TARUN AGARWALA,J. - (1.) EVERY year after the start of the crushing season, there is a spate of litigation inter se between the sugar factories, which are engaged in the business of manufacture of sugar by Vacuum Pan Process. The core issue, which is involved in this bunch of writ petitions, is the allocation of cane areas/sugar centres. Every year there is a general demand from all the sugar factories that the allocation of cane and cane areas by the Cane Commissioner is inadequate and that the sugar factories require more cane for their crushing operations, failing which, the unit becomes unviable.
(2.) THE U.P. Sugarcane (Regulation of Supply and Purchase) Act, 1953 (hereinafter referred to as the 'Act') regulates the supply and purchase of sugarcane required for the use of sugar factories and Gur, Rab or Khandsari Sugar Manufacturing Units. Section 2(a) of the Act defines “assigned area” as an area assigned to a factory under Section 15 of the Act. Section 2(n) of the Act defines “reserved area” as an area reserved for a sugar factory under an order for reservation of sugarcane areas made under Rule 125-B of the Defence of India Rules, 1962, and when no such order is in force, the area specified in an order made under Section 15 of the Act. Section 12 of the Act provides estimates of requirements for sugarcane. For facility, the said provision is quoted hereunder: 12. Estimates of requirements.- (1) The Cane Commissioner, may for purposes of Section 15, by order, require the occupier of any factory to furnish in the manner and by the date specified in the order to the Cane Commissioner an estimate of the quantity of cane which will be required by the factory during such crushing seasons or crushing seasons as may be specified in the order. (2) The Cane Commissioner shall examine every such estimate and shall publish the same with such modifications, if any, as he may make. (3) An estimate under sub-section (2) may be revised by an authority to be prescribed.” Section 15 provides for declaration of reserved area and assigned area. For facility, the said provision is quote hereunder: “15. Declaration of reserved area and assigned area.-(1) Without prejudice to any 3 order made under Clause (d) of sub-section (2) of Section 16 the Cane Commissioner may, after consulting the Factory and Canegrowers' Cooperative Society in the manner to be prescribed: (a) reserve any area (hereinafter called the reserved area); and (b) assign any area (hereinafter called an assigned area), for the purposes of the supply of cane to a factory in accordance with the provisions of Section 16 during one or more crushing seasons as may be specified and make likewise at any time cancel such order or alter the boundaries of an area so reserved or assigned. (2) Where any area has been declared as reserved area for a factory, the occupier of such factory shall, if so directed by the Cane Commissioner, purchase all the cane grown in that area, which is offered for sale to the factory. (3) Where any area has been declared as assigned area for a factory, the occupier of such factory shall purchase such quantity of cane grown in that area and offered for sale to the factory as may be determined by the Cane Commissioner. (4) An appeal shall lie to the State Government against the order of the Cane Commissioner passed under sub-section (1).” In exercise of the powers under Section 28 of the Act of 1953, the State Government framed the U.P. Sugarcane (Regulation of Supply and Purchase) Rules, 1954 (hereinafter referred to as the 'Rules'). For facility, Rule 22 of the Rules is quoted hereunder: “22. In reserving an area for or assigning an area to a factory or determining the quantity of cane to be purchased from an area by a factory, under Section 15, the Cane Commissioner may take into consideration- (a) the distance of the area from the factory, 4 (b) facilities for transport of cane from the area, (c) the quantity of cane supplied from the area to the factory in previous year, (d) previous reservation and assignment orders, (e) the quantity of cane to be crushed in factory, (f) the arrangements made by the factory in previous years for payment of cess, cane price and commission, (g) the views of the Cane-growers' Co-operative Society of the area, (h) efforts made by the factory in developing the reserved or assigned area.” From the aforesaid provisions, it is clear that in order to declare a reserved area or an assigned area for a sugar factory, the Cane Commissioner is required initially to issue an order under Section 12 of the Act estimating the quantity of sugarcane that could be required by a factory during a crushing season or crushing seasons for a sugar factory. Crushing season has been defined under Section 2 (i) of the Act as the period beginning on 1st October of any year and ending on 15th July, the following year. Based on the estimation fixed under Section 12 of the Act, the Cane Commissioner, after consulting the sugar factories and the Canegrowers' Co-operative Society and, after considering the factors contemplated under Rule-22 of the Rules, may reserve an area for a sugar factory and can also pass an order assigning an area to a sugar factory. The underlying idea of reserving an area to a sugar factory is, that it ensures stability to a sugar factory to purchase all the cane in the area so reserved in favour of a sugar factory. When an area is reserved, it becomes obligatory for a sugar factory to lift all the cane from its reserved area so offered by the Cane-growers' Society. Similarly, when an area is assigned by the Cane Commissioner, it becomes obligatory upon such factory, to whom the area is assigned, to lift such quantity of cane grown in that area and offered for sale to the factory as determined by the Cane Commissioner. The difference between a reserved area and an assigned area is, that a reserved area has some kind of a permanency