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2005 DIGILAW 840 (PAT)

Bihar Sugar Mills Association v. Union Of India

2005-09-16

AFTAB ALAM

body2005
Judgment Aftab Alam, J. 1. There are nine petitioners in C.W.J.C. No. 7582 of 2004. Petitioner No. 1 is the Association of Sugar Mills of which petitioners 2 to 9, the eight individual sugar mills, are members. C.W.J.C. No. 8088 of 2004 is filed at the instance of a single sugar mill. All the petitioners in the two writ petitions seek to challenge the rate of transport rebate and the conditions attached for availing the rebate as fixed by the Central Government vide Order No. GSR 203 (E)/ Ess.Com/Sugarcane published in the Gazette of India, Extraordinary, dated March 22, 2004 (A copy of the Gazette notification is at Annexure-1 to C.W.J.C. No. 7582 of 2004). The impugned order allowed the sugar mills in Bihar (as well as in three other States) to deduct from the price paid for the sugarcane, transport rebate @ 28 paise per quintal per kilometre, subject to a maximum of Rs. 5.83 per quintal. However, a proviso to the order added the condition that the rebate would be allowed only to those sugar mills that made timely payments of cane price and cleared all arrears of cane payment dues, together with due interest as per Clause 3 of the Sugarcane (Control) Order, 1966 . 2. The petitioners make the grievance that the transport rebate is fixed at a rate that is too low and inadequate and the conditions attached for availing it is quite illegal, restrictive and unreasonable. 3. In order to examine the petitioners claim in its proper perspective it would be necessary to refer to certain provisions of the Sugarcane (Control) Order, 1966 (made u/s. 3 of the Essential Commodities Act, 1955 (Act 10 of 1955) and the Bihar Sugarcane (Regulation of Supply and Purchase) Act, 1981 and the Rules framed thereunder along with some recent amendments introduced in some of those provisions as a result of the direction(s) given by the Court when the petitioners earlier came before it. Clause 3 of the Sugar Control Order, 1966 (hereinafter referred to as the Central Order) empowers the Central Government to fix the minimum price of Sugarcane to be paid by producer of sugar. The clause, in so far as relevant for the present, is reproduced below : 3. Clause 3 of the Sugar Control Order, 1966 (hereinafter referred to as the Central Order) empowers the Central Government to fix the minimum price of Sugarcane to be paid by producer of sugar. The clause, in so far as relevant for the present, is reproduced below : 3. Minimum price of sugarcane payable by producer of sugar : (1) The Central Government may, after consultation with such authorities, bodies or associations as it may deem fit, by notification in the Official Gazette, from time to time, fix the minimum price of sugarcane to be paid by producers of sugar or their agents for the sugarcane purchased by them, having regard to -- (a) the cost of production of sugarcane; (b) the return to the grower from alternative crops and the general trend of prices of agricultural commodities; (c) the availability of sugar to the consumer at a fair price; (d) the price at which sugar produced from sugarcane is sold by producers of sugar; and (e) the recovery of sugar from sugarcane : Provided xxx xxx xxx Explanation -- (1) xxx xxx xxx. (2) No person shall sell or agree to sell sugarcane to a producer of sugar or his agent, and no such producer or agent shall purchase or agree to purchase sugarcane, at a price lower than that fixed under Sub-clause (1). (3) to (7) xxx xxx xxx xxx 4. By an amendment made on 24-9-1976 Clause 3A was introduced in the order allowing for certain rebates, including transport rebate, from the minimum price of sugarcane fixed under Clause 3. Clause 3-A as it stood at the time of its introduction, insofar as relevant for the present, is as follows : 3A. Rebate that can be deducted from the price paid for sugarcane. Clause 3-A as it stood at the time of its introduction, insofar as relevant for the present, is as follows : 3A. Rebate that can be deducted from the price paid for sugarcane. A producer of 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 3, or the price agreed to between the producer or his agent and the sugarcane grower or the sugarcane growers co-operative society, as the case may be (hereinafter referred to as the agreed price): Provided that -- (i) in the case of sugarcane delivered at any (purchasing) centre,-- (a) xxx xxx xxx (b) if the sugarcane is transported to the factory by road