9911796707
TMI Blog1974 (8) TMI 114X X X X Extracts X X X X X X X X Extracts X X X X ..... are manufacturers of sugar, who have come before us after certification of their cases as fit for appeal to this Court tinder Article 133(1)(c) of the Constitution. They challenged the notification dated 28-6- 1967 issued by the Central Government under clause 7 of the Sugar (Control) Order, 1966, fixing ex-factory prices for sugar factories specified in the notification. It appears that, in the Writ Petitions filed in the High Court for quashing the impugned notification and appropriate orders in the nature of mandamus, the validity of section 3 of the Essential Supplies Act 10 of 1955, as well :as of the Sugar (Control) Order, 1966, issued under it were questioned. But, before us, the appellants have confined their arguments to contentions based on the correctness of the method adopted in fixing prices of sugar manufactured in various States, and the alleged failure of the Central Government to take into account the fact that there was an initial fixation of prices of sugar by a notification dated 1-2-1967 followed by a final fixation on 28-6-1967. According to the appellants, appropriate adjustments or allowances should have been made in the final fixation by a notification of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... djustment" provided for is before a fixation of the estimated price "having regard" to the basis provided by the relevant schedule, but there is no obligation whatsoever cast upon the Government to make any "adjustment" to compensate for losses due to any previous erroneous fixations. Indeed, such attempted adjustments may seem to be unfair to subsequent consumers who ought not, it could be argued, be made to pay for the past benefits possibly enjoyed by others. The Sugar Commission had recommended that the country should be divided into five zones for the purposes of fixation of price of sugar in each zone. Its opinion was, that dividing the country into a large number of zones would make the price fixation of sugar "degenerate" into "cost plus basis". The reason given by the Commission against division of the country into larger number of zones was that this would encourage inefficient factories to remain inefficient instead of inducing them to effect economies by rationalization and modernisation so as to become efficient. The grievance of the appellant Saraswati Industrial Syndicate was that the Government had really divided the cou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of working days on the basis of 22 crushing hours". Here, the heads of costs are '(1) cost excluding basic cost of cane but including extra cost on cane (2) packing (3) grade differential (4) selling expenses (5) "dearness allowance escalation for 10 points". Another set of schedules of fair price fixation for the year 1963-64, for which the basic cost of cane was presumably known, after giving "average capacity", "average crushing days", and "average recovery per cent", contains the following heads (p. 117) "(1) raw materials-basic cost of cane (2) conversion charges including- extra cost of cane (3) packing charges (4) adjustment for extras due to grade differential (5) selling expenses (6) excise duty (7) return (8) fair ex-factory price" Here, manufacturing "costs" are, presumably, covered by "conversion charges". A perusal of the figures under the first set of tables shows that, as the number of working days is increased, the cost is, quite, naturally, reduced. The 10 % recovery basis merely indicates the amount of sugar obtained from the total quantity of sugarcane. But, from both sets of schedul ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uld form the subject matter of representations which could have been made to the Government by each of the parties affected. If their case had substance, they ought to have made a demand for a more just fixation on what they considered to be more appropriate and reasonable basis before going to court. They had not done so. The petitioners did not challenge the price fixation on the ground that a quasi-judicial procedure had to be adopted before prices are fixed even if such price fixation affects, as it must each factory. Price fixation is more in the nature of a legislative measure even trough it may be based upon objective criteria found in a report or other material. 15-L192SupCI/75 it could; not, therefore, give rise to a complaint that a rule of natural justice has not been followed in fixing the price. Nevertheless, the criterion-adopted must be reasonable. Reasonableness, for purposes of judging whether there was an "excess of power" or an "arbitrary" exercise of it, is really the demonstration of a reasonable nexus between the matters which are taken into account in exercising a power and the purposes of exercise of that power. This was made clear by th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... here are intricacies of the trade of all profit making enterprises, which a Commission may not be able to probe." The Panipat Co-operative Sugar Mills' case (supra) the price of fixation of sugar under the Sugar (Price Determination) Order, 1971, on principles laid down by Tariff Commission and other expert bodies were considered by this Court. In that context it said (at page875) "A unit-wise fixation of price as suggested by counsel, and payment on the basis of a price so worked out would mean perpetuating inefficiency and mismanagement, and depriving the partial control policy of the incentives for economy and efficiency inherent