TMI Blog1981 (3) TMI 254X X X X Extracts X X X X X X X X Extracts X X X X ..... riculture, Community Development and Cooperation (Department of Food), Government of India Order No. GSR 122/Ess. Comm/Sugarcane dated July 16, 1966, I, Bhola Nath Tiwari, Cane Commissioner, Uttar Pradesh hereby direct that no owner of power Crusher (other than those vertical power crushers which manufacture Gur or Rab from Sugarcane grown on their own fields) or a Khandsari Unit or any agent of such owner shall in any reserved area, of any Sugar Mill work the Power Crusher, or the Khandsari Unit prior to December 1, 1980 during the Year 1980-81. By Order Bhola Nath Tiwari Cane Commissioner Uttar Pradesh The Control Order was passed by the Central Government in exercise of the powers conferred on it by s.3 of the Essential Commodities Act, 1955 (hereinafter referred to as the 'Act of 1955'). In order to understand the contentions raised by the parties it may be necessary to analyse the prominent features of the above Notification with reference to the situation it was intended to meet. It is not disputed that sugar was being produced in the State of U.P. by the sugar mills through hydraulic process and by the power crushers through what is known as the 'open p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aheshwari, Additional Advocate-General appearing for the State of U.P., contended that, decision to ban the power crushers of the petitioners was taken as a part of a high powered policy to boost the production of sugar which had fallen during the year 1979-80 with the result that in the current year the country faced a great sugar famine. As the situation called for some positive action to increase the production, the matter having been discussed at the 34th Annual Convention of Sugar Technologists of India, it was decided to ban the production of khandsari by the power crushers for a limited period. A large number of documents in the nature of affidavits, counter- affidavits, reports and books have been filed by the counsel for both the parties in support of their respective contentions. We might also mention here that the Notification has since spent its force and, in fact, was not carried into effect because immediately after it was issued the present writ petitions were filed in this Court and the petitioners obtained stay of the operation of the Notification from this Court. The Attorney-General, however, insisted that the matter should be finally decided so that if the Ce ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hibition of the production of an article but envisages only a regulation of the period or hours of working. (5) The Notification violates the principles of natural justice inasmuch as it was passed without hearing the petitioners whose valuable rights were curtailed as they were put completely out of production even though for a short period. (6) The impugned Notification violative of clause 11 of the Control Order itself inasmuch as the prohibition against the working of the power crushers amounts to partial revocation of the licences of the petitioners granted to them under clause 3 of the Licensing Order. Clause 11 of the Control Order clearly provides that no adverse orders could be passed against any manufacturer without hearing him. (7) Even though the impugned Notification purports to have been passed under the Control Order which itself was passed under s. 3 of the Act of 1955 yet if the notification is properly considered and the mischief it causes is borne in mind, it goes against the very spirt and object of the Act of 1955 and, in fact, frustrates the equal distribution and production of sugar which apparently seems to be the objective of the impugned notification ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lines are laid down by the Court, before passing a fresh order the State will certainly hear the petitioners in order to know their point of view. (7) Clause 8 of the Control Order uses the words `period' or working hours' which are wide enough to embrace within their ambit a fixed period of time covering more than a day as also hours of work on any working day. We might also mention that some of the sugarcane growers have supported the arguments advanced by the petitioners. We now proceed to scrutinise and examine the contentions of the counsel for the petitioners. On the contention according to which the impugned notification is violative of Art. 19(1)(g), it may be necessary to dwell in some detail. It is no doubt well settled that where a citizen complains of the violation of fundamental rights contained in sub-clause (g) of clause (1) of Art 19 or for that matter in any of sub clauses (a) to (g) thereof, the onus is on the State to prove or justify that the restraint or restrictions imposed on the fundamental rights under clauses 2 to 6 of the Article are reasonable. In the instant case, we are mainly concerned with sub-clauses 4, 5 and 6 of Art.19. As far ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ns which may be imposed by the State in public interest under clauses 2 to 6 of Art.19. As to what are reasonable restrictions would naturally depend on the nature and circumstances of the case, the character of the statute, the object which it seeks to serve, the existing circumstances, the extent of the