- (1.) THE plaintiffs to the suit and the petitioners in both the Writ Petitions (hereinafter, for the sake of brevity, referred to only as "the plaintiffs") are a company registered under the Companies Act are carrying on the business of manufacturing sugar and allied products at their factory at Harigaton in Ahmednagar District since the last about 45 years. Prior to the coming into force of the Maharashtra agricultural Lands (Ceiling on Holdings) Act (Maharashtra Act XXVII of 1961) on the 26th of January 1962, the plaintiffs owned a large area of agricultural lands which were contiguous to the Plaintiffs' factory and within a convenient distance from the same. The plaintiffs used to cultivate sugarcane on the said lands which was used and consumed entirely by the plaintiffs' sugar factory. In fact, it was with a view to ensure an adequate and continuous supply of raw materials of good quality, without being subject to fluctuations in the prices of sugarcane that the plaintiffs were cultivating the said lands. Under the Maharashtra Agricultural Lands (Ceiling on Holdings) Act 1961, however, all surplus lands of the plaintiffs, i. e. lands in excess of the ceiling fixed in the manner provided by the Act, vested in the State Government, subject, of course, to payment of compensation as therein provided. Section 28 of the said Act which is important for the purpose of this case and which must, therefore, be quoted in extenso, enacts as follows: "28. (1) Where any land held by an industrial undertaking is acquired by and vests in, the State Government under Section 21, such land being land which was being used for the purpose of producing or providing raw material for the manufacture or production of any goods, articles or commodities by the undertaking, the State Government shall take particular care to ensure that the acquisition of the land does not affect adversely the production and supply of raw material from the land to the undertaking.
(2.) NOTWITHSTANDING anything contained in Section 27, but subject to any rules made in this behalf, for the purpose of so ensuring the continuance of the supply of such raw material to the undertaking, and generally for the full and efficient use of the land for agriculture and its effect management, the State Government (a) may, if it is in the opinion of that Government necessary for the purpose aforesaid (such opinion being formed after considering the representation of persons interested therein) maintain the integrity of the area so acquired in one or more compact blocks; (b) may, subject to such terms and conditions (including in particular, conditions which are calculated to ensure the full and continued supply of raw material to the undertaking at a fair price) grant the land, or any part thereof, to a joint faring society (or a member thereof) consisting as far as possible, of (i) persons who had previously leased such land to the undertaking, (ii) agricultural labour (if any) employed by the undertaking on such land, (iii) technical or other staff engaged by the undertaking on such land, or in relation to the production or supply of any raw material, (iv) adjoining landholders who are small holders, (v) landless persons; provided that, the State Government may: (a) for such period as is necessary for the setting up of joint farming societies as aforesaid, being not more than three years in the first instance (extensible to a further period not exceeding two years) from the date of taking possession of the land, direct that the land acquired. or any part thereof, shall be cultivated by one or more farms run or managed by the State, or by one or more corporations (including a company) owned or controlled by the State; (b) grant to the landlord so much of the surplus land leased by him to the undertaking, which together with any other land by him does not exceed the ceiling area (but if the landlord be a public trust and the major portion of the income from the land is being appropriated for purposes of education or medical relief, grant the entire land to the public trust) lease the land to a farm or corporation described in clause (a) aforesaid, and thereafter, in the case of a landlord (not being a public trust) that he becomes a member of the joint farming society, and in the case of a public trust, that it leases the land to a joint farming society.
