Holding

The levy‑sugar price must be fixed in accordance with Section 3(3‑C) of the Essential Commodities Act, taking into account the producer’s liability under clause SA of the Sugarcane (Control) Order, 1966, and the Court’s earlier direction is not ambiguous.

Summary

The Supreme Court examined the fixation of levy‑sugar prices for the years 1974‑75 to 1979‑80 under Section 3(3‑C) of the Essential Commodities Act, 1955. Earlier the Court had directed the Government to amend the notifications to include the sugar producer’s liability under clause SA (5A) of the Sugarcane (Control) Order, 1966. The Government issued new notifications on 22‑Feb‑1995 but failed to incorporate the additional cane price, claiming the earlier direction was ambiguous. The Court rejected this claim, holding that the direction was clear and that the additional liability must be taken into account as part of Factors ‘A’ and ‘B’ while fixing the levy‑sugar price. Consequently, the Court allowed the applications and ordered the Government to issue supplemental notifications complying with the direction.

Issues considered

Whether the levy‑sugar price fixation for 1974‑80 must include the additional cane price payable by producers under clause SA of the Sugarcane (Control) Order, 1966, as required by Section 3(3‑C) of the Essential Commodities Act.
Whether the Supreme Court’s earlier direction (paragraph 109) is ambiguous or admits two interpretations regarding the inclusion of the additional cane price.
Whether the notifications issued by the Government on 22‑Feb‑1995 complied with the Supreme Court’s direction.
Whether the decision on levy‑sugar price for 1982‑83 (T.C. No. 9 of 1990) has any bearing on the fixation for 1974‑80.

Legislation cited

Essential Commodities Act, 1955s. 3(3-C)
Sugarcane (Control) Order, 1966s. clause SA (5A)

Subjects

Essential Commodities ActLevy sugar priceSugarcane (Control) OrderAdditional cane priceFactor AFactor DGovernment complianceSupreme Court direction

Judgment

. SH. MALAPRABHA CO-OP., SUGAR FACTORY LTD. A
v.
UNION OF INDIA AND ANR.

JANUARY 28, 1997

[S.C. AGRA\YAL, B.P. JEEVAN REDDY AND·. B
G.T. NANAVATI, JJ.]

Essential Commodities Act, 1955/Sugarcane (Control) Order, 1966:

S.3(3-C)!Clause SA-Directions issued by Supreme Court to the C
Government of India to take into account the liability of the manufacturer as
regards cane price and refix the price of levy sugm~Doubt or confusion raised
in the Review Petition is the result of wiwillingness of the Govemment to gi,ve
up its views and accept and implement the said decision-Order passed in
respect of levy sugar price for the year 1982-83 could not have any bearing on
the f!Xation of p1ice of levy sugar for the years 1975-76 to 1979-8o-Matter not D
covered by the decision in Malaprabha:

Shri Malaprabha Co-operative Sugar Factory Ltd. v. Union of India &
Anr., (1994] 1 SCC 648, referred to.

CIVIL APPELLATE JURISDICTION : I.A. No. 5-6 of 1995. E

In

Civil Appeal Nos. 122-123 of 1981.

From the Judgment and Order dated 3.10.80 of the Karnataka High F
Court in W.A. Nos. 427 and 440 of 1980.

F.S. Nariman, N.N. Goswami, P.H. Parekh, Ms. Sunita Sharmil,
Subhash Sharma, D.M. Popat, C.V. Subba Rao, T.C. Sharma, D.S. Mehra,
Ranjit Kumar, Praveen Kumar, Rajiv Dutta, Indeevar Goodwill, S.K. G
Dingra, C.S. Srinivasa Rao, G. Narasimhulu, Aruneshwar Gupta, K.P.
Gupta, A.K. Goel, G.I. Gopalkrishnan, M. Qamaruddin, Pradeep Misra,
· _,. S. Ravindra Bhat, Ravindra Bana, Pramod Dayal, Ms. Geetanajali Mohan
and K.L. Mehta for the appearing parties.

