East U.P.Sugar Mills Association ... vs State Of U.P.Through ...

Hon'ble S.,C. Chaurasia, J.

(Delivered by Hon'ble Mr. Justice Devi Prasad Singh)

1. This Court as well as Hon'ble Supreme Court has been battle ground since decades dealing with fixation of cane price contested by mill owners and cane growers at the beginning of almost every crushing season. Sugar becomes more sour every year because of rise of its price for the citizen on the one hand and because of alleged unreasonable price of cane for the farmers on the other. Pull and push continues whenever question arises with regard to fixation of cane price as well as sugar. However, we are concerned with the fixation of cane price only.

In the State of U.P., it has been noticed that sometimes farmers set ablaze their own standing crop because of allegedly lower cane price on the one hand and mill owners threat to close their mill being not satisfied with cane price fixed by the government. There appears to be no uniform principle adopted by the government with regard to fixation of cane price keeping in view the consumer price index, inflation, cost of living as well as production cost of the cane. Conflict between cane price fixed by the State Government and the Central Government may be noticed at the beginning of every season resulting in multiplicity of litigation.

2. Keeping in view lengthy argument, advanced by the parties' counsel, we are adjudicating the dispute under the following heads :

3. This bunch of writ petitions has been preferred by sugar mill owners assailing the recent price hike of the cane by the State Government, challenging the State Advised Cane Price (in short, SAP) for the session 2011-2012 fixed by the State Government by the impugned order dated 8.11.2011 in pursuance to power conferred by Section 16 of U.P. Sugarcane (Regulation of Supply and Purchase) Act, 1953 (in short 1953 Act). By the impugned circular, the Government has fixed Rs.250/- per quintal for early maturing variety of cane, Rs.240/- per quintal for normal variety of cane and Rs.235/- per quintal for rejected variety of cane purchased from the cane growers in the State of U.P.

4. Writ Petition No.11417(M/B) of 2011 is taken as the leading writ petition for disposal of the controversy in question.

5. The petitioners 1 to 3 are association of Private Sugar Sector Factories in the State of U.P whereas the petitioners 4 to 30 are individual sugar companies which are the members of the petitioners 1 to 3. The petitioner No.31 is a shareholder of petitioner No.5.

6. The State Government constituted a committee under the chairmanship of Chief Secretary, Government of U.P., by the order dated 30.9.2011 to recommend for SAP. A meeting was held on 21.10.2011 and after taking into account the cost of production of sugarcane as calculated by the U.P. Council of Sugarcane Research, Shahjahanpur and other bodies for 2011-12, the Committee recommended for enhancement of sugarcane price. However, while assailing the impugned order with regard to SAP, it has been stated that U.P. Council of Sugarcane Research, Shahjahanpur, for the year 2011-12 had given opinion with regard to cost of production of sugarcane as Rs.161.33 per quintal. According to petitioners' counsel, in case 20% profit is added it shall come to Rs.193/- per quintal. According to learned counsel for the petitioners, treating the cost of production including 20% profit on Rs.193/- per quintal, the fixation of SAP at Rs.240-250/- per quintal is excessive more so when it is not permissible under the amended Control Order, adding the word, 'fair and remunerative price' by the Government of India.

7. It is submitted that fair and remunerative price fixed by the Central Government is less than the price fixed by the SAP. Learned counsel for the petitioners further pleaded and stated that the crushing season begins from 1st October and the actual crushing in the State of U.P. virtually starts in the month of November of the calendar year. According to petitioners counsel, a meeting was held on 21.10.2011 under the Chairmanship of Chief Secretary, Government of U.P., only for political reasons. In the said meeting, a modified report was placed for consideration submitted by the U.P. Council of Sugarcane Research, Shahjahanpur. The report reveals material alteration in the cost of production of sugarcane from Rs.161/- to 187/- per quintal which became the basis for increase of SAP. In the fresh report, U.P. Council of Sugarcane Research, Shahjahanpur enhanced the cost of irrigation by Rs.1,425/- for plant cane and Rs.6,250/- has been inserted towards Farm Yard Manure at 250 quintal per hectare. Under the order, Rs.320/- has been inserted and the rental value of land has been enhanced from Rs.18,500/- to Rs.30,000/-. Submission is that the revised report sent by the Institute is at the dictate of the State Government keeping in view the ensuing election in the State of U.P. It is further stated that the State Government while submitting its reply to the Commission for Agricultural Costs and Prices (CACP) in respect of fixation of FRP for the season 2012-13, requested to fix it at the rate of Rs.213/- per quintal.

8. ` It is vehemently argued by the petitioners' counsel that after 20.9.2011, neither the Institute nor the State Government has revised the cost of production of sugarcane and secondly for the year 2012-13, the FRP is fixed at Rs.213/- per quintal.

9. Various data of cane price of different States, have been placed on record. It is submitted that even in Maharashtra, the sugar price is much lesser than the SAP fixed by the State Government. From the newspaper report (Annexure No.20 to the writ petition), it appears that in Maharashtra in pursuance of agreement between the farmers and cane-growers, the procurement of cane price per tonne for three sugar producing seasons, are Rs.2050/- for Kolhapur, Sangli and Satara, Rs.1,850/- for Pune, Ahmednagar, and Solapur and Rs.1,800/- for rest of Maharashtra comprising Vidarbha, Marathwada and Khandesh region. However, it appears that respective cane price has been fixed in the respective States keeping in view the cane production costs based on local facts and circumstances with consultation with cane-growers and the sugar mills.

10. Feeling aggrieved with the aforesaid impugned Government order with regard to SAP, the petitioners submitted representation but the Government has failed to take any decision thereon.

11. Broadly, learned Senior counsel Shri Rakesh Dwivedi and Sri Pinaki Mishra, appearing for the petitioners have assailed the impugned State action on the following grounds :

(1) After amendment, substituting minimum price by FRP, State lacks legislative competence to legislate law or fix cane price.

(2) After amendment or substitution of words, "minimum price" by "fair and remunerative price", State lacks jurisdiction to fix cane price. Regulatory power does not include power to fix cane price by the State Government.

(3) State Advised Cane Price has been fixed on unfounded ground, that too after obtaining fresh report from the Sugarcane Research Institute, Shahjahanpur for political reasons.

(4) State action suffers from vice of arbitrariness, hence hit by Art. 14 of the Constitution of India.

12. On the other hand, Dr. Ashok Nigam, learned Addl. Solicitor General of India submits that the price fixed by the Union of India is a "floor price" for all over the country and the State has got right to fix higher price. However, he submits that only with regard to levy sugar, price fixed by the Union of India is final and binding. The sum and substance of the argument advanced by the learned Addl. Solicitor General is that the State Government has got right to fix higher price keeping in view the facts and circumstances and local conditions of the State. He further submits that the reliance placed by the petitioners on Cabinet Note is not sustainable. He also submits that the Cabinet note is prepared by bureaucrats in consultation with the Minister concerned and Cabinet has got right to take a decision keeping in view the material on record different than the proposal put forward by bureaucracy. He further submits that the statement given or Cabinet note prepared is not binding but it is the decision which is conclusive and binding and not the Cabinet note. He then submitted that the FRP is average cane price for the entire country with option to the State Government to fix higher price.

