PETITIONER:
MAHARASHTRA RAJYA SAHAKARI SAKHAR, KARKHANA SANGH LTD.& ETC.
Vs.
RESPONDENT:
STATE OF MAHARASHTRA & ORS.
DATE OF JUDGMENT: 27/04/1998
BENCH:
G.N. RAY, M. SRINIVASAN
ACT
HEADNOTE
JUDGMENT
JUDGMENT SRINIVASAN. J.
Leave granted.
The appellants are aggrieved by the dismissal of their writ petitions by the High Court of Bombay in which the appellants had challenged the validity of the Maharashtra Sugar Factories (Reservation of Areas and Regulation of Crushing & Sugarcane Supply) (Amendment) October, 1997. This order was passed in exercise of the powers conferred by Paragraphs (a), (c) and (f) of sub-cl.(1) if Clause 6 and sub-cl. (a) of Clause 9 of the Sugarcane (Control) Order, 1966 read with Notification of Govt. Of India, Ministry of Food, Agriculture, Community Development and Corporation (Department of Food). No.GSR. 1127/ESS. Com. Sugarcane, dated 16th July 1966. 2. Sugarcane (Control) Order, 1996 was passed by the Govt. of India under section 3 of the Essential Commodities Act 1955. Clause 6 (a), (c) AND (f) thereof reads as follows:
" (a) reserve any area where
sugarcane is grown (hereinafter in
this clause referred to as reserved
area) 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 enabling the factory
to purchase the quantity of
sugarcane required by it;
(b) ************************
(c) fix, with respect to any
specified sugarcane growers or
sugarcane growers generally in
reserved area, the quantity or
percentage of sugarcane grown by
such grower or growers as the case
may be, is a member of a
cooperative society of sugarcane
growers operating in the reserved
area, through such society, shall
supply to the factory concerned:
(d) *************************
(e) **************************
(f) prohibit or restrict or
otherwise regulate the export of
sugarcane from any area including a
reserved area) except under and in
accordance with a permit issued in
this behalf." Clause 11 of the said Order enables the Central Government to direct by Notification in official gazette that powers conferred upon it by that order shall be exercised also by any officer or authority of the Central Government or a State Government or any officer or authority of the State Government subject to such restrictions, exceptions, conditions, if any, as may be specified in the direction. In exercise of the said power under clause 11, the Central Government issued a Notification dated 16th July 1966 in the following terms:
"NOTIFICATION
New Delhi, the 16th July, 1966
G.S.R. 1127/Ess. Com./Sugarcane
:- In exercise of the powers
conferred by clause (11) of the
Sugarcane (control) Order, 1966 and
in supersession of the
notification of the Government of
India in the late Ministry of Food
and Agriculture (Department of
Food) No. G.S.R.
263/Ess.com./Sugarcane dated the
20th February, 1964 the Central
Government hereby directs that
powers conferred on it by clauses
6,7,8 and 9 of the said Order shall
be exercisable also by the State
Governments of Andhra Pradesh,
Assam, Bihar, Gujrat, Kerala,
Madhya Pradesh, Madras,
Maharashtra, Mysore, Orissa,
Punjab, Rajasthan, Uttar Pradesh,
and the Lieutenant governor of
Pondicherry within their or , as
the case may be, his respective
jurisdiction.
[No.2(6)/66-S.Py]
K.L. PASRICHA, JT. SECY." 3. Thus the power conferred on the Central Government by Clause 6 of the Sugar (Control) order, 1966 was exercisable also by the State Governments mentioned in the aforesaid Notification which included the State of Maharashtra. In 1984, the State Government passed the Maharashtra Sugar Factories (Reservation of Areas and Regulation of Crushing & Sugarcane Supply) Order 1984. The necessity for passing the said order was set out in detail in the preamble to the order itself. It is unnecessary to reproduce the same here. 4. Clause 2(1) of the said order defines a ’reserved area’ as the area reserved for factory as specified in the schedule pertaining to that factory. Clauses 3 and 5 thereof are in the following terms:
"3. Reservation of areas - (1)
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 each of the schedules
is hereby reserved for the factory
mentioned in that schedule, with a
view to enabling it to purchase the
quantity of sugarcane required by
it.