by the owner on his own transport, a rebate, not exceeding 2.5 paise (two and half paise) per quintal, per kilometer subject to a maximum of thirty-two paise per quintal, shall be made from the minimum price or the agreed price, as the case may be, subject to the condition that a certificate regarding the actual distance from the purchasing centre concerned to the factory and the rate per kilometer applicable in that case on the basis of which the rebate is charged, is obtained from the Central Government, or the State Government, or the Director of Agriculture, or the Cane Commissioner, or the District Magistrate, within their respective jurisdiction. Explanation -- xxx xxx xxx (ii) to (iv) xxx xxx xxx 5. It is thus to be seen that when the provision relating to rebate was introduced in the Order the transport rebate was fixed @ 2.5 paise per quintal per kilometre subject to a maximum of 32 paise per quintal. The rate of rebate fixed in the year 1976 remained unchanged for a long time and according to the sugar mills, with passage of time it became almost illusory. 6. The nine petitioners in the first case earlier came to this Court in C.W.J.C. No. 13186 of 2002 questioning the reasonableness and validity of allowing transport rebate at the rate fixed a quarter of a century ago. In that case the petitioners produced an interim order passed by the Allahabad High Court fixing transport rebate at a much higher rate. The nine petitioners in the first case earlier came to this Court in C.W.J.C. No. 13186 of 2002 questioning the reasonableness and validity of allowing transport rebate at the rate fixed a quarter of a century ago. In that case the petitioners produced an interim order passed by the Allahabad High Court fixing transport rebate at a much higher rate. Mainly on the basis of the order passed by the Allahabad High Court, this Court too on 5-12-2002 passed the following interim order in CWJC No. 13186 of 2002: Till further orders, it will be open to the petitioners to deduct a maximum of Rs. 5.75 paise per quintal from the price payable to the cane growers in terms of Clause 3 of the Sugar Control Order, 1966. It is made clear that this interim direction is purely provisional in nature and in case the writ petition fails the petitioner will have to pay to the cane growers the deducted amount along with the interest, cost or fine, as may be directed by the Court within the time as may be specified by the Court. 7. By that order the Court asked counsel for both the Central and the State Government, to file their respective counter affidavits. No counter affidavit was filed by the Central Govt. but by order, dated March 22, 2004 published in the extra-ordinary Gazette of India of the same day an amendment was introduced in proviso (i) of Clause 3-A of the Sugar Cane (Control) Order. In terms of the amended provision both the Central Govt. and the State Govt. were empowered to fix the rate of transport rebate having regard to the actual cost of transportation in the area. 8. In the pending writ petition this Court waited patiently and by orders passed from time to time directed and goaded both the Central and the State Governments to re-fix the rate of transport rebate under the amended provision. But the State Govt. proved to be even more incapable of fixing the rate of transport rebate and from the materials on record it appears that it expressed to the Central Govt. its inability in this regard stating that it had no satisfactory mechanism to ascertain the actual cost of transportation in the area etc. But the State Govt. proved to be even more incapable of fixing the rate of transport rebate and from the materials on record it appears that it expressed to the Central Govt. its inability in this regard stating that it had no satisfactory mechanism to ascertain the actual cost of transportation in the area etc. No revised rate of transport rebate was, thus, fixed for about one year while the earlier writ petition remained pending before this Court. 9. On 2-12-2003 the Standing Counsel of the Central Govt. informed the Court that approval for fixation of rebate had been accorded by the competent authority and the notification in that regard would be issued shortly. On that statement being made before the Court the writ petition was disposed of with a direction to the Director, Department of Food & Public Distribution, Govt. of India to ensure the issuance of the notification within two weeks from the date of the order. 