNA, J.] 311

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

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

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

In exercise of the powers conferred by Section 3 of the Essential Commodities Act, the Central Government ;iromulgated on 27th August H

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A 1955, the Sugar Control Order, 1955 and the Sugarcane Control Order,

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

On 16. 7.1966, the Central Government notified the Sugarcane (Control) Order, 1966. Clause 2(g) defines 'price' to mean the price or the minimum price fixed by the Central Government, from time to time, for sugarcane delivered, inter alia, to a sugar factory. Clauses 3 and 3-A bear reproduction and read thus :-

Clause 3 : Minimum price of sugarcane payable by producer of sugar- ( l) F The Central Government may, after consultation with such authorities, bodies or associations as it may deem fit, by notification in the official Gazette, from time to time, fix the minimum price of sugarcane to be paid by producers of sugar or their agents for the sugarcane purchased by them, having regard to -

G (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;

H (c) the availability of sugar to the consumer at a fair price;

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(d) the price at which sugar produced from sugarcane is sold by A producers of sugar; and

(e) the recovery of sugar from sugarcane :

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

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

(2) No person shall sell or agree to sell sugarcane to a producer of sugar or his agent, and no such producer or· agent shall purchase or agree to purchase sugarcane, at a price lower than that fixed under sub-clause (1). D (3) Where a producer of sugar purchases any sugarcane from a grower of sugarcane or from a Sugarcane-grower's Co-operative Society, the producer shall, unless there is an agreement in writing to the contrary between the parties, pay within fourteen days from the date of delivery of the sugarcane to the seller or tender to him the price of the cane sold at the rate agreed to between the producer and the sugarcane-grower or Sugarcane-growers' Co-operative Society or that fixed under sub-clause (I), as the case may be, either at the gate of the factory or at the cane collection centre or transfer or deposit the necessary amount in the bank account oftne seller or the co-operative society, as the case may be. [Subs. by G.S.R. 945, dated 18.5.1968].

(3-A) Where a producer of sugar or his agent fails to make payment for the sugarcane purchased within 14 days .of the date oi delivery, he shall pay interest on the amount due at the rate of 15 per c~nt per annum for the period of such delay beyond 14 days. Where__payment of interest on delayed payment is made to a cane-growers' society, the sociefy$tym .pass on the interest to the cane-growers concerned after deducting adivinlstrative charges, if any, permitted by the rules of the said society. [Ins. by G.S.R. 62(E) dated 2.2. 1978]. H

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A (4) Where sugarcane is purchased through an agent, the producer or the agent shall pay or tender payment uf such price within the period and in the manner aforesaid and if neither of them has so paid or tendered payment, each of them shall be deemed to have contravened the provisions of this clause. B (5) At the time of payment at the gate of the factory or at the cane collection centre, receipts, if any, given by the purchaser, shall be surrendered by the cane-grower or co-operative society.

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

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

G Clause 3-A : Rebate that can be deducted from the price paid for sugarcane - A producer of sugar or his agent shall pay, for the sugarcane purchased by him, to the sugarcane-grower or the sugarcane-growers' co-operative society, either the minimum price of sugarcane fixed under Clause 3, or the price agreed to between the producer or his agent and the sugarcane- H grower or the sugarcane-growers' co-operative society, as the case may be

U.P. CO.OP. CANE UNION FEDERATION v. WEST U.P. SUGAR MILL ASSON. [SRIKRISHNA, l.] 3 J5 (hereinafter referred to as the agreed price) .......... [Subs. by G.S.R. 815(E) A dated 24.9.1976)

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

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

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

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

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

Under sub-clause (6), it is provided that any extra price paid by the producer of sugar to the sugarcane-grower over and above the minimum H

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A sugarcane price fixed under Clause 3, shall be adjusted against the additional sugarcane price determined under sub-clause (2) or sub-clause (3) and the balance, if any, shall be paid to the sugarcane-grower.