evil sought to be remedied as also the nature of restraint or restriction placed on the rights of the citizen. It is difficult to lay down any hard or fast rule of universal application but this Court has consistently held that in imposing such restrictions the State must adopt an objective standard amounting to a social control by restricting the rights of the citizens where the necessities of the situation demand. It is manifest that in adopting the social control one of the primary considerations which should weigh with the Court is that as the directive principles contained in the Constitution aim at the establishment of an egalitarian society so as to bring about a welfare state within the frame-work of the Constitution, these principles also should be kept in mind in judging the question as to whether or not the restrictions are reasonable. If the restrictions imposed appear ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... might have been but has not been enforced would not expose the restrictions to challenge on the ground that they are not reasonable. Finally, in determining the reasonableness of restrictions imposed by law in the field of industry, trade or commerce, the mere fact that some of the persons engaged in a particular trade may incur loss due to the imposition of restrictions will not render them unreasonable because it is manifest that trade and industry pass through periods of prosperity and adversity on account of economic, social or political factors. In a free economy controls have be introduced to ensure availability of consumer goods like food-stuffs, cloth or the like at a fair price and the fixation of such a price cannot be said to be an unreasonable restriction in the circumstances. Thus, apart from the various other factors which we have referred to above where restrictions are imposed on a citizen carrying on a trade or commerce in an essential commodity, the aspect of controlled economy and fair and equitable distribution to the consumer at a reasonable price leaving an appreciable margin of profit to the producer is undoubtedly a consideration which does not make th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n which the relevant criteria have been laid down but we consider it sufficient to refer to a passage in the judgment of Patanjali Sastri, C.J., in State of Madras v. V.G. Row. In M/s. Diwan Sugar and General Mills (Private) Ltd. and Ors. v. U.O.I.(3) which was also a case arising out of the Act of 1955 and the Sugar Control Order of 1955 promulgated by the Central Government under s. 3 of the said Act, a Constitution Bench of this Court while examining the nature of the restrictions imposed in that case took into account the various circumstances and observed : Clause 5 of the Order lays down the factors which have to be taken into consideration in fixing prices. These factors include among other things a reasonable margin of profit for the producer and/or trade and any incidential charges. This was kept in mind when prices were fixed by the impugned notification... The prices were prevalent in the free market and must certainly have taken account of a fair margin of profit for the producer, though in the case of an individual factory due to factors for which the producer might himself be responsible, the cost of production might have been a little more. Therefore, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dgrains. The most material ratio of this case is that even the freezing of stocks of foodgrains, with a view to securing their equitable distribution and availability was held to be a reasonable restriction. Even if by seizing the food stocks the right of a citizen to trade in food grains was seriously impaired and hampered yet such a State action was justified on the ground of public interest. On a parity of reasoning, therefore, a restriction (on the right of a trader dealing in essential commodities) like the ban in the instant case or fixation of prices aimed at bringing about distribution of essential commodities keeping the consumers interests as the prime consideration, cannot be regarded as unreasonable. We are fortified in our view by a decision of this Court in Prag Ice and Oil Mills and Anr. etc. v. Union of India(1) where Beg, C.J. observed as follows :- All the tests of validity of the impugned price control or fixation order are, therefore, to be found in section 3 of the Act. Section 3 makes necessity or expediency of a control order for the purpose of maintaining or increasing supplies of an Essential Commodity or for securing its equitable distributio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Notification or the Control Order is in direct contravention of the Directive Principles of State policy contained in Art. 39 in part IV of the Constitution inasmuch as instead of developing small-scale industries like the crushers the Notification has curbed the rights of their owners in order to benefit the mills. It is true that one of the important considerations which must weigh with the Court in determining the reasonableness of a restriction is that it should not contravene the Directive Principles contained in Part IV of the Constitution which undoubtedly has a direct bearing on the question as held by this Court in the cases of Saghir Ahmad v. State of U.P. and Ors.