10. Within two weeks of the passing of the order a modification petition was filed on behalf of the Central Govt. in which it was said that the statement that approval for fixation of rebate had already been accorded by the competent authority was made before the Court due to inadvertance and some misunderstanding on the part of the counsel. It was further stated that after the State Govt. expressed its inability to fix the rate of transport rebate the Central Govt. referred the matter to the Commission for Agricultural, Costs & Prices, an expert body for full assessment of the issues involved and their considered recommendations. It was further stated that the recommendation of the commission was awaited and in those circumstances a prayer was made to modify the order, dated 2-12-2002 and to extend the time for making the notification. The Court by order, dated 17-12-2003 directed the concerned authorities in the Central Govt. to issue the notification(s) with regard to the transport rebate positively within four Weeks from the date of that order. 11. On January 14, 2004 the Central Govt. published in the Gazette of India, extraordinary an order of the same date fixing the minimum price of sugar cane under Clause 3 of the Sugar Cane (Control) Order. to issue the notification(s) with regard to the transport rebate positively within four Weeks from the date of that order. 11. On January 14, 2004 the Central Govt. published in the Gazette of India, extraordinary an order of the same date fixing the minimum price of sugar cane under Clause 3 of the Sugar Cane (Control) Order. And finally on 22-3-2004 it made yet another amendment in proviso 1 of Clause 3-A and substituted the following as proviso 1 : (1) In the case of sugar cane delivered at any purchasing centre and the same being transported to the factory by the factory owner by rail or by road using his own transport, a rebate shall be made from the minimum price or the agreed price, as the case may be, and such rebate shall be fixed by the Central Govt. having regard to the actual cost of transportation in the area, after consultation with such body or bodies as it may deem fit, by notification in the official gazette, from time to time and the owner shall accordingly make the rebate. 12. On the same date (22-3-2004) by another gazette notification the Central Govt. amended order No. G.S.R. 44(E)/Ess.Com./ Sugar Cane, dated 14-1-2004 by which the statutory minimum price of sugar cane was fixed and allowed for the deduction of transport rebate at the rate indicated at the begining of the judgment. It is this gazette notification, dated 22-3-2004 that comes under challenge in these two writ petitions. 13. In the counter-affidavit filed on behalf of the Central Govt. authorities it is stated that the Commission for Agricultural Costs and Prices (C.A.C.P.) was an independent expert professional body specifically set up by the Govt. of India to make recommendations on agricultural commodities costs and prices. The matter of revision of the rate of transport rebate was referred to it for expert opinion and the Central Govt. fixed the revised rates under the impugned gazette notification strictly in accordance with the recommendation of the C.A.C.P. In support of the submissions the C.A.C.P.s report, dated 12-3-2004 on sugar cane transport rebate was annexed to the counter-affidavit as Annexure-A. 14. Mr. fixed the revised rates under the impugned gazette notification strictly in accordance with the recommendation of the C.A.C.P. In support of the submissions the C.A.C.P.s report, dated 12-3-2004 on sugar cane transport rebate was annexed to the counter-affidavit as Annexure-A. 14. Mr. Y.V. Giri, learned senior Advocate appearing on behalf of the petitioners on the other hand endeavoured to show that the recommendation of the C.A.C.P. was anomalous and the rate recommended by it was less than the actual cost of transportation worked out in the Commissions report. Annexed to the writ petition (as Annexure 11) is a document from the C.A.C.P. called "A Supplementary Note on Price Policy For Sugar Cane Crop for 2003-04." The submissions of Mr. Giri were mostly centered on this document. Referring to para 2 of this document Mr. Giri submitted that for fixing the statutory minimum price the Commission had taken Rs. 12.00 as the average transportation cost per quintal. He submitted that it was, therefore, logical that the full amount of Rs. 12.00 should have been allowed as transport rebate but the Commission had recommended for the lower amount of Rs. 5.83 only. 15. At this stage it would be appropriate to refer to the Commissions report (Annexure-A to the counter-affidavit of the Govt. of India). In its report the Commission observed that on the basis of the figures supplied by the States of U. P. and Uttaranchal it seemed that on average about 58% of the total cost (of transportation) was borne by sugar mill and 42% was borne by farmers. Using this as the basis, the actual average transport cost borne by sugar mills out of the total transport cost of Rs. 12.00 included in S.M.P. for the year, 2002-04 would work out to Rs. 6.96 per quintal. It was further observed that deduction of this whole amount from S.M.P. would not only cause enormous hardship to sugar cane growers but would also leave no incentive for them to make efforts to improve the productivity of the sugarcane. The Commission, therefore, gave its opinion not to allow more than 80 to 85% rebate on transport cost which would work out in the range of Rs. 5.57 to Rs. 5.92 per quintal for an average distance of 20 KMs for the year, 2003-04. It accordingly made the following recommendations : Therefore, the Commission recommends that under normal situation, Rs. The Commission, therefore, gave its opinion not to allow more than 80 to 85% rebate on transport cost which would work out in the range of Rs. 5.57 to Rs. 5.92 per quintal for an average distance of 20 KMs for the year, 2003-04. It accordingly made the following recommendations : Therefore, the Commission recommends that under normal situation, Rs. 5.83 per quintal for an average distance of 20 km i.e. 0.29 paise per quintal per KM be fixed as the permissible transport rebate to be deducted from S.M.P. on sugar cane, for season, 2003-04. 16. It is, thus, to be seen that the submissions of Mr. Giri on the calculation of S.M.P. is adequately met in the report of the Commission. 17. On behalf of the petitioners a great deal of figures are quoted in support of the plea that the actual cost of transportation is much higher. Reliance is also placed on the letter, dated 24-11-2003 from the Cane Commissioner, Bihar to the C.A.C.P. (copy at Annexure 14). The Cane Commissioner wrote to the C.A.C.P. sending the desired information to it, in reply to its letter, dated 28-10-2003. In the Cane Commissioners letter in reply to the Commissions question No. (iv) it was stated as follows : As regards average cost that the farmers bear for carrying cane from the field to the centres, depends upon the distance of the village to the centres. As such, we are not in a position to give exact cost. But the sugar mills bears carrying cost of cane from different centres to mill gate. It depending upon the distances of the road/rail centres from the factory gate. It comes Rs. 8.05 P/Qt. to Rs. 14.24 P/Qt. as reported by mill authorities. (Emphasis added) In reply to question No. (vi) from the Commission the Cane Commissioners letter gave the following reply : Rebate rate should be Rs. 5.75 paise per quintal. 18. XXX 19. I have simply indicated the broad submissions made on behalf of the petitioners but I do not propose to deal with those submissions in any great detail because I see a fatal flaw in the petitioners claim. 20. The hearing of this case concluded on 10-2-2005 but at the instance of the counsel for the petitioner it was further heard briefly on 14-2-2005 after which the order was reserved. 20. The hearing of this case concluded on 10-2-2005 but at the instance of the counsel for the petitioner it was further heard briefly on 14-2-2005 after which the order was reserved. Later some doubts arose in my mind with regard to which the case was further heard on 21-4-2005. After hearing Mr. Giri at some length the doubt not only persists and remains unresolved but it develops into the considered view of the Court. 21. The question that arises is that the sugar mills can only claim transport rebate as a matter of legally enforceable right only if it is shown that a sugar mill is obliged and is under a legal compulsion to set-up and maintain purchase centres far away from the factory gate for purchase of sugar cane. On the other hand if the sugar mills go out and establish purchase centres of their own volition in order to collect as much sugar cane as they require, then it would be only a competitive trade practice aimed at expansion of business for which they may not claim any transport rebate as a matter of legally enforceable right. The doubt arising in my mind was clearly explained to Mr. Giri when the case was listed under the heading "to be mentioned" on 29-3-2005. Thereafter a further detailed affidavit was filed on behalf of the petitioners on 1-4-2005 and fresh submissions were made by Mr. Giri on 21-4-2005. 