S.K.G SUGAR LTD.versusSTATE OF BIHAR AND ORS.

                                 S.K.G. SUGAR LTD.                                   A
                                            v.
                           stA'fE OF BIHAR AND ORS.

                                  JANUARY i.5, 1991

                  [K. RAMASWAMY, S. SAGHIR AHMAD AND                                 B
                                G.B. PA'f'tANAIK, JJ.)

            Bihar Sugarcane (Regulation of Supply and Punhase) Act; 1981: Sec-
      tions 31 and 42.
                                                                                     c
            Sugarcane (Control) Order, 1966: Clauses 3, 3A and 5A.

              Sugarcane--Pdce fixation-Appellant-Sugar Factory-Sugarcane sup-
       plied by cane growers-Minimum price fixed by Central Govemment:-Appelc
        !ant paid the mii1i111wi1 pdce detennined-Subsequently State Government.
       fixed the price in excess of the minimum p1ice fixed by Central GovenF . .D
       ment--Recovery pMceedings relating to dif!erence between the minimum price
       jiXed by Central Govemment and State Govemment--lssue of celtificate of
       dues f<Jr realisation under Recovery Act-Writ challenging recovery proceed-
       lngS""iJismissal of appeaHleld the celtificate issued by the Collector was
       valid in law-A reading of the relevant Clauses in the Order does not show E
     _ that there is any prohibition on the factory or the association of the factories
       entering into an agreement to pay higher price than the minimum price
       prescribed under the Order-The State Government acted in their statutory
       capacity tofu: the increased price of the sugarcane-There was no need for
       the growers to file separate suit to recover the difference of the price-The.
       recovery proceedings were the appropriate course of action rightly adopted by F
       the State Govemmem.

            State of Madhya Pradesh v. Jaora Sugar Mills Ltd. & Ors. Etc., CA No.
      1811-14/96 decided on 10.10.1996 by Supreme Court, referred to.
                                                                                    G
            CIVIL APPELLATE JURISDICTION: Civil Appeal Nos. 488-489
      of 1985 I

           From the Judgment and Order dated 13.11.84/8.1.85 of the Patna ·
      High Court in C.W.T.C. No. 2370/84 and R.A. in W.P. No. C.W.J.C. No.
      ~~~                                                                           H
•.                                        279
    280                  SUPREME COURT REPORTS                  [1997] 1 S.C.R.

A         Y.V. Giri, D.D. Thakur, Jyoti Saran, Praveen Kumar, Ms. Vijay
    Lakshmi Menon, Sunil Gupta, Mrs. A.K. Verma, P.O. Tyagi, D.
    Goburdhan, D.N. Gourdhan, Ms. Pinky Anand, Ms. Geela Luthra, B.B
    Singh, Ashok Kr. Singh, Ms. Subhashini, A. Sharan, Gopal Singh, A.P.
    Singh, L.R. Singh, V. Shekhar, V.D. Mahajan, P.R. Seelharaman, B. Par-
    thasarathy, Ms. Rani Chhabra, Sanjiv Seth and M.A. Krishna Moorthy for
B   the appearing parties.

          The following Order of the Court was delivered :

         These two appeals arise from the judgment of the Division Bench of
    the Patna High Court, made on November 13, 1984 in Order No. 11 and
c   Review Order, arising thereunder in CWJC No, 2370/84.

        The admitted position is that the appellant factory had a 'reserved
  area' under ~.ection 31 pf the Bihar Sugarcane (Regulation of Supply and
  Purchase) Act, 1981 (for short, the 'Supply Act') and had the sugarcane
D supplied by the growers. The Central Government, exercising the power
  under Clause 3 of the Sugarcane (Control) Order, 1966 (for short, the
  'Order') det~rmined the minimum price for sugarcane at Rs. 13.92 per
  quintal. The State Government announced on March 31, 1983 the price of
  Sugarcane at ~s. 20.50 per quintal. The cane growers supplied the sugar-
E cane to the appellant, but the appellant admittedly had paid ~!;., minimum
  price determined under the Order but the difference between the price
  fixed under the Order and the price annuunced by the State Government
  was not paid. As a consequence, the Collector gave a certificate of dues
  for realisation under the Revenue Recovery Act. Calling those proceedings
  in question, the writ petition came to be filed. The contention raised in the
F High Court as well as in this Court is that the Central Government having
  determined the price of the sugarcane at Rs. 13.92 per quintal, tl;c State
  Government was devoid of power to fix the price at Rs. 20.50 per quintal
  and, therefore, the Collector has no power to issue the certificate of
  arrears; since what is due is the price fixed under the Order which has
G already been paid and therefore, there is nothing due in accordance with
   law.

