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TMI Blog1982 (3) TMI 281X X X X Extracts X X X X X X X X Extracts X X X X ..... what is just stated. 2. In exercise of the power conferred by Clause (4) third proviso of the Sugarcane (Control) Order,1966,('Control Order' for short), the 2nd respondent-State of Uttar Pradesh, with the permission of the 1st respondent Union of India, issued Notification dated September 3, 1980, which is impugned in these petitions. The impugned Notification reads as under : Government Gazette, U.P. Extraordinary Legislative Supplement Part 4, Section (b) (Kha) ...Order Lucknow, Wednesday, 3rd September, 1980. Notification P.As.-306 In exercise of the powers conferred by Clause 4 proviso 3 of the Sugarcane Control Order, 1966, the Governor , with the permission of the Central Government, allows in Uttar Pradesh in respect of Khandsari units, producing Gur, rab or Khandsari sugar, where sugarcane is brought in bundles and is weighed as such, a rebate in regard to the binding material at Order 650 kilograms per quintal. By Order, R. Basudev, Secretary It was stated that there was a printing error in mentioning the figure '0.650 kg.' and a corrigendum has been issued to correct it to '0.625 kg.' per quintal in the Notification 3. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or, with the approval of the Central Government, the State Government, may in such circumstances and subject to such conditions as it may specify allow a suitable rebate in the price so fixed. A. Rebate that can be deducted from the price paid for sugarcane by producers of Khandsari sugar : A producer of khandsari 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 4, or the price agreed to between the producer or his agent and the sugarcane grower or the sugarcane growers' cooperative society, as the case may be (hereinafter referred to as the agreed price : ) Provided that : x x x x x x (iii) Where the sugarcane is brought bound in bundles and weighed as such, the Central Government, or, with the approval of the Central Government, the State Government or the Director of Agriculture or the Cane Commissioner or the District Magistrate within their respective jurisdiction, may allow a suitable rebate in regard to the weight of the binding material not exceeding 0.625 Kilograms per quintal of sugarcane; and, x x x 4. Claus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... power on the Central Government or with the approval of the Central Government, on the State Government to allow rebate at 0.625 kg. per quintal of sugarcane purchased by manufacturers of sugar, such rebate was being prescribed by the Central Government since 1968. The Gazettes of India setting out the notifications for the years 1968, 1971, 1972 and 1975 were shown to us. The notifications were issued in exercise of the power, conferred by Clause 3 of the Sugarcane Control Order, 1966. By the notifications hereinabove referred to minimum price of sugarcane per quintal payable by each sugar mill enumerated in the Schedule to the notification was fixed. While fixing this minimum price the Central Government authorized itself as also conferred power on the State Governments or the Commissioner or Director of Agriculture within their jurisdiction to allow a suitable rebate in regard to the weight of binding material not exceeding 0.625 kg. per quintal of sugarcane. It thus clearly transpires that the power to fix the minimum price of sugarcane comprehended the power to fix rebate to be allowed for binding material where sugarcane is brought to the factory or the producing center bound ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the power to fix price or minimum price of sugarcane and to prescribe rate of rebate are not independent but they are inter-dependent and one cannot be exercised without exercising the other. 8. Clause 4 confers power on 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 khandsari sugar for sugarcane purchased by them. Third proviso to Clause 4 provides that the Central Government or with the approval of the Central Government, the State Government may in such circumstances and subject to such conditions as it may specify, allow a suitable rebate in the price so fixed. If the provision were to end with Clause 4, a serious contention would arise whether the power to determine rate of rebate can be exercised de horse the power to fix minimum price or price of sugarcane or can be unilaterally exercised. Undoubtedly, if the power was exercised under Clause 4 probably the pre-condition to exercise of power of prescribing suitable rebate viz. fixing of minimum price or price of sugarcane if not satisfied, the power to prescribe rate of rebate could not have been ex ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he sugarcane grower is the one negotiated between the two, the producer or his agent will have to allow that much rebate and no more for binding material if notified in exercise of the power conferred by the third proviso. This literal construction accords with the intendment of the provision as would be presently pointed out. 10. Mr. Lodha urged that if the purchaser and seller of sugarcane are free agents to negotiate the price, what useful purpose would be served by prescribing the rate of rebate statutorily ? Says Mr. Lodha, that if higher rebate is to be allowed, the producer of khandsari sugar and the grower of sugarcane would work out the price accordingly and if less rebate is allowed, it will have a direct impact on the negotiated price. This submission proceeds on the unwarranted assumption that a producer of khandsari sugar and the grower of sugarcane are capable of negotiating the price as free agents and stand on a footing of equality. Sugarcane is a perishable commodity. The grower of the sugarcane is at the mercy of producers of sugar or khandsari sugar. It would be uneconomic for him to transport sugarcane to a long distance. By the very nature of the product, it b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e the rate of rebate. Language of Clause 4A on a literal or grammatical construction negatives the submission and it must as well be rejected looking to the intendment underlying this provision. 11. Mr. Shanti Bhushan, learned Counsel appearing for the petitioners in Writ Petitions No. 732 to 763 urged that assuming power to prescribe rate of rebate under Clause 4A read with the third proviso could also be exercised where price of sugarcane may be left to be negotiated between the growers of sugarcane and producers of khandsari sugar, yet the quantum as determined must at least have reasonable relation to the reality of market situation as well as prevalent trade practice. He urged that viewed from this angle fixation of rate of rebate at 0.625 kg. per quintal of sugarcane is unjust and unfair and therefore the Court should strike down the impugned notification on the ground that the determination is arbitrary and utterly unrelated to trade and practice. Simultaneously he contended that assuming that national average of weight of binding material works out at 0.741 kg. per quintal as submitted by the Respondents on the strength of the report of National Sugar Institute, Kanpur, th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... olicy Desk, in which claim for upward revision of allowance for binding material presently allowed under Sugar (Control) Order, 