13.Shri J.N. Mathur, learned Addl. Advocate General as well as Shri K.S. Pawar appearing for Cane Cooperative Federation while defending the SAP submitted that under Entry 14 List II, State Government has got exclusive jurisdiction to deal with the matter relating to agriculture which includes regulation of cane price. Under Entry 33 of List III, both - Union of India and State have been conferred jurisdiction to fix price of the cane. Subject to the condition provided in Article 246 read with Art. 254 of the Constitution, State possessed legislative competence to legislate law and fix cane price in pursuance to 1953 Act. The price fixed by the Union of India under FRP is floor or moderate price all over the country and the State has got right to fix higher price. By fixing higher price in pursuance to power conferred by the statutory provisions, the State had not committed breach of constitutional obligations. Mr. J.N. Mathur, learned Addl. Advocate General further submits that the State exercised statutory power under 1953 Act whereas the Union of India exercise power under subordinate legislation, i.e. the control orders. Hence also, discretion exercised by the State Government cannot be objected. He further submits that even under the amended provisions, option is open to the sugar mills to fix higher price than the FRP in pursuance to the mutual agreement. Hence, it cannot be said that higher cane price fixed by the State Government under the SAP suffers from want of jurisdiction or any illegality. Learned Addl. Advocate General further submits that the allegation raised with regard to fudging by learned Senior Counsel while fixing revised price by the State Government is based on unfounded facts. The committee constituted under the Chief Secretary has considered different facts and circumstances while revising the cane price keeping in view the report of Sugarcane Research Institute, Shahjahanpur. Notwithstanding the amendment incorporated in Essential Commodities Act or the Sugarcane Control Order, the government has power to fix SAP. It is further submitted that reading of overall statement of the Minister at the floor of House in the Parliament read with Explanation 2 of the amendment done in Section 3 also reveals that the Parliament intends to permit the State Government to fix higher price (SAP) than FRP. He further submits that being beneficial legislation, the State has got right to fix higher price.

14. Shri V.M. Singh, a prominent cane grower of the State of U.P appeared as intervener with permission of the court. While defending the SAP, he submits that the State Government has got power to fix higher price than the FRP, which is only a moderate minimum price fixed by the Union of India. He further submits that the price fixed by the State of Uttar Pradesh is not justifiable keeping in view the yield of sugar and comparative cost of production of cane of different states. He further submits that in the State of Uttarakhand, cane price has been fixed to Rs.250/- to 260/- per quintal and in the State of Maharashtra, the case price has been fixed excluding transportation charges. He invited attention to paras 22, 26, 27, 28, 29, 47, 48, 49 of the judgment of West U.P. Sugar Mills Association (supra). Mr. V.M. Singh invited attention to the comparative yield of different States which reveals that even the revised yield of sugarcane in the State of U.P is minimum and even the revised SAP fixed by the State Government seems to suffer from substantial perversity.

15. It is further stated that while considering the SAP on the basis of original report, yield in the State of U.P is 523 quintal per hectare which is much less than other States and in case the SAP is fixed on the basis of yield of 523 quintal per hectare, the cane price should be Rs.270/- per quintal. He submits that the cost of manure and fertilizers taken by the state Government is on lower side and not the actual one. The cost of farm manure per hectare should be Rs.6000 to 7000/- since 5 to 6 trolleys of farm manure are used per acre. He also submits that the FRP is transferable value. He invited attention to the interim order passed in the case of West U.P. Sugar Mills Association (supra). Further submission is that from 1 quintal of sugarcane, total earning of sugar mill is Rs.500 to 600/- which includes earning from bye-product. He also submitted that while supplying the cane to the small scale industries producing gur, rab etc through their Kolhu and other local units, payment is at the rate of Rs.220-230 and payment is done immediately by the units of small scale industries whereas the sugar mills keep the farmers running from pillar to post for more than six months or some time years to come. Attention of this Court has been invited to the fact that even in the last crushing season 2010-2011, some of the sugar mills have paid the cane price at the rate of Rs.255/- per quintal voluntarily.

16. Mr. V.M. Singh and Mr. K.S. Pawar both have submitted that majority of sugar mills are running in profit and they are not in loss and some of the sugar mills have accepted the SAP fixed by the State of U.P.. Their number is almost 25 sugar mills who have accepted the price fixed by the State Government of U.P for the season 2011-2012.

17. Mr. V.M. Singh and Mr. K.S. Pawar both have vehemently argued that the sugar mills are in enormous profit in case the income earned by them from bye-product which includes production of electricity by degeneration from bagasse, ethanol and alcohol, organic fertilizers, molasses, press mud, particle board etc are added. Learned counsel representing the respondents has vehemently relied upon the Constitution Bench judgment in West U.P. Sugar Mills Association (supra) while defending the State action.

(I) STATUTORY PROVISIONS

17. The Parliament has enacted the Sugarcane Act, 1934 with the Statement of Objects and Reasons that the matter of fixing price of the cane should be left over to the provincial government, so as to suit local conditions. Under Section 3 of 1934 Act, the provincial governments were empowered to declare any area as controlled area by notification published in the official gazette. The controlled area is demarcated to fix minimum price for purchase of sugarcane intended for use in any factory and to prohibit in any controlled area the purchase of sugarcane intended for use in any factory, otherwise than from the grower of sugarcane or from a person licensed to act as purchasing agent. The purchase of sugarcane at a price less than the minimum price notified is an offence under Section 5 of 1934 Act. Section 7 of 1934 Act confers vide power on the State Government to make rules for the purpose of carrying into effect the object of the Act.

18. The Legislatures of the State of U.P enacted the U.P. Sugar Factories Control Act, 1938 (U.P. Act 1 of 1938) which repealed the Sugarcane Act, 1934 in its application to the State of U.P.

19. Section 2(a) of Essential Commodities Act (in short, E.C. Act) defines 'essential commodities' and in view of Section 2(b) of the said Act, the "food crops" includes crops of sugarcane. The Central Government in exercise of power under Section 3 of the E.C. Act notified Sugarcane (Control) Order, 1955. Clause 3(a) of the Sugarcane Control Order provides that the Central Government may after consultation with the authorities, bodies or association as it may deem fit by notification in the official gazette, fix in respect of an rea of price or minimum price to be paid by purchasers of sugar, for sugarcane purchased by them. This order was repealed by Sugarcane (Control) Order, 1966 (in short 1966 Order).

Relevant provision of 1966 Order, viz Clause 2(g) and (I) and Sub Clauses (1), (2), (3) of Clause 3 are reproduced as under :

2(g) "price" means the price or the minimum price fixed by the Central Government, from time to time, for sugarcane delivered -

(i) to a sugar factory at the gate of the factory or at a sugarcane purchasing center; or

(ii) to a khandsari unit;

(i) "producer of sugar" means a person carrying on the business of manufacturing sugar by vacuum pan process

3. Minimum price of sugarcane payable by producer of sugar -(1) The Central Government may, after consultation with the authorities, bodies or associations as it may deem fit, by notification in the official Gazette, from time to time, fix the minimum price of sugarcane to be paid by producers of sugar or their agents for the sugarcane purchased by them, having regard to -

(a) the cost of production of sugarcane;

(b) the return to the grower from alternative crops and the general trend of prices of agricultural commodities;

(c) the availability of sugar to the consumers at a fair price;

(d) the price at which sugar produced from sugarcane is sold by producers of sugar; and

(e) the recovery of sugar from sugarcane:

Provided that the Central Government or, with the approval of the Central Government, the State Government, may, in such circumstances and subject to such conditions as specified in Clause 3-A, allow a suitable rebate in the price so fixed.

Explanation - (1) Different prices may be fixed for different areas or different qualities or varieties of sugarcane.

(2) No person shall sell or agree to sell sugarcane to a producer of sugar or his agent, and no such producer or agent shall purchase or agree to purchase sugarcane, at a price lower than that fixed under sub-clause (1).

(3) Where a producer of sugar purchases any sugarcane from a grower of sugarcane or from a sugarcane grower's co- operative society, the producer shall, unless there is an agreement in writing to the contrary between the parties, pay within fourteen days from the date of delivery of sugarcane to the seller or tender to him the price of the cane sold at the rate agreed to between the producer and the sugarcane grower or sugarcane growers' co-operative society or that fixed under sub-clause (1),as the case may be, either at the gate of factory or at the cane collection center or transfer or deposit the necessary amount in the Bank account of the seller or the co- operative society, as the case may be."

