1987 JTR(SC) 794
1987 AIR(SC) 2351 ; 1988 1 CurCC(SC) 272 ; 1988 EastCrC(SC) 46 ; 1987 4 JT 154 ; 1987 2 Scale 824 ; 1987 Supp SCC 476 ; 1988 1 SCR 577 ; 1988 68 STC 407 ; 1975 UJ 417 ; 1988 1 UJ 187 ; 1987 KHC 778
B.C. RAY AND K. JAGANNATHA SHETTY, JJ.
Writ Petn No. 7993 of 1982, D/- 26-10-1987.
M/s. Gupta Sugar Works, Petitioners
Versus
State of U.P. and others, Respondents.
Act
Referred
:CONSTITUTION OF INDIA : Art.14, Art.141, Art.19(1)(g), Art.32
ESSENTIAL COMMODITIES ACT : S.3(3)(c)
(A) The Essential Commodities Act, 1955, Section 3(3)(c) read with Section 5 delegates authority to the Central Government to impose levies on essential commodities, which was exercised here to enforce a 50% levy on Khandsari sugar production under the U. P. Khandsari Sugar (Levy) Order, 1981 framed under the Act. The Constitution of India, Article 14 ensures equality before law and reasonable classification, Article 19(1)(g) protects the right to practise any profession, and Article 32 provides the right to move the Supreme Court for enforcement of these rights. Article 141 binds courts to declare the law declared by the Supreme Court, and Section 32 empowers the Court to examine whether the statutory price fixation complied with the legislative policy and guidelines under sub-section (3C) of Section 3, without revaluating the commercial or financial consequences. The Constitution (Application to Jammu and Kashmir) Order, 1954, is also applicable in this context.
(B) Price fixation under the Essential Commodities Act is subject to judicial review only for compliance with the statutory policy and guidelines; courts will not interfere with reasonable commercial decisions or individual loss claims. The primary consideration is the interest of consumers and equitable distribution at fair prices, but the industry is entitled to a reasonable return. The mere allegation of loss by producers does not render the law unreasonable, and the exercise of power must not be colourable or discriminatory.
Facts of the case:
The petitioner, engaged in the manufacture of Khandsari sugar, challenged the validity of the U. P. Khandsari Sugar (Levy) Order, 1981, issued under Section 3 of the Essential Commodities Act read with Section 5. The Order required surrender of 50% of production by sulphitation units and allowed the balance 50% along with total production from subsequent processes to be sold in the open market, with levy sugar priced at Rs. 320 per quintal. The petitioner contended that the price fixation ignored sub-section (3C) guidelines, imposed an unreasonable restriction on fundamental rights, and that the public auction of levy sugar resulted in a colourable profit for the State.
Findings of Court:
The Court held that price fixation is primarily the domain of the executive, and its examination is limited to whether the statutory policy and guidelines were considered. Citing precedents, the Court confirmed that the interest of consumers is the dominant factor, and producers are not entitled to price fixation decisions that override this objective. The Court observed that the petitioners could sell 50% of their production freely, and any minimal loss was justified. The explanation for the public auction was found reasonable, with no colourable exercise of power. The petition was dismissed.
Issues:
Whether the State Government, while fixing the price of levy Khandsari sugar, took into consideration the guidelines in sub-section (3C) of Section 3 of the Essential Commodities Act, 1955, and whether the levy order imposed an unreasonable restriction on the fundamental rights under Articles 19(1)(g) and 14 of the Constitution.
Ratio Decidendi:
The Court reaffirmed that under the Essential Commodities Act, price fixation for essential commodities is governed by consumer interest and equitable distribution, and the judiciary will only review compliance with statutory guidelines. Producers are not entitled to dictate price, and the exercise of power is valid if it is not colourable, arbitrary, or based on irrelevant considerations, even if it results in some loss to industry.
Result:
The Writ Petition is dismissed with costs.
(A) The Essential Commodities Act, 1955, Section 3(3)(c) read with Section 5 delegates authority to the Central Government to impose levies on essential commodities, which was exercised here to enforce a 50% levy on Khandsari sugar production under the U. P. Khandsari Sugar (Levy) Order, 1981 framed under the Act. The Constitution of India, Article 14 ensures equality before law and reasonable classification, Article 19(1)(g) protects the right to practise any profession, and Article 32 provides the right to move the Supreme Court for enforcement of these rights. Article 141 binds courts to declare the law declared by the Supreme Court, and Section 32 empowers the Court to examine whether the statutory price fixation complied with the legislative policy and guidelines under sub-section (3C) of Section 3, without revaluating the commercial or financial consequences. The Constitution (Application to Jammu and Kashmir) Order, 1954, is also applicable in this context.
(B) Price fixation under the Essential Commodities Act is subject to judicial review only for compliance with the statutory policy and guidelines; courts will not interfere with reasonable commercial decisions or individual loss claims. The primary consideration is the interest of consumers and equitable distribution at fair prices, but the industry is entitled to a reasonable return. The mere allegation of loss by producers does not render the law unreasonable, and the exercise of power must not be colourable or discriminatory.