(1) and The State of Bombay and Anr. v. F. N. Balsara(2) where this Court made the following observations : The new clause in Article 19(6) has no doubt been introduced with a view to provide that a State can create a monopoly in its own favour in respect of any trade or business, but the amendment does not make the establishment of such monopoly a reasonable restriction within the meaning of the first clause of Article 19(6). The result of the amendment is that the State would not have to justify such ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . (1) Ray C.J., speaking for the 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. The question of fair price to the consumer with reference to the dominant object and purpose of the legislation claiming equitable distribution and availability at fair price is completely lost sight of if profit and the producer's return are kept in the fore-front...... 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. By its very nature, industry or trade or commerce goes through periods of prosperity and adversity on account of economic and sometimes social and political factors. In a largely free economy when control have to be introduced to ensure availability of consumer goods like foodstuff, cloth and the like at a fair price it is an impracticable proposition to require the Government to go t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t drought conditions faced by our country particularly the State of U.P. which is one of the main suppliers of sugarcane. Yet another cause of the shortage was that the sugar famine led to the large scale diversion of cane to gur and khandsari manufacturers. The counter-affidavit then proceeds to give a chart of the production of sugar by the crushers and the mills. It was further averred that unless the position was set right the stocks of 1979-80 would have been exhausted completely by the middle of November 1980. To meet this national crisis, the Government of India took various steps to increase the production of sugar in the country during the current season (1980-81). In the first place, the Government of India allowed rebate in the basic excise duty on excess sugar production in order to serve as an incentive to the sugar mills to start early cane crushing operation. This step however, could not possibly have the desired effect unless the sugar factories got the raw material, viz., constant supply of sugarcane. Indisputably sugarcane is utilised for manufacture of sugar, gur, rab and khandsari and some of the quantity is also utilised for seed, feed and chewing. It was fu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s detailed in the counter-affidavit of the respondents. Thus, in view of the factors detailed above, it was contended by the Union of India that it was in public interest that with a view to remove shortage of sugar and achieve equal distribution of sugarcane to the mills the impugned notification was passed which seems to strike a just balance between the requirements of the country and those of the khandsari units. The Attorney General contended that since the ban was imposed only for a very short period of about one month and a half, there could be no appreciable loss to the khandsari units, and even if there was some loss it could be recouped after the ban was lifted because the working cost of the khandsari units was much less than that of the mills. In other words, by virtue of the policy adopted by the Government in passing the impugned notification, a fair margin of profit was left to the khandsari units which were not completely closed. It was further stated that out of 89 sugar mills in the entire State of U.P., 18 sugar mills are owned by the U.P. State Sugar Corporation which is a Government company and controlled by the State. Sixteen sugar mills are under the coope ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sari units for the production of sugar. The consequence is the recovery of sugar from sugarcane in the case of khandsari units run by power crushers is between 4 to 6 per cent whereas in the case of sugar factories it ranges between 9 1/2 to 11 1/2 per cent. Thus, the overall position is that the utilisation of sugarcane by the mills is double that by the crushers and if the crushers are not able to produce more than the existing 4 to 6 per cent, half of the total quantity of sugarcane supplied to them goes waste which, if utilised by the factories, would have served for production of more sugar. This solid distinction between the two processes of manufacture followed by the mills and the crushers is, in our opinion, a very rational distinction which puts the mills in a different class and which also provides a reasonable nexus between the restrictions imposed on the crushers and the object sought to be achieved. The petitioner sought to falsify the figures quoted by the Union of India regarding the percentage of recovery of sugar by reference to a book written by Mr. Bepin Behari, and entitled `Rural Industrialization in India'. On page 100 of the book, the author has obser ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t period is more excessive than the situation demanded. In Madhya Bharat Cotton Association Ltd. v. Union of India Anr.