22. Mr. Giri did not question the premise that the sugar mills could raise a dispute over the rate of transport rebate and claim higher rates only if it were shown that the mills were under legal compulsion to set-up purchase centres far away from the factory gate. He, however, tried to show that that was in fact the case and in support of the submission relied upon several provisions of the Bihar Sugar Cane (Regulation of Supply & Purchase) Act, 1981. He also brought on record, along with the affidavit filed on 1-4-2005, the orders (Annexures 15, 16 series and 17 series etc.) on the basis of which the petitioner mills had set-up their respective purchase centres, Mr. Giri referred to Sub-sec. s (e) and (f) of sec. 2 of the Act that defines Cane Officer and Collector respectively. He further referred to Secs. 12 and 13 that deal with the appointment of Cane Commissioner and Cane Officer. Giri referred to Sub-sec. s (e) and (f) of sec. 2 of the Act that defines Cane Officer and Collector respectively. He further referred to Secs. 12 and 13 that deal with the appointment of Cane Commissioner and Cane Officer. He then referred to Sub-sec. s (2), (8) and (9) of sec. 13. Sub-sec. (8) empowers Cane Officer to issue such instructions for equitable purchase of cane as he deemed necessary and provides that such instructions would be complied with immediately. Sub-sec. (9) makes it obligatory for the occupier of a factory etc. to comply with any order, direction or instructions issued u/s. 13. 23. Mr. Giri then came to sec. 29 which to my mind is mainly relevant for the present purpose. sec. 29 is as follows : 29. Establishment of purchasing centres : (1) The occupier of a factory, or the Secretary of a Co-operative Society may establish a purchasing centre after giving a notice in writing to the Collector at least thirty days before the commencement of purchase of cane and copies of such notice shall be sent by the occupier of the factory or the secretary of the society forthwith to the Cane Officer concerned and the Cane Commissioner : Provided that in urgent circumstances, a purchasing centre may be established at shorter notice with the previous approval of the Collector : Provided further that establishment of a purchasing centre at any railway station or at any place within eight kilometres of the purchasing centre already established for supply of cane to another factory shall require previous sanction of the Cane Commissioner. (2) The Collector may, subject to Sub-sec. (1) after consulting the council concerned and giving the occupier of the factory or the Secretary of the co-operative society, an opportunity of being heard, order in writing that such occupier or Secretary (a) shift the location of any purchasing centre to another place in accordance with the order; (b) establish a new purchasing centre at a place specified in such order; and (c) suspend the operation of a purchasing centre already established. (3) The prescribed authority may, either suo motu or on an application made to it by the occupier of the factory or the Secretary of the Co-operative society, within fifteen days of the receipt of Collectors order under Sub-sec. (2), revise such order. (3) The prescribed authority may, either suo motu or on an application made to it by the occupier of the factory or the Secretary of the Co-operative society, within fifteen days of the receipt of Collectors order under Sub-sec. (2), revise such order. (4) Subject to other provisions of this Act any order or direction of the Cane Commissioner-in respect of purchase of cane or its movement from any area including its despatch by rail may be revised by the prescribed authority which shall have the power to initiate proceedings in revision either suo motu or on an application made to it by any aggrieved person within fifteen days of the receipt by him of such order or direction. 