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Madhya Pradesh High Court · body

2006 DIGILAW 429 (MP)

GWALIOR SUGAR COMPANY LTD v. STATE OF M. P.

2006-03-23

RAJENDRA MENON

body2006
( 1 ) AS common questions are involved in both these petitions, they are being disposed of by this common order. Petitioner is a public limited company incorporated under the Companies Act having its registered office in Dabra, district gwalior. The company is engaged in the manufacture of sugar and for the said purpose they have a factory established at dabra in district Gwalior. Challenge in these petitions are made to demands made by the state Government and the notifications issued by the State Government fixing purchase price of sugar cane payable by the owners of the sugar factories to the sugar cane growers. ( 2 ) IN W. P. No. 1127/99, the price fixed for purchase of sugar cane for the financial year 1998-99 as contained in annexure P/2 and the demand note Annexure P/1 are challenged. Similarly, in W. P. No. 253 of 1999 the price fixed for purchase of sugar cane from the sugar cane growers for the year 1995-96, Annexure P/3 and the demand raised through the Revenue Recovery certificate vide Annexure P/6 are challenged. ( 3 ) IT is the case of the petitioner that under clause 3 of the Sugar Cane Control order, 1966 (hereinafter referred to as the control Order) fixation of price for sugar cane is done by the Central Government and once the price is fixed by the Central Government, the State Government is not empowered to fix any other price. It is stated that except for fixation of additional price as contemplated under clause 5-A of the control Order, no power is vested with the state Government for fixing any other price than the one fixed by the Central Government. It is stated in the petition that for the year 1995-96 vide notification dated 14th may 1996 (Annexure P/2), the Central Government had fixed the price at Rs. 42. 50 per quintal linked to a basic recovery of 8. 5% subject to a premium of Rs. 0. 54 for every 0. 1 percentage increase in the recovery. Accordingly, for Dabra and the petitioner's company, the price fixed by the Central Government was Rs. 50. 60 as is evident from the enclosure to the notification dated 14th may 1996. However, it is stated that against the aforesaid price fixed by the Central Government vide Annexure P/3 dated 28th February, 1996, the State Government has fixed the price at Rs. 50. 60 as is evident from the enclosure to the notification dated 14th may 1996. However, it is stated that against the aforesaid price fixed by the Central Government vide Annexure P/3 dated 28th February, 1996, the State Government has fixed the price at Rs. 65/- per quintal to be payable at the Purchase Centre and Rs. 70/- at the factory premises. Similarly for the year 1998-99, the Central Government had issued a notification and fixed the price of sugarcane at a lower rate but without considering the same, the State Government fixed the price vide Annexure P/2 dated 5th april 1999 at Rs. 67. 50 at the purchase centre and Rs. 72. 50 at the factory premises. It is stated in the petition that fixation of price by the State Government in such a manner has been considered by the allahabad High Court in Civil Misc. Writ petition No. 36889 of 1996 (West U. P. Sugar mills Association and others v. State of U. P. , and others decided on 11 th December 1996 (Reported in 1997 (29) All LR298) vide annexure P/14 and the similar notification issued by the State of U. P. , has been quashed. The Patna High Court also by judgment and order dated 4th February 1997 filed as Annexure P/15 in Civil Writ Jurisdiction Case No. 12717 of 1996 (Reported in (1997) 7 BLJ 767) (Bihar Sugar Mills Association (Branch of all India Sugar Mills association, New Delhi) Patna and ten others v. The State of Bihar through Secretary, department of Sugarcane-cum-Industries and others) has quashed similar price fixation done by the State of Bihar for the year 1996-97. That apart, inviting my attention to a order passed by a Single Bench of this court in W. P. No. 1202 of 1998 (The Gwalior sugar Company Limited, Dabra v. State of m. P. and others) decided on 24th September 1998 vide Annexure P/12, learned counsel argued that the additional price fixed by the State Government exercising the jurisdiction under clause 5-A (2) of the Control order has been held to be illegal and that the additional price under clause 5-a{2) has to be fixed strictly in accordance with provisions of Second Schedule and that also after the sugar year is over on 30th day of september of the year in question. ( 4 ) INTER alia contending that the notification issued in both these cases, i. e. on 28th February 1996 and 5th April 1999 are contrary to the provisions of Section 5-A of the Control Order, interference in the matter is sought for. ( 5 ) LEARNED counsel appearing for the petitioner taking me through the provisions