(1) while considering a restriction imposed for a short time, this Court observed as follows :- Further, cotton being a commodity essential to the life of the community, it is reasonable to have restriction which may, in certain circumstances, extend to total prohibition for a time, of all normal trading in the commodity. Accordingly, we are of opinion that Clause 4 of the Cotton Control Order of 1950 does not offend Art. 19 (1) (g) of the Constitution because sub- clause (5) validates it. (Emphasis supplied) In that case the restriction imposed on cotton was for a short period of one month in February 1954 and for another month in May 1954; and was held to be justified and a reasonable restraint so as not to be violative of Art 19 (1) (g). The situation here is similar. Afterall, the petitioners were working their crushers under a licence granted to them under the Licensing Order and the impugned notification merely seeks to regulate the right and not to abolish the same. For the above reasons the first contention put forward by the petitioners tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... detailed below. In Chinta Lingam Ors. v. Government of India Ors., (1) this Court made the following observations: At any rate, it has been pointed out in more than one decision of this Court that when the power has to exercised by one of the of the highest officers the fact that no appeal has been provided for is a matter of no moment.....It was said that though the power was discretionary but it was not necessarily discriminatory and abuse of power could not be easily assumed. There was moreover a presumption that public officials would discharge their duties honestly and in accordance with rules of law. This case was followed in V. C. Shukla v. State (Delhi Admn.)(2) where one of us (Fazal Ali, J.) speaking for the Court observed as follows : Furthermore, as the power is vested in a very high authority, it cannot be assumed that it is likely to be abused. On the other hand, where the power is conferred on such a high authority as the Central Government, the presumption will be that the power will be exercised in a bona fide manner and according to law. Moreover, the power cannot be said to be arbitrary or unguided because the impugned notification derives its ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e low working cost of the crushers they sought to outcompete the mills and deprive them of the requisite amount of sugarcane which they should have got. It was not only just but also essential to boost the production of the factories so that white sugar may be produced on a large scale and sugarcane may not be wasted which would have been the case if most of the sugar-cane went to the crushers. We have pointed out that the recovery of sugarcane juice by the mills is double that by crushers, and if the latter were allowed to operate the wastage of the sugarcane would have been almost 50 per cent which could have been avoided if sugar cane was allowed to be utilised by the mills. The third limb of the argument on this point was that there was was no rational nexus between the prohibition contained in the Notification preventing the petitioners from working their crushers, even though for a short period, and the object sought to be achieved by it. This contention also must necessarily fail as we have already shown that such nexus existed. It was argued by Mr. Garg that as India lives in villages it was not understandable why the Central Government was bent on reducing the suppor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ried out in the open pans. This sugar used to be palish yellow in colour Nagaranjars and his co-workers studied the conductivity of plantation white sugars and refined sugars and found distinctive difference in conductivity of plantation white sugar and refined sugar. It has been clearly averred in para 15 of the counter affidavit filed by Mr. Bhola Nath Tiwari, Cane Commissioner, Government of U.P. (who issued the impugned notification) that in year 1978-79 the production in the reserved areas was 578.78 lakh tonnes out of which the percentage of cane utilised by the sugar mills was 27.24 whereas it was 9.73% in the case of the khandsari manufactured by power crushers. It is also stated that out of the total quantity of sugarcane only 45.23 per cent was utilised by gur manufacturers and the remaining 17.5 per cent was used for seed, feed and chewing purposes etc. Similarly, in the year 1979-80 there was a steep fall in the production of sugarcane from 578.78 lakh tonnes in the previous year to 471.11 lakh tonnes. Owing to this loss of production, there was keen competition for purchase of sugarcane between the sugar mill owners and the khandsari units. As a result of this unhe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r crusher and a horizontal one, namely, (1) a vertical power crusher can crush 1500 quintals of sugarcane per month whereas a horizontal one crushes 5600 quintals of the commodity in the same period; (2) vertical power crushers are non commercial and fall within the category of cottage industry whereas horizontal power crushers are included in the category of small-scale industry; (3) vertical power crushers are run by their owners them selves and draw supplies from sugarcane growers and (4) vertical power crusher do not require any licence. So far as the last