Vinod Kumar Agarwal v. State of U. P — 1981 DIGILAW 567 (ALL)

ORDER 1. The petitioner is a Khandsari manufacturer having a cane crusher of the size sulphitation non-hydraulic cane crusher. He had been granted a licence to manufacture Khandsari sugar under the U.P. Khandsari Manufacturing Licensing Order, 1967. Since Khandsari sugar is an essential commodity within the meaning of the Essential Commodities Act, 1955, its distribution, sale and purchase has been the subject matter of various Control Orders issued from time to time by the respective Governments, in exercise of the powers under S. 3 of the Essential Commodities Act, 1955. 2. On 31-1-1981, the State of U. P. issued a notification in exercise of the powers under Section 3 of the Essential Commodities Act, 1955, known as the Uttar Pradesh Khandsari Sugar (Levy) Order, 1981 (hereinafter referred to as `the Levy Order'). This had been issued by the State Government as it was of opinion that for securing equitable distribution of Khandsari sugar and for its availability at fair price it was necessary to do so. Cl. (3) of the said Levy Order provides that every producer shall sell to the State Government at the specified price at a purchase centre, fifty per cent of the Khandsari sugar manufactured by him in the first process. The Explanation added to this Cl. (3) was that no levy shall be due on the sugar manufactured in the second or any subsequent process. 3. The validity of the Levy Order was challenged in the Supreme Court by various producers of Uttar Pradesh. On Feb. 27, 1981 (reported in AIR 1981 SC 998 ), the Supreme Court dismissed the writ petition upholding the validity of the Levy Order. The Supreme Court found that none of the points raised challenging the validity of the Levy Order had any merit. The Supreme Court held (at p. 1000) :- "It is manifest that individual interests, however precious they may be, must yield to the larger interest of the community, namely, in the instant case, the large body of the consumers of sugar. In fact, even if the petitioners have to bear some loss there can be no question of the restrictions imposed on the petitioners being unreasonable." 4. From paragraph 27 of the writ petition, it appears that the petitioners were required to give 643.20 quintals of khandsari sugar out of the stock manufactured by him. In fact, even if the petitioners have to bear some loss there can be no question of the restrictions imposed on the petitioners being unreasonable." 4. From paragraph 27 of the writ petition, it appears that the petitioners were required to give 643.20 quintals of khandsari sugar out of the stock manufactured by him. Out of this, 353 quintals of levy khandsari sugar had been supplied by the petitioner, but the remaining quantity of of 290.20 quintals had not been given. 5. From Government Order No. 4273/ LXX-M-31/81, dated June 4, 1981, it appears that a number of applications were made to the State Government regarding the grant of concession in levy. The Government took a lenient view of the representations and found that although in the levy Order there was no provision regarding the grant of concession, but as the basis of demand for grant of concession by the khandsari units was that their production had been less and that they had no khandsari sugar for giving levy, hence the Govt. decided to grant the concession to those who had not supplied the required quantity of khandsari sugar order the Levy Order, on various conditions. The Government held the view that the price of sugarcane had been comparatively very high this year, and that lesser price was likely to be fixed next year. It could not, therefore, be definitely said as to what the production cost of khandsari units would be during the next year as compared to this year. It further found that the percentage of levy on khandsari could also not be predicted for the next year. Taking all these matters into consideration. the Government laid down the procedure which had to be followed for the disposal of the applications received for grant of concession in levy. We are in the present writ petition concerned with only one condition, out of several conditions, mentioned therein. The said condition is Cl. Taking all these matters into consideration. the Government laid down the procedure which had to be followed for the disposal of the applications received for grant of concession in levy. We are in the present writ petition concerned with only one condition, out of several conditions, mentioned therein. The said condition is Cl. (c), which is reproduced below :- "In regard to the khandsari units, which do not have khandsari in the aforesaid quantity in the first process at present, the Controller may consider their cases for grant of concession subject to the condition that the unit concerned shall furnish bank guarantee in favour of District Magistrate in regard to the value of levy unpaid share of khandsari, which shall be fixed at the rate of Rupees 600/- per quintal." 