DIWAN SUGAR AND GENERAL MILLS PRIVATE LIMITED Vs. UNION OF INDIA

JUDGEMENT

(1.) This petition under Art. 32 of the Constitution challenges the legality of the notification dated July 30, 1958, (hereinafter called the impugned notification), issued by the Government of India fixing the ex-factory price per maund of sugar produced in Punjab, Uttar Pradesh and North Bihar. It has been supported by two sets of interveners consisting of sugar factories in these areas who did not join the petition.

(2.) The case of the petitioners is that the Essential Commodities Act, (X of 1955), (hereinafter called the Act) was passed by Parliament in 1955, for the control of the production, supply and distribution of, and trade and commerce in, certain commodities which included sugar. By S. 3 of the Act, the Central Government was given the power, if it was of opinion that it was necessary or expedient so to do for maintaining or increasing supplies of any essential commodity or for securing their equitable distribution and availability at fair prices, to provide by order for regulating or prohibiting the production, supply and distribution thereof and trade and commerce therein. Section 3(2) further provided inter alia for controlling the price at which any essential commodity might be bought or sold. In exercise of these powers, the Central Government promulgated the Sugar (Control) Order, 1955, (hereinafter called the Order) on August 27, 1955. Clause 5 of the Order gave power to the Central Government, by notification in the Official Gazette, to fix the price or the maximum price at which any sugar might be sold or delivered, and different prices might be fixed for different areas/factories or different types or grades of sugar. Such price or maximum price had to be fixed with due regard to various factors, with which we shall deal later. On June 27, 1958 the Central Government promulgated the sugar Export Promotion Ordinance, No. V of 1958, empowering it to appoint an export agency for carrying out the work of buying sugar in the Indian market and exporting the same to foreign markets and fixing the quantity of sugar for export. The Central Government was also authorised by that Ordinance to fix quotas apportioning the quantity of sugar to be supplied by each factory for export and levy an additional excise duty at the rate of Rs. 17 per maund on any factory failing to deliver its quota of sugar for export. On the same day, three notifications were issued:(1) fixing 50,000 tons of sugar as the quantity to be exported out of India during the period ending October 31, 1958, (2) appointing the Indian Sugar Mills Association, Calcutta, as the export agency, and (3) delegating the powers conferred on the Central Government to the Chief Director of Sugar and Vanaspati, Ministry of Food and Agriculture also. Then followed the impugned notification fixing ex-factory prices of sugar produced by the factories in Punjab, Uttar Pradesh and North Bihar. It is being challenged on the ground that the price fixed is considerably below the cost of production and ignores various factors affecting the cost of production and distribution of sugar including charges incidental to sale and distribution. The impugned notification is also attacked on the ground that it did not fix any price at which the persons purchasing sugar from the mills would sell it, so that it was open to the middleman who bought sugar from the factories to sell it at any price, us creating discrimination between factories and factories and between the producers selling sugar and the middlemen who buy sugar selling the same in their turn. It is also alleged that fixing of the price was arbitrary and did not take into account the cost of production of a large number of units in the country and did not provide for a fair and equitable distribution of sugar in the country at a price in any way related to the price at which the factories were compelled to sell their products. Consequently, the petitioners prayed for an appropriate order, direction or writ in the nature of mandamus or any other writ quashing the Sugar (Control) Order, 1955, an all orders made in pursuance of it including the impugned notification.

(3.) The petition has been opposed by the Central Government. It is contended on their behalf that the entire object of fixing the price of sugar was (a) to make it available at a reasonable price to the consumer, and (b) to ensure adequate and smooth flow and supply of sugar which is an essential commodity for the life of the people to all parts of the country according to their needs and requirements, checking the speculative tendency of the market and destroying the creation of an artificial shortage by unscrupulous persons. Prices of sugar were first put under control as far back as 1942 and this control continued up to 1947 when it was withdrawn on December 8, 1947. It was, however, found that internal prices were raised during the de-control period on the pretext of subsidizing export, which never materialised. In consequence, control was again imposed on September 2, 1949; but it was lifted in 1952, when it was found that there was sufficient stock available at the end of the 1951-52 season. In 1953-54, however, production fell and control had again to be imposed for that season. It was, however, lifted a year later. In November 1956 there was a considerable surplus of sugar and the Central Government permitted export of 1.53 lakh of metric tons in 1957. The Central Government was again approached in 1958 to make the export of sugar a permanent feature and it agreed to allow export during 1958 in view of the carry over from the previous season and also for earning foreign exchange in the interest of the country. Therefore, the Central Government promulgated the Sugar Export Promotion Ordinance, No. V of 1958, on June 27, 1958. But as this Ordinance was expected, a tendency developed in the sugar industry to push up prices after the month of April 1958. As a result of this tendency, prices went up by about a rupee per maund in May and June 1958, and it was feared that they might go up further in view of the quota for export announced on June 27, 1958. In view of this apprehension, the industry, assured Government that the sugar factories would offer to sell their released stocks freely at prices prevalent before the export policy was announced i.e., in the week before June 27, 1958. In spite, however, of this assurance, there was a general rise in prices during the four weeks preceding the impugned notification. This rise was particularly marked in Northern India. It was in these circumstances that the Government decided to control ex-factory prices of sugar in Punjab, Uttar Pradesh and North Bihar. The Government took all relevant factors into account in fixing the price. This was done in the interest of the general public in order that sugar might be available at fair prices. As Uttar Pradesh and North Bihar are the main surplus areas and feed the deficit areas of the country it was not necessary to control prices elsewhere; nor was it necessary to control prices beyond the ex-factory stage as the prices in the wholesale or the retail markets are governed by exfactory prices. There was in the circumstances no question of discrimination or any unreasonable restriction on carrying on trade in sugar. The Government did not admit that the price fixed was below the cost of production generally. Consequently, it was prayed that the petition should be dismissed.