of Section 5{a) of the Control Order and the observations made by this Court in W. P. No. 1202 of 1998 (supra) argued that in view of the aforesaid judgment, both the notifications, annexure P/2 in W. P. No. 1127 of 1999 and annexure P/3 in W. P. No. 253 of 1999 are liable to be quashed. It is the case of the petitioner that the power to fix price of sugar cane under the statutory provisions as per the Control Order vests exclusively with the Central Government and once the central Government has fixed the price, the power cannot be exercised by the State Government for fixing a different price. It was argued by learned counsel that the only power that can be exercised by the State government is under clause 5-A of the Control Order, that also after the sugar year is over and not before that as the additional price to be fixed under clause 5-A is based on the concept of profit sharing between the manufacturers of sugar and the sugar cane growers. Accordingly, on the grounds made hereinabove, interference in the matter is sought for in these petitions. ( 6 ) STATE Government has refuted the aforesaid and by filing a detailed return, it is stated by the State Government that the contention of the petitioner is not correct. As far as claim made in W. P. No. 253 of 1999 for the year 1995-96 is concerned, it is submitted on behalf of the State Government that for the same year, W. P. No. 559 of 1998 was filed by the petitioner challenging the recovery effected by the State government and the said petition was disposed of vide judgment dated 15th September 1998, (Annexure R/l) and in view of the aforesaid judgment, petitioner is not entitled to challenge the price fixation for the year 1995-96. Inter alia contending that the order dated 15th September 1998 passed in w. P. No. 559 of 1998 operates as res judicata. respondents seek dismissal of petition, w. P. No. 253 of 1999. Inter alia contending that the order dated 15th September 1998 passed in w. P. No. 559 of 1998 operates as res judicata. respondents seek dismissal of petition, w. P. No. 253 of 1999. That apart, in both these petitions on merit, it is stated that the control Order and the statutary rules empowers the State Government to fix the price and for the purpose of fixation of price, it is stated that the competent authority under the Control Order had called for a meeting and it is only after due negotiations and agreement with the manufacturers of sugar that a decision was taken. Bringing on record the minutes of the meeting held on 24th November 1995 for the purpose of price fixation for the year 1995-96 and inter alia contending that in this meeting, petitioner/ company was represented by their General manager, one Shri Mahendrakumar and one shri Vikram Shrivastava, it is stated that petitioner cannot challenge the price fixation. Similarly, for the year 1998-99, it is stated that a meeting was held on 8th January 1999 in which the question of price fixation for the year 1998-99 was discussed and in this meeting also, the representatives of the petitioner/company were present, and therefore, it is stated that action taken in the matter of price fixation by the State Government is proper and no case for interference is made out. ( 7 ) 1 have heard learned counsel for the parties at length and perused the record. ( 8 ) BEFORE adverting to the question of power to be exercised by the State Government for fixation of price for sugar cane, the objection with regard to res judlcata raised by the State Government in W. P. No. 253 of 1999 has to be considered. For considering this objection, the records of said W. P. No. 559 of 1998 were called for and a perusal of the records indicates that the said petition was filed challenging the action of the State government in attaching 34304 bags of sugar from the petitioner/company's godown and an order of recovery, Annexure p/l passed by the Tehsildar proposing to recover a sum of Rs. 5,60,45,419/- (Rupees five crores sixty lacs forty five thousand and four hundred nineteen only ). 5,60,45,419/- (Rupees five crores sixty lacs forty five thousand and four hundred nineteen only ). A perusal of the pleadings made in the said petition and the order dated 15th September 1998 passed by this Court indicates that the question now raised by the petitioner in this petition with regard to power of the State Government for fixing the price for purchase of sugar cane higher than the one fixed by the Central government was not at all considered or decided in the said writ petition, that being so, I am not inclined to dismiss W. P. No. 253 of 1999 on the ground of res judcata. The question involved in both these petitions were not subject-matter of adjudication in the earlier writ petition No. 559 of 1998. Therefore, it cannot be said that the order dated 15th September 1998 operates as res judicata. Accordingly, the preliminary objection raised by the State Government is rejected. ( 9 ) FOR the purpose of determining the controversy involved in these petitione, it is necessary to take note of the statutory provisions governing the field. Apart from the sugarcane (Control) Order of 1966, The madhya Pradesh Sugarcane (Regulation of supply and Purchase) Act, 1958 (hereinafter referred to as the Act, 1958) and the madhya Pradesh Sugarcane (Regulation of supply and Purchase) Rules 1959 are relevant. As indicated hereinabove, the Central government exercising powers under section 3 of the Essential Commodities Act, 1955 has made the Sugarcane (Control)Order, 1966 and clause 3 of this Order stipulates that 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. Clause 2 (f) of the Sugarcane Order defines a 'price' to mean the minimum price fixed by the Central Government. Thereafter, Clause 3-A relating to rebate that can be deducted from the price paid for sugarcane. Clause 5-A was inserted on 25th September 1974 with regard to fixation of additional price. A perusal of the definition of 'price' as given in Clause 2 (g) of the Control order clearly indicates that the price referred to therein can be either the price or the minimum price fixed by the Central Government. Clause 5-A was inserted on 25th September 1974 with regard to fixation of additional price. A perusal of the definition of 'price' as given in Clause 2 (g) of the Control order clearly indicates that the price referred to therein can be either the price or the minimum price fixed by the Central Government. The definition of 'price' given in Clause 2 (g)and the language of Clause 3 and Clause 3-A clearly indicates that apart from the price fixed by the Central Government under clause 3 (1), there can be another price that can be fixed under the statutory provisions which may be in the nature of a agreed price between the producer of sugar and the sugarcane grower or the sugarcane growers cooperative society. Similarly, Clause 5-A, lays down the procedure for fixing the additional price and Schedule II thereof provides procedure for fixing the additional price. Thereafter, the Act of 1953 and the Rules of 1959 regulates the supply and purchase of sugarcane in the State of Madhya Pradesh and these regulations contemplate various provisions like declaration of reserved area, purchasing agent and the Rules of 1959 also provides for reservation and assignment of area, Weighments, Payments, Commission on purchase of cane, Cane Growers* Co-operative Societies, etc. , From the aforesaid act of 1953 and the Rules of 1959, it is clear that procedure for the purpose of regulating the supply and purchase of sugarcane in the State of Madhya Pradesh is controlled by these Statutory provisions. ( 10 ) THE main arguments advanced on behalf of the petitioner were that once the price for sugarcane is fixed by the Central government exercising the power under clause 3 of the Control Order, the State government does not have any power to fix any other price. The aforesaid argument is based on the judgment of the Allahabad High court in the case of West U. P. Sugar Mills association and others (Supra) and Patna high Court in the case of Bihar Sugar Mills association (supra ). The aforesaid argument is based on the judgment of the Allahabad High court in the case of West U. P. Sugar Mills association and others (Supra) and Patna high Court in the case of Bihar Sugar Mills association (supra ). Both these judgments have been considered and were subject-matter of Special Leave Petitions before the supreme Court and a Five Judges Bench of the Supreme Court in the case of U. P. Cooperative Cane Unions Federations v. West u. P. Sugar Mills Association and others, (2004) 5 SCC 430 : ( AIR 2004 SC 3697 ) has considered these judgments of the Allahabad high Court and the Patna High Court and both the judgments have been quashed by the Supreme Court. ( 11 ) THAT being so for the purpose of determining the question involved in the present petitions, this Court is only required to take note of the law laid down by the Supreme Court in the case of U. P. Cooperative Cane Unions Federations. ( AIR 2004 SC 3697 ) (supra) ( 12 ) A perusal of the aforesaid judgment of the Supreme Court indicates that the controversy that was raised by the parties in the appeals by special leave and transferred petitions before the Supreme Court basically related to the competence of the State Government to fix the "state-advised price" for purchase of sugarcane by an occupier of a sugar factory over and above the minimum price fixed by the Central Government. In all these appeals before the Supreme Court, the validity of the price so fixed by the State governments for payment to a sugarcane grower was under challenge. That being so, it is clear from the aforesaid that the question of fixation of price by the state Government which is known as "state advised price" has been considered and decided by the Supreme Court in the said case. In the present