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PETITIONER:

MAHARASHTRA RAJYA SAHKARI SAKKAR KARKHANA SANGH LTD.

Vs.

RESPONDENT:

STATE OF MAHARASHTRA & ORS. ETC. ETC.

DATE OF JUDGMENT18/04/1995

BENCH:

SAHAI, R.M. (J)

BENCH:

SAHAI, R.M. (J)

JEEVAN REDDY, B.P. (J)

SEN, S.C. (J)

CITATION:

1995 SCC Supl. (3) 475 JT 1995 (3) 581

1995 SCALE (2)772

ACT:

HEADNOTE:

JUDGMENT:

R.M. SAHAI, J.

1. These are two sets of appeals filed by various Sahakari

Sakkar Karkhanas, that is, Co-operative Societies of

Sugarcane Growers, Private Undertakings, Joint Stock

Companies producing sugar in the State of Maharashtra and

the State itself one, directed against direction by a Full

Bench of the Bombay High Court in Satara Sahakari Sakhar

Karkhana Ltd. & Anr. v. Stale of Maharashtra & Ors., AIR

1989 Bombay 53 that the cane growers who were not members of

any Co-operative Society but who were required to supply

their cane under reservation order or Control Orders to

sugar factories with which they were attached were entitled

to market price instead of price fixed by the Government,

and other directed against fixation of market price for

1993-94 by the High Court at Rs. 740/- as against Rs.340/-

to Rs.400/- fixed by the Government.

2. The directions issued by the Full Bench are as under:

"We are therefore of the view, that unless

provisions for the following arc made in it,

the State Order will not be valid

(i) The sugarcane &rowers who are not

members of the factory or factories to which

they are required to supply their sugarcane

shall be paid for the sugarcane supplied by

them the price calculated at the market rate

prevailing in the locality at the date of the

sale;

(ii) The market rate may be as agreed between

the parties, namely, the sugarcane grower and

the factory or factories concerned. If there

is any dispute over it, the same should be

resolved by an independent authority which may

be created under the Order such as the one

under clause'12 of the present Order. The au-

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thority concerned should decide the dispute

expeditiously after hearing the parties and by

a speaking order,

(iii) No unauthorised deductions on any

account should be made by the factory from the

price to be paid to the sugarcane grower

without his consent. The State Order should

provide for a machinery similar to the above

to hear and grant to the sugarcane grower,

expeditious relief if he has any complaint in

that behalf."

585

The reasons for these directions were twofold, one, the non

members were not bound by the price fixed under bye- laws

framed under the Cooperative Sugar Act and other that there

was no machinery in the Zoning Order issued by the State

Government to hear the non-members before the price was

fixed. Before examining whether these reasons are well

founded in law leading to the impugned directions it is

necessary to narrate in brief the necessity which impelled

the Central Government to grant protection to sugar industry

and consequently to control, supply and distribution of the

sugarcane without sacrificing the interest of canegrower.

3. Sugar is an item of daily use in every household, rich

or poor. Use of white sugar has increased with rolling of

years, growth of population, rise in income etc. Today it

is somewhere 134 lakh tonnes. Even in 1931 the requirement

was more than 9 lakh metric tonnes. But the production was

nearly 1.8 lakh metric tonnes only. And there was an import

of more than 8 lakh metric tonnes. The Government,

therefore, decided to grant protection to the sugar

industry. The Bhargava Commission appointed by the Central

Government in 1970 in Chapter 1 of Part I of its report has

traced the growth and development of the sugar industry and

observed that till 1930-31 there were only 29 sugar

factories producing 1.22 lakh tonnes of sugar in the

country. That was, however, not adequate to meet the

internal requirement and nearly 8 lakh tonnes of sugar was

imported in that year. In 1932 protection was granted to

the sugar industry. Following this there was a phenomenal

expansion of the industry and the number of sugar factories

increased to 111 in 19-3334 and to 137 in 1936-37. The

sugar import which was about 8 lakh tonnes in 1930-31 was

almost stopped from 19-3637. Thereafter there was little

development of the industry upto 1951-52. The development

and regulation of the sugar industry came under the control

of Government of India for the first time from May 1952 when

the Industries (Development and Regulation) Act, 1951 came

into force. All the 138 sugar factories which were working

before 1952 were registered under the provisions of

Industries (Development and Regulation) Act, 1951. New sugar

factories were established thereafter under licences granted

by the Central Government. Another important feature of

post-1951 development noticed by the Commission was setting

up of sugar factories largely in the cooperative sector due

to Government policy of giving preference to cooperative

societies in the matter of licensing. In respect of State

of Maharashtra the Commission observed that sugar industry

in Maharashtra was progressing very fast and the sugar

production in Maharashtra was expected to reach 16.37 lakh

metric tonnes and the State was to become the largest

producer of sugar in the country. Today the State accounts

for nearly 30% of the sugar output. The national output of

sugar for 1991-92, 19-9293 and 1993-94 was 134 106 and 96

lakh metric tonnes respectively. The output of Maharashtra

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was 42, 36 and 27 lakh tonnes for the corresponding years.

4.While granting protection to the sugar factory the

Government did not ignore the interest of sugarcane growers.

It is the basic rather the only raw material for sugar. It

is grown by cultivators who were usually exploited or at

least were in danger of being exploited. Therefore, the

Government agreed for fixing price of cane.

586

At a conference called by the Government of India in 1933

representatives of cane growers asked for a minimum price

The Government accepted the demand an in 1934 passed the

Sugarcane Act, 193 which conferred powers on the then

provincial governments to fix minimum price for the cane.

Since 1950 it is being don under Control Orders issued from

time the time. The last Order known as Sugarcane (Control)

Order was 'Issued by the Central Government in 1966. the

main feature of the Order arc two-fold one, that it

broadened the base for price fixation by providing that the

minimum price of can shall be fixed having regard to the

cost of production of sugarcane, the return to the grower

from alternative crops, the availability of sugar to

consumer at fair price, the price at which sugar produced

from sugarcane is sold by producer of sugar and the recovery

of sugar from sugarcane. The other is that it regulates

distribution and movement of sugarcane by empowering the

Government to notify in the Gazette and reserve any area

where sugarcane is grown for a factory having regard to the

crushing capacity of the factory, the availability of

sugarcane in the reserved area and the need for production

of sugar with a view to enable the factory to purchase the

quantity of sugarcane required by it. The Order thus

attempts to assure supply of cane to sugar factories and

ensure minimum price to cane growers.

5.The Bhargava Commission in Chapters 1 and 11 of Part 11

dealing with price fixation and stabilisation of supply of

cane after examining pros and cons of the various competing

interests was of the opinion that the need for steady and

adequate supply of cane to the sugar industry from year to

year could not be over- emphasised. It felt that an assured

and of adequate supply of cane was essential for the

working of the sugar industry on an efficient and economic

level. The Commission observed that sharp increase and

decrease in cane supply from year to year were the bane of

the Indian sugar industry. Therefore, it felt that it was

imperative that some kind of stability in the matter of

supply of raw material to the industries should be brought

about. It, therefore, recommended that provisions should be

made for agreement between cane growers and factories. The

Commission suggested that where Cane Growers' Societies

Union operated it would be desirable to have tripartite

agreements involving factories, the societies and the

growers. It suggested that minimum price be fixed for

sugarcane related to a basic recovery of 8.5% with a premium

for every 0. 1% increase in recovery on proportionate basis.

It also recommended that the sales realisation from sugar

after expenses should be shared with the cane growers who

execute agreement for supply of cane and fulfil their

contract. Both these recommendations were accepted. The

latter has been incorporated as paragraph 5A in the

Sugarcane (Control) Order, 1966 order for short). The

minimum price for cane is fixed for growers throughout the

country and recommendations of Bhargava Commission are being

followed both in fixing minimum price of cane, and payment

of additional price in accordance with formula framed by it

appended as Schedule 11 to 1966 Order.

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6. In the State of Maharashtra it was the experience of

the Government that there were cyclic ups and downs in

sugarcane production in the State which adversely affected

some of the sugar factories, par-

587

ticularly those which were identified as sick and

financially weak. The Government found that in times of

shortage of sugarcane crop, in the absence of statutory

provisions earmarking areas for drawal of cane it became

difficult for certain factories to get adequate quantity of

cane thereby affecting their obligations towards the cane

growers for payment of cane price, employees and workers for

payment of their salaries and wages etc. In such situations

the State Government was required to assist the factories

with huge amounts for enabling them to discharge their

obligations by diverting funds with considerable stress and

strain on the State Exchequer. The Government found that at

times some of the factories starved of sugarcane whereas

others exceeded their crushing capacity. In order to find

out some solution to these problems the State Government

appointed a Committee as an Experts Committee under

Government Resolution dated 28th April, 1980 in exercise of

the powers delegated to it by Notification issued by the

Central Government in 1966. The said Committee was

requested to take review of the work done in the past in

regard to the formation of zones for Sugar factories; to

identify the limitations due to which the object of

formation of zones could not be achieved; and to suggest

remedial measures in various matters. The Committee

submitted its Report in October 1983. After considering the

Report the State Government on 12th September 1984 issued

the Maharashtra Sugar Factories (Reservation of Areas and

Regulation of Crushing and Sugarcane Supply) Order, 1984.