(3.) THE State Government may provide that: (a) for the breach of any term of condition referred to in clause (b) of sub-section (2), or (b) if the landlord to whom the land is granted fails to lease the land to the farm or corporation or to become a member of a joint farming society; or (c) if it considers after such inquiry as it thinks fit that the production and supply of raw material to the undertaking is not maintained at the level or in the manner which, with proper and efficient management it ought to be maintained, or (d) for any other reason it is undesirable in the interest of the full and efficient cultivation of the land, that the joint farming society should continue to cultivate the land, the grant shall, after giving three months' notice of termination thereof and after giving the other party reasonable opportunity of showing cause, be terminated, and the land resumed. Thereafter, the State Government may make such other arrangements as it thinks fit for the proper cultivation of the land and maintenance of the production and supply of raw material to the undertaking. " Section 46 of the said Act empowers the State Government to frame Rules, inter alia, for carrying out the purposes of section 28 of that Act. The State Government framed Rules in exercise of the rule-making power conferred upon them under section 46 of the said Act. On 24th October 1967, the State Government amended these Rules by framing Rules 12b and 12c under sub-section 2 (d) of Section 46 of the Act, to the contents of which I will refer at the appropriate place later on. 2. There are, however, certain material facts relating to this case which occurred prior to the framing of Rules 12b and 12c, which must be narrated here. On the 6th of March 1963, the Maharashtra State Farming Corporation Ltd. , which is the defendant to the suit and the second respondent in both the Writ Petitions, was registered under the Companies Act in accordance with the provisions of proviso (a) to section 28 (2) of the Maharashtra Agricultural Lands (Ceiling on Holdings) Act; and it is not disputed that the entire share-holding of the said company was not only owned by the State Government, but its Board of Directors consisted wholly of nominees of the State Government, the Revenue Minister for the time being, being the Chairman of the Board of Directors of the said company. On a Writ Petition (being Special C. A. No. 80 (Sic of 1963) filed by the plaintiff company challenging the validity of the Maharashtra Agricultural Lands (Ceiling on Holdings) Act, 1961, a Division Bench of this Court, consisting of Kotawal and Mody JJ. , held on the 25th October 1963 that section 28 of the said Act was void as offending against Article 14 of the Constitution, but that the rest of the said Act, which was severable, was valid. It may be mentioned that that was a common judgment delivered in the said Special C. A. No. 800 (Sic) of 1963 filed by the plaintiffs, and in several other petitions filed by other sugar companies. Appeals were filed from the said decision of the High Court, but before the same could be heard, the 17th amendment to the Constitution came into force on the 20th June 1964 by which the Maharashtra Agricultural Lands (Ceiling on Holdings) Act, 1961, was placed as Entry No. 34 in the 9th Schedule to the Constitution, the legal effect of which was that by virtue of the provisions of Article 31b of the Constitution, the validity of the said Act could not be challenged on the ground that it violated any of the fundamental rights declared under Part III of the Constitution. In another matter that came before it on a Writ petition (Spl. C. A. No. 1642 of 1963 filed by the Godavari Sugar Mills Co. Ltd. , a Division Bench of the High Court consisting of Chainani C. J. and H. R. Gokhale J. , held on the 10th of March 1965, that the 17th Amendment to the Constitution had put section 28 and other provisions of the impugned Act beyond challenge on the ground that they were inconsistent with or took away or abridged any of the fundamental rights guaranteed under the Constitution, a decision which was confirmed by the Supreme Court in appeal on 10th April 1963. 3. In order to complete the outline of the previous judicial decisions on the subject, it may be mentioned that, on the 27th day of February 1967, a Special Bench of eleven judges held, by a majority, in the case of Golak Nath v. State of Punjab, (A. I. R. 1967 S. C. 1643, paragraphs 52-53) that Parliament has no power to amend any of the provisions of Part III of the Constitution so as to take away or abridge the fundamental rights enshrined therein, but applying the doctrine of "prospective overruling" of its own earlier decisions, it was held that the 17th amendment and all amendments effected prior thereto by which fundamental rights were sought to be abridged were valid on the basis of earlier decisions of the Supreme Court itself. Soon after the decision of the High Court in Spl. C. A. No. 1642 of 1963, some time in or about April-May 1965, negotiations started between the plaintiffs' representatives and the