20. The 1966 Order was amended from time to time by the Central Government. Sub-clause (3) of Clause 3 was substituted on 18.5.1968. Clause 3-A relating to rebate that can be deducted from the price paid for the sugarcane was inserted on 24.9.1976 and Clause 5-A was inserted on 25.9.1974. The definition of 'price' given in Clause 2(g) shows that it can either be the price or the minimum price fixed by the Central Government. Clause 3(3) deals with payment of the price of the cane sold at the rate agreed to between the producer and the sugarcane grower or sugarcane growers' co-operative society or that fixed under sub-clause (1) as the case may be. Clause 3-A which deals with rebate that can be deducted from the price paid for sugarcane also refers to either the minimum price of sugarcane fixed under Clause 3 or the price agreed to between the producer and the sugarcane grower or the sugarcane growers' co-operative society. So far as the power of the Central Government is concerned, under Clause 3(1) it can fix only the "minimum price" of sugarcane to be paid by producers of sugar for the sugarcane purchased by them. This is the lowest permissible rate. The effect of Clause 3(2) is that a producer of sugar can under no circumstances purchase sugarcane at a price lower than the minimum price fixed under Clause 3(1) and there is a similar prohibition on the cane grower and he cannot sell or agree to sell sugarcane to a producer of sugar below the said price. But the 1966 Order, in view of definition of "price" given in Clause 2(g) and also the language used in Clauses 3 and 3-A, clearly contemplates that there can be a price other than the "minimum price" of sugarcane fixed under Clause 3(1), namely, the "price agreed to between the producer and the sugarcane grower or the sugarcane growers' co-operative society". Clause 5-A lays down that where a producer of sugar purchases sugarcane from a grower of sugarcane during each sugar year, he shall in addition to the minimum sugarcane price fixed under Clause 3 pay to the sugarcane grower an additional price, if found due in accordance with the provisions of the Second Schedule This additional price is to be calculated in accordance with the formula given in Second Schedule and is dependent upon the value of the sugar produced and the profits made and in effect it is a sharing of profits. Sub-clause (5) of Clause 5-A lays down that no additional price determined under sub-clause (2) shall become payable by a producer of sugar who pays a price higher than the "minimum sugarcane price" fixed under Clause 3 to the sugarcane grower, if the same is not lesser than the total of the price fixed under Clause 3(1) and additional price determined under Clause 5-A (2). This provision again contemplates payment of price higher than the minimum price fixed under Clause 3 (1). A whole reading of the 1966 Order would, therefore, show that the Central Government shall fix the minimum price of sugarcane but there can be a price higher than the minimum price which may be in the nature of agreed price between the producer of sugar and the sugarcane grower or the sugarcane growers' co-operative society. So the field for a price higher than the minimum price is clearly left open in the 1966 Order made by the Central Government.

21. The provision contained in 1966 Order with regard to minimum price of sugarcane has been considered and interpreted by a Constitution Bench of Hon'ble Supreme Court in the case reported in (2004)5 SCC 430 U.P. Cooperative Cane Unions Federations versus West U.P. Sugar Mills Association and others (in short, West U.P. Sugar Mills case).

22. Section 3 of E.C. Act has been amended by the Essential Commodities (Amendment and Validation) Act, 2009 notified on 22.12.2008. A perusal of the Aims and Objects of Amending Act, 2009 reveals that the Parliament amended Section 3 on account of some conflicting judgment of Hon'ble Supreme Court keeping in view the relevancy of actual price payable to cane growers for determining the price of levy sugar. The amendment has been done with retrospective effect to validate determination of price of levy sugar by the Central Government from time to time in pursuance to 1955 Act. In section 3, explanation has been inserted with effect from first day of October, 1974.

23. I(A) AMENDMENT OF SECTION 3 OF ESSENTIAL COMMODITIES ACT (From 1.10.2009) 2. In section 3 of the Essential Commodities Act, 1955 (10 of 1955) (hereinafter referred to as 'the principal Act')-- (a) in sub-section (3C), the existing Explanation shall be numbered as Explanation I, and after Explanation I as so numbered, the following Explanation shall be inserted and shall be deemed to have been inserted, with effect from the 1st day of October, 1974, namely--

'Explanation II--For the removal of doubts, it is hereby declared that the expressions "minimum price' referred to in clause (a), "manufacturing cost of sugar" referred to in clause (b) and "reasonable return on the capital employed" referred to in clause (d) exclude the additional price of sugarcane paid or payable under clause 5A of the sugarcane (Control) Order, 1966 and any price paid or payable under any order or enactment of any State Government and any price agreed to between the producer and the grower of sugarcane or a sugarcane growers' co-operative society."

(b) for sub-section (3C) and the Explanations thereafter under, the following shall be substituted, and shall be deemed to have been substituted, on and from the 1st day of October, 2009, namely--

'(3C) Where any producer is required by an order made with reference to clause (f) of sub-section (2) to sell any kind of sugar (whether to the Central Government or to a State Government or to an officer or agent of such Government or to any other person or class of persons) whether a notification was issued under sub-section (3A) or otherwise, then, notwithstanding anything contained in sub-section (3), there shall be paid to that producer only such amount as the Central Government may, by order, determine, having regard to--

(a) the fair and remunerative price, if any, determined by the Central Government as the price of sugarcane to be taken into account under this section;

(b) the manufacturing cost of sugar;

(c) the duty of tax, if any, paid or payable thereon; and

(d) a reasonable return on the capital employed in the business of manufacturing of sugar;

Provided that the Central Government may determine different prices, from time to time, for different areas or factories or varieties of sugar;

Provided further that where any provisional determination of price of levy sugar has been done in respect of sugar produced up to the sugar season 2008-2009, the final determination of price may be undertaken in accordance with the provisions of this sub-section as it stood immediately before the 1st day of October, 2009.

Explanation-- For the purposes of this sub-section--

(a) "fair and remunerative price" means the price of sugarcane determined by the Central Government' under this section;

(b) "manufacturing cost of sugar" means the net cost incurred on conversion of sugarcane into sugar including net cost of transportation of sugarcane from the purchase centre to the factory gate, to the extent it is borne by the producer;

(c) "producer" means a person carrying on the business of manufacturing sugar;

(d) "reasonable return on the capital employed" means the return on net fixed assets plus working capital of a producer in relation to manufacturing of sugar including procurement of sugarcane at a fair and remunerative price determined under this section."

Validation of action taken, etc., under specified orders issued under sub-section (3C) of section 3 of the Principal Act

3. (1) Notwithstanding anything contained in any judgment, decree or order of any court, Tribunal or other authority--

(a) all things done or all actions taken by the Central Government under the specified orders shall be deemed to be and deemed to have always been done or taken in accordance with law;

(b) no suit, claim or other proceedings shall be instituted, maintained or contained in any court, Tribunal or other authority for the payment or adjustment of any payment in relation to the determination of price of levy sugar under any specified order;

(c) no court shall enforce any decree or order directing any payment in relation to the determination of price of levy sugar under any specified order;

(d) no claim or challenge shall be made in, or entertained by any court, Tribunal or other authority on the ground that the Central Government did not take into consideration any of the factors specified in sub-section (3C) of section 3 of the principal Act in the determination of price of levy sugar under any specified order.

2 In this section, "specified order' means any order relating to the determination of price of sugar issued under sub-section (3C) of section 3 of the principal Act before the 21st day of October, 2009, in relation to sugar produced in any sugar season up to any including the sugar season 2008-2009."

24. A perusal of the amendment done, reveals that the Government of India took a decision to determine levy price of sugar for payment to purchasers keeping in view the fair and remunerative price which shall be based on price of sugarcane purchased by the sugar mills, manufacturing cost of sugar, duty or tax if any, paid or payable and reasonable return on the capital employed in business of manufacturing of sugar. The amendment further seems to minimise the intervention of States in fixation of cane price.

25. It is further provided that the Government of India may determine different price from time to time for different areas of factories or varieties of sugar. The amended provision further provides that fair and remunerative price which co-relate with the price of sugarcane determined by the Central Government and net cost incurred on conversion of sugarcane into sugar including net cost of transportation of sugarcane from the purchase centre to the factory gate, to the extent it is borne by the producer. It may be noted that earlier to aforesaid amendment, the Control Order was further amended by notification dated 29.12.2008. In clause 3 under sub-clause (1) in the Control Order, following provision was inserted to quote:-

"(f) the realization made from sale of by-products viz. molasses, bagasse and press mud or their imputed value."