In the Preamble to the Order it is mentioned that the

Notification was issued to implement the recommendations of

the Experts Committee appointed by it and also to ensure

economic viability of large number of sugar factories. The

order mentions that since the Government of India had

granted letters of intent for establishment of new sugar

factories and has stipulated therein that the conversion of

the letters of intent into industrial licences shall, inter

alia, depend on the State Government notifying the zones for

drawal of sugarcane by new sugar factories. The Order

defines 'cane grower' either as 'owner' or as a 'tenant

including a body corporate such as a company registered

under the Companies Act, 1955 (1 of 1956), a society

registered under the Maharashtra Cooperative Societies Act,

1960 (Mah.XXIV of 1961), any body corporate, set up under

any law for the time being in force, including an

Organisation owned or controlled by the Government of any

State or Government of India'. It defines the 'reserved

area' to mean, the area reserved for a factory as specified

in the schedule pertaining to that factory. Clause (3) of

the Order provides that having regard to the crushing

capacity of sugar factories and the yield of sugarcane in

the reserved areas, and the need for production of sugar,

the area as specified in the schedule, shall be reserved for

the sugar factory with a view to enabling it to purchase

quantity of sugarcane required by it. Sub-clause (2) of

Clause 3 prohibits any sugar factory to purchase cane or

accept supplies of cane from cane growers except from the

area reserved for that factory. The only exception to It is

contained in Clauses 4 and 5 of the Order. Clause 4 deals

with grant of licence and Clause 5 regulates supply of

sugarcane empowering a permit officer to allow a sugar

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factory to purchase cane from areas other than the reserved

for it under Clause 3 provided he is satisfied that the

circumstances mentioned in the clause existed. The order

was amended in 1987,

588

1988 and 1989. Sub-clause (1A) was added after sub-clause

(1) in Clause 3 of the Order issued in 1984 by the

Maharashtra Sugar Factories (Reservation of Areas and

Regulation of Crushing and Sugarcane Supply) (Second

Amendment) Order, 1987 and it is-provided that the area

specified in each of the schedules and reserved for the

factory mentioned in that schedule in accordance with sub-

clause (1) of the clause shall be reviewed by the State

Government after every three years and in Clause 4, sub-

clause (6A) was added after sub-clause (6) which empowered

the licensing authority to allow a sugar factory to

manufacture sugar from the sugarcane to be purchased by it

from non- members which is grown in the area reserved for it

which is overlapping or common with other factories if such

factory has entered into contracts for purchase of cane from

such growers and if the sugarcane does not exceed the

requirements of the factory based on its licensed crushing

capacity during any crushing season.

7. Trouble appears to have started after the Notification

was issued by the State Government in 1984. Writ petitions

were filed by cooperative societies and sugarcane growers

challenging the Order as being beyond the scope of the Act

and the 1966 Order. It was claimed that the Order was

violative of the rights guaranteed under Articles 14 and 19

of the Constitution. The challenge on behalf of the growers

that the Order in preventing the cane growers from selling

their sugarcane at the best price available imposed an

unreasonable restriction. It was claimed that in process of

reservation they have been derived of the highest price in

the area, therefore, it was liable to be struck down

arbitrary. The prohibition in the Order on enrolment of the

members was also challenged. A Division Bench of the Bombay

High Court in The Bahuri Sahakari Sakkar Karkhana Ltd. &

Anr. v. State of Maharashtra & Ors., AIR 1987 Bombay 248

held that the Order was not violative of the provisions of

the Constitution or the Central Government Order of 1966 and

the Essential Commodities Act (hereinafter referred to as

'the Act'). Nor did the Bench find any merit in the claim

that the reservation policy was violative of any

constitutional guarantee as the Orders having been issued in

view of the scarcity or non-availability of sugarcane and

for securing the equitable distribution the Order was

squarely covered in the Directive Policy unfolded by clause

(b) of Article 39 of the Constitution. The Bench did not

find any merit in the claim that the distribution of

sugarcane on the licensing capacity of the sugar factories

was violative of any statutory provision or the Constitution

as the licence for,crushing the sugarcane was granted by the

Central Government merit under the provisions of Industries

(Development and Regulation) Act, 1951. The Bench repelled

the challenge that the order was arbitrary or violative of

Article 14 of the Constitution. Nor it agreed with claim of

nonmembers of the cooperative societies that the prohibition

in the Order from becoming members or obligation to supply

cane to the factory in the reserved area was unreasonable or

arbitrary. The Bench observed

"With the sole intention of avoiding cutthroat

competition between the different sugar

factories as well as the sugarcane growers,

the impugned order has been issued. In this

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context, it cannot be forgotten that the Co-

operative Societies Act has been enacted

keeping in view the Directive Principles and

the State Policy as

589

enshrined in the Constitution. The co-

operative movement in the ultimate analysis is

socio-economic and moral movement. It is a

part of the scheme of decentralisation of

wealth and power. Cooperative capitalism is

neither co- operation nor socialism. On the

other hand, co-operation is a substitute for

self-interest of an individual or groups of

individuals for the benefit of the whole

society. Wealth has no meaning if it is

concentrated in few hands. In the absence of

decentralisation or equitable distribution of

wealth or property, it becomes impropriety.

Therefore equitable distribution is the

essence of equality. If for achieving this

object the impugned order has been issued

under the powers conferred by the Essential

Commodities Act and the Sugarcane (Control)

Order, 1966, then it cannot be said that this

equitable distribution results in inequity or

arbitrariness. In our view, the criteria

adopted and the guidelines laid down are

reasonable. They have a nexus with the object

sought to be achieved. Without reserving

areas qua each factory and regulating the

supply of sugarcane to the members or non-

members, the object of distribution of the

essential commodity viz. the sugarcane, would

not have been achieved. Therefore, we find it

difficult to accept the challenge raised by

the petitioners which is based on Art. 14 of

the Constitution of India. "

[Emphasis supplied]

Grievance was also made by the non-members of absence of any

hearing by the Permit Officer. It was stated on behalf of

the State that it was intended to follow a fair procedure.

Note 1 to 7 incorporating the procedure was produced before

the Bench. It was found to be reasonable but the Bench was

of the view that it required to be given statutory shape by

amending 1984 Order. Since the necessary amendments were

not made another Bench a Aurangabad held that since the

State Government did not carry out the amendment in clause

5(1)(d) of the 1984 Order as pointed out by the Bench in the

earlier decision the sugarcane growers had a right to supply

sugarcane grown by them to the factory of their choice as

they were likely to receive better value in the from of

price for the sugarcane grown by them. A contrary view

appears to have been taken by another Bench. The

controversy was referred to a larger Bench which in para-

graph 9 of the Judgment has noticed the views taken by

different benches. It then observed that in none of the

earlier decisions given by the Division Benches they were

called upon to test the validity of the Order on the ground

of deprivation of sugarcane grower of the best price

available to them. The Bench observed that its validity was

challenged only on the ground of the alleged illegality of

the restrictions on the freedom to sell and purchase the

sugarcane except to and by the factories in whose favour the

Reservation Order was issued. The Bench held that the Order

issued by the Central Government in 1966 did not provide for

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fixation of the maximum price of sugarcane to be supplied by

the sugarcane grower to the sugar factories. The Full Bench

observed that the Aurangabad Bench had issued the directions

permitting the growers to sell their sugarcane at the best

price to different factories only because there was no

machinery to hear the sugarcane growers before fixing the

price and redress their grievance. The Bench found that

this direction had not been complied. It thereafter con-

sidered the question of fixation of price by dividing the

sugarcane growers in two categories one, who are members of

any co-operative society and the others who are nonmembers.

It held that since those

590

growers who were members of the Society had to enter into an

agreement under the bye-laws framed which were the same in

all co-operative societies they could not make any grievance

against fixation of price. It found that even otherwise

before the Government which fixed the price they were

represented by their elected Board of Directors who

protected their interests. In respect of nonmembers it was

held that since they were not heard nor they were

represented by any one before the Committee they were placed

in a double jeopardy and in absence of any machinery to hear

them before the price was fixed they were put to grave

injustice. The Bench further held that since there was no

power in the State Order to fix the maximum price payable to

the cane growers, therefore, those growers who were non-

members of any sugarcane co-operative society or they were

suppliers to non-debtor factories they were not bound by the

prices fixed by the State Government. The price fixation

was binding only on the members of the debtor factory.

Having reached the conclusion that the price fixation was

not binding on the non-members, therefore, "they have a

choice either not to supply the sugar to any of the

factories or to sell it to the highest bodies", the Bench

held that, "the latter freedom of the members is however

rendered nugatory by the provisions of clause 3 of the State

Order", the effect of which was that the non-members would

be placed in a situation where either they had the option

not to supply the sugarcane to the factory owners or to

resign themselves to their fate by allowing their crop to go

waste. To get over this difficulty, what the Bench

described as Hobson's choice it resorted to Section

(3)(2)(f) of the Act read with Section 3(3)(c) and held that

the supply by the growers being in nature of a compulsory

sale, they were entitled to supply the sugarcane at the mar-

ket rate.

8. How far this conclusion of the Full Bench is legally

sustainable and whether the reasons in support of it are

properly founded is the crux of the matter that requires

consideration. Varied submissions on wide spectrum were

advanced touching upon not only the provision of the Act,

the Central and the State Orders but also the Cooperative

Societies Act, the limited' scope of interference by the

courts in policy decision and the principles of price fixa-

tion in controlled economy. If Sri F.S. Nariman, the

learned senior counsel appearing for the Sahkari Karkhanas

apprehended the effect of decision to be collapse of zoning

system and gradual erosion of cooperative movement in the

State, then Sri G. Ramaswamy, the teamed senior counsel

appearing for the State could not see any justification for

the court to interfere in matters of economic policy and the

direction of the Full Bench according to him was violative

of the scheme of the Act. Sri Dholakia, yet another senior

counsel appearing for the State did not find any rationale

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to distinguish between controlled price and the market price

as once the price, of any commodity was statutorily fixed

under the orders issued by the Government then that alone

became the market price. Sri Venugopal the learned senior

counsel appearing for private undertakings urged that the

Act visualised water tight compartmentalisation of the Order

issued under it to balance the interests of consumers and

when the Government did not fix any maximum price but

provided for payment of minimum price only there was no

scope to import the concept of higher price or market price.

According to him

591

the rationale for price fixation did no suffer from any

infirmity nor it caused an prejudice to the cane growers.

Sri R. Nariman the learned senior counsel appearing for

joint stock companies urged that payment of market price

would result in closing down of smaller units as price

structure was co-related with yield and not the market.