(2) Subject to the provisions
of clauses 4 and 5 of this order,
no sugar factory shall purchase
cane or accept supplies of cane
from cane growers, except from the
area reserved for that factory.
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 cane
grower or cane growers from the
area reserved for a particular
factory declining to supply came 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 or 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 reasons, the Permit
Officer shall give the parties
concerned a reasonable opportunity
of being heard in person of through
the authorised representative." 5. The validity of the said order of 1984 was challenge in the High Court of Bombay. a Full Bench of the Bombay High Court disposed of the proceedings with certain directions to the State Government in its judgment dated 23.9.1988. That judgment was the subject-matter of appeals in this Court in Civil Appeals No.522 of 1989 etc. etc. - Maharashtra Rajya Sahkari Sakkar Karkhana Sangh Ltd. & Ors. Versus State of Maharashtra & Ors. This court by its judgment dated April 18, 1995 set aside the directions given by the Full Bench Of the High Court and upheld the validity of the order of the State Government. The judgment is reported in 1995 Supp. (3) S.C.C. 475. In Paragraph 2 of the judgment the directions issued by the Full Bench of the High Court and the reasons thereof were set out as follows:
"2. The directions issued by
the Full Bench are as under:
"We are therefore of the view,
that unless provisions for the
following are made in it, the State
Order will not be valid-
(i) The sugarcane-growers who
are not members of the factory or
factories to which they are
required to supply to which they
are required to supply their
sugarcane shall be paid for the
sugarcane supplied by them the
price 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 authority 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."
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 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 the supply and distribution
of the sugarcane without
sacrificing the interest of the
cane-grower." After referring to Clause 5 of the State Government’s order, this Court said in paragraphs 36, 37 & 38 as follows:
"36. Clauses (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 caone-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 irrularities mentioned in
sub-clause (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
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
clauses 5(d) are present it would
be open to the 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 II 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 the
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 non-members 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 para 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.
(iii) The Government may
appoint a Committee of Experts to
study and examine the price
structure in the light of what has
been stated 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 liable
to be paid Rs.600 for its cane
during the years in dispute." 6. The State Government appointed an Expert Committees as directed by this Court but the said Committee did not go into the aspect of zoning and confined itself to the price of sugarcane. There was an agitation by the farmers in the State according to whom the Government order of 1984 had led to an unsatisfactory situation warranting an amendment thereof. The State Government appointed a Committee on 6.1.1996 to take a decision on zoning. The Committee was headed by the Deputy Chief Minister of the State. Based on the recommendations made by that Committee, the State Government passed the impugned order amending the order of 1984 by introducing certain provisos to Clause 3(2) of the order of 1984. The same reads as follows:
"In Maharashtra Sugar
Factories (Reservation of Areas and
Regulation of Crushing and
Sugarcane Supply) Order, 1984, -
(i) in clause 3, to the
condition No. (2), the following
provisos shall be added:
Provided that in case of a
Cooperative Sugar Factory, the
cane-growers who are not member of
the Cooperative Society, shall be
free to supply their cane to any
factory of their choice;
Provided further that a member
of a Cooperative sugar factory
shall be bound to supply sugarcane
to that Cooperative sugar factory
in the ratio of shares held by him
and area under sugarcane as per the
bye-laws of the Co-operative sugar
factory and he will be free to
supply excess cane, if any, to any
factory of his choice be entering
into agreement or contract to that
effect:
Provided also that the Non-
members cane growers in case of a
Cooperative sugar factory and cane-
growers in case of other sugar
factories shall be free to their
sugarcane to any factory of their
choice by entering into agreement
or contract to that effect. Same
provision will apply to excess
sugarcane or the member of
Cooperative Sugar factories:
Provided also that if any
cane-grower fails to enter into
such agreement for supply of his
sugarance, responsibility of
disposal of such cane shall be
entirely his own. There shall be no
responsibility on any sugar
factory, Cooperative or otherwise
or on the State Government, for
