BIHAR SUGAR MILLS ASSOCIATION Vs. UNION OF INDIA

JUDGEMENT

(1.) Petitioner no.1 which claims to be an association of sugar mills in Bihar and U.P. has filed this writ petition alongwith some of the sugar mills challenging the Sugar (Price Determination for 1974-75 Production) Amendment Order, 1999 issued by the Government of India vide the notification dated 13.4.1999. By this notification levy sugar price for the sugar season 1974-75, was revised by the Government pursuant to the judgment of the Supreme Court in Shri Malaprabha Coop. Sugar Factory Ltd. Versus Union of India and another (1994) 1 SCC 648 (in short referred to as `Malaprabha-I') and the judgment of the Supreme Court in IA No.5-6/1995 in Civil Appeal Nos.122-123/1981 reported as Shri Malaprabha Coo. Sugar Factory Ltd. Versus Union of India and Another (1997) 10 SCC 216 (in short referred to as `Malaprabha-II'). The fixation of levy sugar price for the season 1974-1975 has been challenged on the ground that the same has not been properly fixed by the respondents in accordance with the provisions of Section 3 (3C) of the Essential Commodities Act read with Sugarcane (Control) Order, 1966 and in terms of the guidelines laid down by the Supreme Court in Malaprabha-I and Malaprabha-II. A few facts relevant for deciding this petition are:-

(2.) For equitable distribution of an essential commodity, including sugar, not only regarding its quantity but also the price to the consumers, the Government under Section 3 of the Essential Commodities Act, is empowered to issue a notification/order fixing the price of an essential commodity. Under Section 3 of the Act, the Government of India issued an order known a Levy Sugar Supply (Control) Order, 1972 (in short referred to as `Levy Sugar Order'). This order provides for compulsory supply or sale of sugar from a producer or recognised dealer of a specified quantity to a person or organisation or to such State Governments as it may direct from time to time and at a price not exceeding the price determined under Section 3 (3C) of the Essential Commodities Act. While fixing the price under Section 3 (3C), the Government is required to have regard to the four factors, namely, (i) minimum price of sugarcane (ii) manufacturing cost (iii) taxes and duties and (iv) reasonable return on the capital employed by the sugar factories. The sugar season normally starts from October 1 of every year and continues upto 30th September of the next year. Pending finalisation of the price to be fixed under Section 3(3C) of the Act, the Government in the first instance notifies the levy sugar price almost at the beginning of the sugar season by way of an interim measure. This interim price is normally the levy sugar price of the last sugar season. In the present case, this Court is concerned with the fixation of the levy sugar price for the sugar season 1974-75. The fixation of levy sugar price involves an elaborate exercise such as forecasting the cane availability for sugar production, duration, recovery etc. Pending finalisation of all these, prices notified for the year 1973-74 were repeated by notification dated November 28, 1974 as an interim measure. It had to be so done because the Government had to release 1974-75 sugar season production. Without such a price fixation, sugar could not have been released and the same would have resulted in disruption of sugar through public distribution system. By notification dated 28.11.1974, the Government had fixed the price of levy sugar at Rs.168.80paise per quintal. In January, 1975 the Government increased the free sale quantity of sugar from 30 to 35%. However, a decision was taken not to review the price immediately as the increase in free sale quota could have given some relief to the industry by way of higher realisation. By July, 1975, the final working results of the season were available for almost all the zones. The free sale prices were high compared to the levy sugar price and the Government was, therefore, required to determine prices in a suitable manner. The Government having regard to Section 3 (3C) and taking into consideration the minimum price of cane as fixed by the Government, manufacturing cost of sugar, duties and taxes thereon and ensuring a reasonable return to the producer on the entire production issued a notification on 11.7.1995 revising the levy sugar price w.e.f. 12.7.1975 at Rs.223/- per quintal. Before the issue of second notification dated 11.7.1975, the recommendations of the Bhargava Commission which was constituted to go into the question of fixation of price of sugar had been received and on the basis of the recommendations, the Government issued an order by adding Clause 5-A in the Sugarcane (Control) Order, 1966) under the provisions of the Essential Commodities Act. In terms of Clause 5-A of the Sugarcane (Control) Order, 1966 the excess realisation from the sale of free sugar was to be shared on 50:50 basis between the producers and the growers. Both the notifications dated 28.11.1974 and 11.7.1975, fixing the price of levy sugar were challenged by the association of sugar mills and some of the sugar mills by filing writ petitions in different High Courts. The matter was finally taken to the Supreme Court and the same was decided on 22.9.1993 and is reported as (1994) 1 SCC 648 (already referred to as `Malaprabha-I'). The Supreme Court while deciding the case observed that while fixing the price of levy sugar, the Government had not taken into consideration the impact of Clause 5-A of the Sugarcane (Control) Order. The Court, therefore, in paragraph 109 of the judgment observed that "the impugned notifications except the one dated November 28, 1974 cannot be upheld. The reason why we leave out the notification dated November 28, 1974 is that the same came to be issued before the new pricing policy was introduced. We hereby direct the Union of India to amend the notifications taking into account the liability of the manufactures under Clause 5-A of the Sugarcane (Control) Order, as regards cane price and refix the price of levy sugar having regard to the factors mentioned in Section 3 (3C) of the Act." On these directions being issued the matter was considered by the Government and order was issued on 22nd February, 1995 fixing the levy sugar price for the sugar season 1974-75, at Rs.206.48paise per quintal. This notification was also challenged by making an application before the Supreme Court. The Supreme Court by a judgment reported as (1997) 10 SCC 216 (Malaprabha-II) set aside this order as well and again directed the Government to issue orders/notifications in terms of the directions given by the Court. On these directions being given, the Government issued the impugned notification on 13th April, 1999 reiterating the price of levy sugar for North Bihar region at Rs.206.48paise. This notification has now been challenged by the petitioners by filing the present writ petition.

(3.) The contention of Mr.Sudhir Chandra, learned senior advocate appearing on behalf of the petitioners is that at the time of fixation of the revised price, the Government is required to take into consideration the losses suffered by the sugar mills by supplying sugar at the price fixed at the start of the sugar season by way of an interim measure. It is submitted that the levy sugar price fixed by the Government was the actual levy sugar price and the same had not taken into consideration the losses suffered by the Mills upto July 11, 1975 because of their supplying sugar at the interim price fixed by the notification dated November 28, 1974. It is submitted that the price fixed by notification dated 22nd February, 1995 and the notification dated 13th April, 1999, reiterating the earlier notification, was merely repetition of the `L' factor which clearly shows that the Government had not taken into consideration the losses suffered by the mills prior to the issue of the notification fixing the final price of the levy sugar. It is submitted that if it was the actual levy sugar price constituted of only the `L' factor, the same should have been fixed for the entire year and not w.e.f. 12th July, 1975. It is submitted that the losses of the earlier period were not taken into consideration is clear from the counter affidavit of the respondent and the petitioners are entitled to the final price fixed by the notification dated 13th April, 1999 for the entire sugar season and not w.e.f. 12th July, 1995 alone. Reliance for this is placed upon the judgment of the Supreme Court passed on 29th April, 1994 in SLP (C) No.13513/1990 titled as Kanoria Industries Ltd. Versus Union of India and ors. By this judgment the Supreme Court had held