Elaborating their submissions, the learned counsel submitted

that the Government of Maharashtra has been encouraging the

cooperative movement in the State over the last several

decades. As a result of its effort more than hundred sugar

factories have come to be established in the cooperative

sector. These cooperatives societies span the entire

spectrum of the State's agricultural sector. All the sugar-

cane-growing areas arc covered by one or the other

cooperative society which has established its own sugar

factory. This development has not only enhanced the sugar

production but has changed the very face of the rural

Maharashtra. It has brought prosperity and awareness to vil-

lagers besides providing several amenities. The cooperative

societies supply seeds, fertilizers, agricultural implements

and many other goods at comparatively cheaper rates to their

members. Many of them run schools and other educational

institutions providing education to the children of the

sugarcane growers. The interest of the State and the

interest of the public demands that this cooperative

movement is kept alive and is not allowed to be weakened or

stultified. On the contrary, every effort should be made to

encourage and promote it since the fate of these factories

is indivisibly connected with the well-being and survival of

millions of farmers who are their members. After the

amendment of the Maharashtra Cooperative Societies Act

(reference is to the 1985 Amendment which came into force on

and from May 12, 1985) any and every person who seeks to

become a member of the society will be enrolled as such.

What is called the concept of 'universal membership' has

been introduced by the said amendment. Every grower is

welcome to join the cooperative society of his area. Nobody

who applies will be refused, but if somebody wants to stay

out he cannot complain at the same time that he is being

paid the same price as the members of the society. It is

open to him either not to raise sugarcane or to raise and

sell the same to the cooperative factory concerned at the

same price as the members. He cannot claim a preferential

status. He too can become a member of the society if he

likes and avail of all the benefits provided by the society

but nobody can help him if he chooses to stay out

voluntarily. While the members are under an obligation to

raise sugarcane in the specified area year after year, the

nonmembers are under no such obligation; they are, free to

raise such crops as they choose. The argument further was

that the economy of each sugar factory was different for

various reasons it was also not possible to ensure an

uniform price by all the factories. And if every sugar

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factory is compelled to pay price at Rs. 700/- a tonne, as

some factories are paying, most of them would go out of

market which would cause incalculable damage to the rural

economy of the State. If these societies are to be kept

alive, it is necessary that a separate price is fixed for

each factory having regard to its own economy and other

relevant factors. Neither the members can complain of it

nor the non- members. So far as the questions of law are

concerned, the learned counsel submitted that neither the

Central Government nor the State Government made any order

un-

592

der Section 3(2)(f) of the Act; hence, the was no obligation

upon them to ensure the price as contemplated by Section

3(3)(c). It was urged that even if it assumed for the sake

of argument that a order under Section 3(2)(f) must be

deemed to have been made by necessary implication, even then

Section 3(3)(c) must be held to have been satisfied for the

reason that the expression 'locality' in clause (c) means,

in the context, the reserved area (zone) in which the grower

is situated. The price paid by the sugar factory to its

members in that zone must be deemed to be and is the market

price there is no other price in the said locality and

since that is paid to the non-members as well, Section

3(3)(c) is satisfied.

9.Dr. Rajiv Dhawan, the learned senior counsel appearing for

the non-members, however, found compulsion flowing from the

zoning order both in supply and price which was arbitrary

and the basis for it being the efficiency of factory it was

wholly extraneous to price fixation for cane growers. Dr.

Abhishek Singhvi, the learned senior counsel, did not find

any justification for apprehending collapse of zoning or

cooperative movement. Dr. Rajiv Dhawan submitted that non-

members were not bound by the bye-laws of the society.

Those bye-laws are between the society and its members.

Because the society is indebted to the State, it is obliged

to agree to the price advised by the State Government, the

creditor. But so far as the non-members are concerned,

there was no reason why they should be bound by the price

fixed by the creditor for its debtor. The provisions of the

Maharashtra Reservation of Areas Order in effect and in

truth create a situation contemplated by Section 3(2)(f).

Looking from the point of view of the non-member growers,

the situation is no different from the one obtaining had a

formal order been made under Section 3(2)(f) requiring the

growers to sell their stock to the factory of that zone.

The Government cannot simply create such compulsion and

leave the growers to the mercy of the factory. In such a

situation, the factory would be free to exploit and take

advantage of their helplessness. A mere condition in their

licence that they shall pay the same price to nonmember

growers as is paid to member growers is not sufficient to

secure their legal rights. While the factory can wait, the

grower cannot, for the reason that if not harvested and used

at the appropriate time, the cane dries up, becomes less

yielding and then dies. The Government is bound to ensure,

in such a situation, price for sugarcane as contemplated by

Section 3(3)(c). The Reservation Order cannot be used to

promote or perpetuate the cooperative movement in the State

nor can it be used as a lever to compel growers to become

members of the cooperative societies. There is no such

compulsion under the Cooperative Societies Act and such a

compulsion cannot be brought about by the Reservation of

Areas Order. The nonmembers cannot be punished by compel-

ling them to sell their cane to uneconomic and inefficient

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factories at the price such factories can afford, i.e., at a

price far lower than the true value and market price of the

cane. The members may be so compelled because they may have

a stake in the survival of those societies but the non-mem-

bers have no such ties to the factory. Article 19(1)(c) of

the Constitution of India entitles a citizen of this country

not to join a society or an association if he does not wish

to. He cannot be compelled by law to join a society or an

association. No

593

person can be compelled to walk into these societies, which

are in truth "debtor colonies". Inasmuch as the State has

failed to provide or to ensure the market price as

contemplated by Section 3(3)(c) of the Act, the Full Bench

was right in declaring that the non-members are entitled to

sell their sugarcane to whomsoever they like and at whatever

price they can obtain. Even with respect to non-members who

have entered into agreements with the factories, Dr. Dhawan

urged, the situation created by the Government is such that

the non-members are also being forced to enter into such

agreements. He explains the position thus: even if a non-

member does not obtain a loan, he will be paid the very same

price for sugarcane as a member of the society. If so, why

should a non-member forego the facility of loan which is

normally advanced at a lower rate of interest. By foregoing

the loan facility, he would be losing at both ends. The

vice lies, says Dr. Dhawan, in the very system that has been

generated by the statutory orders made by the State.

Therefore, he says, the nonmembers cannot be deprived of

their liberty to sell their product freely just because they

have entered into loan agreements. It is another matter

that they may be liable for damages for breach of contract

with the sugar factories but that is a matter between the

factory and that person. So far as the Government is con-

cerned, it cannot take note of that agreement and compel

such person to sell his cane at the SAP since that would

mean enforcing a private contract between the parties

otherwise than through court of law. Dr. Dhawan says that

in other States (other than Maharashtra and Gujarat) the

Governments have not only issued statutory orders creating

zones for each of the sugar factories but have also notified

the price at which the sugarcane is to be sold by the

growers to the factories and this price is common to the

entire State though it may vary corresponding to the sugar

content in the case.

10. Since entire thrust on the price structure operating

unfavourably to nonmembers of cooperative society proceeded

on assumption that price fixation by the Government for

cooperative society was influenced with creditor and debtor

relationship between the two it is necessary to understand

the mechanism of pricing for cane prevalent in the State and

whether it works harshly and unreasonably against non-

members. The entire process of price fixation can be

divided in three stages. The first is the fixation of what

is known as the minimum ex-factory price by the Central

Government under 1966 Order for entire sugar factories in

the country linking it with basic recovery of 8.5% with a

proportionate increase for every 0. 1% extra recovery.

Therefore, normally the minimum price of cane paid by two

factories cannot be same. For instance, the normal recovery

in the State of Maharashtra is stated to bell.05%. In the

year 1987-88 the minimum price fixed was Rs. 19.50 per quin-

tal. The highest and lowest price paid for the sugarcane in

the Ahmednagar District during 1987-88 was Rs.366/- and

Rs.240/ by Sangamner Sahkari Sakkar Karkhana and Jagdamba

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Sahkari Sakkar Karkhana respectively. The recovery of

Sangamner SSK Ltd. was 11.64% whereas the recovery of

Jagdamba SSK Ltd. was 10.36%. It was explained that

difference of 1.28% between recovery of sugar by the two

factories resulted in difference of sugar production per

tonne to extent of 12.8 kg. and the realisation too was

Rs.64/- per tonne more. This difference got reflected

594

594

in the price fixation.

11. The next is the State Advised Price. Every State has

its own method to determine it. The power is assumed under

Acts of the State Legislature or orders issued by the

Governments. For instance, in the State of Haryana a

Sugarcane Central Board is constituted under -Section 3 of

the Punjab Sugarcane (Regulation of Purchase and Supply) Act

1953 headed by the Chief Minister and other high officials

of the Agricultural and Cooperative Department, the Director

of Sugar Mills etc. to advise the Government and the Cane

Commissioner on various matters including the price of cane

to be paid to growers. Similarly in U.P. and Andhra Pradesh

it is done under orders issued under the U.P. Sugarcane

(Regulation of Supply and Purchase) Act 1953 and the Andhra

Pradesh Sugarcane (Regulation of Supply and Purchase) Act

1961. In Maharashtra 95% of sugar factories are in the

cooperative sector. They are governed by the Cooperative

Societies Act and the bye-laws framed thereunder. Bye-laws

63, 64, 64A, 65A and 65B deal with fixation of price of

cane. Bye-Law 64 empowers the State Government to fix the

price of cane so long the amount invested by it in setting

up of sugar factory is not repaid. The exercise is un-

dertaken by a Committee constituted by the Government known

as 'Ministerial Cabinet Committee'. It comprises of the

Chief Minister and other concerned Minister. It takes into

account the ex-gate minimum price declared by the Central

Government, the estimated sugar production and its

availability for production by the sugar factories, the

estimated average of sugar factory, the estimated conversion

charges and the present day levy and free sale sugar price

while fixing the price. In the written submission filed by

the appellants it is stated that in the year 1993 while the

statutory minimum price fixed by the Government of India was

Rs.345/- per metric tonne the State Advised Price for the

State of Maharashtra was Rs.360/- to Rs.400/per metric

tonne. It is explained that although such price in other

States, for instance Andhra Pradesh, Madhya Pradesh and

Uttar Pradesh was Rs.400/-, Rs.530560/- and Rs.580-600/- per

metric tonne respectively but these prices were ex-gate

whereas in the State of Maharashtra it was ex-field. That

is a cane grower apart from the price determined by the

State Government is paid harvesting and transportation

charges etc. And when all this is totalled then the price

paid to the cane grower in the State is the highest in the

country. The advance cane price or the price for harvesting

and transportation is paid to the cane growers irrespective

of whether they are members of any cooperative society or

not. The advance according to the appellants was paid by

sugar factories under agreement entered with growers whereas

according to respondents it was paid by the Banks and the

nonmembers did not enter into any agreement. Since the

parties were at variance on an issue of fact they were

granted time on 24th February 1995 to file further affida-

vits clarifying their stand. From the affidavits filed it

now transpires that the loans are normally advanced by the

village societies or rural banks to the farmers on the

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certificate issued by the sugar factories showing cane