part of the argument of the Additional Advocate-General of U.P. that vertical power crushers do not require a licence is concerned, it is factually wrong because all such crushers require a licence by virtue of the Orders passed by the Central Government under s.3 of the Act of 1955. Regarding the other distinctive features the mere ipse dixit of deponent Gupta who has sworn an affidavit, there is absolutely no documentary evidence to support the features pointed out or relied upon by the Additional Advocate General. In these circumstances, it has not been proved to our satisfaction that there is any real distinction between ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o be worked but it refers to another category of regulation viz., whether a crusher is to run or not for a particular period of time. We are unable to agree with the contention of Mr. Garg that the two words must be taken to have been used in clause 8 in the same sense. In fact, this interpretation of the words will cause violence to the language of the statutory provision and instead of advancing its object it would frustrate the purpose which clause 8 seeks to subserve. In the instant case, the notification has resorted to the first category, viz., the period of the working of the crushers, that is to say, about one and a half month, and has not at all touched or impinged upon the working hours of the crushers. If, however, the notification had fixed certain hours of the day during which only the crushers could work, then the notification would have resorted to the alternative mode of regulation, which obviously has not been done in this case We are unable to agree with the contention put forward by Mr. Garg and hold that the impugned notification is wholly consistent with the provisions contained in clause 8 of the Control Order. Contention Nos. 5, 6 and 7 relate to the objec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . The procedural pre-condition of fair hearing, however minimal, even post-decisional, has relevance to administrative and judicial gentlemanliness. The Election Commission is an institution of central importance and enjoys far-reaching powers and the greater the power to affect others' right or liabilities the more necessary the need to hear. We consider it a valid point to insist on observance of natural justice in the area of administrative decision-making so as to avoid the devaluation of this principle by administrators already alarmingly insensitive to the rationale of audi alteram partem ! Strong reliance was also placed on the observations of this Court in Maneka Gandhi v. U. O. I.(') where Bhagwati, J., after full discussion of the entire subject, observed thus:- The law must, therefore now be taken to be well settled that even in an administrative proceeding which involves civil consequences, the doctrine of natural justice must be held to be applicable. Similarly, in a very recent case S. L. Kapoor v. Jagmohan(2) this Court had taken an opportunity to emphasis the importance of rules of natural justice and reiterated as follows: The old dist ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hers, it would have completely defeated and frustrated the very object not only of the Notification but also of the Act of 1955 and created complications which may have resulted in a further deterioration of an already serious situation. If the rules of natural justice were not applied in such an emergent case, the petitioners cannot be heard to complain. Afterall the notification directed stoppage of operation of the petitioners' crushers only for a very short period and they would have had an opportunity of recouping their loss after they were allowed to function because the proportion of consumption of khandsari sugar was limited as indicated above. The petitioners were, therefore, not seriously prejudiced and have rushed to this Court rather prematurely. The Attorney General had, however, a much more effective answer to the contention raised by Mr. Garg on this point. It was submitted by the Attorney General that having regard to the circumstances, the background and the situation in which the impugned notification was issued under clause 8 of the Control Order, it had a statutory complexion and should be regarded as purely legislative in character. He added that no one ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ustice, can be complained of. Unnatural expansion of natural justice, without reference to the administrative realities and other factors of a given case, can be exasperating. (Emphasis supplied) In Joseph Beauharnais v. People of the State of IIIinois(2) the following observations were made which are apposite to the facts of the present case :- This being so, it would be out of bounds for the judiciary to deny the legislature a choice of policy, provided it is not unrelated to the problem and not forbidden by some explicit limitation on the State's power. That the legislative remedy might not in practice mitigate the evil, or might itself raise new problems, would only manifest once more the paradox of reform. It is the price to be paid for the trial-and- error inherent in legislative efforts to deal with obstinate social issues. The passing of the notification in the instant case was an act of a legislative character and was really a trial- and-error method adopted to deal with a very serious social problem. In Bates v. Lord Halsham of St. Marlebone and Ors.