Bhopal Sugar Industries Ltd., Sehore M. P. and another Vs Union of India and others

@JUDGMENTTAG-ORDER

G.P. Singh, C.J.

The Bhopal Sugar Industries Ltd., petitioner No. 1 in this petition, is a public limited company which owns a sugar factory at Sehore. Petitioner No. 2 is a share-holder of the company. By this petition under Article 226 of the Constitution the petitioners pray for quashing of the Sugar (Price Determination for 1980-81 Production) Order, 1980, in so far as it relates to Madhya Pradesh Zone.

The price fixed by the impugned Order was for levy sugar and was different for different zones. By levy sugar is meant the sugar requisitioned under the Levy Sugar Supply (Control) Order 1979. For Madhya Pradesh zone, the price of D-30 grade of sugar for delivery into railway wagons in respect of factories specified in Schedule V of the Order was Rs. 344-97 per quintal. The price fixed for factories specified in Schedule VI for the same grade of sugar was Rs. 369.41 per quintal. The prices for other grades of sugar were also similarly fixed with slight variations. The petitioners'' factory is in Schedule V. The sugar year 1980-81 commenced from 1st October 1980 and ended on 30th September 1981. The impugned order was issued u/s 3(3C) of the Essential Commodities Act, 1955.

In fixing the price of levy sugar u/s 3(3C) of the Act, the Central Government must have regard to (a) the minimum price fixed for sugarcane, (b) the manufacturing cost of sugar, (c) the duty or tax paid or payable thereon, and (d) the securing of a reasonable return on the capital employed in the business of manufacturing sugar. The minimum price payable by a producer of sugar for sugarcane is controlled by the Government under the Sugarcane (Control) Order, 1966. The price of levy sugar is fixed on zonal system as recommended by the various commissions, which were constituted for preparing costs schedules to enable the Government to fix the price of levy sugar.

The Department of Food, Ministry of Agriculture, by office Memorandum dated 25th March 1980, appointed a High Level Committee with the following terms of reference;

To determine the cost of production of sugar ?nd estimated cost for the future as well as fair ex-factory prices of levy sugar to be paid to the industry for different geographical zones, taking into account all relevant factors more particularly managerial efficiency, norms of production and productivity etc.

The quantum of incidentals further to the ex-factory prices towards transport and handling, wholesalers/retailers'' margin etc., for a proper assessment of the consumer price.

Committee consisted of the Chairman, Bureau of Industrial Cost and Prices (BICP); two members of BICP; Joint Secretary, Department of Food; Chief Director, Directorate of Sugar; Financial Adviser, Department of Food; and Director, National Sugar Institute. The Committee made its recommendations for sugar years 1980-81, 1981-82 and 1982-83. It is on the basis of the recommendations of this Committee that price fixation of levy sugar for the year 1980-81 was done by the impugned Order. The price of levy sugar at Rs. 344.97 per quintal as explained in Annexure R-I to the return was determined by taking the cost of cane at Rs. 155.64 per quintal of sugar, cost of conversion at Rs. 158.36 and return on the capital employed at Rs. 30.97.

The first contention raised by the learned counsel for the petitioners is that the cost of cane at Rs. 155.64 per quintal was calculated on the basis of recovery of 9.15 whereas the actual recovery for the year 1980-81 was only 8.5. The High Level Committee submitted its report in October 1980. As earlier stated by us, the sugar season commences from 1st October and ends on 30th September. The price of levy sugar for a particular year has to be estimated and fixed in the beginning of the year. It is, therefore, not practicable to take into account the actual recovery of sugar of the year for which the price of sugar is to be fixed. The committee collected the figures of recovery of sugar that were available. It took into account the average recovery on the basis of the recovery figures of five years ending 1979-80 of the zone. The figure of recovery of 9.15 is taken on that basis. This was the only reasonable way to estimate the cost of cane. In Kalooram Govindram Vs. The Union of India (UOI) and Another, which related to fixation of price of sugarcane under the Sugarcane (Control) Order, 1966, it was held that the minimum price has to be fixed before the crushing season starts, when it is impossible to find out recovery of sugar of that year and regard must, therefore, be had to the recovery of sugar in earlier years. The same principle must be applied here also. The price fixation of levy sugar cannot be held to be invalid on the ground that in estimating the cost of cane the Government did not take into account the actual recovery for the year 1980-81 and it took into account the average recovery from recovery figures of five years ending 1979-80. It was also argued that the cost of sugarcane actually incurred by the petitioners and not the cost on the basis of minimum price should have been taken into account. The argument is untenable as it is against the plain words of clause (a) of section 3(3C) which requires that regard must be had to the minimum price for sugarcane, if any fixed by the Central Government. The manufacturing cost of sugar which will include cost of sugarcane has thus to be worked out for purposes of price fixation on the basis of minimum price for sugarcane.