           Shri Y.V. Giri, learned counsel for the appellant, has contended that
    Secti~n 42 of the Supply Act prescribes only the power for fixation of the
    price in respect of the units, namely, Khandasari Unit or any unit manufac-
H   turing sugar under open pan process. Under the proviso, the Government
                           S.K.G. SUGAR LTD. v. STATE                          281

>}   have no power fix higher price of sugarcane supplied to sugar factC?ry than A
     that is fixed for the Khandasari units. The fixation of the price at Rs. 20.50
     per quintal is without any authority of law or jurisdiction, for a issuance of
     a certificate what is required to be done is that the amount should be in
     accordance with law but not in accordance with any order passed by the
     State Government. The Dues in accordance with the price fixed under B
     Clause 3 of the Order having been paid, the appellant is not due of any
     sugarcane price payable to the cane growers and, therefore, the view taken
     by the High Court is not correct in law. Even if there are dues, the same
     could be recovered in a suit by the growers. We find no force in the
     contentions.
                                                                                       c
          Sub-clause (1) of Clause 3 of the Order provides thus :

             "The Central Government may, after consultation with such
             authorities, bodies of associations as it may deem fit, by notification
             in the official Gazette, from time to time, fix the minimum price         D
             of sugarcane to be paid by producers of sugar or their agents for
             the sugarcane purchased by them, having ,regard to ... Provided
             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."                                            E

            It is seen that what is postulated under Clause 3 of the Order is the
     fixation of the minimum price payable to the cane growers for the sugar-
     cane supplied by them and purchased by a sugar factory or its agents.
     Equally, Clause SA prescribes payment of additional price consistent with F
     the returns had by the factory. Clause 3A equally provides rebate that can
     be given in respect of the price for sugarcane. A reading of these relevant
     Clauses in the Order does not show that there is any prohibition on the
     factory or the association of the factories entering into an agreement to pay
     higher price than the minimum price prescribed under the Order. The
     object of the Order is to ensure -that the cane growers should not be G
     compelled to sell their sugarcane at a price minimum to the price
     prescribed by the Central Government under Clause 3 of the Order. In
     State of Madhya Pradesh v. Jaora Sugar Mills Ltd. & Ors. Etc., [1997] Vol.
     9 SCC 207 by a Bench of two Judges, to which two of us (K. Ramaswamy
     and G.B. Pattanaik, JJ.) were members, considered the similar question ·H
    282                  SUPREME COURT REPORTS                     [1997] 1 S.C.R.

A and held thus :

           "Rule 3(3) determines "where a producer of §U~1!f purchases any
           sugarcane from a grower of sugarcane or from a sµgarc;me
           grower's co-operative society, the producer shall, unless there is
           an agreement in w1iting to the contrary between the pm1ies, pay within
B          fourteen days f 01111 the date of delive1y of the sugarcane tp the selleF ,
           or tender to him the price of the cane sold at the rate agreed to
           between the producer and the sugarcane grower~· of sugarcane
           gro~ers' co-operative society or that fixed under sub-clause (1), as
           the case m!ly be, either at the gate of the factory or at the cane
c          collection centre or transfer or deposit the necessary amount in
           the Bank Account of the seller or the co-operative society, as the
           case may be."