6. Challenging the aforesaid clause of the Government Order dated June 4, 1981, Sri B. D. Agarwal, learned counsel, argued that the demand for furnishing of bank guarantee towards the price of the khandsari sugar which could not be supplied in this year at the rate of Rs. 600/- per quintal was arbitrary and unreasonable. Counsel's argument was that the requirement of depositing the bank guarantee Rs. 600/- per quintal would compel the petitioner to furnish the bank guarantee in the sum of Rs. 1,75,000/-. This demand, apart from being harsh, was contravention of Article 14 of the Constitution. Counsel urged that the petitioner could get the bank guarantee from the Bank only on depositing cash amount and if the cash worth the amount was deposited, the petitioner's trade was likely to suffer heavily. In that connection, counsel contended that dumping of such a huge amount in the Bank was not likely to subserve any interest of the Government as well. 7. Counsel next urged that the concept of the basic principle enshrined in Article 14 of the Constitution has undertone a change. It carries a protection against arbitrariness. Hence, an order, if it is found to be arbitrary, is liable to be quashed. For this submission, learned counsel relied on a decision of the Supreme Court in Ajay Hasia v. Khalid Mujid, ( AIR 1981 SC 487 ). In this case, the Supreme Court held as follows (at p. 499): "No attempt should be made to truncate its all-embracing scope and meaning for, to do so would be to violate its activist magnitude. For this submission, learned counsel relied on a decision of the Supreme Court in Ajay Hasia v. Khalid Mujid, ( AIR 1981 SC 487 ). In this case, the Supreme Court held as follows (at p. 499): "No attempt should be made to truncate its all-embracing scope and meaning for, to do so would be to violate its activist magnitude. Equality is a dynamic concept with many aspects and dimensions and it cannot be imprisoned within traditional and doctrinaire limits............ Article 14 strikes at arbitrariness in State action and ensures fairness and equality of treatment. The principle of reasonableness, which legally as well as philosophically, is an essential element of equality or non-arbitrariness pervades Article 14 like a brooding omnipresence. This was again reiterated by this Court in International Airport Authority's case (1979) 3 SCR 1014 at p. 1042 (at p. 1642) of the Report. It must therefore now be taken to be well settled that what Article 14 strikes at is arbitrariness because an action that is arbitrary, must necessarily involve negation of equality. The doctrine of classification which is evolved by the Courts is not paraphrase of Article 14 nor is it the objective and end of that Article. It is merely a judicial formula for determining whether the legislative or executive action in question is arbitrary and therefore constituting denial of equality. If the classification is not reasonable and does not satisfy the two conditions referred to above, the impugned legislative or executive action would plainly be arbitrary and the guarantee of equality under Article 14 would be breached. Wherever, therefore, there is arbitrariness in State action whether it be of the legislature or of the executive or of an "Authority" under Article 12, Article 14 immediately springs into action and strikes down such State action. In fact, the concept of reasonableness and non-arbitrariness pervades the entire constitutional scheme and is a golden thread which runs through the whole of the fabric of the Constitution." 8. Article 14 forbids discrimination. It requires every citizen falling in one group to be treated alike. "Equality before the law or the equal protection of the laws" within the meaning of Article 14 means absence of any arbitrary discrimination by the law or the administration. Article 14 forbids discrimination. It requires every citizen falling in one group to be treated alike. "Equality before the law or the equal protection of the laws" within the meaning of Article 14 means absence of any arbitrary discrimination by the law or the administration. It, however, does not forbid a reasonable classification which should be based on some real and substantial distinction and must have a correlation to the object sought to be achieved. As said by the Supreme Court in State of West Bengal v. Anwar Ali, ( AIR 1952 SC 75 ) (at p. 93): "The classification must not be arbitrary, but be rational, that is to say, it must not only be based on some qualities or characteristics which are to be found in all the persons