24. Mr. Giri also referred to some provisions of the Bihar Sugar Cane (Regulation of Supply & Purchase) Rules, 1978, He referred to Rule 2(i) that defines purchasing centre as being any place at which cane is supplied, delivered, purchased or weighed and includes any such portion off the premises of the factory which is used for any of those purposes. He further referred to rules 22(3), 23 and 24 dealing with the conditions of setting up and the working of the purchase-centre and weighment etc. of sugar cane. Mr. Girt submitted that the provisions of sec. 29(2) read with sec. 13(8) would make it evident and clear that the sugar mills were under a legal obligation to set-up purchase-centres for purchase of sugar cane from farmers at far away places from the factory gate. 25. I am unable to accept the submission. sec. 29 of the Bihar Act has been fully quoted above. From a bare perusal of the provisions of that section it would appear that it is in two parts. Sub-sec. (1) of the section allows the occupier of a factory or the Secretary of a Co-operative Society to establish a purchasing centre, of course after giving a notice in writing to the Collector. Sub-sec. (2) empowers the Collector to direct the occupier of the factory or the Co-operative Society, as the case may be, to shift a purchasing centre, establish any purchasing centre or to suspend the operation of a purchasing centre. It is, thus, clear that if a purchasing centre is set-up under Section 29(1) of the Act on the initiative of the sugar mill itself, then there is no question of any legal compulsion. It is, thus, clear that if a purchasing centre is set-up under Section 29(1) of the Act on the initiative of the sugar mill itself, then there is no question of any legal compulsion. The sugar mill proceeds to set-up a purchasing centre away from the factory gate for collecting additional amount of sugarcane in order to meet its requirement and it is thus, for the mill to balance its different economic considerations, including the cost of transportation. Whatever is permissible as transport rebate may be viewed as an incentive and may not form the subject-matter of any dispute. And the claim of higher rate of transport rebate cannot be raised by the sugar mill as a matter of legally enforceable right. 26. Now coming to the actual facts of the case. From the orders enclosed with the affidavit it would appear that in several cases permission was accorded to set-up the purchase centres by the respective sugar mills on the basis of the proposals received from them. It was only after the purchasing centres were set up that any orders u/s. 13 were issued regulating the sale by fixing quantities etc. that could be purchased at any particular purchasing-centre. There is not a single order issued by the authority u/s. 29(2) of the Act requiring a sugar mill to set up a purchasing centre regardless of its will or volition. It was, thus, open to the sugar mills not to set-up any purchasing centres if the transportation cost from those centres to the factory gate made the transactions uneconomical. The sugar mills have gone out of their factory for purchasing additional quantities of sugar cane fully aware of the cost of transportation to bring the sugar cane to the factory and one should imagine, after fully analysing all the relevant financial considerations. They cannot, therefore, be heard to claim a higher rate of transport rebate than is allowed to them by the Central Government. 27. It may be stated here that Mr. Giri also assailed the condition attached for availing the rebate. Learned Counsel submitted that the consequences of any delay in payment of the cane price to the cane growers were fully dealt with in the different provisions of the Sugar Control Order and the impugned condition according to him amounted to supplanting those statutory provisions. Giri also assailed the condition attached for availing the rebate. Learned Counsel submitted that the consequences of any delay in payment of the cane price to the cane growers were fully dealt with in the different provisions of the Sugar Control Order and the impugned condition according to him amounted to supplanting those statutory provisions. In view of what is stated above, there is no need to discuss this point in any further detail. 28. Summing up the discussions made above I find and hold : (1) There is no compulsion attached to a purchase centre set-up under Section 29(1) of the Bihar Act. (2) Hence, in respect of purchase centres set-up u/s. 29(1} the sugar mills cannot claim any transport rebate as a matter of right and cannot therefore raise a dispute with regard to the rate of transport rebate fixed by the Central Government. (3) Transport rebate may be claimed with regard to purchase-centre(s) that a sugar mill is directed to set up in terms of sec. 29(2) of the Act (4) In this case no petitioner was able to show that it was obliged to set the purchase centres u/s. 29(2) of the Act. (5) No relief can, therefore, be granted to the petitioners as claimed by them. (6) I, thus, find the two writ petitions without merit. These are accordingly dismissed but with no order as to costs.