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

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

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

As a matter of practice, it has been found that in the States such as U.P., A.P., Bihar, Tamil Nadu and Haryana, the State Governments have been pressurising the sugar producers to enter into agreements for payment of purchase price of sugarcane at a rate higher than that decided under the

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Sugarcane (Control) Order, 1966. In the case of Tamil Nadu, it has been A "frankly conceded that there is no statutory basis and that the State Advised Price was merely an executive act intended to resolve a dispute between the contending parties. As far as the States ofU.P., Haryana and Bihar are concerned, counsel for the respective States and the sugarcane suppliers contend that the State is fully empowered under the State Legislation to B fix a price. for sale/purchase of sugarcane to sugar producers as a 'remunerative price' which would take into account several local factors. This price is popularly described as 'State Advised Price' (SAP) and arrived at by calling for a meeting at the highest level, and after hearing the representatives of the contending parties. C In order to appreciate the contentions urged at the bar, I would take up the cases arising under the U.P. Sugarcane Act, 1953.

Mr. Shanti Bhushan, learned Senior Counsel appearing on behalf D of the West U.P. Sugar Mills Association (the association of sugar producers), questioned the power of the State Government under the U.P. Sugarcane Act, 1953 and the subordinate legislation made thereunder to fix any price for sale of sugarcane by the sugarcane-growers to the sugarcane factories. E Before we attempt a detailed analysis of the provisions of the Acts, Rules and Or.ders, we strrightaway notice that in none of them is there any reference to the so-called 'State Advised Price', which appears to be a term coined for convenience, either. by the State Government, or by the parties, and popularised by usage. Even if such an expression is to be found absent in the concerned legislations, the question is whether there is a statutory basis for the 'State Advised Price'.

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

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A (a) matters pertaining to the regulation of supply and purchase of cane for sugar factories;

(b) the varieties of cane which are suitable or unsuitable for use in sugar factories; B (c) the maintenance of healthy relations between occupiers or managers of factories, cane-growers, Cane-growers' Constitution-operative Societies, Cane Development Council; and

C (d) such other matters as may be prescribed.

The functions of the Development Council are indicated in Section 6(1) as unde~ :-

(a) to consider and approve the programme of development for the D zone;

(b) to devise ways and means for the execution of the development plan in all its essentials such as. cane varieties, cane seed, sowing programme, fertilizers and manures; E (c) to undertake the development of irrigation and other agricultural facilities in the zone;

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

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

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

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

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Chapter !II which deals with "Supply and Purchase of Cane" contains the fasciculus of Sections 12 to 19. Under Section 12, an officer known as Cane Commissioner makes estimates of requirements of the quantity of cane, which will be required by any factory after getting appropriate infonnation from the factory. Sections 13 and 14 deal with the manner of keeping information as to the cane-growers and Cane-growers' Co- B' operative Society by registers and by surveys carried out by the State Government. Section 15 empowers the Cane Commissioner to reserve and assign any area for the purposes of supply of cane to a factory in accordance with the provisions of Section 16 during one or more crushing seasons as may be specified. It also empowers him to cancel such order or alter the boundaries of the area so reserved or assigned. Under sub- C section (2) of Section 15, where any area has been declared as .reserved area for a factory, the occupier of such factory shall, if so directed by the Cane Commissioner, purchase all the cane grown in that area, 'which is offered for sale to the factory'. According to sub-section (3), where any area has been declared as assigned area for a factory, the occupier of such D factory 'shall purchase such quantity of cane grown in that area and offered for sale to the factory' as may be determined by the Cane Commissioner. There is an appeal provided to the State Government against the order of the Cane Commissioner passed under sub-section (I). E Then comes Section 16 on which most of the addressed arguments turn. It reads thus :-

"16. Regulation of purchase and supply of cane in the reserved and assigned areas - F (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 G (b) purchase of cane in any area other than a reserved or assigned area.

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

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