grouped together and not in others who are left out." 9. It, however, appears necessary in this case to find out first as to whether Cl. (c) of the Government Order dated June 4, 1981, is arbitrary. In this connection, it must be noted that under the Levy Order the petitioner was to supply fifty per cent of the manufactured khandsari sugar. This Order, as stated above, has been found to be valid. The petitioner, admittedly, did not give the khandsari required to be sold to the Government under the Levy Order. For non supply of khandsari sugar, the petitioner could be prosecuted, and under Cl. (4) of the Levy Order his licence granted under Cl. (3) of the U.P. Khandsari Sugar Manufacturing Licensing Order, 1967, was liable to be cancelled. Like the petitioner, there were many others who approached the Government for a concession being given to them as they knew that non-supply of khandsari sugar could put them in serious difficulty. The Government took a lenient view of the matter. It was interested in the assurance for getting the commodity, that is, the khandsari sugar for making it available to the public at large, at a fair price. It considered the representations made to it and decided to grant the concession by not insisting upon realisation of khandsari sugar in this year. For assuring the supply of khandsari sugar next year, the Government thought of imposing such a condition in public interest so that the khandsari manufacturers could not wriggle out of the same. It laid down in Cl. For assuring the supply of khandsari sugar next year, the Government thought of imposing such a condition in public interest so that the khandsari manufacturers could not wriggle out of the same. It laid down in Cl. (c) that those khandsari units which did not have khandsari of the first process which was required to be supplied under the Levy Order, could be given the concession subject to their furnishing bank guarantee in favour of the District Magistrate in regard to the value of unpaid share of khandsari at the rate of Rs. 600/- per quintal. The concession given was a grant. The petitioner had no right to get such a concession. It is still open to the petitioner to avail it or not to do so. The petitioner if thinks that the condition of giving bank guarantee is likely to cause hardship to him, by adversely affecting his trade, it is still open to the petitioner not to give the bank guarantee. 10. There appears to be a purpose be hind fixing the rate of Rs. 600/- per quintal. The purpose is to impel the supply of khandsari sugar to the State Government out of the total stock which would be manufactured next year. If the khandsari sugar was not supplied, the Government would be entitled under the Government Order dated June 4, 1981, to forfeit the guarantee. This will work a compulsion on the petitioner not to wriggle out of the undertaking given by him. The object behind this clause was motivated by the laudable desire to make khandsari sugar available to the public at a reasonable price. A thing is said to be arbitrary when any decision has been taken capriciously and without adequate determining principle not founded in the nature of things, non-rational, not done according to reason or judgment. We cannot subscribe to the submission of the learned counsel Sri B.D. Agarwal that the condition of making the demand at the rate of Rs. 600/- per quintal is capricious or irrational. 11. Counsel in this regard emphasised that bank guarantees are available in the market from the banks only on the condition of deposit of cash with them. Be that as it may, that itself cannot be a ground for holding that the condition is arbitrary. 600/- per quintal is capricious or irrational. 11. Counsel in this regard emphasised that bank guarantees are available in the market from the banks only on the condition of deposit of cash with them. Be that as it may, that itself cannot be a ground for holding that the condition is arbitrary. The country faced a very difficult situation this year, when the sugar, including khandsari, was available to it in the market at a very high price. From the market reports appearing in the Times of India of the 16th April, 1981, it appears that in the Muzaffarnagar market an 15th April, 1981, khandsari sugar was sold @ Rs. 557/- to Rs. 820/- per quintal. This is being cited by us as only an illustration. On account of the high price, sugar was available only in the kitchen of the rich and well to do persons. It is matter of common knowledge that khandsari units purchased sugarcane at a very high price, as a result of which major quantity of sugarcane was diverted to them. Sugar mills could not compete with khandsari units and had to close down their production. 