26. By notification dated 29.12.2008, it is provided that relaxation made from sale of products i.e., molasses, bagasse and press mud of their imputed value, shall be taken into account as income from cane products. While adding explanation (4), it has further been provided that imputed value of the by-product would include unsold value or notional or transfer value of such by-products for further value addition in the sugar factory like alcohol and ethanol production from molasses, use of press mud for making bio-fertilizer and/or distillery effluent treatment, generation of power from bagasse or any other product produced through value addition to the by-products mentioned but should not include the bagasse used for running the boiler of the main sugar factory for the production of sugar alone.

27. Explanation 5 further provides that relaxation made from sale of bio-products namely, molasses, bagasse and press mud or their imputed value means only approval price and not the value of or profit from given generated power. Alcohol or ethanol bio-fertilisers or distillery affluent treatment or any other product produced through value addition to bio-production mentioned above.

28. Another important amendment in Section 3(c) of Essential Commodities Act was done by the Act No.35 of 2010, notified on 8.9.2010 restoring the States' power for SAP.

29. By Act No.35 of 2010, Section 3 has been further amended by the Parliament interpreting Fair & Remunerative Price. The aims and object reveals that the purpose of amendment is to empower the State Government to fix cane price and also extend legal sanctity to the agreed higher price between the sugar mills and cane growers or cane grower cooperative society. In none of the judgments of this Court or Apex Court or even in the order dated 17.1.2012, passed in Civil Appeal No.7508 of 2005 West U.P. Sugar Mills Association and others versus State of U.P and others passed by Hon'ble Supreme Court referring to the larger Bench, the amendment done in Section 3 of the Essential Commodities Act notified on 8.9.2010 has been considered. It shall be appropriate to reproduce the entire Amending Act along with statement of objects and reasons which is as under :

""An Act further to amend the Essential Commodities Act, 1955 Be it enacted by Parliament in the Sixty-first Year of the Republic of India as follows-

Prefatory Note-Statement of Objects and Reasons.- The Essential Commodities Act, 1955 seeks to provide, in the interests of the general public, for the control of the production, supply and distribution of, and trade and commerce in, certain commodities. Sugar and sugarcane are foodstuffs and thus essential commodities under the said Act. Under the system of partial control on sugar, a part of the sugar produced by sugar mills is requisitioned as levy sugar and the balance is allowed to be sold as non-levy (free sale) sugar in the open market. While the price of non-levy sugar is determined by the market forces, the price of levy sugar is fixed by the Central Government under the provisions of sub-section (3C) of section 3 of the aforesaid Act, having regard to--

(a) the fair and remunerative price, if any, fixed for sugarcane by the Central Government;

(b) the manufacturing cost of sugar;

(c) the duty or tax, if any, paid or payable thereon; and

(d) the securing of a reasonable return on the capital employed in the business of manufacturing of sugar.

2. Sub-section (3C) of section 3 of the Essential Commodities Act, 1955 was last amended by clause (a) of section 2 of the Essential Commodities (Amendment and Validation) Act, 2009, inter alia, inserting therein the following Explanation II with effect from the 1st day of October, 1974 to clarify beyond doubt that the cost components of levy sugar mentioned in the said sub-section (3C) do not include the additional price of sugarcane paid or payable under the erstwhile clause 5A of the Sugarcane (Control) Order, 1966 and the price paid or payable under any order or enactment of any State Government and any price agreed to between the producer and the grower of sugarcane or a sugarcane growers' co-operative society:--

'Explanation II.--For the removal of doubts, it is hereby declared that the expressions "minimum price" referred to in clause (a), "manufacturing cost of sugar" referred to in clause (b) and "reasonable return on the capital employed" referred to in clause (d) exclude the additional price of sugarcane paid or payable under clause 5A of the Sugarcane (Control) Order, 1966 and any price paid or payable under any order or enactment of any State Government and any price agreed to between the producer and the grower of sugarcane or a sugarcane growers' co-operative society.'.

3. The said Explanation II, however, remained effective till the 30th September, 2009 only as the said sub-section (3C) of section 3, was substituted by a new sub-section (3C) on and from the 1st day of October, 2009 vide clause (b) of section 2 of the aforesaid Amendment Act of 2009. Since the newly substituted sub-section (3C) does not contain any Explanation on the lines of the said Explanation II, it is likely that it may lead to a possible interpretation that the intention of the legislature has been not to exclude, with effect from the 1st day of October, 2009, the consideration of any price paid or payable by the producer of sugar under any order or enactment of any State Government and any price agreed to between the producer and the grower of sugarcane or a sugarcane growers' co-operative society. Such an interpretation is again likely to lead to ambiguity and further litigation, which in fact, the Essential Commodities (Amendment and Validation) Act, 2009 was intended to remove. The objective of the amendment is to extend the application of Explanation II [inserted under sub-section (3C) by clause (a) of section 2 of the Amendment Act 36 of 2009] beyond the 30th September, 2009 as well.

4. In view of the above, it is proposed to amend sub-section (3C) of section 3 of the Essential Commodities Act, 1955, by inserting therein an Explanation with retrospective effect that is with effect from the 1st day of October, 2009 so as to clarify the intention of the legislature beyond doubt.

5.The Bill seeks to achieve the above objects.

1. Short title.- This Act may be called the Essential Commodities (Amendment) Act, 2010.

2. Amendment of Section 3 of Act 10 of 1955.- In Section 3 of the Essential Commodities Act, 1955, in sub-section (3-C), the Explanation shall be numbered as Explanation I, and after Explanation I as so numbered, the following Explanation shall be inserted and shall be deemed to have been inserted, with effect from the 1st day of October, 2009, namely-

'Explanation II.- For the removal of doubts, it is hereby declared that the expressions "fair and remunerative price" referred to in clause (a), "manufacturing cost of sugar" referred to in clause (b), and "reasonable return on the capital employed" referred to in clause (d), of this sub-section do not include the price paid or payable under any order or any enactment of any State Government and any price agreed to between the producer and the grower or a sugar cane growers co-operative society".

30. The Government of India again amended the Control Order by notification dated 22.10.2009 (Annexure No.4 to the writ petition) and defined minimum price as fair and remunerative price and fair and remunerative price means the price fixed by the Central Government of India under clause 3. It further provides that reasonable margin by the growers of sugarcane on account of risk and profit should also be one of the conditions which shall be taken into account for fixing price.

31. The amending notification dated 22.10.2009 further provides that if any authority of State Government fixes any price for fair and remunerative price above that fixed by the Central Government of India under clause 3, such authority or State Government shall pay the amount which it fixes above the fair and remunerative price as fixed by the Central Government. Keeping in view the aforesaid amendment done in the Control Order as well as in the statutes, the petitioners association submitted representation (Annexure No.5 to the writ petition) to the State Government not to fix any State Advised Cane Price (SAP) for the season 2011-2012.

32. The Legislature of the State enacted U.P. Sugarcane (Regulation of Supply and Purchase) Act, 1953 (in short, 1953 Act), published in official gazette on 9.10.1953. The 1953 Act defines the 'assigned area, reserved area and make provision for declaration of reserved and assigned area and also empowers the State Government to regulate, purchase and supply of cane in the reserved and assigned area.

33. It would be appropriate to reproduce Section 2(a), 2(n), Sections 12, 13, 14, 15 and 16 of the 1953 Act which is as under :

Section 2(a) "assigned area" means an area assigned to a factory under Section 15;

Section 2(n) "Reserved area" shall mean the area reserved for a factory under an Order for reservation of Sugarcane areas made under Rule 125-B of the Defence of India Rules, 1962, and when no such order is in force, the area specified in an order made under Section 15.