case also petitioner has contended that the "state advised price" fixed by the state Government by the notifications in question, Annexure P-2 and Annexure P-3 for the years 1998-99 and 1995-96 are illegal. In the present case also petitioner has contended that the "state advised price" fixed by the state Government by the notifications in question, Annexure P-2 and Annexure P-3 for the years 1998-99 and 1995-96 are illegal. ( 13 ) IT is seen that the right of the State government for fixing higher sugarcane price was recognized by the Supreme Court in the case of Maharashtra Rajya Sakkar karkhana Sangh Ltd. v. State Maharashtra, 1995 Supp (3) Supreme Court Cases 475 : (1995 AIR SCW 2338) and State of M. P. v. Jaora Sugar Mills Ltd. and others (1997) 9 supreme Court Cases 207 : ( AIR 1997 SC 600 ). In both these cases, it has been held that the State Government has an obligation to ensure proper payment of price to the sugarcane growers by the occupiers of the factory, and therefore, was entitled to fix higher price. However, certain observations to the contrary were made by another two Judge Bench of the Supreme Court in the case of 1996 State of Tamil Nadu v. Kothari Sugars and Chemicals Ltd. (1996) 7 scc 751 : (1996 AIR SCW 842), and therefore, initially the matter was referred to a bench of Three Judges and subsequently the matter was referred to a Bench of Five judges which has decided the matter now. In the judgment rendered by the Supreme court in the case of the U. P. Co-operative cane Unions Federations ( AIR 2004 SC 3697 ) (supra), similar notification issued by the State of U. P. , State of Bihar, State of punjab and Haryana fixing higher price for purchase of sugarcane by the State Governments under clause 3 of the Control Order were considered. In the said case the provisions of Sugarcane (Control) Order 1966, the provisions of U. P. Sugarcane (Regulation of Supply and Purchase) Act 1953 and the rules framed under the said act have been taken note of The statutory rules i. e. Act of 1958 and the Rules of 1959 applicable in the State of Madhya Pradesh are similar to the rules and Regulations framed by the State of U. P. In the case before the Supreme Court on behalf of the sugar manufacturers, similar arguments as have been advanced before this Court were advanced as is evident from the submissions made by the learned counsel for the sugar factories as indicated in paragraph 8 of the aforesaid judgment of the Supreme Court. Learned counsel who have represented the sugar factories before the Supreme Court had submitted that the price fixed by the central Government under clause 3 of the control Order is, in fact, the price for sugarcane payable by the purchasers to the growers of sugarcane. In reply, it was stated on behalf of the State Governments that the statutory minimum price as fixed by the central Government is basically linked to fixation of the price of levy sugar and is not linked with the actual price of the sugarcane. That being so, deliberately the Central government kept the minimum price of sugarcane at a lower level. The additional price payable under clause 5a is a factory specific price and has correlation only with the profits of the sugar factory, and therefore, it is a matter of chance for a sugarcane grower to get some additional amount if the factory makes profit. It was submitted that the Act of 1953 and the Rules framed by the state of U. P. , have been enacted to regulate the distribution, sale and purchase of cane and these statutory provisions enable the state Government to regulate the distribution, sale and purchase of a cane in any reserved or assigned area and this power conferred under the Act on the State government is of a wider amplitude and takes within its fold the power to determine a remunerative price to the cane grower. It has also been argued on behalf of the State Government that even if it is assumed that the statutory provision do not give any power to the State Government then also under Article 162 read with Entry 33 List III of the seventh Schedule of the Constitution em* powered the State Government to fix the price by an executive order. It was the case of the State Government that it is empowered to fix the price at a higher rate than the one that can be fixed by the Central Government. ( 14 ) AFTER considering all these submissions made in the matter and after taking note of the statutory provisions applicable in the State of U. P. , as per U. P. Sugarcane (Regulation of Supply and Purchase) Act, 1953 and the regulations framed thereunder in paragraph 19 of the said judgment, the Supreme Court has observed as under : "the provisions referred to above have been made for the benefit of the sugar factory so that it is assured of and gets a continuous supply of freshly harvested sugarcane in quantity according to its crushing capacity and for the whole duration of the crushing season. No doubt, the cane grower