representatives of the Government, and it is the plaintiffs' case in paragraph 24 of the plaint that, at one of those meetings, Shri D. R. Pradhan, the then Chief Secretary to the State Government and a Director of the defendants as representating the State Government and the defendants, agreed with the plaintiffs' representatives that the prices to be charged to the plaintiffs by the defendants for the sugarcane supplied from the 1966-67 season onwards would be the prices fixed by the Government of India. This agreement is denied by the defendants in paragraph 24 of the plaint that the plaintiffs' representatives were assured and promised by the said Pradhan that they would be treated and given the same terms and conditions as other sugar factories which had already handed over their surplus lands. This statement is not denied in paragraph 16 of the Written Statement. Possession of the surplus lands of the plaintiff-company, admeasuring about 11,393 acres and 18. 5/8 gunthas, was given by it to the State Government on the 25th of May 1965. It was at that stage that a meeting was held between the representatives of the plaintiffs on the other hand, and two of the directors of the defendants on the other, on the 20th of July 1965. The fact that such a meeting was held is not denied by the defendants, but there is difference in the respective versions of the parties as to what transpired at the said meeting. The plaintiffs' case with regard to the same, as set out in paragraph 27 of the plaint, is that at the said meeting it was agreed between the parties that the price to be charged for sugarcane produced by the defendants on the surplus lands of the plaintiffs, all of which was to be supplied to the plaintiffs, would be governed by the notifications issued by the Government of India from time to time, and that the plaintiffs would in their turn be bound to purchase all the cane produced on the said surplus lands of the plaintiffs at those prices. This part of the averments in paragraph 27 of the plaint is not denied in paragraph 19 of the Written Statement. It is, however, further stated in paragraph 27 of the plaint that the said prices meant and were understood by the parties to mean the minimum prices fixed by the central Government under its annual notifications, and that the said minimum prices were regarded by the parties as fair prices within the meaning of Section 28 of the Act. The first part of that averment is clearly denied in paragraph 19 of the Written Statement. As far as the second part of the said averment is concerned, though the same is not denied in paragraph 19 of the Written Statement which deals inter alia with paragraph 27 of the plaint, it has been contended by the learned Advocate General that the same has been denied in paragraph 27 of the plaint, it has been contended by the learned Advocate-General that the same has been denied in paragraph 27 of the written Statement. It may be mentioned that it is further stated in the said paragraph that it was agreed that the defendants were to enter into a formal agreement with the plaintiffs for the supply of sugarcane. That has not been denied in paragraph 19 of the Written Statement. The plaintiffs by their letter dated 5th August 1965 (Ex. B.) forwarded to the defendants a copy of the Minutes of the said meeting of 20th July 1965 (Ex. C) and asked for confirmation of the same. In item No. 1 of the said Minutes which related to the prices of sugarcane to be charged by the Corporation, it was stated that it was agreed that the price to be charged for such cane was stated that it was agreed that the price to be charged for such cane was to be governed by notifications issued by the Government of India from time to time, and that the factory would be bound to purchase all such cane at those prices. It is further stated in the said item that the Corporation would enter into a formal agreement with the Company for the supply of cane. The Court is not concerned in the present case with the remaining items in the said Minutes. The managing director of the defendant Corporation by his letter dated 9th August 1965 (Ex. D) confirmed the arrangement arrived at in respect of the said Item No. The Board of Directors of the defendant-Corporation passed a Resolution at their meeting held on the 9th September 1965 approving of the agreement arrived at by the said Corporation with the plaintiff company as a result of discussions with their representatives. The material portion of the agreement approved of by the said Resolution was in the following terms: "6. The Prices of Cane to be charged by the Corporation.- The prices to be charged for the Corporation's sugarcane shall be governed by the notifications issued by the Government of India, from time to time, and the factory shall be bound to purchase all such cane at that price. The Corporation should enter into a formal agreement with the company for the supply of cane. " a copy of the relevant portion of the Minutes of the said meeting of the Board of Directors of the defendant Corporation is Ex. E in the present proceedings.;