12. Estimates of requirements.- (1) The Cane Commissioner, may for purposes of Section 15, by order, require the occupier of any factory to furnish in the manner and by the date specified in the order to the Cane Commissioner an estimate of the quantity of cane which will be required by the factory during such crushing seasons or crushing seasons as may be specified in the order. (2) The Cane Commissioner shall examine every such estimate and shall publish the same with such modifications, if any, as he may make.

(3)An estimate under sub-section (2) may be revised by an authority to be prescribed."

13. Register of Cane-growers and Cane-growers' Co-operative Society or Societies.-(1) The occupier of a factory shall maintain in the prescribed form a register of all such cane-growers and Cane-growers' Co-operative Society or Societies, and shall sell cane to that factory.

(4)(2) The State Government may, by rules, make provision for the following-

(a) correction of entries made in the register and addition of new entries if necessary;

(b) Fixing of prices in respect of the entries so corrected or added in the register and prescribing of the procedure for payment of such price; and (C) the supply of copies of entries made in the register on payment of the prescribed fee.

(14) Power of survey etc.-(1) The State Government may, for purposes of Section 15, by order, provide for-

(a) a survey to be made of the area proposed to be reserved or assigned for the supply of cane to a factory and the recovery of the cost of such survey from the occupier of the factory;

(b) the appointment of an officer for purposes of such survey, his duties and powers;

(C) the procedure in accordance with which the survey shall be made;

(d) the assistance and facilities to be provided to the officer appointed in pursuance of clause (b) by the persons owning or occupying land in the rea; and

(e) such incidental and consequential matters as may appear to be necessary or desirable for this purpose.

(2) Any amount due from the occupier of a factory in pursuance of Cl. (a) of sub-section (1) shall be recoverable from such occupier as an arrear of land revenue.

"15. Declaration of reserved area and assigned area - (1) Without prejudice to any order made under Clause (d) of sub- section (2) of Section 16, the Cane Commissioner may, after consulting the Factory and Cane-growers Co-operative Society in the manner to be prescribed -

(a) reserve any area (hereinafter called the reserved area), and

(b) assign any area (hereinafter called an assigned area), for the purposes of the supply of cane to a factory in accordance with the provisions of Section 16 during one or more crushing seasons as may be specified and may likewise at any time cancel such order or alter the boundaries of an area so reserved or assigned.

(2) Where any area has been declared as reserved area for a factory, the occupier of such factory shall, if so directed by the Cane Commissioner, purchase all the cane grown in that area, which is offered for sale to the factory.

(3) Where any area has been declared as assigned area for a factory, the occupier of such factory shall purchase such quantity of cane grown in that area and offered for sale to the factory, as may be determined by the Cane Commissioner.

(4) An appeal shall lie to the State Government against the order of the Cane Commissioner passed under sub-section (1).

16. Regulation of purchase and supply of cane in the reserved and assigned areas - (1) The State Government may, for maintaining supplies, by order, regulate -

(a) the distribution, sale or purchase of any cane in any reserved or assigned area; and

(b) purchase of cane in any area other than a reserved or assigned area.

(2) Without prejudice to the generality of the foregoing powers such order may provide for -

(a) the quantity of cane to be supplied by each Cane-grower or Cane-growers' Cooperative Society in such area to the factory for which the area has so been reserved or assigned;

(b) the manner in which cane grown in the reserved area or the assigned area, shall be purchased by the factory for which the area has been so reserved or assigned and the circumstance in which the cane grown by a cane-grower shall not be purchased except through a Cane-growers' Co-operative Society;

(c) the form and the terms and conditions of the agreement to be executed by the occupier or manager of the factory for which an area is reserved or assigned for the purchase of cane offered for sale ;

(d) the circumstances under which permission may be granted -

(i) for the purchase of cane grown in reserved or assigned area by a Gur, Rab or Khandsari Manufacturing Units or any person or factory other than the factory for which area has been reserved or assigned; and

(ii) for the sale of cane grown in a reserved or assigned area to a Gur, Rab or Khandsari Manufacturing Unit or any person or factory other than the factory for which the area is reserved or assigned;

(e) such incidental and consequential matters as may appear to be necessary or desirable for this purposes."

34. In pursuance to power conferred by Section 28 of the 1953 Act, the State Government has made U.P. (Regulation of Supply and Purchase) Rules, 1954 (for short 'the Rules'). Rule 21 lays down that the occupier of a factory shall, by August 31, each year, apply to the Cane Commissioner in Form I, Appendix III, for the reservation or assignment of an area for supply of cane to the factory during the ensuing crushing season. There is a specific column viz. Item No.6 in Form I Appendix III wherein details of purchases, if any, made at more than the minimum cane price during the last crushing season have to be given. Here the occupier has to fill in the quantity of sugarcane which was purchased at a price more than the minimum price and also the amount of increase over and above the minimum price. Thus payment of higher price and quantum of sugarcane so purchased is a factor which is taken into consideration while reserving or assigning an area in favour of a sugar factory. Rule 38-A enjoins that at every purchasing center, at least one weighment clerk shall be appointed and deputed by the occupier of a factory who is required to weigh the sugarcane and calculate the cane price correctly. Similarly under sub-rule (4) of this Rule, the cane growers' co-operative society is required to appoint one society clerk at every purchasing center who has to carefully watch and check the weighment of cane and also examine the parcha in which weight and price of cane are recorded. Rule 94(b) requires occupier of a factory to put up at each purchasing center a notice in Devnagri script, showing the minimum price of cane fixed by Government and also the rates at which cane is being purchased at the center. Rule 96 (1)(i) (j) lays down that no occupier of a factory shall purchase cane without preparing or causing to be prepared at the purchasing center a parcha in quadruplicate showing correctly the rate at which the sugarcane is purchased and the price that has to be paid for the sugarcane at that rate. Rule 100 requires an occupier of a factory to maintain in respect of each sugarcane grower (except in respect of cane purchased through a cane growers' co-operative society) a detailed account containing several items including the net weight of cane purchased and the rate per quintal paid for sugarcane.

35. In pursuance to power conferred by Section 16 of the Act, the State Government has made UP Sugarcane (Regulation of Supply and Purchase) Order, 1954 (hereinafter referred to as 1954 Order). Clause 3-A of this Order provides for purchase of cane in reserved area and Clause 4 provides for purchase of cane in an assigned area. Clause 3(2) lays down that a cane grower or a cane growers' co-operative society may within 14 days of the issue of an order reserving an area for a factory, offer to supply cane grown in the reserved area to the occupier of the factory in Form A of the Appendix. Clause 3(3) and Clause 4 (1) lay down that the occupier of the factory for which an area has been reserved or assigned shall within fourteen days of the receipt of the order enter into an agreement in Form B or Form C of the Appendix, with the cane grower or the cane growers' co-operative society, as the case may be, in respect of the cane offered. Clause 5 (1) lays down that cane grown in the reserved or assigned area shall not, except with the permission of the Cane Commissioner, be purchased by any person without the previous issue of requisition slips and identification cards to the growers by the occupier of the factory. Sub-clauses (2) and (3) of Clause 5 mandate that the requisition slips and identification cards to the members of cane growers' co-operative society shall not be issued except by such society and records of the same have to be maintained by the occupier of the factory and also by the cane growers' co-operative society. Clause 5(4) lays down that purchase of cane shall be spread over the entire crushing season in an equitable manner and Clause 5(7) lays down that no person shall transfer or abet the transfer of requisition slips for the cane of a grower to another person.

36. Form C is the proforma of the agreement which has to be executed between the cane growers' co-operative society and the occupier of a factory regarding sale and purchase of sugarcane. Para 1 of this proforma contains the agreement of the society to sell sugarcane (giving details of the area and the quality) to the factory at the minimum price notified by the Government and the supply has to be made in such quantities and on such dates as may be specified in the requisition slips issued by the occupier. It also contains a proviso that the price payable by the factory to the society shall not in any case be lower than that paid generally by the factory to other growers of the villages in which co-operative society operates. The remaining paragraphs of the agreement are almost similar to that of proforma in Form B regarding supply of cane being taken by the factory in installments equitable spread over the whole working period of the factory, compensation to be paid by society to the factory in the event of deficit and the right of the society to make other arrangements for the disposal of the cane with the previous permission of the Cane Commissioner in the event of break down or happening of other circumstances where under factory is unable to purchase the sugarcane.