also gets some advantage in the sense that purchase of his yield is assured but at the same time many limitations and restrictions are imposed upon him. In view of the aforesaid statutory provisions, the position of canegrower becomes entirely different from that of a farmer producing any other kind of agricultural crop where there are absolutely no restrictions upon him. He is at absolute liberty to harvest his crop at his convenience without being dictated by a third party, to sell it to anyone whomsoever he likes and whenever he wants. It is in this scenario, which is not the creation of the cane grower but of the statutory provisions operating in the field, that we have to examine the question whether the State has any authority or power to fix the price of the sugarcane supplied to a producer of sugar (sugar factory ). It is in this scenario, which is not the creation of the cane grower but of the statutory provisions operating in the field, that we have to examine the question whether the State has any authority or power to fix the price of the sugarcane supplied to a producer of sugar (sugar factory ). " (Emphasis supplied) ( 15 ) THEREAFTER the question has been examined in detail and after analysing various legal provisions in paragraph 26 of the judgment, it has been held by the Supreme court that the irresistible conclusion which can be drawn in the matter is that a regulatory power is possessed by the State Government which also includes the power to fix the price of the sugarcane. It has been held by the Supreme Court that if the State under its power of regulation cannot fix the price, then the statutory provision contained in the Act of 1953 and the Rules of 1954 applicable in the State of Uttar Pradesh would become completely one sided, operating entirely for the benefit of sugar factories giving them many advantages with no corresponding obligations and leaving the cane grower in a lurch with a host of restrictions upon him. It has been held by the supreme Court in the concluding lines of this para that this can never be the intention of the legislature and it would not be fair to read the Act and the Rules in such a restrictive manner, whereby the provisions made for the benefit of the cane-growers will become illusory. Thereafter it has been held that the price fixed by the Central Government is the minimum price for purchase of sugarcane and the State Government in exercise of its regulatory power can fix higher price for sugarcane. It has been held that the State Government is empowered to fix higher price for purchase of sugarcane. In paragraph 37, it has been held that under sub-clause (1) of clause 3 of the Control order, the Central Government can only fix the minimum price of sugarcane and this clause shall not be read along with sub-clause (2) to mean that it prohibits fixation of another price for the purchase of sugarcane. In paragraph 37, it has been held that under sub-clause (1) of clause 3 of the Control order, the Central Government can only fix the minimum price of sugarcane and this clause shall not be read along with sub-clause (2) to mean that it prohibits fixation of another price for the purchase of sugarcane. Thereafter, considering the judgment of the Supreme Court in the case of maharashtra Rajya Sahkari Sakkar karkhana Sangh Ltd. (1995 AIR SCW 2338) (supra) and the judgment in the case of jaora Sugar Mills Ltd. ( AIR 1997 SC 600 ) (supra), it has been held so in paragraph 39 ( AIR 2004 SC 3697 , Para 148) : "these cases clearly lay down that under the 1966 Order the Central Government only fixes the minimum price and it is always open to the State Government to fix a higher price. Under the enactments made by the state Legislatures, areas are reserved for the sugar factories and the cane-growers therein are compelled to supply sugarcane to them and therefore the State Government has incidental power to fix the price of sugarcane which will also be the statutory price. They further lay down that the Cane Commissioner can direct the cane growers and the sugar factories to enter into agreements for purchase of sugarcane at a price fixed by the State Government and such agreements cannot be branded as having been obtained by force or compulsion. " (Emphasis supplied) ( 16 ) THE judgment in the case of Kothari sugar Mills and Chemicals Ltd. (1996 AIR SCW 842) (supra) was distinguished on the ground that in the State of Tamil Nadu, there is no statutory provision regulating the supply and purchase of sugarcane, and therefore, the said judgment was held to be not applicable in the case of U. P. Cooperative cane Unions Federations ( AIR 2004 SC 3697 ) (supra) wherein the matter is regulated by statutory provisions. It was held that in the absence of any statutory enactment regulating the purchase and distribution of sugarcane, the State of Tamil Nadu has no power to fix the price and further it can be done only with the agreement of