               Clause (3A) to Rule 3 was introduced by way of an amendment
           made in GSR 62(E), dated 2.2.1978. For payment of the price
D
           within 15 days with interest on the delayed payment at the rate of
           15% per annum for the period of such delay beyond 14 days has
           been introduced. Earlier, it was covered by the Act. Clause (1) of
           Rule 3 fixes the minimum price of sugar payable by the purchaser
           of the sugarcane as fixed by the Central Government in the manner
E          indicated therein. Clause (2) of Rule 3 is relevant for the purpose
           of this case which shows that "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 u11der sub-clause ( J)". Section 23(3)
F          of the Act, also couched in similar language, enables to novate by
           contract the minimum price fixed by the Central Government in
           respect of cess payable to Government.

               This would clearly indicate that despite the fixation of minimum
           price under clause (1) of Rule 3, by agreement between the
G          sugarcane grower and the purchaser of the sugarcane, they would
           be at liberty to agree to sell or purchase the sugarcane at a higher
           price than that was fixed by the Central Government under clause
           (1) of Rule 3. Only for postponement of payment beyond 14 days,
           there should be an agreement in writing between the parties
H          obviously with the co11curre11ce of the Central Government or
                     S.KG.SUGARLTD. v.STATE                             283

        authorised authority in that behalf. Thus, there is no statutory A
        prohibition in that behalf to pay higher price. That would be
        further clear by Rule 3(2) which speaks of the contract between
        the ·parties for payment of higher price of sugarcane fixed under
        clause (1) of Rule 3 pursuant to the agreement or pursuant to the
        minimum price fixed by the Central Government under Rule 3(1)
        of the Order.
                                                                          B

            Under Rule 3(1) and additional price fixed under Rule SA, it
        was within the domain of the contract between the sugarcane
        growers and the factories who could agree to pay price higher than
        the minimum price fixed under the Order. What sub-rule (2) of           C
        Rule 3 prohibits is the purchase or sale or agreement in that behalf,
        for bargain to pay price lesser than the minimum price fixed by
        the Central Government. In other words, the sugarcane growers
        should not be compelled to sell the sugarcane at a price lesser than
        what was prescribed by the Order. Thus, we hold that there was          D
        no statutory prohibition at the relevant time to agree to pay higher
        price than was fixed under the order."

       There is, thus, no prohibition on payment of higher price, it is seen
and it is not disputed that there was an agreement by the Sugar Factory
Owners Association with growers of sugarcane entered in January 1983 E
wherein the price to the sugarcane at Rs. 20.50 per quintal was agreed to
be paid. It is stated in the judgment of the High Court that this was fixed
after the agreement between the Millers Association and the farmers at a
meeting convened by the State Government and the agreement was notified
by the State Government. The High Court has also stated that the appellant F
had played prominent part in fixati.on of the price and it acted upon it till
March 31, 1983. What was contended in the High Court was that though
the agreement was there, since the Company is an independent entity in
the eye of law, it is not boui:id by such an agreement and, therefore, the
appellant is entitled to resile from the agreement with the farmers at that
meeting convened by the State Government. In Jaora's case this Court had G
held thus:

        "The question is : whether such a higher price has been agreed to
        be paid to the sugarcane growers, when contract has come into
        existence between the respondents and the cane growers with the         H
    284                  SUPREME COURT REPORTS                   [1997) 1 S.C.R,

A          aegis of the appellants?, As a facts, except Kaluram, all repre-
           sentatives of other factories were present at the time of the agree,
            ment dated March 21, 1976. As far as Kaluram is concerned, on
            the first occasion he was present, but on the second occasion when
            the meeting was adjourned, he was not present, it has been averred
            in the counter-affidavit that the Secretary of the Sugarcane Fac-
B           tories Owners' Association had contracted him when he was in the
            hospital and thereafter, the agreement was entered into. Though,
           'subsequently, an attempt was made by the Secretary to wriggle out
            from it, the Government have stated that and the sugarcane
            growers have agreed for the same, we are of the considered view
c           that he was a consenting party and there was consensus ad idem
            to pay higher price of sugarcane than the minimum price fixed by
            the Ct;ntral Government and they acted upon it. There was no
            prohibition for oral agreement between growers and owners
            through the service of the Cane Commissioner, a statutory
            authority to effect such agreement.
D
            It would thus be clear that the Cane Commissioner having power
            to compel the cane growers to supply cane to the factory Khandsari
            unit, he has incidental power and duty bound to ensure payment
            of the price of the sugarcane supplied by the sugarcane grower.
E           The price fJXed or agreed is a statutory price and bears the stamp
            of statutory first charge on the sugar and assets of the factory over
            any other contracted liabilities to recover the price of the sugar-
            cane supplied to the factory of Khandsari unit.