plantation, acreage, date of plantation, etc. Although the

factum of agreement between the cultivator and the sugar

factory is riot clearly admitted in the reply filed on

behalf of the respondent but apart from those cultivators

who do not need any loan for growing the crop whose

595

percentage appears to be negligible, it appears by and large

rather the uniform practice is that a tripartite arrangement

is arrived between the cultivator, the loaning society and

the sugar factory. The loan is advanced on basis of the

certificate issued by the sugar factory and it is the sugar

factory which ultimately repays the amount due to the

loaning society out of the price of cane to be paid to the

cultivator, Such agreements were recommended by the Bhargava

Commission as well. Even otherwise no bank or society would

advance any loan unless it is assured of its repayment. It

is, therefore, reasonable to assume that the advance is paid

to the cultivators by the rural banks or societies on the

certificate issued by the sugar factories.

12. The third is the price paid at the end of the season.

The Bhargava Commission had recommended payment of

additional price at the end of season on fifty-fifty profit

sharing basis between growers and factories to be worked out

in accordance with Schedule II to the 1966 Order. Even

though in the affidavit filed earlier by the officials of

the Department in the special leave petition it was stated

that additional price was paid but a doubt had arisen as in

Ex.6 filed along with the additional affidavit of Dy. Secy.

to the Government of Maharashtra in C.A. No.523/89

explaining the mechanism of fixation of cane price it

appeared that in the State of Maharashtra either the State

Advised Price is paid or additional cane price is paid,

whichever is more. Therefore, the appellant was directed to

explain whether the additional price was paid in addition to

State Advised Price but the affidavit filed in pursuance of

the Order dated 24th February 1995 remains vague. It

appears the practice in the State is to pay the advance as

stated earlier at the beginning of the season and then the

cost of transportation and harvesting in the middle of the

season and the price worked out finally at the end of the

season, by the Ministerial Cabinet Committee headed by the

Chief Minister, Cabinet Ministers of the concerned

Department etc. on statements submitted by each factory and

recommendations made by the Committee after discussing the

matter with members of State Federation of Cooperative Sugar

Factories and representatives of the State Co-operative

Bank. In the State of Maharashtra, therefore, it appears

instead of additional price it is the State Advised Price

which is paid.

13. It would be appropriate to notice here how ,he State

Advised Price and the additional price is worked out and if

it in any manner prejudice the cane growers specially the

non-members. In the additional affidavit filed by Dy.

Secretary of Govt. of India in Civil Appeal No.523 of 1989

the mechanism of price fixation is explained as under :

------------------------------------------------------------

Mechanism of fixation

of cane price

Receipts - Financial Results -

------------------------------------------------------------

1. Sale of Sugar

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Add - Value of the } Levy and Free sale

closing stocks } at assumed prices.

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as on 30/9 of }

the year. }

Deduct - value of the opening }

stocks of the year }

2.Add or deduct profit or

loss from Ancillary Units.

3.Add - other receipts from

a) Sales of molasses Press mud Bagasse.

b) Miscellaneous

receipts.

c) Rebates

--------

(1) + (2) + (3) (R)

-------

Expenditure

I. Cane cost

(a) Govt. of India minimum price

linked with actual recovery

deducting the average harvesting/

transport charges.

II. Expenditure relating to cane -

Commission to Harvesting

and Transport contract

Khodaki etc.

III. Harvesting & Transport charges.

IV. Cane Purchase Tax.

V. Conversion charges.

a) Store consumption

b) Electrical charges

c) Outside repairs

597

d) Salaries/wages

e) Overheads

VI. Interest Payable.

1) Capital loans and deposits (NRD/RD)

2) Working Capital

VII. Bonus - Minimum 8.33%

VIII.Education Fund under section 68 Maharashtra

Cooperative Societies Act.

Audit Fees.

Other Provision.

DSI/Sakhar Sangh

-----------

Grand Total of 'E'

I to VIII

R - E = S Surplus

Deduct : Current Depreciation Investment |

Allowance Development Rebate and | D

part of accumulated losses |

S - D + 'NS' Net Surplus.

Per M.T. 'NS' = Additional cane price.

Govt. of India's Minimum statutory CP + Addi. C. P. = 'X'

Govt. of - Minimum

Maharashtra Advised CP - `Y'

X or Y whichever is more.

-----------------------------------------------------------

14. The manner of working out additional cane price is

provided in Schedule 11 of the Control Order, 1966 in

following manner:

598

"The amount to be paid on account of

additional price (per quintal of Sugarcane)

under Cl.5-A by a producer of sugar shall be

computed in accordance with the following

formula, namely:

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R-L+2A+B

x = --------

2C

Explanation. - In this formula -

1. "X" is the additional price in rupees

per quintal of sugarcane payable by the

producer of sugar to the sugarcane grower.

2. "R" is the amount in rupees of sugar

produced during the sugar year excluding the

excise duty paid or payable to the factory by

the purchaser.

3. "L" is the value in rupees of sugar

produced during the sugar year, as calculated

on the basis of the unit cost per quintal ex-

factory, exclusive of excise duty determined

with reference to the minimum sugarcane price

fixed under Cl.3, the final working results of

the year and the Cost Schedule and return

recommended by such Authority as the Central

Government may specify from time to time.

4. "A" is the amount found payable for the

previous year but not actually paid [vide sub-

clause (9)].

5. "B" is the excess or shortfall in

realisations from actual sales of the unsold

stocks of sugar produced during the sugar

year, as on 30th day of September [vide item

7(ii) below] which is carried forward and

adjusted in the sale realisations of the

following year.

6. "C" is the quantity in quintals of sug-

arcane purchased by the producer of sugar

during the sugar year.

7. The amount "A" referred to in Expla-

nation 2 shall be computed as under, namely

(i)the actual amount realised during the sugar

year; and

(ii)the estimated value of the unsold stocks

of sugar held at the end of 30th September,

calculated in regard to free sugar stocks at

the average rate of sales name during the

fortnight 11th to 30th September and in regard

to levy sugar stocks at the notified levy

prices as on the 30th September.]

Explanation. - In this Schedule "Sugar" means

any form of sugar containing more than ninety

per cent. sucrose]."

-------------------------------------------------------------

15.A comparison of the two would indicate that there is not

much difference the two. In the latter too the cost

incurred in producing sugar has to be deducted fro the

receipts. In any case since the grow is paid either the

State Advised Price Additional Cane Price whichever is high

no prejudice can be said to be caused nonmembers. In the

affidavit filed on 10 March 1995 it is stated that the final

price determined for the earlier year is the advance price

for the next year. For instance, if amount 'A' was fixed as

final State Advised Price at the end of 1993-94 for a

factory then that becomes the advance pn. for 1994-95. It

has been explained the the final State Advised Price is

fixed basis of detailed statement submitted the Sugar

Commissioner giving a detailed operational financial picture

of the working of the sugar factories such as sugar cane

crushing, sugar recovery, sugar bags

599

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produced, quantity sold as levy and free, income from other

items, cost relating to harvesting and transport of cane,

sugar factory wages, power, fuel, chemical and other

expenses, depreciation provision etc. etc. According to the

affidavit broadly these principles related to, (a) valuation

of closing stock of free sale sugar and molasses; (b)

fixation of Khodki charges (i.e. labour charges paid for

collecting cane pieces remaining in the field after

harvesting); (c) provision of depreciation and investment

allowance/development rebate; (d) sugarcane price to be paid

to the members/nonmembers outside the area of operation;

(e) limit of cash component to be paid to the farmers in

the cane payment where cane price is on the high side; (f)

interest rate on non-refundable/refundable deposits to be

paid to members/non-members; and (g) deductions to be made

compulsorily from the sugarcane price payment to the

farmers. In effect the price for next year which is paid at

the commencement of season comprises of not only the price

based on recovery of 8.5% but also the profit arrived at

after sale of sugar.

16. Few facts are necessary to be stated in respect of

price fixed under the bye-law of the society. One price

fixation for the cooperative societies under bye-law 64

either by the Director of Factories or by the State

Government was not challenged to be ultra vires, either

before the High Court or this Court. It cannot, therefore,

legitimately be urged that it was violative of the Control

Order or the Zoning Order or it was arbitrary. In fact as

explained earlier it is the State Advised Price. If the

claim of non-members is taken to its logical conclusion it

would act unreasonably for them. Let it be tested. Suppose

the price fixed for two factories 'A' and 'B' is Rs.400/-

and Rs.500/- respectively, 'X' being a non-member in area

'A' the price for factory 'A' is not binding on him. If it

be so the price fixed for 'B' is certainly not binding on

him. And the factory 'B' is not bound to offer him Rs.