sugarcane growers and the purchaser of sugarcane at higher price. It was held that in the absence of any statutory enactment regulating the purchase and distribution of sugarcane, the State of Tamil Nadu has no power to fix the price and further it can be done only with the agreement of sugarcane growers and the purchaser of sugarcane at higher price. A complete reading of the aforesaid judgment indicates that the right of the State Government to fix higher price has been approved by the Supreme court in the aforesaid case and the judgments of the Allahabad High Court and the patna High Court referred to hereinabove on which reliance has been placed by the learned counsel for the petitioner have been quashed. ( 17 ) IN the case of Jaora Sugar Mills Ltd. ( AIR 1997 SC 600 ) (supra) also wherein the provisions of Act of 1958 and the Control order, 1966 applicable in the State of madhya Pradesh have been considered, it has been held that the statutory authorities, namely; the Cane Commissioner and the State Government have an obligation to ensure proper price for sugarcane supplied by the sugarcane growers. It has been held that the Government has to ensure meeting of the growers and occupiers of factory and their associations and thereafter final price for sugarcane has to be fixed. It is, therefore, clear from the aforesaid judgments of the Supreme Court that contention of the learned counsel for the petitioner to the effect that once the price is fixed by the Central government, the State Government is not entitled to fix any other price is wholly unsustainable. A complete reading of the judgments indicates that the State Government by exercising the regulatory power as contained in the Act of 1958 and the Rules of 1959 is empowered to fix higher price and for the said purpose in the present case, it is seen that meetings were held on 24th november 1995 for the year 1995-96 and on 8th January 1999 for the year 1998-99 for fixing the price and it is on the basis of these agreements in which representatives of the petitioner appeared that the notifications Annexure P/3 in W. R No. 253 of 1999 and Annexure P/2 inw. R No. 1127 of 1999 were issued fixing the price for the relevant years by the Government of Madhya pradesh. R No. 1127 of 1999 were issued fixing the price for the relevant years by the Government of Madhya pradesh. That being so, it is to be held that fixation of price by the State Government is on the basis of power vested in the State government as per the statutory provisions regulating supply and purchase of sugarcane in the State and the Government has power to fix a higher price than the one notified by the Central Government, i. e. the minimum price under clause 3 of the Control Order, this principle is now recognized by the Supreme Court in the case of U. P. Co-operative Cane Unions Federations (supra ). ( 18 ) HAVING held so, the only other ground urged on behalf of the petitioner with regard to the effect of the judgment passed by a Bench of this Court in W. P. No. 1202 of 1998 (supra) is to be considered. In the aforesaid judgment, the provisions of Section 5-A and Second Schedule of the Control order, 1966 have been taken note of and the additional price fixed was held to be illegal. However, the said judgment was pronounced on 24th September 1998 before the judgment by the Five Judges Bench of the Supreme Court in the case of U. P. Co-operative Cane Unions Federations ( AIR 2004 SC 3697 ) (supra ). The question of price fixation is now required to be considered in the light of the law laid down by the Supreme Court in the case of U. P. Co-operative Cane unions Federations (supra ). Even though in the return filed by the State Government, it is stated that the power is exercised by the State Government under clause 5-A of the Control Order but merely on such assertion made in the return, relief cannot be granted to the petitioner. The State Government apart from contending that it is empowered to fix price under Section 5-A, during the course of hearing have pointed out that in the light of the law laid down by the Supreme Court, they are entitled to fix higher price and the fixation of price has been done on the basis of meetings held with the representatives of the sugar manufacturers including the representatives of the petitioner/company. That being so, I am of the considered view that the judgment of this court in W. P. No. 1202 of 1998 (supra) will not apply in the facts and circumstances of the present case after the matter Is dealt with again by the Supreme Court. The law laid down by the Supreme Court will now govern the field, and therefore, the judgment in the case of W. P. No. 1202 of 1998 (supra)does not help the petitioner any more. ( 19 ) ACCORDINGLY, finding no case made out for quashing the impugned notifications issued by the State Government, both these petitioners are dismissed without any order as the cost. Petition dismissed. .