37. It may be noted that the reservation of an area under the aforesaid provisions ensures the supply of entire sugarcane grown in the reserved area to the factory in whose favour it has been reserved. Similarly, assignment of an area ensures the supply of such quantity of sugarcane to the factory in whose favour, it has been assigned as it may be determined by the Cane Commissioner. It is advantageous to the sugar factory that the sugarcane from its reserved or assigned area cannot be sold to any other factory in the vicinity even if the said factory offers a higher price to the cane growers. The arrangement does not allow the market forces to operate and thereby completely avoids competition amongst the sugar factories which could lead to escalation in prices.

38. The order passed by the Cane Commissioner is appellable under Section 15 of the Act. Once an area is reserved in favour of factory, the cane grower in the specified area or the cane growers' cooperative society operating therein gets tied to that factory and has to compulsorily enter into an agreement in prescribed proforma appended in the form of Form-B or Form-C to the 1954 Order. In view of Clause 5 of the 1954 Order, the cane grown in the reserved or assigned area cannot be purchased by any one without previous issue of requisition slips and identity cards to the growers by the occupiers of the factory and in the case of members of cane growers' cooperative society by such society. The requisition slips are non-transferable and are issued by the sugarcane factory according to its requirement of sugarcane. Thus, it completely controls the purchase of sugarcane from a reserved or assigned area. The terms and conditions given in form B and Form C are quite stringent and it provides that in the event of failure to supply at least eighty-five per cent of the agreed quantity of sugarcane, the cane grower or the cane growers' cooperative society has to pay compensation. In the event of a breakdown in the factory or its inability to purchase due to calamities or circumstances beyond human control, the cane-grower or the cane-growers' cooperative society is not at liberty to make any other arrangement for disposal of cane except after giving a week's notice to the factory and obtaining prior permission of the Cane Commissioner. There is no provision with regard to payment of compensation by the factory to the cane growers or cane growers' cooperative society for the loss which the cane growers may suffer.

39. Because of aforesaid statutory provisions, the position of cane growers stands at different pedestals than of a farmer producing other kind of agricultural crop where there appears to be no alike restriction. The farmers are at liberty to harvest his or her crop as per convenience without having dictate of third party. It is open for them to sell it to any one whomsoever he or she likes and whenever he or she wants.

40. The preamble of 1953 Act is to regulate the supply and purchase of sugarcane for use in sugar factories. The different provisions of the Act unmistakably reveals that it regulates the supply and purchase of sugarcane required for use in the sugar factories.

41. The constitutional validity of Section 16 was impugned in this Court and a Division Bench of this Court by judgment and order dated 7.7.2008 passed in writ petition No.8324(M/B) of 2007, has upheld its validity.

42. Shri Pinaki Mishra, learned Senior Counsel while appearing in writ petition No.8324(M/B) of 2011 reiterated the argument advanced by Mr. Rakesh Dwivedi and further proceeded to submit that the increase of Rs.12,000/- on the ground of rental value is based on unfounded fact while enhancing cane price more than FRP.

43. Shri Rakesh Dwivedi and Shri Pinaki Mishra, learned Senior Counsel appeared for the petitioners and relied upon the cases reported in (2002)9 SCC 232 ITC Limited versus Agricultual Produce Market Committee and others, AIR 1996 All. 135 SIEL Ltd and others versus Union of India and others, AIR 1956 SC 676 Ch. Tika Ramji versus State of U.P., (2004)5 SCC 430 U.P. Cooperative Cane Unions Federations versus West UP Sugar Mills Association and others, (1987)2 SCC 720 Union of India and another versus Cynamide India Limited and another, (1998)7 SCC 26 SIEL Limited and others versus Union of India and others and (2007)2 SCC 640 Ashoka Smokeless Coal India (P) Limited and others versus Union of India and others, (1983)1 SCC 147 Sanjeev Coke Mfg. Co. versus Bharat Cooking Cole Limited, (2010)6 SCC 499 Goa Glass Fibre Limited versus State of Goa, (1997)2 SCC 745 Bhuri Nath versus State of J & K, (2005)2 SCC 92 Pu Myllai versus State of Mizoram, AIR 1955 SC 549 Ram Jawaya Kapur versus State of Punjab, (2002)2 SCC 333 Balco Employees' Union (Regd) versus Union of India, (2005)8 SCC 696 Union of India versus Raja Mohammed Amir Mohammad Khan, AIR 1962 SC 1044 Calcutta Gas Co. versus State of W.B., (1999)9 SCC 620 Belsund Sugar Company Limited versus State of bihar and others, (1955)4 SCC 104 State of T.N. Versus Abhiyaman Educational & Research Institute, (2007)10 SCC 201 Maharashtra University of Health Sciences versus ParyaniMukesh Jawaharlal, (2009)4 SCC 590 Annamalai University versus Secretary to the Government, Information and Tourism Department and others, (2000)8 SCC 655 The Quarry Owners Association versus State of Bihar.

44. Shri J.N. Mathur, learned Addl. Advocate General has relied upon 1993 AC 593 Pepper (Inspector of Taxes) versus Hart, 1993 AC 498 Stubbings versus Webb, 1993 AC 754 Chief Adjudication Officer versus Foster, 1993 AC 583 Regina versus Warwickshire County Council.

45. (II) LEGISLATIVE COMPETENCE While assailing the legislative competence of the State Government, learned Senior Counsel Shri Rakesh Dwivedi has invited attention to Entries 33 and 34 of List III of the Seventh Schedule which is as under :

"33. Trade and commerce in, and the production, supply and distribution of,--

(a) the products of any industry where the control of such industry by the Union is declared by Parliament by law to be expedient in the public interest, and imported goods of the same kind as such products;

(b) foodstuffs, including edible oilseeds and oils;

(c) cattle fodder, including oilcakes and other concentrates;

(d) raw cotton, whether ginned or unginned, and cotton seed; and

(e) raw jute.

34.Price control."

46. Under Entry 33, the production, supply and distribution in a trade and commerce, the Government of India as well as State both have jurisdiction to legislate law. However, in the event of conflict or inconsistency, in view of the provisions contained in Art. 254 of the Constitution, the central law shall prevail.

47. However, under List II of Seventh Schedule, the State has been conferred jurisdiction to legislate law with regard to agriculture, under Entry 14. For convenience, Entry 14 of List II of Seventh Schedule is reproduced as under :

"14. Agriculture, including agricultural education and research, protection against pests and prevention of plant diseases."

48. By using the word, 'agriculture' in the State List, the Constitutional framers have given wide power to State Legislature to deal with agriculture which seems to be comprehensive in nature. Exclusive power under List II has been conferred on the State to legislate law which includes all agriculture produce including sugarcane. In West U.P. Sugar Mills Association (supra), the Constitutional Bench of Hon'ble Supreme Court has discussed the issue and held that the sugarcane is a product of agriculture grown in the field like other agricultural crop. To quote relevant portion :

"10. ................Sugarcane is the main raw material for manufacture of sugar as it is the sugarcane juice which is ultimately converted into crystals which becomes a marketable commodity. Sugarcane, unlike coal or ore of minerals is not available under the surface of the earth which may be extracted and stored and may be used as and when required. It is a product of agriculture which has to be grown in fields like any other agricultural crop and requires inputs and hard labour for its production and it dries within a short time of its harvesting and becomes virtually useless. The sugar factories do not have an unlimited capacity to crush sugarcane but have a fixed capacity and, therefore, they require fresh sugarcane in a limited quantity everyday during the entire crushing season. Sugar factories in the State of U.P. generally commence crushing in the month of November and continue upto the end of April or sometimes middle of May i.e. for about six months. In order to ensure proper and continuous supply of sugarcane to sugar factory throughout the crushing season, the harvesting of crop has to be done in limited quantity (according to crushing capacity and requirement of the sugar factory) everyday and not in one stretch. In view of this peculiar requirement of sugar factory the position of sugarcane growers becomes entirely different from those who grow other crops like wheat or paddy which can be harvested in one go and can be sold later on at the convenience of the farmer at the opportune time. In order to achieve the proper balance viz. to ensure a continuous supply of adequate quantity of sugarcane to the sugar factory and proper remuneration to the cane grower for the cane supplied by him, various enactments have been made which we will presently refer to."