500/-. It may or may not. That may lead to uncertainty and

even exploitation. And then the price of Rs.500/- fixed for

'B' is as much State Advised Price as Rs.400/- for 'A'.

Much argument was advanced on how the market price in a

locality should be understood. It appears unnecessary to

deal with it as any other construction would be destructive

of zoning and the concept of pricing in controlled economy.

Second, there is no machinery in the State to determine the

State Advised Price for non-members as 95% of the sugar

factories being in cooperative sector the fixation of price

under the bye-laws was always considered to be legal. And

rightly so. Therefore, any determination of price by an

authority under the bye-laws is valid for cane growers

attached to a sugar factory in reserved area. Third, entire

concept of minimum and maximum price for cane appears to be

out of place. As pointed out by the Commission minimum

price is fixed on quality formula. Further, average

recovery of the normal crushing period was preferred

according to Commission as against average recovery of the

optimum period. All this results in payment of adequately

reasonable price which comprises of not only cost of

cultivation but profit as well. It does not stop there.

The payment of additional price or final State Advised Price

on profits obtained by a factory as indicated earlier is

also paid. The price thus being paid on recovery of cane

and profits made from sale of sugar is not minimum but

optimum price which is paid to a cane grower. The fourth

and the most

600

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important is that the advance paid to the cultivators at the

commencement of the season on final price determined for

earlier years appears to be reasonable and fair. The mere

fact that such determination is made in exercise of power

under bye-law 63 does not render it bad for non-members. No

objection could be taken to payment of transport and

harvesting charges. That too is explained to be linked with

distance etc. So long the determination of price is fair

and just and based on relevant material it cannot be held to

be not applicable to one class of growers, namely, non-

members in the zone because they are not members of the

cooperative societies. If the exercise of power is not bad

for members of the society it cannot be held to be bad for

non-members, unless it is found to be arbitrary. So far

cultivation of cane and payment of price is concerned the

two are similarly situated. Further the production of sugar

being of primary concern the Government ensured that the

growers were not denied the minimum. The Additional Cane

Price or final State Advised Price are paid as a mater of

incentive. And what is incentive for one year becomes the

minimum price for next year. The concept of market price,

better price or higher price thus has no place in the

scheme. There is no reason why such fixation should not be

held to be binding on nonmembers as in the scheme of price

fixation no distinction is made between members and non-

members.

17. The difference between members and non-members of

cooperative societies in relation to cane price may also be

noticed. A cooperative society usually invests 7.5% in

setting up of a factory or Sahkari Karkhana whereas the

balance is borne by the State and the financial

institutions. Its members under bye-laws are under

obligation to clear every dues of the society otherwise any

amount due from them to the society is first charge on the

sugarcane cultivated by them and is recoverable from the

price of cane. Every member of the society under bye-law

18A is required to undertake cultivation of minimum of half

acre. The nonmembers on the other hand have no such

obligation. They are not required to cultivate or grow any

minimum cane. But they derive all those benefits and

advantages as are available to the members of the society.

In the licence for crushing cane issued under clause 4(5) of

the State Order it is provided in the Form B clause (xvii)

that the factories shall be bound to pay same cane price to

non-members as members. A nonmember is also entitled to

share the profits which are worked out at the end of the

season. There is thus practically no difference between a

member and non-member so far supply of cane or its price is

concerned. A member is no doubt entitled to some facilities

such as running of other business or availing the education

facility etc. run by the cooperative societies but that has

nothing to do with cane price or its supply. As a matter of

fact the sale of by-products etc. is shown as receipt while

calculating additional price or final State Advised price.

18. With this background it may now be examined whether

provision in the State Zoning Order suffers from any

drawback for not providing any machinery to hear the

individual non-members and also whether the fixation of

price by the Director of Sugar Factories or the State

Government under bye-law 64 framed under Cooperative

Societies Act can be said to be binding on members only thus

entitling

601

nonmembers to sell their cane at market price. The exercise

of pricing is undertaken by a Committee in accordance with

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guidelines provided after taking into consideration various

factors so that the price of sugar does not escalate and

cane growers are not deprived of good return to dissuade

them from going for alternative crop. In the affidavit

filed by the Under Secretary of the State it is explained

that the price determined by the Committee is notified every

year but no objection was ever received. No cane grower can

thus legitimately claim that the price fixed for the cane

was not productive. The affidavit also pointed out that the

non-members have not organised themselves so as to entitle

their representative to be invited. Hearing of every

individual grower even otherwise is physically impossible.

Presence of representative of cane growers' cooperative

society before the Committee fixing the price makes it broad

based. Such representative would bargain for better price

for cane growers irrespective of whether such a cane grower

is a member of the cooperative society or not. No repre-

sentative would agree for lower price for members of the

society. Therefore, absence of individuals or non-members

of cooperative society before the Committee fixing the price

cannot reflect adversely on the price fixation. No material

has been placed to demonstrate how the fixation of price by

the State Committee with assistance of Director of Sugar

Factories has prejudiced the non- members. In the affidavit

filed on behalf of the State it is pointed out that the

price of cane fixed to be paid by the Sahkari Sakkar

Karkhana is even paid by other factories. Reason being that

the price fixation having been done by the Committee it is

taken to be fair and just. Same reasoning applies to non-

members. Truly speaking the price fixation should be

observed in broad perspective. If every individual has to

be heard the entire system may fall for sheer non-practi-

cality. In Maharashtra there are 137 sugar factories. With

each factory nearly five to six thousand cane growers are

attached. Twenty per cent of them are non-members. If the

Committee starts hearing every individual non-member then it

shall prove to be an unending purposeless exercise. One may

have right to challenge the price fixation on ground that

the Committee or the authority did not act in accordance

with the guidelines for fixation of price in accordance with

the order but that right can be exercised appropriately only

after publication of the price. In these appeals since no

one objected, the individual members cannot claim that the

price fixed was not fair or just.

19. Therefore, absence of any machinery in the State Order

for hearing nonmembers could not destroy effectiveness of

pricing. Even otherwise the price fixation in a controlled

economy may not be bad so long it is in accordance with the

policy formulated by the Government and the decision by the

Committee of Experts is not found to be arbitrary. It

cannot be assailed only because cane growers of one area are

getting better price than the other. The difference in

price arising due to application of principle uniformly is

neither bad nor arbitrary. It may be that since the price

is linked with yield it may cause hardship to one set of

growers as they might be deprived of better price as

compared to his neighbour due to deficient functioning of

the factory but in a welfare State and controlled economy

individual hardship cannot override the larger social

interest.

602

20.Reason for government intervention to fix the price has

been explained earlier. It was to increase sugar

production. It continues even today. While doing so the

Government ensured stable and assured income to the growers.

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That is why the pricing was devised even before 1950. When

the First Five Year Plan was drafted in 1951 the control was

justified, for smooth functioning of an unregulated economy.

When the second Five Year Plan was made it was recognised

that controls were administratively cumbersome but it was

found necessary for a developing economy. Necessity of

control for sugar and fixing of price for cane is as neces-

sary today as it was in 1934 or 1951 or 1956. The role of

price control is not merely to reduce distortions which

would otherwise have been prevalent resulting in

exploitation of cane growers particularly when there was

surplus production of cane but to promote his financial and

social condition. The fruits of controlled economy for the

weaker and poorer cannot be doubted. In agricultural sector

the price control as an instrument of policy has boosted the

economy. To denounce it, therefore, may not be in interest

of the cane growers. Once when there was glut of cane in

1990- 91 it was the State which came to rescue and paid Rs.

10,000/- per hectare even to non-members. The Full Bench

too did not find any flaw in price fixation, nor it held it

to be unremunErative yet it imported the concept of free and

competitive market price for those cane growers who were not

members of any society mainly because they were not bound by

the bye laws. The submission of compulsive cooperative

system founded on bye laws does not have much substance. No

material was placed before the High Court or this Court to

substantiate

that the Government resorted to under pricing of cane to

enable the sugar factories to discharge their financial

obligation. In absence of any material it cannot be assumed

that the Director of Sugar Factories who are none else than

cane growers themselves would opt for a lesser price for

their cane because the sugar factories of which they are

members were under an obligation to pay their debts.

21. Coming to the other rationale of the Full Bench that

the price of cane having been fixed under the bye- laws for

the cooperative societies it was binding on the members and

not others it may be appropriate to reproduce the gist of

relevant bye-laws noticed by the Full Bench

"Bye-laws Nos.63, 64, 64A, 65A and 65B deal

with the fixation of price of sugarcane and

deduction of certain amounts from the prices

paid to the members.

Bye-law 63 states that the Board of Directors

of the factory will give advances to the

members against the price of the sugarcane

supplied by them, by prior permission of the

Director of Sugar and the Deputy Registrar of

the Co- operative Societies and in accordance

with their directions and after making

deductions for certain purposes.

Bye-law 64 states that the price of the

sugarcane supplied by the members, shall be as

fixed by the Board of Directors every year.

The Board of Directors will fix the price

according to the constitution, the object and

the bye- laws of the society and after taking

into consideration the financial transactions

and conditions of the year. The bye-law then

makes an exception to this general rule and

states that so long as the share capital

invested by the Government is not refunded

com-

603

pletely and/or the loan taken from the In-

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dustrial Finance Corporation or from any

Central Financial Institution supplying funds

for fixed capital assets is not fully repaid,

the price to be paid to the members shall be

that as fixed by the State Government. For

the purposes of our discussion, we will refe

r

to this period briefly as the debt-period.

Bye-law 64A states that whenever it becomes

necessary for the factory to purchase

sugarcane from non-members outside its

jurisdiction, the factory shall take

permission of the State Government for such

purchase. However, during the debt period the

price to be paid to the nonmembers shall be

that as will be fixed by the State Government

before the beginning of the crushing season.

Bye-law 65A mentions the deductions to be made

from the price payable to the members for

raising non-refundable deposit from them, the

rate of such deductions and the rate of and

the manner of its disbursal and the interest

to be paid on such deposit.