(3) under similar circumstances a statutory committee had made an order in relation to powers to licen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... en a temporary suspension of the operation of power crushers amounted to a partial revocation of the licence granted to the petitioners and that therefore it was incumbent on the authorities concerned to give the petitioners an opportunity of being heard and making a representation before such revocation took effect. The Attorney General rightly pointed out that neither subclause (2) nor the proviso thereto is attracted in the instant case. It is true that the petitioners got licences under the Licensing Order which was also passed under the Act of 1955. A revocation of a licence means that the licence has not been suspended but cancelled for all times to come entailing civil consequences and complete abolition of the right for the exercise of which the licence was granted. A temporary suspension of the working of the crushers owned by the petitioners cannot amount to a revocation, either complete or partial. In fact, in our opinion, the proviso to sub-clause (2) of clause 11 of the Control Order does not at all envisage a partial or periodical revocation of a licence. The proviso would come into play only if a licence is revoked or cancelled once for all. Since a revocation or can ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ne and the increasing demand of sugar by the consumers, the interests of the consumers had to rank above all considerations. The notification, as stated by us earlier strikes a just balance between the needs of the consumers and the harm which may be done to the owners of the crushers. The degree and urgency of the evil sought to be remedied by a social control is the purport and the central theme of the impugned notification. Having regard to the various aspects which we have indicated above, it cannot be argued with any show of force that the remedy sought by the notification is in any way arbitrary or excessive. On the other hand, the report of the experts, stoppage of the production of sugar by the factories, the drought conditions and other factors have to enter into the decision of the Government in passing the impugned notification. The notification ex facie cannot be said to have been passed without due care and deliberation. Relevant portion of Section 3 of the Act of 1955 runs thus:- 3. (1) If the Central Government is of opinion that it is necessary or expedient so to do for maintaining or increasing supplies of any essential commodity or for securing their equitable ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... own by this Court in determining whether or not a restriction is reasonable. Before closing the judgment we would like to lay down certain guidelines for any future policy that the Government may consider fit to shape in the light of the discussion on the points raised before us in this case. In fact, both counsel for the petitioners and the Attorney General had requested us to lay down certain guidelines so that the Government may benefit from the same. Although we have upheld the impugned notification but having regard to the special features of the present case we are not quite satisfied that a better policy to control sugar or increase its production could not be followed which may satisfy the parties concerned, viz., the crushers, the mills, the sugarcane growers and the consumers. In case the Government decides to impose a ban in future on the power crushers or other units, it may consider the desirability of giving a bare minimum hearing not to all the owners of khandsari units but to only one representative of the Association representing them all, and getting their views on the subject. It is possible that they might give some suggestions which the Government would l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m the purview of the notification. Thus it was asserted that the owners of crushers who want to switch over to production of gur or rab, because of the ban imposed by the Government on the production of khandsari may be allowed to do so. The Attorney General, however, pointed out that if this course is adopted it will be difficult to detect as to how many crushers are producing khandsari sugar in the garb of gur or rab. Wherever any step for banning production is taken, the Government has to evolve some procedure to detect the defaulters and with the resources at its command, we cannot understand why a special staff cannot be appointed on a temporary basis for looking after the compliance of the order by the crushers and making surprise checks periodically. Another method to prevent the abuse of the privilege of production of gur or rab by producing khandsari in a clandestine fashion may be to insert a condition in the licences of the manufacturers of khandsari sugar that if they produce khandsari during the period of the ban their licences would be cancelled. The result is that all the contentions raised by the petitioners except the one raised by Mr. Gupta that the introducti ..... X X X X Extracts X X X X X X X X Extracts X X X X
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