49. Under Section 2(h) of the Essential Commodities Act, "food crops" has been defined to include the crop of sugarcane, hence also it shall fall under "agriculture", within the legislative competence of the State.

50. In view of above, State Legislature has possessed legislative competence to legislate law dealing with sugarcane which includes fixation of price for its supply to sugar industries. Whether by fixing the price, the State may fix higher price than FRP is the question which is to be dealt with keeping in view the inconsistency between the law framed by the Union of India and the State Legislature.

51. It may be noted that under Entry 33 of List III, both the State legislature and Parliament may legislate law subject to repugnance test. But under Entry 14 of List II, only the State legislature has power to legislate law.

"Sugar" being the industrial product shall be covered by Entry 33 of List III. But sugar being not an agriculture produce, State lacks legislative competence to exercise power under Entry 14 of List II. Hence, the Union of India while exercising power under Entry 33 of List III may in appropriate case claim exclusive right to control sugar price.

52. However, in Tika Ramji(supra) also, legislative competence of the State has been upheld by the Supreme Court. Though Entry 14 has not been considered but their Lordships have considered Entries 24 and 27. Entry 24 of List II deals with product of industries whereas Entry 27 deals with States' power with regard to production, supply and distribution of goods keeping in view the definition given under Art. 366(12) of the Constitution which includes all raw materials, commodities etc. It shall be appropriate to quote relevant portion from Tika Ramji's case (supra) :

"18. Production, supply and distribution of goods was no doubt within the exclusive sphere of the State Legislature but it was subject to the provisions of Entry 33 of List III which gave concurrent powers of legislation to the Union as well as the States in the matter of trade and commerce in, and the production, supply and distribution of, the products of industries where the control of such industries by the Union was declared by Parliament by law to be expedient in the public interest. The controlled industries were relegated to Entry 52 of List I which was the exclusive province of Parliament leaving the other industries within Entry 24 of List II which was the exclusive province of the State Legislature. The products of industries which were comprised in Entry 24 of List II were dealt with by the State Legislatures which had under Entry 27 of that List power to legislate in regard to the production, supply and distribution of goods, goods according to the definition contained in article 366(12) including all raw materials, commodities and articles. When, however it came to the products of the controlled industries comprised in Entry 52 of List I, trade and commerce in, and production, supply and distribution of, these goods became the subject-matter of Entry 33 of List III and both Parliament and the State Legislatures had jurisdiction to legislate in regard thereto. The amendment of Entry 33 of List III by the Constitution Third Amendment Act, 1954, only enlarged the scope of that Entry without in any manner whatever detracting from the legislative competence of Parliament and the State Legislatures to legislate in regard to the same. If the matters had stood there, the sugar industry being a controlled industry, legislation in regard to the same would have been in the exclusive province of Parliament and production, supply and distribution of the product of sugar industry, viz., sugar as a finished product would have been within Entry 33 of List III. Sugarcane would certainly not have been comprised within Entry 33 of List III as it was not the product of sugar industry which was a controlled industry. It was only after the amendment of Entry 33 of List III by the Constitution Third Amendment Act, 1954 that foodstuffs including edible oil seeds and oils came to be included within that List and it was possible to legislate in regard to sugarcane, having recourse to Entry 33 of List III. Save for that, sugarcane, being goods, fell directly within Entry 27 of List II and was within the exclusive jurisdiction of the State Legislatures. Production, supply and distribution of sugarcane being thus within the exclusive sphere of the State Legislatures, the U. P. State Legislature would be, without anything more, competent to legislate in regard to the same and the impugned Act would be intra vires the State Legislature."

53. Federal Court in a case, reported in AIR 1939 Federal Court 74 Shyam Kant Lal versus Ram Bhajan Singh and others held that when the question is whether a Provincial legislation is repugnant to an existing Indian law, the onus shall be on the party attacking its validity and every effort should be made to reconcile them. To quote relevant portion :

"When the question is whether a Provincial legislation is repugnant to an existing Indian law, the onus of showing its repugnancy and the extent to which it is repugnant should be on the party attacking its validity. There ought to be a presumption in favour of its validity, and every effort should be made to reconcile them and construe both so as to avoid their being repugnant to each other; and care should be taken to see whether the two do not really operate in different fields without encroachment. Further repugnancy must exist in fact, and not depend merely on a possibility :

Their Lordships one discover no adequate grounds for holding that there exists repugnancy between the two laws in districts of the Province of Ontario where the prohibitions of the Canadian Act are not and may never be in force: Att.-Gen. for Ontario v. Att.-Gen. for the Dominion of Canada (1896) A.C. 348, at pages 369-70."

54. Mr. Rakesh Dwivedi, learned Senior Counsel has relied upon the case reported in AIR 1956 SC 676 Ch. Tika Ramji and Ors. etc versus The State of U.P and others and submitted that after amendment providing fair and remunerative price (in short, FRP), the Constitution Bench's judgment in the case of West U.P. Sugar Mills(supra) shall not be applicable and the State lacks legislative competence to legislate law as well as provide S.A.P. The case of Tika Ramji (supra) has been dealt with by Hon'ble Supreme Court in West U.P. Sugar Mills case(supra) as under :

"It may be noted that the writ petitions in the said case were filed in this Court in the year 1954 and the judgment was delivered on 24.4.1956. At the relevant time, it was the Sugarcane (Control) Order, 1955 which was in operation. Clause 3 of this Order empowered the Central Government to fix the price or the minimum price to be paid by a producer of sugar for sugarcane purchased by him. The 1955 Order has been repealed by Sugarcane (Control) Order, 1966 and Clause 3 of this Order provides that the Central Government may fix the minimum price of sugarcane to be paid by producers of sugar. There is a difference between "the price" which is a fixed amount and "the minimum price" which only indicates the lowest permissible rate. The 1966 Order which itself was made by the Central Government more than a decade after the judgment was rendered in Tika Ramji was amended in 1978 and Clauses 3(3) and 3-A thereof contemplate an "agreed price" which in view of the mandate of Clause 3(2) is bound to be higher than the "minimum price" fixed under Clause 3(1). Naturally it is this "agreed price" which is to be mentioned in the agreements for sale and purchase of sugarcane in Forms B and C otherwise the very purpose of entering into agreements would be defeated. The State Government had not fixed any price for the sugarcane under its regulatory power by the time Tika Ramji (supra) was decided by this Court in April, 1956 and only the Central Government had taken a step for fixing the price. It was in these circumstances that it was observed that the "price fixed by the Government" would mean "the Central Government". The observations relied upon by the learned counsel for the respondents were made while considering the question whether there was any repugnancy between the provisions of the Sugarcane Control Order 1955 and the 1953 Act, the Rules and 1954 Order and they should be understood in that context. The relevant portion of the judgment on page 434 is being reproduced below :

"The price of cane fixed by Government here only meant the price fixed by the appropriate Government which would be the Central Government, under clause 3 of the Sugarcane Control Order, 1955, because in fact the U.P. State Government never fixed the price of sugarcane to be purchased by the factories. Even the provisions in behalf of the agreements contained in clauses 3 and 4 of the U.P. Sugarcane Regulation of Supply and Purchase Order, 1954, provided that the price was to be the minimum price to be notified by the Government subject to such deductions, if any, as may be notified by the Government from time to time meaning thereby the Central Government, the State Government not having made any provision in that behalf at any time whatever. The provisions thus made by the Sugarcane Control Order, 1955, did not find their place either in the impugned Act or the Rules made thereunder or the U.P. Sugarcane Regulation of Supply and Purchase Order, 1954; and the provision contained in Section 17 of the impugned Act in regard to the payment of sugarcane price and recovery thereof as if it was an arrear of land revenue did not find its place in the Sugarcane Control Order, 1955."