Bye-law 65B gives power to the Board of

Directors to collect deposits by making

deductions from the price to be paid to all

sugarcane suppliers and states that such

deposits shall be used only for the expansion

of the factory and other capital expenditure.

The bye-law also lays down the rate of

interest to be paid on such deposits."

Bye-law 64 empowers the Board of Directors to fix the price

of sugarcane to be supplied by members of cooperative soci-

ety to the factory. It further provides that the price so

fixed shall be according to the Constitution the object and

the bye-law of the society and after taking into consider-

ation the financial transaction and conditions of the year.

In this bye-law there is a further exception empowering the

State Government to fix the price so long the share capital

invested by the Government is not refunded completely or the

loan taken from the financial institution is not repaid.

The Board of Directors which are referred in the bye-laws

are none else than the agriculturist or the cane, growers

themselves. It is difficult to visualise that they would

opt or fix a price for the sugarcane which would be

unremunerative. As explained earlier the price fixed by the

Cabinet Committee in exercise of power under the bye-law is

the State Advised Price. It applies uniformly to all cane

growers irrespective of whether they are members or non-

members and whether they are in reserved area or outside it.

To confine it to the members as they having entered into

agreement and being members of the cooperative societies are

bound by it is ignoring the entire price mechanism. Nowhere

in the country the State Advised Price is fixed for one

class of growers only. In absence of any material to show

that the fixation by the Government was one sided or with a

view to exploit the cane growers the submission that it did

not apply to non-members cannot be accepted. The order does

not make any distinction between members and non-members.

Nor does it visualise separate mechanism for price fixation

for the two. The price is fixed, may be, by the Board of

Directors or by the State Government under bye-laws but the

prices are for the reserved area. The Central Government

did not fix any maximum price obviously because the

conditions in the agricultural sector differed from State to

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State. Therefore, it having fixed a minimum price expects

the State to offer remunerative price to its cultivators.

In a controlled economy the price fixation machinery is to

be determined by

604

the State Government or under the 1966 Order in the manner

provided therein. Since in Maharashtra 95% of the sugar

factories are in the cooperative sector the price is fixed

by the Government as it has substantial financial stock.

But so long the price fixation does not suffer from any

infirmity or it is held to be prejudicial to cane grower so

as to benefit the State or the financial institution it

cannot be held to be bad. Therefore once the price fixation

has been undertaken and performed by such an authority it

cannot be held to be inapplicable to one particular class of

cane growers as the fixation having been done by the State

Government under the bye-laws it was not binding on those

cane growers who were not members of any society. That

would be defeating the entire purpose of enforcing controls.

22. Reverting to the various issues which arise for

consideration it may be stated that zoning or reservation

and fixation of price for each zone are inter-linked.

Therefore, it may be seen whether zoning suffers from any

infirmity. It has already been explained that even under

the 1966 Order the fixation of minimum price Is factory-

wise. Thus each factory has been considered to be one zone.

Reservation or zoning and fixation of price for each zone

has been upheld by this Court in Shri Malaprabha Coop.

Sugar Factory Lid v. Union of India & Anr. (1994) 1 SCC 648

and Anakapalle Co-op. Agrl. and Industrial Society Lid.,

etc.etc. v. Union of India and others (1973) 3 SCC 43 5.

That was not challenged as well. Yet it was urged that such

zoning could not be used to enforce a cooperative pricing

system contrary to the statutes and rules. The approach

does not appear to be correct as it assumes that price

fixation is undertaken for cooperative societies as they are

indebted to State Government, Manner of price fixation has

been indicated earlier. The exercise is taken by the

Committee in accordance with guidelines in the 1966 Order.

In absence of any challenge to it on ground of it being

arbitrary or being in violation of the principles of pricing

the assumption that pricing in zone is like a private

arrangement between the State as a creditor and cooperative

society as a debtor cannot be countenanced. The mere fact

that the bye-laws empower the State Government to fix the

price for cooperative society does not render it bad. If

the price fixed by the Government is good for members of

cooperative society who are as much cane growers as

nonmembers then there is no reason to hold that such price

was bad or it operated unreasonably for non- members.

Zoning has been resorted to in the State to regulate the

supply of cane to various factories on equitable basis. It

is a well established feature in the country. Once a zone

is reserved for a factory the cane grower has an obligation

to supply cane to the factory and the factory has a

corresponding obligation to lift the cane from the field,

crush it produce sugar and pay to the grower not only the

minimum price but also share the profit with him.

23. In the affidavit filed by the Dy. Secretary of the

State it has been explained that while forming the zones for

the sugar factories besides capacity and requirement of

sugarcane to the sugar factory the physiological nature of

sugarcane is also taken into consideration. It is stated

that crop of sugarcane is a perishable commodity and it has

to be crushed at the earliest after its harvesting for which

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the optimum distance of 40 kms has been laid down by the

Union

605

of India, therefore, zones of the factories are normally

between 35 to 40 kms radius around the factory. The

affidavit points out that in the process of zoning many

Talukas in the State pockets where there are no sugar

factories have been left out because those areas do not fall

within the radius of 35 to 40 kms. However, from such

pockets where the sugarcane is produced such sugarcane is

allotted to the neighbouring needy factories in accordance

with the Maharashtra Sugar Zoning Order and the cultivators

supplying sugarcane from such free areas, even though they

are non-members they, get the same benefits as are available

to the members of the said factory to whom the sugarcane is

allotted. It is also stated that in any areas where there

is no sugarcane production or it is very meager like the

parts of Thane District, they have been kept free because

such sugarcane involves huge transport costs and it is not

possible to transport the sugarcane in adequate quantity to

any of such factories. The affidavit further points out

that in those areas where there is adequate sugarcane supply

or they have good potential for growing sugarcane but there

is no sugar factory they have been kept free so that the

rights of sugarcane growers in such areas to organise and

establish sugar factories can be protected. Till such time

the sugarcane grown in such areas is allotted to the

neighbouring needy zone and the price paid is the same as is

paid to the members of the cooperative societies of the

sugar factories. In one of the applications filed by one of

the karkhanas, I.A. No. 11 of 1993 in C.A. No. 523 it is

stated that before the crushing season starts the karkhana

enters into an agreement both with the members and non-

members and gives them all necessary input for growing

sugarcane such as seeds, fertilisers, technical know- how,

guarantee, finance for crop loan and also undertakes an ac-

tivity of harvesting and transporting of sugarcane. The

application points out that the claim of the non-members was

not justified as when there was a glut then it were the

karkhanas like the applicant who had at heavy expenditure

ensured that the cane of the non-members was diverted to

other karkhanas and they even bore the cost of

transportation. But in absence of Zoning Order when there

was a glut then the sugar factories exploited the cane

growers by offering them lower price. It has been pointed

out that nearly 80% to 95% sugar factories are in the

cooperative sector but some of them have better cane growing

areas coupled with better and efficient functioning of the

factory. They are in a position to offer better price as

compared to other factories which are economically weak and

are in difficulty. What is clear from these affidavits is

that zoning is beneficial to the cane growers and it has

been resorted not only to ensure that the regular cane

supply is available to sugar factories but also to protect

the cane growers who may otherwise have been seriously af-

fected.

24. Having discussed the pricing of sugarcane, the near

similarity between members and nonmembers of a cooperative

society qua supply of cane and payment of price, the non-

feasibility of hearing every individual grower by the Com-

mittee before fixation of the price of cane and

applicability of uniform rate of cane in the reserved area

both for members and non-members it may now be examined

whether supply of cane by the cane growers under the Zoning

Order issued by the State of Maharashtra is a compulsory

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sale within meaning of clause (f) of sub-sec-

606

tion (2) of Section 3 of the Act so as to attract Section

3(3)(c) of the Act. Both these sub-sections arc part of

Section 3 of the Act which is the main Section and is

directed towards achieving the objective of the Act to

provide, in the interest of general public, for the control

of the production, supply and distribution of, and trade and

commerce in certain commodities. Sub-section (1) of Section

3 spells out the general power of the Government to control

production, supply and distribution of essential commodities

if it is of opinion that it is necessary or expedient so to

do for maintaining or increasing supplies of any essential

commodity or for securing their equitable distribution and

its availability at fair price. Sub-section (2) illustrates

this power, further, by empowering the Government to provide

for, issuing licences or permits for production or

manufacture of any essential commodity or for its storage,

transport etc. and for controlling price at which an

essential commodity may be bought or sold. Its clause (f)

empowers the Government to direct any producer to sell the

goods produced by it either to itself or to State Government

or to any person or class of persons specified in the Order.

What price is lo be paid to the producer for such sale is

provided by Section 3(3) of the Act. Relevant part of it is

reproduced below:

"S.3. Powers to control production, supply,

distribution, etc., of essential commodities

(1)..........

(2)..........

(3) Where any person sells any essential

commodity in compliance with an order made

with reference to clause (f) of subsection

(2), there shall be paid to him the price

therefor as hereinafter provided

(a) where the price can, consistently with

the controlled price, if any, fixed under this

section, be agreed upon, the agreed price;

(b) where on such agreement can be reached,

the price calculated with reference to the

controlled price, if any;

(c) where neither clause (a) nor clause

(b)applies, the price calculated at the market

rate prevailing in the locality at the date of

sale."

A very perusal of it indicates that its field of operation

extends to where any person is required to sell any

essential commodity in compliance with an order made with

reference to clause (f) of sub-section (2) of Section 3.

25. Two conditions, therefore, must exist one, it should

be a sale of an essential commodity and second that such

sale must be in compliance with an order with reference to

sub-section (2)(f) of Section 3, the relevant part of it

reads as under:-

"S.3. Powers to control production, supply,

distribution, etc., of essential commodities

(1)........