The following Order of the Court was delivered : H
641
642 SUPREME COURT REPORTS [1997) 1 S.C.R.
A A batch of civil appeals (including the above mentioned two ap-
peals), special leave petitions, writ petitions, transfer petitions and trans-
ferred cases challenging the fixation of price of levy sugar for the years
1974-75 to 1979-80, by orders issued under Section 3(3-C) of the Essential
Commodities Act, 1955, was disposed of by this Court by a common
B judgment dated 22.9.93. This Court held that the impugned orders/notifica-
tions were bad as the price was not fixed in accqrdance with the relevant
provisions of law. However, it did not quash the notifications as they would
have led to nebulous situation during the interregnum till re-fixation of
price. Instead of quashing the said notifications it directed the Union of
India to amend the notifications taking into account the liability of
C producers of sugar under clause SA of the Sugarcane (Control) Order,
1966 (hereinafter referred to as the '1966 Order'), having regard to the
factors mentioned in Section 3(3-C) of the Act. The Government was also
directed to issue the amended notifications by December 31, 1993.

The union of India was not satisfied with the judgment and, there-
D fore, filed Review Peti,ion Nos. 211 and 212 of 1994 on 15.11.93. They were
dismissed on 23.2.94. The Union of India had also filed an application on
24.12.93 for directions/clarifications and extension of time. The clarification
was sought for on the follmving ground:

E "It is submitted that the decision of this Hon'ble Court lends
itself to two different interpretations as mentioned below :

(a) The amount of additional cane price payable by sugar
factories at the end of each season is to be added to the SMP of
Sugarcane while computing the element of cost as per Factor 'A' \ ...
F of Section 3(3-C) of the Essential Commodities Act, 1955 for
purposes of price fixation;

(b) The levy sugar prices may be ref1Xed taking into account
only Factors 'A' to 'D' of Section 3(3-C) of the Essential Com-
G modities Act, 1955."

It wanted this Court to clarify :
,,__ '

"......whether the revised levy sugar price should be the sum total
of Factors 'A', 'B', 'C' and 'D' of Section 3(3-C) of the EC Act in
H case of price fixation."
MALAPRABHACO-OP.,SUGARFACTORY v. U.O.I. 643
. The application was dismissed with costs but the time for im- A
plementation of the judgment was extended upto November 30, 1994
peremptorily. In spite of this direction the Government did not issue the
required notifications within time. It issued the following six notifica-
tions on 22.2.9S :

1. No. GSR 76(E)/Ess. Com./Sugar dt. 22.2.1995 - 1974-75. B

2. No. GSR 77(E)/Ess. Com./Sugar dt. 22.2.1995 - 1975-76.

3. No. GSR 78(E)/Ess. Com./Sugar dt. 22.2.1995 - 1976-77.

4. No. GSR 79(E)/Ess. Com./Sugar dt. 22.2.1995 - 1977-78. C
5. No. GSR 80(E)/Ess. Com./Sugar dt. 22.2.1995 - 1978-79.

6. No. GSR 81(E)/Ess. Com./Sugar dt. 22.2.1995 - 1979-80.

It is the grievance of the applicants that the. said notifications have D
been issued in disregard and contravention of the judgment of this Court
inasmuch as the Government, while re-fixing the levy sugar price for the
said six years, has failed to include in such re-fixation the element of
additional cane price payable by the producers under clause 5A of the 1966
Order. They, therefore, want this Court to give appropriate directions to E
the Union of India to forthwith comply fully and effectively with the
judgment by issuing supplemental notifications providing for additional
levy sugar price. applicant No. 1 in both these applications is the Indian
Sugar Mills Association and it has filed the applications on behalf of all
its members. Applicant Nos. 3 to 33 are some of its members and were
parties to the above referred batch of cases. Though the Government, while F
issuing the said six notifications, did not take into consideration the addi-
tional cane price payable by the producers of sugar under clause 5A yet
the stand taken by them is that the said notifications are consistent with
the judgment of this Court. The contentions raised in this behalf by them
are the same as were taken earlier while the said batch of matters, the G
review applications and the applications for clarification were heard. In
order to appreciate whether there is any substance in the contentions
• -J. raised by the respondents it is necessary to recall the rival submissions
made earlier and how they were dealt with by this Court.