crushing of any such cane." 7. It is the aforesaid amendment which is attacked by the appellants. The High Court dismissed the writ petition of the appellants observing that they did not find that the impugned order was in any way illegal or unreasonable and that the order would appear to ensure better sugarcane price to the farmers who are not members of any Cooperative sugar factory. 8. Before us, Mr. F.S. Nariman, learned senior counsel for the appellants has advanced three contentions:
The first contention is that the State Government being a delegatee from the Central Government under the Notification dated 16th July 1966 is not empowered to pass an order inconsistent with the Sugar (Control) Order of 1966 passed by the Central Government. Our attention is drawn to Section 6 of the Essential Commodities Act and it is contended that the Sugar (Control) Order of 1966 being one under Section 3 of the said Act shall have effect notwithstanding anything inconsistent therewith contained in any enactment other than that Act or any instrument having effect by virtue of any enactment other than that Act. It is argued that the impugned order is in exercise of the power conferred under clause 6 (1) of the Sugar (Control) Order, 1966 read with the Notification dated 16th July 1966 and it cannot therefore run counter to sub-clause 2 of Clause 6 of the Sugar (Control) Order of 1966. The said Clause is in the following terms:
"Every sugarcane grower,
sugarcane growers cooperative
society and factory, to whom or to
which an order made under paragraph
(c) of sub-clause (1) applies,
shall be bound to supply or
purchase, as the case may be, that
quantity of sugarcane covered by
the agreement entered into under
the paragraph and any wilful
failure on the part of the
sugarcane grower, sugarcane
grower’s cooperative society of the
factory to do so, shall constitute
a breach of the provisions of this
order:
Provided that where a default
committed by any sugarcane growers’
cooperative society is due to any
failure on the part of any
sugarcane grower, being a member
of such society, such society shall
not be bound to make supplies of
sugarcane to the factory to the
extent of such default." According to him the impugned amendment is contrary to the above clause. 9. We are unable to accept this argument of learned senior counsel. Clause 6(1) only prescribes the matters with reference to which the Central Government may pass orders by notifying in the official gazette. By virtue of the Notification dated 16.7.66, the State Government is also empowered to do so. Sub-cl.(2) of Clause 6 of the Sugar (Control) Order 1966 is dependent upon an order made under paragraph, (c) of sub-cl.(1) of Clause 6. Admittedly there is no order passed by the Central Government under Clause 6(1) (c). Such an order was made by the State Government in 1984 as referred to by us earlier. The said order of 1984 is amended by the present impugned order of the State Government. It is not contended before us that the State Government has no power to amend the order of 1984 or that the power delegated by the Central Government by the notification dated 16.7.1966 got exhausted with the passing of the order of 1984 and thereafter the State Government had no power to issue another order. hence, there is no merit in the contention that the State Government has no power to pass the impugned order. 10. There is also no merit in the contention that the impugned order is in conflict with the sugar (Control) Order, 1966 issued under Section 3 of the Essential Commodities Act. As pointed out already the said order does not by itself make any provision for the matters set out in Clause 6(1). Hence the first contention is rejected. 11. The second contention is that the State Government has exercised its power arbitrarily and discriminated against the factory owners. According to learned counsel the various observations made by this Court in its judgment dated April 18, 1995 while upholding the Government Order, 1984 have been completely ignored by the State Government and that the Expert Committee appointed pursuant to the direction given by this Court has not made any recommendation for the present amendment. It is also contended that another Committee appointed by the State Government had time till 30.8.1997 but the impugned order was passed even in April without waiting for the report of the second Committee. We are unable to see any merit in this contention. We have already referred to the circumstance that the Expert Committee appointed pursuant to the directions given by this Court in the judgment dated April 18, 1995 had not considered the aspect of zoning and had confined itself to the price of sugarcane. The present amendment was made pursuant to the suggestions made by the Committee appointed by the State Government on 6.1.1996. The reasons for the present amendment as suggested by the Committee are set out in the counter-affidavit filed by the State Government as follows:
"REASONS FOR AMENDMENT OF
ZONING ORDER 1984
In the background of the
aforesaid facts it was necessary
for the State Government to protect
the interest of the members and
non-members cane growers by
permitting them to sell their
sugarcane outside the zone of the
factory so that they could get the
most remunerative prices for his
sugarcane. It was necessary to do
so as it was found that :
1. The factories neglect non-
members totally in the season when
the cane is in excess than their
capacity.
2. In this situation even the
members are restricted to the
extent of their shares.
3. The large difference in the cane
price within the same village in
two different factories goes up to
Rs.300 per metric ton (R-7).