Facts of the case:
The petitioner, engaged in the manufacture of Khandsari sugar, challenged the validity of the U. P. Khandsari Sugar (Levy) Order, 1981, issued under Section 3 of the Essential Commodities Act read with Section 5. The Order required surrender of 50% of production by sulphitation units and allowed the balance 50% along with total production from subsequent processes to be sold in the open market, with levy sugar priced at Rs. 320 per quintal. The petitioner contended that the price fixation ignored sub-section (3C) guidelines, imposed an unreasonable restriction on fundamental rights, and that the public auction of levy sugar resulted in a colourable profit for the State.
Findings of Court:
The Court held that price fixation is primarily the domain of the executive, and its examination is limited to whether the statutory policy and guidelines were considered. Citing precedents, the Court confirmed that the interest of consumers is the dominant factor, and producers are not entitled to price fixation decisions that override this objective. The Court observed that the petitioners could sell 50% of their production freely, and any minimal loss was justified. The explanation for the public auction was found reasonable, with no colourable exercise of power. The petition was dismissed.
Issues:
Whether the State Government, while fixing the price of levy Khandsari sugar, took into consideration the guidelines in sub-section (3C) of Section 3 of the Essential Commodities Act, 1955, and whether the levy order imposed an unreasonable restriction on the fundamental rights under Articles 19(1)(g) and 14 of the Constitution.
Ratio Decidendi:
The Court reaffirmed that under the Essential Commodities Act, price fixation for essential commodities is governed by consumer interest and equitable distribution, and the judiciary will only review compliance with statutory guidelines. Producers are not entitled to dictate price, and the exercise of power is valid if it is not colourable, arbitrary, or based on irrelevant considerations, even if it results in some loss to industry.
Result:
The Writ Petition is dismissed with costs.
B.PARTHASARTHY, C.V.SUBBA RAO, Kuldip Singh, Prithvi Raj, R.K.JAIN, R.P.SINGH PAL, SHOBHA DIXIT
Judgement
JAGANNATHA SHETTY, J. :- This is a petition under Article 32 of the Constitution. The petitioner is engaged in the manufacture of Khandsari sugar. The petitioner challenges the validity of the U. P. Khandsari Sugar (Levy) Order, 1981 ("Levy Order"). It was issued in exercise of powers under Section 3 of the Essential Commodities Act, 1955 by virtue of delegation of power by the Central Government under Section 5 of the said Act. The Levy Order requires Khandsari manufacturing units to surrender levy of 50% of the production by sulphitation units in the first process. The balance 50% of that process with the total production by subsequent processes was left free to be sold in the open market by the manufacturing units. The price fixed for the levy Khandsari sugar was Rs. 320/- per quintal.
2. The petitioner challenges the price fixation on the ground that the State Government has not taken into consideration the guidelines in-built in sub-section (3C) of Section 3 of the Essential Commodities Act, 1955. The petitioner alleges that the levy order is unreasonable or excessive restriction on the fundamental rights guaranteed under Articles 19(l)(g) and 14 of the Constitution. It is also the case of the petitioner that the State Government sold the levy sugar by public auction realising large profit and the levy, therefore, was a colourable exercise of the power.
3. Before considering these contentions, we may start with recent observation of O. Chinnappa Reddy, J. in Union of India v. Cynamide India Ltd., AIR 1987 SC 1802 at p. 1805:
"Price fixation is neither the function nor the forte of the Court. We concern ourselves neither with the policy nor with the rates. But we do not totally deny ourselves the jurisdiction to inquire into the question, in appropriate proceedings, whether relevant considerations have gone in and irrelevant consideration kept out of the determination of the price. For example, if the legislature has decreed the pricing policy and prescribed the factors which should guide the determination of the price, we will, if necessary, inquire into the question whether the policy and the factors are present to the mind of the authorities specifying the price. But our examination will stop there. We will go no further. We will not deluge ourselves with more facts and figures. The assembling of the raw materials and the mechanics of the price fixation are the concern of the executive and we leave it to them. And, we will not revaluate the considerations even if the prices are demonstrably injurious to some manufacturers or producers. The Court will, of course, examine if there is any hostile discrimination. That is a different cup of tea altogether."
4. This will be the parametres and the limitation of inquiry by Courts whenever the price fixation of any essential commodity is called into question. The Court does not act like a Chartered Accountant nor acts like an Income-tax Officer. The Court is not concerned with any individual case or any particular problem. The Court only examines whether the price determined was with due regard to considerations provided by the statute. And whether extraneous matters have been excluded from determination.
5. In the present case even this limited inquiry appears to be unnecessary. The validity of the same Levy Order was the subject-matter of decision of this Court in New India Sugar Works v. State of Uttar Pradesh, (1981) 3 SCR 29 : (AIR 1981 SC 998).