            Thus, it would be seen that the Act regulates the recovery as
F
            arrears of land revenue. Accordingly, demand has been for pay-
            ment of the amount in a sum of Rs. 6,34,166 in CA No. 1813/80,
            Rs. 13,40,700 in CA No. 1814 and Rs. 2,71,000 in CA No. 1812/80.
            Thus, the demands issued against the respondents are in accord-
            ance with the provisions of the Act and they are liable to pay the
G           same.''--


          It is not in dispute that under Section 31 of the Supply Act, the State
    Government has power to fJX the reserved area, in other words, zone was
    carved out for the appellant for the supply of sugarcane to the factory. All
H   the farmers who are cultivating the sugarcane within that zone are bound
                          S.K.G. SUGAR LTD. v. STATE                       285

     by the State action to supply sugarcane to the factories within that reserved A
     area; Consequently, the factory also is bound by the actions of the State
     Government. Obviously, pursuant to the obligation had by the State under
     the Supply Act, the meeting was convened by the State Government
     whereas the factory owners'. Association and farmers participated and
     agreed to fix the price at Rs. 20.50 per quintal of sugarcane. As a conse- B
     quence, both the cane growers as well as the owners of the factory are
     bound by the decision. This having been agreed upon, the price fixed by
      the State Government in excess of the minimum price fixed by the Central
     Government under ·clause 3 of the Order would be the price fixed for
     supply of sugarcane and the Government would be entitled to enforce the
     liability. As a consequence, the Collector was empowered and duty bound C
     to issue a certificate of the dues as arrears of land revenue for recovery
     under the Revenue Recovery Act. The certificate obviously relates to the
     difference between the minimum price fixed by the Central Government,
j'
     i.e., Rs. 13.92 per quintal and the price of Rs. 20.50 determined by the
     agree!!'.~nt between the parties. Under the circumstances, there need not D
     be any separate agreement to be entered into between the cane growers in
     the reserved area and the appellant's factory to be-enforceable. We hold
     that the certificate issued by the Collector is valid in law. As held earlier,
     the State Government acted in their statutory capacity to fix the increased
     price of the ·sugarcane. There is no need for the growers to file separate
     suit to recover the difference of the price. The recovery proceedings are E
     the appropriate course of action rightly adopted by the State Government.

            Shri Giri next sought to contend that the appellant-factory was
     notified to be taken over and denotified for divestment and in the inter-
     regnum sales and purchases have taken place and the consequence thereof F
     requires to be considered. The appellant had crushed the sugarcane though
     vacuum pan process in producing sugar in the relevant period. So it alone
     is liable to pay the cane price. We find that the question in this case of
     sharing the liability by the State Government does not arise. Therefore, it
     is unnecessary for us to go into the question in these appeals. By order
     dated February 29, 1996 passed by this Court, the State Government was G
     directed to work out the amount due and payable to the cane growers in
     terms of the undertaking given to this Court at the time of passing the
     interim order. Pursuant thereto, it appears and is not in .dispute that the
     Government has worked out the dues at Rs. 62,90,398.72 and made a
     demand on March 22,1996 and in furtherance thereof, the appellant has H
    286                  SUPREME COURT REPORTS                  [i997] 1 S.C.R.
                                                                                  {
A deposited the amount on April 3; 1996. In view of the above, if there is any
    demand tlthet than What was directed, the respondents are at liberty to
    proceed in accordance with law and if there is no demand and the demand
    has already been satisfied, then it is needless to mention that the respon-
    dents inay not take any further steps in that behalf.

B        The appeals are accordingly dismissed with the above observations.
    No costs.

    T.N.A.                                              Appeals are dismissed.