It was next contended that the conversion cost of Rs. 158.36 per quintal of sugar was calculated by taking the duration of the working of the petitioners'' factory as 75 days whereas the factory did not work for more than 50 days. This contention is also unsubstantial. We have already stated that price fixation is done on zonal basis and not with reference to each factory. What is material, therefore, is not the duration of working of any particular factory but what would generally be the reasonable duration of working having regard to the minimum level of efficiency. The High Level Committee, keeping in view the economic operation of a sugar plant at a minimum level of efficiency and providing incentive for longer duration of working laid down minimum and maximum cut off points for duration. Seventy-five days was fixed as the lower cut off point and 160 days as the maximum cut off point. If the petitioners'' factory did not work for 75 days and only worked for 50 days, that must have been because of inefficiency in management and the price fixation of sugar on the basis of the conversion cost calculated by taking into consideration the minimum duration as 75 days cannot be held to be invalid.

It was then contended that the cost of conversion was prepared by the Committee on the basis of figures available for the year 1979-80 and that further escalations have not been taken into account. The report of the committee (paragraphs 5.3.1. to 5.3.10) will go to show that escalations in costs of conversion upto June/July 1980 were taken into account by the committee in preparing the cost schedule for 1980-81. The report of the committee was submitted in October 1980 and the Government notified the price of levy sugar on the basis of the cost schedule prepared by the committee. The Government did not take into account the escalations in cost between July and November when the price was notified. However, no reliable data has been placed before us for reaching the conclusion that there was any substantial escalation during this period. Further, in price fixation Rs. 30.97 per quintal were allowed as return on the capital employed without taking into account the profit that the producer makes on sale of free sugar. Normally, the profit made on sale of free sugar can also be taken into account in fixing the price of levy sugar; [See The Panipat Co-operative Sugar Mills Vs. The Union of India (UOI), , Anakapalle Co-op. Agrl. and Industrial Society Ltd., Vs. Union of India (UOI) and Others, and Bhopal Sugar Industries v. Union of India AIR 1979 MP 1631.] We are, therefore, not satisfied that the price fixed for levy sugar by the impugned Order will not enable the producer to earn reasonable return on the capital employed on the ground that the Government did not take into account the escalations into cost of conversion between July and November 1981. We may also point out that section 3(3C) of the Act only says that the price of levy sugar should be fixed by the Government "having regard to" the matters specified therein. The section does not require a rigid adherence to those matters. As held by the Supreme Court in Saraswati Industrial Syndicate Ltd. and Others Vs. Union of India (UOI), the expression "having regard to" only obliges the Government to consider as relevant data material to which it must have regard. We are satisfied that the recommendations of the committee on the basis of which the Central Government fixed the price of levy sugar took into account all the relevant matters and the price fixation does not suffer from non-consideration of any of the matters specified in section 3(3C).

It was lastly contended that the petitioners'' factory ought to have been shown in Schedule VI to the order and not in Schedule V. Schedule VI to the order lists the weaker sugar manufacturing units. They have been allowed a higher price of Rs. 26 per quintal so that they may stand competition with bigger sugar manufacturing units. The criteria laid down by the Central Government for eligibility to claim extra levy price of Rs. 26 per quintal are as below :

(A) The factory as a unit/undertaking must have been erected prior to the 1955-56 season, that is to say before 1st October, 1955.

and

(B) The factory as a unit /undertaking should have licenced capacity less than 1,250 tonnes T. C. D.

The petitioners'' factory was no doubt erected before 1st October 1955, but its licenced capacity was not less than 1250 tonnes and, therefore, it did not qualify for claiming extra levy price of Rs. 26 per quintal and for being placed in Schedule VI to the order. The petitioners were granted licence by the Central Government on 20th September 1961 for raising the crushing capacity from 750 tonnes T. C. D. to 1250 tonnes T. C. D. The petitioners were required to complete the expansion of the factory before 1962-63 crushing season. As the expansion was not completed within this period, further extensions were granted from time to time upto 31st December 1972. Within this period the petitioners completed the expansion for increasing the crushing capacity to 1250 tonnes T. C. D. and the same was notified by the Central Government on 15th September 1973, to the concerned authorities. According to the schedule of machinery furnished by the petitioners for 1979-80 season, the size of milling plant was indicated as 29" x 56" and the number of rollers as 15 which was capable of crushing around 1624 tonnes T. C. D Tn view of these facts, it is clear that the petitioners'' factory could not claim extra levy price of Rs. 26 per quintal and its inclusion in Schedule VI.

The petition fails and is dismissed with costs. Counsel''s fee Rs. 200. The outstanding amount of a security deposit, if any, be refunded to the petitioners.