1966 in the light of the suggestions received from Indian Sugar Mills Association as per its letter dated July 14, 1977 has been meticulously examined. It appears that Indian Sugar Mills Association approached the Central Government requesting it for upward revision of the rebate for binding material till then granted under the Control Order. Indian Sugar Mills Association appears to be the spokesman of the sugar industry. Probably a grievance was voiced that while producers of sugar are under a statutory obligation to grant the prescribed rate of rebate, the producers of khandsari sugar are under no such obligation even though they purchase sugarcane from the same market. Accordingly while examining the question whether any upward revision in the rate of rebate should be allowed to the producers of sugar who purchase sugarcane, it was decided to simultaneously introduce an identical provision in respect of purchase of sugarcane by producers of khandsari sugar. That is the genesis of the introduction of Clause 4A in the Control Order. The file meticulously ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s difficult to accept the submission that the fixation of rate of rebate for binding material at 0.625 kg. for the whole country is either arbitrary or unreal or unrelated to trade and practice. The rate of rebate seems to have been determined by the law of averages after collecting information from all over the country. Coupled with this is the fact that the present rate of rebate is in vogue for over a quarter of a century. It in itself is sufficient to negative the contention that the rate of rebate is fixed arbitrarily or unrelated to trade and practice, 14. The next submission is that assuming that the Central Government was influenced by the report made by the Director of the National Sugar Institute, Kanpur, the report suggests that the average works out at 0.741 kg, per quintal, being approximately the mean between 0.64 and 1.5%. Therefore, it was vehemently urged that there was no justification for further reducing it to 0.625 kg. When the determination has to be made on law of averages and applicable to the whole country, the final figure cannot be mathematically determined. If the existing rate of rebate, determined on the national average is marginally higher or lower ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was lying at site. The weight of the joon (binding material) after it had been removed came to 32 kgs. If the actual weight of the binding material in respect of 1800 quintals of sugarcane turned out to be 32 kg., obviously per each quintal it would be much less than 0.625 kg. Mr. Shanti Bhushan, however, attempted to urge that the last sentence in the Report is disjointed and misplaced and he wanted us to read the Report as meaning that the weight of sugarcane in the trolly was 15.96 kg. and that the weight of the binding material in respect of the same was 32 kg. and, therefore, on an average it would work out at 2 kg. per quintal. It is not possible to read the Report in the manner indicated by Mr. Shanti Bhushan. In fact, the Report was produced on behalf of the petitioners and not a word has been stated in the affidavit to which it is annexed as to how the Report is to be read. It would thus appear that the rate of rebate set out in the impugned Notification bears resemblance to the sample testing of actual weight of binding material used in binding sugarcane when brought in bundles to the khandsari factory. 16. Our rejection of the submission should not be interpreted to im ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in bundles and he is free to negotiate the price when price or minimum price of sugarcane is not fixed and the impugned notification will not even remotely impinge upon his freedom to carry on his trade. Therefore, the short answer is that the restriction complained of does not directly and proximately interfere with the exercise of freedom of trade and Article 19(1)(g) is not attracted. 19. Assuming that the impugned notification making it obligatory to grant rebate for binding material when sugarcane is brought bound in bundles to the extent prescribed in the impugned notification does impose a restriction on the freedom to carry on trade, the next question is, whether the restriction is reasonable and imposed in the interest of general public. Once it is assumed that the impugned notification imposes a restriction on the freedom of trade, the burden is on those who support it, to show that the restriction imposed by the impugned law is reasonable and is imposed in the interest of general public. In other words, the burden is on those who seek the protection of Clause (6) of Article 19 not on the citizen who says that the restrictive enactment is invalid (see Saghir Ahmad v. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... roval of the Central Government, the State Government does not fix minimum price or price of sugarcane there is a further restriction on his freedom of negotiating the price because he is statutorily bound to give rebate for the binding material as prescribed in the impugned notification. To that extent one may give credence to the contention that there is a marginal restriction on the freedom of trade. 22. The statutory prescription of quantum of rebate for binding material has been prescribed for the benefit of sugarcane growers. Producers of sugar and khandsari sugar constitute a powerful trade lobby, the fact of which one can take judicial notice. Sugar being an essential commodity occasionally kept in short supply and being a commodity needed for consumption by almost the entire population, the powerful industry magnates in this field are in a position to dominate both the growers of sugarcane as also the consumers of the essential commodity. Number of regulations have been enacted almost since the dawn of independence to regulate this powerful combination of manufacturers of sugar and khandsari sugar all over the country for the ultimate benefit of consumers on the one hand ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sed is excessive. 23. Viewed from another angle, the impugned restriction is entirely reasonable. If price or minimum price of sugarcane is fixed, the producers of sugar would try to circumvent the price by unrealistic and impermissible deductions. The rebate for the weight of binding material seems to be a source for indulging in this nefarious, if not wholly fraudulent conduct. It is equally well settled that the State can impose reasonable restrictions under Clause (6) of Article 19 to prevent fraud or where advantage of a fraudulent conduct is sought to be taken (see Fedco (P) Ltd. v. S.N. Bilgram [1960]2SCR408 . The impugned restriction serves two-fold purpose : (i) it ensures price of sugarcane avoiding impermissible deductions; (ii) it circumvents possible fraud by making such deductions as would render illusory even the negotiated price, if not fixed price. And it is indisputable that if the rebate is not statutorily prescribed the cane growers will be at the mercy of the producers of sugar and khandsari sugar. If price or minimum price of sugarcane can be fixed by the State, because this power was never questioned before us, this very power comprehends the power to provid ..... X X X X Extracts X X X X X X X X Extracts X X X X
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