12. Taking into consideration all the above circumstances, it is not possible to say for us that the demand of the Government for securing the assurance of supply of khandsari sugar from the petitioner and others for the next year for making it available to the consumers at a fair price, is irrational or capricious. As already observed above, the choice is still with the petitioners. 13. The petitioners' counsel submitted in the alternative that if the amount of bank guarantee demanded was @ Rs. 280/- per quintal, the petitioner could have arranged for the same. He urged that the demand of Rs. 600/- per quintal is unjustified inasmuch as if the petitioner would have supplied khandsari sugar to the State Government, the latter would have been bound to pay the price of the same. According to the counsel, if the price of the khandsari would have been taken into account at the time of fixing the bank guarantee, the demand could not have exceeded more than Rs. 280/- per quintal. The offer of the petitioner to give bank guarantee in the sum of Rupees 280/- per quintal is not bona fide. According to the counsel, if the price of the khandsari would have been taken into account at the time of fixing the bank guarantee, the demand could not have exceeded more than Rs. 280/- per quintal. The offer of the petitioner to give bank guarantee in the sum of Rupees 280/- per quintal is not bona fide. In the next year, the price at which khandsari sugar may be sold in the market cannot today be speculated. But, seeing the circumstances, as they are, one can reasonably believe that it would be sold nearly at the same rate at which it was available this year. Khandsari sugar was sold in the market between Rs. 700/- and Rs. 800/- per quintal. If the petitioner would get the above price of the khandsari sugar in the market, he is likely to sell the same in the open market and earn more with out caring for the lapse of the bank guarantee. Even if the bank guarantee is lapsed, he would still be a gainer. 14. Another thing worthy of being noticed is that the petitioner, admittedly, sold the levy sugar in the market instead of supplying it to the Government for being made available to the consumers. From the price of khandsari sold by him in the market, the petitioner must have made huge profits. The petitioner has pocketed the profit and is not even prepared to furnish bank guarantee. 15. On the facts and in the circumstances of the present case, we are unable to agree that the demand of bank guarantee @ Rs. 600/- per quintal was arbitrary. This Court has no power to reduce the amount of Rs. 600/- to Rs. 280/- per quintal, even if it had found that the demand of bank guarantee Cd Rs. 600/- per quintal was excessive. It is not the judicial question. The power resides in the State Government. The High Court cannot substitute its own opinion. Assuming that we would have found that Article 14 was infringed on account of the arbitrariness demonstrated by the petitioner, we would have only quashed Cl. (c) of the Government Order of June 4, 1981. 16. It would be apparent that the order of Government now impugned is relating to a concession in favour of the petitioner, and not any detraction from the right he possessed. (c) of the Government Order of June 4, 1981. 16. It would be apparent that the order of Government now impugned is relating to a concession in favour of the petitioner, and not any detraction from the right he possessed. If the impugned clause of the scheme now be vacated, the result would be that the petitioner would be relegated to the rights that he possessed before the formulation of the Government policy contained in the Government Order dated June 4, 1981. Obviously, that is not the relief which the petitioner seeks by this petition. In the circumstances, the allegation that there has been infringement of Article 14 of the Constitution, is incorrect. 17. The Standing Counsel relied upon certain decisions of this Court and the Supreme Court, and contended that since the petitioner did not have any right to get the concession from the Government and was bound to supply khandsari sugar under the Levy Order, he could not challenge the validity of the same by claiming protection of Article 14 of the Constitution. Amongst others, the decisions relied upon were (1) K.V. Raja Lakshmiah Setty v. State of Mysore, ( AIR 1967 SC 993 ), (2) International Cotton Corporation v. Commercial Tax Officer, ( AIR 1975 SC 1604 ) and (3) Shri Sita Ram Sugar Company v. State of U.P., (1978 All LJ 1067). Since we have found the impugned Government Order to be valid and not arbitrary, we are not called upon to go into this question in this petition. 18. No other point was pressed. Counsel had confined his argument to the attack on Government Order dated June 4, 1981, on the grounds stated above. The petition is dismissed summarily.