(2) Without prejudice to the generality of

the powers conferred by sub-section (1), an

order made thereunder may provide

(a)

(b)

(C)

(d)

(e)

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(f) for requiring any person holding in

stock, or engaged in the production, or in the

business of buying or selling, of any

essential commodity,

607

(a) to sell the whole or a specified part of

the quantity held in stock or produced or

received by him, or

(b) in the case of any such commodity which

is likely to be produced or received by him,

to sell the whole or a specified part of such

commodity when produced or received by him,

to the Central Government or a State Gov-

ernment or to an officer or agent of such

Government or to a Corporation owned or

controlled by such Government or to such other

person or class of persons and in such

circumstances as may be specified in the

order."

This sub-Section came up for interpretation by this Court in

Union of India & Anr. v. Cynamide India Ltd. & Anr. (1 987)

2 SCC 720. It was held:

" an order under Section 3(2)(f) is a specific

order directed to a particular individual for

the purpose of enabling the Central Government

to purchase a certain quantity of the

commodity from the person holding it. It is

an order for a compulsory sale. "

It was reiterated in Shri Malaprabha (supra) and it was

observed:

"It is a specific order directed to a par-

ticular individual in order to enable the

Central Government to purchase a certain

quantity of commodity from the person holding

it. It is an order of compulsory sale. "

26. Can clause (3) of the State Order issued in 1984 either

on the language or its effect be construed to be an Order of

compulsory sale? It expressly does not purport to be. an

order under Section 3(2)(f) of the Act. It is not an order

of the nature as was issued by the Central Government for

sale of levy sugar. It does not direct cane grower to sell

its cane to the Government or to any person specified in the

Order. In absence of any provision the order cannot be held

to be order directing the producers to sell the cane so as

to make it a compulsory sale under clause (f) of sub-section

(2) of Section 3.

27.Language of the Order apart even otherwise the purpose

and objective for which the Order was issued does not re-

motely or even impliedly warrant any inference that the

supply of cane by the growers was sale. Mere restriction on

supplying cane to anyone else than the specified sugar

factory cannot be construed as an order for sale. It is

true that the effect of such an order as has been issued by

the State of Maharashtra is that a grower who is in the

reserved area is precluded from supplying his cane to any

other factory than the one specified but that is a

restriction to subserve the main objective of ensuring that

the sugar factory is not starved and the production does not

suffer. That does not make the Zoning Order one of com-

pulsory sale. Any order under sub-section (1) resulting in

restricting the supply of essential commodity in a

particular area or directing it to be sold or purchased on a

particular price is not an order under Section 3(2)(f) of

the Act. If compulsion arising out of restriction is held

to be compulsory sale then it would render the entire scheme

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of Section 3(2) nugatory. What is contemplated by Section

3(2)(f) is a specific order. It applies in those cases

where any essential commodity is directed to be sold or

parted with in pursuance of an order of the Government. It

has no application to supply in a reserved area. Further

under clause (5) of Zoning Order the cane

608

under orders of the Director can be supplied to other

factories. The provision completely demolishes the argument

of compulsory sale.

28.What was vehemently urged by Dr. Dhawan, was that the

invidious pricing system resorted to by the sugar factories

which were indebted to State Government resulted in forcibly

drawing such cane growers who were not members of any coop-

erative society, therefore, it was contrary to the statutory

equitable pricing system consequent to the compulsory sale

under the Act. It was urged that the fixation of price was

irrational and unfair as it had no bearing or relation to

the yield of the crop or to the predicament of the farmer.

The learned counsel vehemently submitted that any pricing

resorted to either by the cooperative societies or by the

State Government solely and exclusively in relation to the

management of cooperative factories was an extraneous and

irrelevant consideration. The learned counsel urged that

since price fixation was not delegated under the 1966 Order

any action by the State Government or cooperative societies

to resort to price fixation which was unfair and unjust to

the nonmembers was contrary to the Act. The submission

proceeded on assumption that the fixation of price was in

respect of a commodity which was directed to be compulsorily

sold under the orders issued by the Government. As ex-

plained earlier the assumption does not appear to be well

founded. The entire edifice of the submission was built on

the compulsive nature of transaction involved in supply of

cane and payment of price But what was lost sight of was

that Section 3(3)(c) could be attracted only if the order

issued by the Government could be held to be one under

Section 3(2)(f). The submission ignores that economics of

pricing in a controlled economy is entirely different than a

free market. The equilibrium in the latter is reached by

interaction of supply and demand. Its graph keeps on moving

up and down governed by the principle of scarcity. But the

controlled economy does not operate on demand and supply.

The production, distribution and the supply are regulated

and controlled by the Government in public interest. Such

orders are issued in social interest for the common benefit

and fair price for the needy and poor. Legality of such

orders cannot be tested on cost structure of free economy or

maximum profit theory. The concept of cost structure and

the profit in a controlled economy is entirely different.

In M/s. New India Sugar Works etc. etc. v. State of Uttar

Pradesh & Ors. etc. etc. (1981) 2 SCC 293 this Court

although in a different context observed as under:

"The policy of price control has for its

dominant object equitable distribution and

availability of the commodity at fair price so

as to benefit the consumers. It is manifest

that individual interests, however' precious

they may be must yield to the larger interest

of the community, namely, in the instant case,

the large body of the consumers of sugar. In

fact, even if the petitioners have to bear

some loss there can be no question of the

restrictions imposed on the petitioners being

unreasonable.

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29.The another facet of the same submissions by Dr. Dhawan

was that due to operation of the State Order directing a

cane grower to supply its cane to a factory in whose

reserved area it falls, the real nature of supply was a

compulsory sale as visualised in Section 3(2)(f). It was

attempted to be supported by clauses (6)(a), (6)(b), (6)(c)

of the 1966 Order and clauses

609

(3)and (1) of the State Order. It was urged that even

though compulsory supply has to be made by operation of

different provisions of the two orders yet it was in nature

of contract of sale under compulsion. Reliance was placed

on Andhra Sugars Ltd. & Anr. Etc. v. State of Andhra

Pradesh & Ors. (1 968) 1 SCR 705 and Vishnu Agencies (Pvt.)

Ltd. Etc. v. Commercial Tax Officer & Ors. Etc. (1978) 2

SCR 433. The learned counsel submitted that since the Order

was specific both in letter and intent and it was clear from

the schedules that all growers could supply cane only to an

identifiable sugar factory the necessary inference that

arose was that it was a compulsory sale and, therefore, the

respondents were entitled for a market price under Section

3(3)(c). Help was also taken from Shri Malaprabha (supra)

and it was urged that where there were general orders which

identified the seller and the buyer and both were aware of

the nature of transaction that the sale had to be made to

identifiable designated person the sale was nothing but a

compulsory sale. It was urged that a provision with in

built specific identification could not be used as a device

to disguise the real nature of transaction. None of the

submissions appear to be well founded. As observed in Shri

Malaprabha (supra) and Anakapalle (supra) the provisions of

Section 3(3)(c) could apply only where there was a specific

order of sale. In absence of any such order the inference

that the learned counsel for respondent has attempted to

draw cannot be said to be justified. What is contemplated

under Section 3(3)(c) is an order of a compulsory sale and

not a compulsion arising out of enforcement of restrictions

under the provisions of controlling distribution and supply.

A cane grower in a reserved area gets the price for supply

of his cane to a specified factory. This price is payable

both to members and nonmembers. The orders only restrict

that the supply could not be made to any factory outside the

area. The restriction may result in confining the choice

but it cannot be construed as an order of sale. The situ-

ations in which an order can be considered to be an order

for compulsory sale may be one where the Government by a

particular order or a general order as in the case of levy

sugar directs the producer to part with his goods. Number

of commodities have been declared to be essential commodity

under Section 3 of the Act. Its supply and distribution may

be regulated either by restricting the area or fixing the

price. If in respect of any such commodity the Government

passes an order directing a producer to sell any essential

commodity to Government or to any class of persons specified

in the order then it shall be a compulsory sale. None of

the decisions on which reliance was placed has any

relevance. The observation in Andhra Sugars (supra) that

where cane growers entered into agreement with factory

owners who were bound to purchase the cane by operation of

statutory provisions may amount to compulsion of law and not

coerce and the agreements so entered are enforceable as

contracts of sale as defined in Section 4 of the Indian Sale

of Goods Act, did not mean that the compulsive element of

supplying cane resulted in compulsory sale. The Court was

bringing out the distinction between coerce and compulsion

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under law. But every compulsion does not bring about a

compulsory sale. Similarly the other decision in Vishnu

Agencies (supra) was concerned with determining whether

supply made under statutory order was sale for purposes of

levy of sales tax.

610

30.The dual pricing system, one, for members and other for

nonmembers or the option to non-members to sell to the

factory of their choice may be negative of the zoning

concept and may effect the cooperative movement in the

State. Dr. Singhvi may be right that even before Zoning

Order was issued the cooperative movement was there and the

benefits that a member of the society derives may not result

in affecting the system largely but any policy which has the

tendency of shaking the system rudely must be avoided.

31.Consequently the first two directions issued by the Full

Bench on price fixation cannot be upheld. As regards third

direction it has been explained in the affidavit filed in

pursuance to order dated 24th February 1995 which

substantially remains uncontroverted that the deductions

under bye-law 65 are made for the Chief Minister's Relief

Fund, Small Saving Schemes, Cane Development Fund,

Vasantdada Sugar Research Institute, Area Development Fund

etc.. The details as to how the deductions are made have

also been mentioned. It is true that they are made in

exercise of power under bye- law 65 which does not apply to

non-members. But these deductions being for the general

welfare of the society it cannot be said that they are

either bad or they suffer from any infirmity. The deposits

deducted unlike members arc refundable and they carry same

interest as is paid to members. A non-member who is sharing

in profits of the sugar production cannot be heard to say

that he has no obligations towards the society because he is

not a member of any co-operative society.