4. the amendment is only an
extension to the earlier zoning
order 1984, clause 5(1) (d) (para
50) .
5. The failure of the factories to
enroll non-members for political
reasons and also on account of the
membership granted in favour non-
cane growers.
6. Non-members is deprived of the
facilities granted to the members
i.e. supply of seeds, fertilizers,
implements, incentives to drip and
sprinkler irrigation, credit
facilities and supply of sugar at
concessional rate.
7. The alarming drop of sugarcane
cultivation from 1995-96 to 1997-98
crushing season from 560 lakh M. T.
to 312 lakh M.T.
8. The expected sugarcane
production in India in the year
2000 will be 2000 lakh M.T. and
Maharashtra is expected to grow
about 800 lakh M.T.
9. There is a trend to divert from
sugarcane to other crops like
soyabeen, cotton and horticultural
crops which is 100% subsidy
programme of the State. The area
has gone up under horticultural
development by nearly five times
(para 15)
10. The nearly 90% contribution is
by the State Government to these
factories (para 5).
11. Large scale mismanagement of
the sugar factories leading to law
cane price and drop in cane
cultivation (Para 13).
12. Zoning has not yielded desired
results during the last 13 years." 12. In view of the above, it is not possible to accept the contention that the State Government has acted arbitrarily in amending the order of 1984. Nor is there any discrimination against the factory owners. In fact, this Court has in its judgment dated April 18, 1995 taken note of the plight of the growers of sugarcane and directed the State Government to take appropriate steps to amend Clause 5(1) of the Zoning Order. (see paragraphs 37 & 38 of the judgment already quoted). The State Government has instead of amending Clause 5 amended Clause 3(2) in order to improve the position of growers and in particular those who are not members of cooperative societies. 13. The third contention is that the amendment is wholly unreasonable and it will put an end to the cooperative movement. In support of this contention, reliance is placed on the following observation made by this Court in Paragraph 30 of its judgment dated April 18,1995:
"30. The dual pricing system,
one, for members and other for non-
members or the option to non-
members to sell to the factory of
their choice may be negative of the
zoning concept and may affect 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." It is submitted that the present amendment has the effect of practically annulling the cooperative system. 14. We are unable to accept this contention. We do not find any justification in the facts and circumstances of the case for the contention that the cooperative system would be affected by the present amendment. We find that it is a balancing act on the part of the State Government to protect the interests of farmers who are not members of cooperative societies. After the passing of the 1984 order it has been found by the State Government that the provisions thereof could not enable the Government to achieve the objects with which it was passed. The counteraffidavit filed by the State Government has set out in detail the various circumstances which necessitated the State Government to re-consider the zoning order of 1984. Our attention has also been drawn to the counter-affidavit filed by the Govt. of India in which the stand taken by the State government has been fully supported. Paragraph 9 of the said counter-affidavit reads as follows:
"9. I further submit that the
intention of Zoning or reserving
cane areas for each sugar factory
is not to introduce any monopoly to
any sugar factory but only to sub-
serve to the interest of the
farmers, sugar-factories and
consumers at large both at times of
shortage of cane production and in
years of surplus.
I further submit that the
Government of Maharashtra may be
allowed to operate the order dated
19th November, 1997 till the report
of the high Powered Committee set
up by the Government of India Under
the chairmanship of Sh: B.B.
Mahajan to enquire into various
legislations relating to the Sugar
Industry in India including the
fixation of Statutory minimum Price
of cane is received and a decision
is taken by the Government in the
matter." 15. It is also pointed out to us that the impugned amendment is pursuant to a policy decision of the State Government to protect the interests of the farmers on the one hand and the cooperative societies on the other. Nothing has been placed on record to show that the impugned order is vitiated by mala fides. In such circumstances. It is not possible for this Court to interfere with the order issued by the State Government. We do not also find anything unreasonable in the impugned amendment. 16. In the result, we agree with the views expressed by the High Court and dismiss the appeal. 17. The transfer petitions are for transferring proceedings pending on the file of the High Court in order to be heard along with the above appeal. We do not find any necessity to withdraw those proceedings to this Court. Now that we have disposed of the appeal in the above manner, the High Court may dispose of the proceedings pending before it in accordance with this judgment. 18. The Civil Appeal and the transfer petitions are dismissed. There will be no order as to costs.