6. There Fazal Ali, J. who spoke for the Bench observed (at p. 1000 of AIR):
"It was next strongly contended that in fixation of the price of levy sugar the Government has not taken into consideration the fact that the petitioners would undergo a serious loss because the price would not be sufficient even to cover their manufacturing cost. We are, however, unable to agree with this argument. The policy of price control has for its dominant object equitable distribution and availability of the commodity at fair price so as to benefit the consumers It is manifest that individual interest, however, precious they may be must yield to the interest of the community viz., in the instant case, the large body of the consumers of sugar. In fact, even if the petitioners have to bear some loss there can be no question of the restrictions imposed on the petitioners being unreasonable. In Shree Meenakshi Mills Ltd. v. U.O.I. (AIR 1974 SC 366) this Court observed as follows:
"If fair price is to be fixed leaving a reasonable margin of profit, there is never any question of infringement of fundamental right to carry on business by imposing reasonable restrictions.
In determining the reasonableness of a restriction imposed by law in the field of industry, trade or commerce, it has to be remembered that the mere fact that some of those who are engaged in these are alleging loss after the imposition of law will not render the law unreasonable."
(Emphasis supplied)*
* Emphasis not found in original - Ed.
7. Similar view was taken by this Court in the case of Prag lce and Oil Mills v. Union of India, (1978) 3 SCR 293: (AIR 1978 SC 1296) where the Court speaking through Beg, C. J. observed as follows:
"It has also to be remembered that the object is to secure equitable distribution and availability at fair price so that it is the interest of the consumer and not of the producer which is the determining factor in applying any objective tests at any particular time."
8. In this view of the matter, the primary consideration in the fixation of price would be the interest of consumers rather than that of the producers. Moreover, we think that since the petitioners are allowed to sell freely at any rate they like the remaining 50% of the sugar (after excluding the 50% which they have to give for levy) as also the produce by the second and third process, the loss if any caused to the petitioners would be minimal.
9. Mr. R. K. Jain learned counsel for the petitioner however, urged that the above case did not lay down the correct law. He said that the primary consideration in the fixation of price would not be the interest of consumers, but to ensure a reasonable return to producers. That according to him the law laid down by this Court in (i) The Panipat Cooperative Sugar Mills v. Union of India, (1973) 2 SCR 860: (AIR 1973 SC 537) and Anakapalle Co-op. Agrl. & Industrial Society Ltd. v. Union of India, (1973) 2 SCR 882: (AIR 1973 SC 734). Since these two decisions have not been referred to in the New India Sugar Works case (AIR 1981 SC 998) we should. refer this case to a larger bench for decision.
10. We do not think that the counsel is justified in his submission. We do not find any diversity of views taken in the aforesaid cases. All those cases concerned with the price fixation of the essential commodity under the Essential Commodities Act. The primary object of the Act was to control the production, , supply and distribution of essential commodities and to make such commodities available at a reasonable price. The Preamble of the Act makes it clear. It reads: "An Act to provide in the interest of the general public, for the control of the production, supply and distribution of and trade and commerce in certain commodities.
11. The exercise provided under the Act was intended ultimately to serve the interest of consumers. It is fundamental in the entire scheme of the Act. But then, the interest of the industry as a whole cannot be left out. It is also required to be borne in mind. The levy price of sugar should ensure reasonable return to the industry. That is one of the guidelines provided under sub-sec. (3C) of S. 3 of the Essential Commodities Act. But that does not mean that the interest of producers should outweigh the interest of consumers. It would be tilting the balance too much. Such a contention in our opinion, also runs afoul of our earlier analysis.
12. It is true that there is no express reference to Panipat (AIR 1973 SC 537) and Anakapalle (AIR 1973 SC 734) in the judgment in New India Sugar Works. But the judgment need not be a digest of cases. It need not be written like a thesis. The decision in New India Sugar Works (AIR 1981 SC 998) may be brief, but not less predictable on the principles of Panipat and Anakapalle. There this Court found the levy price reasonable even from the point of view of the industry. This Court took into consideration the liberty reserved to manufacturers to sell freely 50% of the sugar manufactured and also 100% of the produce by 2nd and 3rd processes. This Court was of opinion that by such a free sale the industry could get reasonable return. We agree with this conclusion and see no reason for reconsideration.
13. As to the grievance of the petitioner that the State has made profit by the sale of Khandsari sugar at public auction, we perused the counter-affidavit of the State. We do not find any colourable exercise of the power. There was every justification for the sale by public auction. It has been stated that the petitioner and some other producers delivered inferior quality of Khandsari. That was found to be unacceptable to consumers at Fair Price Shops. The State officers accordingly reported to the Government. The Government issued instructions to distribute the levy sugar liberally through permits for marriages and religious functions. The consumers, however, could not come forward. The Government then directed the disposal of levy-sugar by public auction. It was not with a view to earn profit although incidentally the Government made some profit. The levy sugar was brought to public sale only to prevent deterioration when the consumers refused to accept it. We have no reason to doubt the explanation given by the State Government.
14. In the result, the Writ Petition fails and is dismissed with costs.
Petition dismissed.