The challenge to the fixation of price of levy sugar was two- fold. It H
644 SUPREME COURT REPORTS 11997] 1 S.C.R.
A was challenged on the ground that it was no.t determined in accordanc~
with Section 3(3-C) of the Act inasmuch as the price was fixed without
regard to the four Factors specified therein. The submission in that behalf
was that while fixing the price under Section 3(3-C) regard must be had to
the producer's liability under clause 5A of the 1966 Order which provides
B for payment .of additional minimum price to be paid by the producer of
sugar to the Sugarcane grower and, therefore, what is statutorily payable
to the grower has necessarily to be included as an element of Factor 'A'
of Section 3(3-C). Moreover, the minimum price payable under Section
3(3-C) and the additional minimum price payable under clause 5A are
integral components of manufacturing ccist under Factor 'B'. The second
C ground of challenge was that mopping up of the entire excess realisation
by sale of free sugar was also incorrect in view of clause 5A as that would
result in total denial of any return on the capital employed in the business
of manufacturing sugar, resulting in not even recovering the actual cost of
production. Though prior to October 1, 1974 the date on which clause 5A
D was added, 100% mopping up, that is taking the entire realisation by sale
of free sugar into consideration for fixing price of levy sugar was permis-
sible, after that date only 50% could be considered for that purpose.

On the other hand, it was contended that the objectives of Section
3(3-C) and. clause 5A are different. Whereas Section 3(3-C) deals with
E fixing of price of levy sugar, clause 5A deals only with the amount payable
to the cane grower. Thus, clause 5A cannot have any relevance for deter-
mination of price of levy sugar. It was submitted that price of levy sugar
has to be fixed in advance whereas determination of the share of cane
grower under Clause 5A comes into operation only after the sugar year is
F over. The liability of payment of additional cane price under clause 5A
would arise only in case of surplus from sales of both levy and free sugar
after adjustment of the unit cost production. This surplus may or may not
arise. Therefore, it cannot be regarded as a statutory or mandatory pay-
ment. As regards mopping up of the extra realisation by sale of free sugar,
the contention raised by the Government was that even after introduction
G of clause 5A, it being an independent provision, it was open to the
Government to mop up the entire extra realisation, even though clause 5A
entitles the producer to retain 50% of the extra realisation as his share to
meet with his other financial obligations and liabilities.
...
H This Court rejected the contention that Section 3(3-C) and clause 5A
)'--
f\fALAPRABHACO-OP.,SUGARFACTORY V. U.O.I. 64S
are totally independent and held that "if the determination of minimum A
' ~'
price of sugar and fixation of the price of levy sugar under quantity of sugar
to be supplied by the producer are inter-connected, then they must be
read as a whole and not separately as though each is distinct". With respect
to mopping up of extra realisation on sale of free sugar for the purpose of
determining price of levy sugar this Court held that according to the new
B
pricing policy contained in clause SA the producer became entitled to SO%
of such excess realisation from October 1, 1974 and, therefore, it was not

.. open to the Government to mop up his share also while fixing the price of
levy sugar. We need not refer to this aspect of mopping up further because
that is really not relevant for deciding these applications. We may only state
that under Factor 'D' of Section 3(3-C) extra realisation on sale of levy free c
sugar is a relevant consideration and, therefore, the Government can take
it into account to enable it to fix levy price at a lower level. As explained
by this Court in that judgment the effect of mopping up is to depress or
reduce the levy sugar price.

~
.. This Court construed clause SA as introducing a new pricing policy
which conferred a benefit on the producer by providing that he shall be
entitled to retain SO% of the extra realisation from sale of levy free sugar.
D

At the same time, it created a new liability for him by providing that he
shall share the extra realisation from sale of levy free sugar with the cane
grower on SO:SO basis. In view of this new liability this Court held that the E
Government was bound to take that also into account while fixing the price
of levy sugar, without specifying as to whether that liability became a
component of Factor 'A' or Factor 'B' or both those Factors of Section
3(3-C).
F
...-" As regards the direction to take into account the liability of the
producer of sugar under clause SA what is now submitted on behalf of the
respondents is as under :

"........ it is submitted that this part of the directions was com-
plied with by not mopping up the extra realisations on account of G
sales of free-sale sugar. While determining the originally notified
prices, the extra realisations were mopped up for purposes of
determination of the prices. This had resulted in a reduction in
~· the prices to a level lower than the price to which the sugar
producers would have been entitled to in terms of the provisions H
646 SUPREME COURT REPORTS [1997) 1 S.C.R.
A of the aforesaid Section 3(3-C)."