32.With the conclusion thus arrived the other issues are

rendered academic. Suffice it to say that the Court's

responsibility is to construe the provision which may

advance the co-operative movement in the State. The

amendments in Sections 22 and 23 have facilitated the

membership Notwithstanding the right of a cane grower to

become a member of cooperative society the provisions cannot

be construed so as to result in nullifying the whole system

of control devised to improve production of the sugar in the

country. For sake of more profit to few individuals the

society cannot be made to suffer. Ours is a mixed economy.

Competition and control have been blended to reduce economic

imbalance. If the individual growers who do not constitute

more than 20% otherwise get the same profit as a member of

cooperative society then there appears no justification to

construe the provision to give them a bit more profit when

it is fraught with danger of small units closing down and

the entire zoning system coming to a crash.

33. Even though as discussed earlier the supply made by

the non-members could not be considered to be compulsory

sale within meaning of Section 3(2)(f) and therefore, the

provisions of Section 3(3)(c) are not attracted, yet the

methodology adopted by the State for fixing price requires

to be rationalised as various discrepancies have surfaced

for which there is no satisfactory explanation. The Full

Bench felt that there was something grievously wrong with

pi-icing system in the State, therefore, it found a legal

basis for striking it down at least for non-members. What

is baffling is that even though factory after factory,

rather, nearly the entire lot is shown to be suffering loss

yet new units are coming up every day in the cooperative

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sector. May be because as

611

claimed by the State it is vitally concerned in production

of sugar and is, therefore, investing substantial funds,

nearly 95% in setting up of the units. May be as suggested

by the respondents that the public funds thus transferred

for social welfare is being siphoned off by vested

interests. May be as argued that the loss is more paper

work than truth as in fact it has resulted in giving rise to

what has come to be known as powerful political sugar lobby

in the State of Maharashtra. But these are matters more

political than legal, the remedy for which may not be in

courts. Even otherwise it is not possible to identify the

evil, both, for paucity of material and discipline, of re-

straint, of keeping away rather than delving in such

hazardous zone. All the same from the chart filed along

with the affidavit in C.A. No.523 of 1989 it appears the

factories having better recovery have been permitted to pay

lower price as compared to the factories the recovery of

which is lower. For instance at item Nos.14 and 15 the two

karkhanas, Ashok and Dayaneshwar, arc shown to have recovery

of 10.21% and 10.53% respectively. Yet the price paid in

1985-86 was Rs.270/ - per tonne by Ashok whereas it was

Rs.250/- by Dayaneshwar. Similarly serial nos.21 and 22 the

factories, Sanjiwani and Sangamrer with same recovery, that

is, 11. 3 1 % have been made to pay Rs. 3 64/ -, Rs.330/-

and Rs.240/- for years 1985-86, 1986-87 and 1987-88 and

Rs.391/-, Rs.348/- and Rs.366/- respectively. Then again at

serial no.37 and 38 Shriram and Ajinkyatara the recovery

percentage was 10. 84 and 11. 75 respectively and the price

paid was Rs.311.50, Rs.300/- and Rs.285/ - and Rs.305.50,

Rs.330/- and Rs.415/respectively. It has not been explained

how this difference has arisen. Such wide disparities are

bound to create distrust. In price mechanism chart the

expenditure which is deducted from the receipts includes

overheads which are substantial. Over and above the

interest, loan, bonus etc. is also deducted.

34. In the written arguments filed on behalf of respondents

it is explained that there is considerable disparity in the

market price of sugarcane in Maharashtra in recent years and

the variation in 1990-91 ranged between Rs.545/- to Rs.275/-

in 1991-92 between Rs.511/- and Rs.286.80 whereas in 1992-93

it was between Rs. 731/ -and Rs.310/-. According to

respondents this price variation has nothing to do with the

product, namely, the recovery from the sugarcane but is

based on extraneous consideration as seen by its principal

creator, namely, the State Government.

35. The respondents may not be justified in advancing this

submission as the entire price structure of cane is founded

on two basic factors, one, the recovery percentage and other

the incentive for sharing profit arrived at by working out

receipt minus expenditures And that is neither contrary to

law nor unfair. But the wide disparity in the price paid by

two factories is certainly glaring and is apt to create

misgiving. How to remedy it? In a welfare society the

consumer of essential goods is as important as the

manufacturer and producer of it. The entire objective of

the Essential Commodities Act is to promote social welfare.

It is being achieved by controlling price of sugar with

equal emphasis on cultivation of cane and its price. Any

legislation must be viewed with this perspective. In the

Zoning Order clause (5) empowers sugar factory to accept

cane from other zone as well but no similar right has been

given to cultivators.

612

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For better appreciation the entire clause is set out :

"5. Regulation of supply of Sugarcane.-

(1) A permit officer may allow a sugar

factory to purchase cane or to accept supplies

of cane from cane growers from areas other

than the area reserved for it under clause 3

if he is satisfied that any 'of the following

circumstances exist namely

(a)In the event of production of cane in the

area reserved for the factory being not

adequate for enabling it to reach optimum

level of crushing;

(b)In the, event 'of surplus production of

cane in the areas reserved for other factories

which those factories are not able to crush

during the crushing season.

(c)In the event of stoppage of nearby sugar

factory due to mechanical break down, labour

unrest, lock-out or any other reason.

(d)In the event of cane grower or cane growers

from the area reserved for a particular

factory declining to supply cane to the said

factory on account of any of the following

reasons, if found justified by the Permit

Officer

(i)Non-payment or late payment of cane price

by the sugar factory; or

(ii)Non-fulfilment of any of the obligations

by the sugar factory arising out of agreement

between the cane grower or cane growers and

the sugar factory; or

(iii)Discrimination by the sugar factory in

harvesting of cane and thereby causing loss to

the cane grower or the cane growers;

Provided that before passing any order under

this sub-clause, for any of the above reasons,

the Permit Officer shall give the parties

concerned a reasonable opportunity of being

heard in person or through the authorised

representative."

36.Clause (5) prescribes the situations in which one sugar

factory will be permitted by the prescribed authority to

purchase sugarcane from the zone of another sugar factory.

It does not provide for the cane grower seeking a permit for

sale of his cane to another sugar factory (than the factory

within whose zone he may be situated) even if any or all the

conditions prescribed in the clause are satisfied. Take a

case where a sugar factory indulges in all the three

irregularities mentioned in subclause (d) of Clause (5),

viz., it does not pay the price of cane at the proper time,

it does not adhere to the agreement it has entered into with

the grower and it also discriminates in harvesting the cane

thereby causing loss to the cane growers even then the cane

grower cannot apply for permit to sell his cane to

whomsoever he likes. All that probably he can do is to

complain. But he will get some relief only when there is

another factory (which, of course, has its own zone) which

is prepared to purchase cane from this zone and applies for

permit to the permit officer to purchase cane from this

zone. If it does not so apply, the grower within the first

zone is helpless. That is not being fair and just to the

growers. It is, therefore, necessary that the State

Government may suitably amend the Zoning Order so as to

provide that in a case where any of the three circumstances

mentioned in Clause 5(d) are present it would be open to the

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613

cane growers to apply to the specified officer for

permission to supply his cane outside the zone. In such an

event, it may be open to the officer to designate the

factory to which the grower should sell his cane ensuring

that the grower gets a price which is not less than the

price obtained in his zone.

37.The State Government would be further well advised to get

the matter thrashed out, before the next crushing season

commences, by an Expert Committee comprising of economists

and financial experts well versed in price fixation,

particularly in agricultural sector. This exercise has

become imperative after the enforcement of Zoning Order. In

fact when Zoning Order was introduced the State at that time

should have got these aspects examined. However, the price

equation since 1984 has undergone tremendous upsurge. The

escalation is manifold. Benefit of higher price of sugar

must percolate to growers as well. Therefore, the Committee

may examine,

(a) if the fixation of State Advised Price

uniformly for the entire State as it is being

done in other States, or at least separately

for different zones, as the normal recovery in

the zones varies, would be more feasible;

(b) if the additional price worked out in

the manner indicated in Schedule 11 of Control

Order of 1966 is more advantageous and

beneficial to the growers. If it be so it may

opt for the same as it would avoid tedious

exercise by the Ministerial Committee and have

the benefit of uniformity;

(c) The Committee may further examine whether

Rs. 600/- which has been paid by the factories

to the non-growers under interim order passed

by this Court would not be a reasonable

minimum price for 1995-96 and may furnish the

basis for fixation of price for future years;

(d) It may also suggest ways and means for

improving yield by the sugar factories and

reducing overhead expenses and eliminating,

possible, paper loss;

(e) It would further be in interest of the

Government to ask the Committee to examine if

the shortcomings pointed out by the Full Bench

in other regard can be rectified and

rationalised; and

(f) The Committee may examine whether bye-

law 65 should be applied to nonmembers or not.

38. Although the price fixation has not been found to

suffer from any infirmity yet due to passage of time, nearly

eight or nine years, since this price fixation was

challenged and with rise of price all around it appears

expedient to dispose of these appeals with following

directions to ensure smooth functioning both for the past

and future :

(i)The directions of the Full Bench in

paragraph 25 of the Judgment shall stand set

aside.

(ii)The State Government may take appropriate

steps to amend Clause (5) of the Zoning Order

so as to protect the cane growers.

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(ii) The Government may appoint a Committee

of Experts to study and examine the price

structure in the light of what has been stated

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earlier.

(iv)Even though the order issued by the State

Government determining price for each factory

is upheld but since in consequence of the

order passed by the High Court an interim

order was granted by this Court and the

factories were directed to pay Rs.600/- to the

cane growers and they were directed to furnish

bank guarantee for Rs.145/- it is directed

that the amount paid by the factories shall

not be liable to recovery from the cane

growers. But the bank guarantee furnished by

the appellants or sugar factories shall stand

discharged.

(v) It is made clear that the direction not

to recover Rs. 600/- from non-growers would

not entitle any member of the cooperative

society or the cooperative society itself to

claim that it was entitled to be paid Rs.600/-

for its cane during the years in dispute.

39. For the reasons stated in the order these appeals are

disposed of with above directions. Parties shall bear their

own costs.

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