attached to it, and an assigned area is on a temporary basis. The court, in several cases, has interpreted as to when an assignment can be made. The courts have held that where there is a breakdown in the factory during the crushing season and the sugar factory is unable to lift the cane, the Cane Commissioner, in such an eventuality, can issue an assignment order, assigning a certain area to another sugar factory to lift a particular quantity of cane, so that, cane is not lost; the cane-growers do not suffer; and production of sugar, which is of national interest, does not suffer. There could be another reason for assignment, namely, that a sugar factory is unable to pay cane dues. In that scenario, the Cane Commissioner could pass an order of assignment assigning the cane reserved for a factory to another factory for a particular period and for a limited quantity. Other reason could be that in a particular year, there is surplus cane in a reserved area of a 6 sugar factory and such surplus cane which is in excess of its crushing capacity could be assigned to another factory in whose reserved area there is less cane. These are some of the reasons when assignment could be made. There could be other reasons as well which the Court is not dwelling upon, but the reason for expressing these differences in a reserved area and in an assigned area is, the fact that an order for reserved area is passed on different considerations and an order for assignment is passed on different considerations. Taking the aforesaid in mind, the Court has to consider the reservation order that has been passed by the Cane Commissioner in the crushing season 2010-11. Prior to the issuance of the reservation order under Section 15 of the Act, an exercise under Section 12 of the Act is required to be taken by the Cane Commissioner to estimate the cane requirements of each sugar factory. In the present case, the dispute is between three sugar factories, namely, Laxmi Sugar Mills Co. Ltd., Uttam Sugar Mills Ltd. and RBNS Sugar Mills. The Cane Commissioner estimated the requirement of cane for Uttam Sugar Mills at 80 lac quintals, for Laxmi Sugar Mills it was 64 lac quintals and for RBNS Sugar Mills it was 112 lac quintals. This estimation of cane is basically based on the crushing capacity of the factory. The crushing capacity of Uttam Sugar Mills is 2500 TCD, for Laxmi Sugar Mills it is 4000 TCD and for RBNS Sugar Mills, the crushing capacity is 7000 TCD. The Cane Commissioner for reasons best known considered the crushing capacity of Uttam Sugar Mills at 5000 TCD, which will be discussed at a later stage. Based on the estimation fixed by the Cane Commissioner, a reservation-cum-assignment order dated 4th November, 2010 was passed under Section 15 of the Act of 1953. By this order, various areas/cane centers were reserved in favour of the sugar factories and by the same order, the Cane Commissioner simultaneously assigned some reserved areas in favour of another sugar factory. By the reservation order, allotment of sugar cane through a reserved or an assigned area to Uttam Sugar Mills was 85.11 lac quintals against the estimated requirement fixed at 80 lac quintals; for Laxmi Sugar Mills, against the estimation of 64 lac quintals, the reservation order allotted 91.64 lac quintals and for RBNS Sugar Mills, against the estimation of 112 lac quintals, allotted 148.52 lacs quintals. It transpires that the Cane Commissioner issued another reservation order dated 31st December, 2010, whereby one centre was allotted to Uttam Sugar Mills and half of another centre was assigned to Laxmi Sugar Mills. Against the aforesaid two reservation orders dated 4th November, 2010 and 31st December, 2010, RBNS Sugar Mills filed two appeals under Section 15(4) of the Act before the appellate authority contending that 16 reserved centres have been assigned to other sugar mills, namely, 9 reserved centres to Uttam Sugar Mills, 7 centres to Laxmi Sugar Mills and 3 centres to Doiwala Sugar Mills (which sugar factory is not before this Court). Uttam Sugar Mills also preferred an appeal against the reservation order dated 4th November, 2010, alleging that 3 reserved centres have been assigned to Laxmi Sugar Mills and praying that in view of the shortage of allocation of sugar cane, 7 centres of Laxmi Sugar Mills and 5 centres of RBNS Sugar Mills should be assigned.
(3.) THE appellate authority, after considering the objections of all the sugar factories and after hearing the matter and after considering the factors enumerated under Rule-22 of the Rules, passed an appellate order dated 15.2.2011 disposing of the appeals by modifying the reservation order. By the appellate order, 3 reserved centres of RBNS Sugar Mills were given back to RBNS Sugar Mills and at the same time, certain other centres were assigned. 8 centres of Uttam Sugar Mills were taken away, 4 centres were reserved again in favour of Laxmi Sugar Mills and 4 were reserved in favour of RBNS Sugar Mills, but 9 centres of Laxmi Sugar Mills and RBNS Sugar Mills were given to Uttam Sugar Mills by way of assignment. The appellate authority, as a result of this jugglery, has held, while enumerating it in the chart, that equitable distribution of sugarcane has been made inter se between all the sugar factories. The appellate authority while passing the impugned order considered two factors, namely, that as far as possible a reserved centre, which has been reserved in favour of a sugar factory, should not be disturbed and that simultaneous assignment should not be made by the Cane Commissioner. The second factor taken is, that the centres so reserved or assigned should be made in such a fashion that it should be compact and contiguous to a particular sugar factory. The appellate authority considered the objection of Laxmi Sugar Mills with regard to the crushing capacity of each sugar factory but did not base its order on that ground.;