in it. We are, therefore, satisfied both on the language of the sub-section, the background in which it was enacted and the mischief the legislature sought to remedy through its working that the true construction is that a fair price has to be determined In respect of the entire produce, ensuring to the industry a reasonable return on the capital employed in the business of manufacturing sugar. But this does not mean that Government can fix any arbitrary price, or a price fixed on extraneous considerations or such that it does not secur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... any adjustment in respect of deliveries of sugar made prior to the date of any notification issued thereunder. All that the said sub- clause provides is fixation of a price having regard to the estimated cost of production. (d) From the very nature of things it is obvious that even the cost schedules, recommended by the Sugar Enquiry Commission are not based on the actual cost of production in any individual factory, but are based on the average of only a few sample factories taken into account by the Sugar Enquiry Commission, which necessarily results in the price not being based on actual cost of production in any individual factory. (e) It is also incorrect to state as has been done by the petitioner that the price which is so fixed under the Sugar (Control) Orders if fixed on the basis of the previous year's results. As a matter of fact, the price, which is so fixed,isanestimate on the basis of data not only of the previous year's results, but also on the basis of the working of more than one year in the past and also crop forecasts and various other factors relating to the commencing year in respect of which the price has to be fixed. The statement by the petitio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nually with reference to the actual duration and recovery. The basic cost of cane and the margin of profit will have to be added to arrive at the ex-factory price. It may be reiterated that in applying the schedules, packing charges, grade, differentials and selling expenses should be kept constant per quints of sugar irrespective of recovery percentage while other items of cost should be adjusted in inverse proportion to the recovery percentage. Although the passage set out above primarily refers to other matters which are to be taken into account in determining the ex-factory selling price of white sugar, yet, it is relied upon by Mr. Desai inasmuch as the terms "year to year in the same zone" and "determined annually" occur here. These passages- only indicate a practice. Furthermore, they show that the Commission meant to lay down only guide-lines in determining relevant criteria for maximum price fixation. What is most important to note, however, is the reference to the margin of profit which the schedules do not mention. It is evident that the schedules are not all embracing. We also find (at p. 116) in this Report : "Table X.5 gives the fair ex-fa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... adesh 171.91 3. The revised prices have been notified today and come into effect immediately. 4. The prices for factories in other areas will be announced in due course". We find that, in the previous year, the price actually fixed subsequently was lower than the price fixed originally so that various sugar producers, including, we presume, all the appellants, got the benefit of such higher prices fixed earlier. We mention this only to indicate that the price-fixation for the whole season 1966-67 did not appear to be either arbitrary, capricious, or unfair.: As the High Court pointed out, it cannot, be contended that the estimate of manufacturing costs land the resulting fixation of price made in the beginning of February, 1967, Was wholly unrelated to the actual conditions which came to light after the working results of the crushing season as a whole were known at the end of the season. The practice of fixing the pieces once during the initial months of available and the other at the end of the season has been invariably followed. From the very nature ex factory price could not take Place, on any other basis. It could not e kept waiting until the whole season came t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of any other made under' Section 3. (2) No suit or other legal proceeding shall lie against the Govt. for any damage caused or likely to be caused by anything which is in good faith done or intended to be done in pursuance of any order made under section 3". This means that no suits or other legal proceedings, apart from those specified in the Constitution can be brought against the Govt. or its. officers for any action taken by the Govt. in fixing the price of sugar in good faith. There is no allegation made by the appellants that the action of the Govt. in fixing the price twice within a season was lacking in good faith. Hence, no proceeding could have been brought in a Civil Court to claim damages against the Govt. even if its bona-fide action was vitiated,by some illegality, of the kind set up by the appellants. The result is that, even if we could have given a mere decla- ration that the price fixation for the season 1966-67 in good faith was vitiated by some illegality, such a delcaration would have been useless to the appellants. It is well established practice that Courts do not issue writs or make declarations which are futile. We have already indicated ab ..... X X X X Extracts X X X X X X X X Extracts X X X X
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