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1982 (3) TMI 281

..... 2 - A. Vardarajan And D.A. Desai, JJ. For Appellant: C.M. Lodha, Adv. in W.P. Nos. 6443-44/80, Shanti Bhushan, Adv. in W.P. Nos. 732-63, 3423-25/81, S.N. Kackar, Adv. in W.P. Nos. 777-96 And 1131-52 of 81, R.K. Jain And S. Mitter, Advs Girish Chandra And A. Subhashini, Advs. in W.P. Nos. 6443-44/8 JUDGMENT 1. Even an innocuous marginally regulatory measure affecting the sugar trade at fringes is sufficient for this powerful industry to invade the courts with petitions galore almost proclaiming that there should be hands off policy in respect of this trade. The filimsty albeit untenable grievance made in this group of petitions would underscore the truth of 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. Notifica .....

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..... "Rebate that can be deducted from the price paid for sugarcane by producers of Khandsari sugar" was introduced. Clauses 4 and 4 A are material for the present discussion and they may be extracted: 4. Minimum price of sugarcane payable by producers of Khandsari sugar: The Central Government or a State Government, with the concurrence of the Central Government, may, by notification in the Official Gazette, from time to time, fix the minimum price or the price of sugarcane to be paid by producers of khandsari sugar or their agents for the sugarcane purchased by them : x x x Provided also 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. 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 .....

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..... arcane where sugarcane is brought in bundles and is weighed as such, i.e. with the binding material. Armed with this power, the 2nd respondent after obtaining approval of the Central Government, as per letter dated September 6, 1979, issued the impugned notification directing that where sugarcane is brought in bundles and is weighed as such a rebate in regard to the binding material at 0.625 kg. per quintal be allowed. 6. Before adverting to the contentions raised in this group of petitions it may be made distinctly clear that though Clause 3A was inserted in the Control Order in 1976 conferring similar 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 ea .....

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..... on is that where minimum price of sugarcane is fixed by the Government, in order to ensure that that price is paid for sugarcane and simultaneously to avoid any unauthorised deduction, the Central Government or the State Government may prescribe the rate of rebate to be allowed beyond which no deduction under the camouflage of rebate for binding material can be resorted to by the purchaser; but if the power to fix minimum price or price of sugarcane is not exercised, there does not arise a situation in which the power to prescribe rebate to be allowed for binding material can be exercised. It was urged 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 c .....

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..... ich either the minimum price of sugarcane is fixed under Clause 4 or where no such price if fixed, the price agreed to between the sugarcane grower and the producer who purchased sugarcane and even in this latter situation the power to prescribe rate of rebate only in respect of binding material was conferred on the Central Government or the authorities set out in the third proviso to Clause 4A. Therefore, fixing of the minimum price may be a precondition to the exercise of power under the third proviso of Clause 4, as far as Clause 4A is concerned, even where the price to be paid by the producer to the 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 k .....

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..... t the invisible loss inflicted by the subtle method on the growers of sugarcane. Therefore, while retaining the power to fix minimum price or price to be paid and also in a given situation leaving it to the purchaser of sugarcane and grower of sugarcane to negotiate the price in order to eschew any exploitation of the weaker section between the two, the power to prescribe the rate of rebate was acquired and can be rightly enforced. Therefore, viewed from either angle, there is no merit in the submission that unless the power to fix the price or minimum price is exercised there is no power to prescribe 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 rea .....

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..... para 4 reads as under : With reference to Para 6 of the counter-affidavit I say that to the best of my information no survey was carried out at any time after 1976. It is to the best of my information that National Sugar Institute, Kanpur, conducted some kind of survey in 1964 or earlier. This half-hearted lack of knowledge would not be sufficient to reject what Mr. Vaz stated in his counter-affidavit. However, to put this factual averment beyond the pale of controversy Mr. Girish Chandra, learned advocate who appeared for the Union Government produced a file of the Department of Food, Sugar Policy 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 pr .....

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..... ween 0.64 to 1.5% except in Orissa where it is found to be 3.00%. When the matter was still under consideration of the Department, the present writ petitions were filed. It was observed that the present rate of rebate is in force for the last over 20 years, so far as the vacuum-pan sugar manufacturers are concerned and the same can be applied to the khandsari sugar manufacturers also. Probably further examination of the request for upward revision came to be stalled in view of the fact that the present writ petitions were filed. 13. In the light of the fact situation hereinabove set-out, it is 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 assu .....

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..... with sugarcane was weighed. The gross weight was 37 quintals and 36 kgs. Shri Shobha Ram, the owner of the sugarcane was directed to remove the joon (binding material) of sugarcane. The weight of M. Trolly was found to be 21 quintals and 40 kgs. Subtracting the weight of trolly from the gross weight, the weight of sugarcane with binding materials worked out at 15 quintals and 96 kgs. Then followed the calculation which may be extracted : The above farmer (kastkar) also reported that the sugarcane was being purchased at ₹ 9. 10 p. per quintal. Approximately about 1800 quintals cane 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 .....

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..... price for sugarcane the sugarcane grower and the producer of khandsari sugar are free to negotiate the price. The negotiated price would take care of the condition in which E sugarcane should be supplied. It would be open to the producer of khandsari sugar to buy sugarcane from the grower who may be asked to bring sugarcane not bound in bundles. The rebate for binding material is to be allowed only when sugarcane is brought to the khandsari sugar producing unit bound in bundles. It is always open to the purchaser of sugarcane to insist upon the grower bringing the sugarcane not bound 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 restr .....

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..... At any rate, the petitioners in the petitions in which Mr. Kacker appears, were supplied a copy of the counter-affidavit and therefore this passing submission must be negatived. 21. If freedom of trade postulates, inter alia, freedom to negotiate price for purchase and sale both the raw material and the finished product, the control order confers power to fix price of sugarcane and to that extent there is a restriction on freedom of trade. But the restriction is not under examination here. Even When he is left free to negotiate the price where either the Central Government or with the approval 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 .....

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..... tively extended to the powerful sugar industry and the cane growers because the cane growers admittedly are at a comparative disadvantage to the producers of sugar and khandsari sugar who were described in the course of arguments as sugar barons. It does not require an elaborate discussion to reach an affirmative conclusion that sugarcane growers who are farmers cannot negotiate on the footing of the equality with the producers of sugar and khandsari sugar. The State action for the protection of the weaker sections is not only justified but absolutely necessary unless the restriction imposed 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. Bilg .....

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