The respondents have also tried to support their action by contend-
ing that clause SA is 'inter-connected with clause 3 of the 1966 Order and
section 3(3-C) is an independent provision. Therefore, the direction given
B by this Court cannot be interpreted to mean that the additional cane price
fixed in terms of clause SA should also be taken into account as a cost
element in addition to those specified in Section 3(3-C). It is also submitted
that it is also not feasible to include the additional cane price payable under
clause SA in the minimum cane price payable under Section 3(3-C) as the
two exercises are required to be done at two different stages and the
C additional cane price is payable only in case of surplus. It was lastly
contended that a three-Judge Bench of this Court has upheld on 20.2.96
the levy prices fixed for 1982-83 in T.C. No. 9 of 1990 and that would mean
that this Court has now accepted the contention of the Government that it
is not required to include the additional cane price payable under clause
D SA while determining the price of levy sugar under Section 3(3-C).

All these contentions except the last one were raised by the respon-
dents earlier while the above batch of matters, the review applications and
the applications for clarification were heard by this Court. All those
contentions have been rejected and, therefore; it is really not open to the
E respondents to raise them again. It appears to us that the respondents, like
an ordinary litigant, are 'trying to find excuses for not complying with the
judgment of this Court merely because it is not palatable to them. The
direction given by this Court in Paragraph 109 of the judgment is quite
clear and does not lend itself to two interpretations or any confusion as
F contended by the respondents. In unambiguous terms this Court has
directed the Government of India to take into account the liability of the
manufacturer under clause SA of the 1966 Order as regards cane price and
re-fix the price of levy sugar. Obviously, the price of levy sugar has to be
fixed having regard to the Factors mentioned in Section 3(3-C) of the Act
and, therefore, this Court while giving the aforesaid direction also directed
G them to re-fix the price of levy sugar having regard to those Factors also.
The doubt or confusion, if any, appears to us to be the result of unwilling-
ness of the Government to give up its views and accept and implement the
decision of this Court.

H The observation, in Paragraph 104 of the judgment that the amount
MALAPRABHACO-OP.,SUGARFACTORY v. U.O.I. 647

which the producer of sugar is entitled to retain cannot be taken into A
consideration for determination of price of levy sugar, was made in the
context of mopping up of the ei.tra realisation. The issue was whether the
entire extra realisation or only SO% thereof could be mopped up, in view
of the new pricing policy contained in clause SA, for depressing the levy
price. Since by the new pricing policy a benefit was sought to be conferred
B
on the producer of sugar by making him entitled to retain SO% of the Extra
realisation this Court held that the said amount cannot be taken into
consideration for determination of price of levy sugar. That was entirely a
different aspect. The observation which is made in Paragraph 109 and the
direction given therein is with respect to the aspect of sugar producer's
liability to pay additional Sugarcane price. Clause SA being inter-con- c
nected with Section 3(3-C), this new liability would certainly get projected
into Factors 'A' and 'B' of Section 3(3-C). As earlier pointed out mopping
up of extra realisation is an element of Factor 'D' of Section 3(3-C). Thus
the contentions raised on behalf of the respondents even otherwise also do
not deserve to be accepted. D
The order that was passed by this Court on 20.2.96 in Transferred
Case (Civil) No. 9 of 1990 was in respect of levy sugar price for the year
1982-83 and, therefore, it cannot have any bearing on the fixation of price
of levy sugar for the years 197S-76 to 1979~80. Moreover, this Court, while
passing the said order, has clearly stated that ".... this matter is not covered E
by the decision of this Court in Slui Malprabha Co-operative Sugar Factory
• Ltd. v. Union of India andAnr., (1994] 1SCC648". Even if the Government
has omitted to take into consideration one unfavourable element, namely,
mopping up of excess realisation it cannot justify its omission to take into
consideration another relevant element which is favourable to the producer
of sugar. F

We, therefore, allow these applications and direct the Government
to issue additional orders/notifications in terms of the directions given by
this .Court in the above referred batch of cases.

G.N. Applications allowed.

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