However, in Tika Ramji, Constitution Bench of Hon'ble Supreme Court has not considered Entry 14 of List II and regulatory power of State under Section 16 of 1953 Act.

55. Question cropped up is whether only because of amendment done inserting FRP, Tika Ramji(supra) shall reoccupy the field ? Their Lordships of Hon'ble Supreme Court held that under Clause 3, the Central Government was authorised to fix price or minimum price. Now, by amendment, the Government of India has been conferred power to fix, fair and remunerative price. How, this amendment shall deprive the State Government to fix SAP does not seem to born out from the argument advanced by the learned Senior Counsel appearing for the petitioners, more so when 1953 Act has not been impugned.

56. Dr. Ashok Nigam, learned Addl. Solicitor General of India while considering the affect of amendment with regard to FRP admits that the amendment does not change the situation and the State will have got always right to fix higher price than the FRP. The price fixed by the Government of India is only "floor price" which means SAP cannot be lower than FRP. He further submits that so far as levy sugar price is concerned, the price fixed by the Union of India shall be binding and final.

57. In AIR 1968 SC 599 Andhra Sugars Limited and another versus State of Andhra Pradesh, Andhra Pradesh Sugarcane (Regulation of Supply and Purchase) Act, 1961 was considered to be valid piece of legislation by the Supreme Court.

58. The same principle has been reiterated in the case reported in (1972)1 SCC 23 Solar Jung Sugar Mills Limited etc. versus State of Mysore and others.

59. The power of the State Legislature under 1968 Order and 1953 Act was subject matter of consideration before Hon'ble supreme Court in the case reported in 1982 Vol. 2 SCC 150 Sukhnandan Saran Dinesh Kumar and others versus Union of India and others. After considering statutory provisions, their Lordships of Hon'ble Supreme Court upheld the legislative right of the State Government to regulate the cane price.

60. In AIR 1952 SC 366 State of Travancore Cochin and others versus Bombay Company Limited, their Lordships of Hon'ble Supreme Court ruled that too narrow construction cannot be given to the entries of Seventh Schedule. To quote relevant portion :

"12.It was said that, on the construction we have indicated above, a "sale in the course of export" would become practically synonymous with "export", and would reduce clause (b) to a mere redundancy, because article 246 (1), read with entry 83 of List I of the Seventh Schedule, vests legislative power with respect to "duties of customs including export duties" exclusively in Parliament, and that would be sufficient to preclude State taxation of such transactions. We see no force in this suggestion. It might well be argued, in the absence of a provision like clause (b) prohibiting in terms the levy of tax on the sale or purchase of goods where such sales and purchases are effected through the machinery of export and import, that both the powers of taxation, though exclusively vested in the Union and the States respectively, could be exercised in respect of the same sale by export or purchase by import, the sales tax and the export duty being regarded as essentially of a different character. A similar argument induced the Federal Court to hold in Province of Madras v. Boddu Paidanna and Sons(1) that both central excise duty and provincial sales tax could be validly imposed on the first sale of groundnut oil and cake by the manufacturer or producer as "the two taxes are economically two separate and distinct imposts". Lest similar reasoning should lead to the imposition of such cumulative burden on the export-import trade of this country which is of great importance to the nation's economy, the Constituent Assembly may well have thought it necessary to exempt in terms sales by export and purchases by import from sales tax by inserting article 286 (1) (b) in the Constitution.

13.We are not much impressed with the contention that no sale or purchase can be said to take place "in the course of" export or import unless the property in the goods is transferred to the buyer during their actual movement, as for instance, where the shipping documents are indorsed and delivered within the State by the seller to a local agent of the foreign buyer after the goods have been actually shipped, or where such documents are cleared on payment, or on acceptance, by the Indian buyer 'before the arrival of the goods within the State. This view, which lays undue stress on the etymology of the word "course" and formulates a mechanical test for the application of clause(b), places, in our opinion, too narrow a construction upon that clause, in so far as it seeks to limit its operation only to sales and purchases effected during the transit of the goods, and would, if accepted, rob the exemption of much of its usefulness."

Accordingly, wider meaning should be given to Entries 14 and 27 of List II of the Seventh Schedule.

61. In AIR 1959 SC 648 Deep Chand versus State of U.P and others, it was ruled by Hon'ble Supreme Court that the doctrine of eclipse has no application to the post- constitutional laws.

62. A Constitution Bench of Hon'ble Supreme Court in the case reported in AIR 1979 SC 898 M. Karunanidhi versus Union of India and another after considering all earlier authorities laid down the following test to adjudicate the repugnancy keeping in view Article 254(2) of the Constitution of India. To quote relevant portion :

"35. On a careful consideration, therefore, of the authorities referred to above, the following propositions emerge:

(1) That in order to decide the question of repugnancy it must be shown that the two enactments contain inconsistent and irreconcilable provisions, so that they cannot stand together or operate in the same field.

(2) That there can be no repeal by implication unless the inconsistency appears on the face of the two statutes.

(3) That where the two statutes occupy a particular field, there is room or possibility of both the statutes operating in the same field without coming into collision with each other, no repugnancy results.

(4) That where there is no inconsistency but a statute occupying the same field seeks to create distinct and separate offences, no question of repugnancy arises and both the statutes continue to operate in the same field."

63. In AIR 1983 SC 1019 Hoechst Pharmaceuticals Limited and others versus State of Bihar and others, Hon'ble Supreme Court held that the inconsistency arose when the State law and Union law operate on the same field and one is repugnant or inconsistent with the other and are cumulative conditions.

64. In AIR 1988 SC 329 National Engineering Industries Limited versus Shri Kishan Bhageria and others, Hon'ble Supreme Court held that the test of repugnancy is that if one prevails, other cannot prevail.

65. In a case reported in 1999 Vol. 7 SCC 120 Dr. Preeti Srivastava and another versus State of M.P and others, question arose with regard to repugnancy based on List I of Seventh Schedule and List III of the Seventh Schedule, the State and Union of India both while exercising their power providing standard of medical education. Their Lordships of Hon'ble Supreme Court upheld the State's power and held that the State has got right to lay down higher eligibility qualification for admission to postgraduate medical courses and does not suffer from repugnancy. The controversy dealt with by the Hon'ble Supreme Court in the case of Dr. Preeti Srivastava (supra) seems to be squarely applicable to the present case also. To quote relevant portion :

"35. The legislative competence of the Parliament and the legislatures of the States to make laws under Article 246 is regulated by the VIIth Schedule to the Constitution. In the VIIth Schedule as originally in force, Entry 11 of List II gave to the States an exclusive power to legislate on "Education including universities subject to the provisions of Entries 63, 64, 65 and 66 of List-I and Entry 25 of List III." Entry 11 of List-II was deleted and Entry 25 of List III was amended with effect from 3-1-1976 as a result of the Constitution 42nd Amendment Act of 1976. The present Entry 25 in the Concurrent List is as follows:

Entry 25, List III : Education, including technical education, medical education and universities, subject to the provisions of Entries 63, 64,65 and 66 of List I: Vocational and technical training of labour.

Entry 25 is subject, inter alia, to Entry 66 of List I. Entry 66 of List-I is as follows:

Entry 66, List I.: Co-ordination and determination of standards in institutions for higher education or research and scientific and technical institutions.

Both the Union as well as the States have the power to legislate on education including medical education, subject, inter alia, to Entry 66 of List-I which deals with laying down standards in institutions for higher education or research and scientific and technical institutions as also coordination of such standards. A State has, therefore, the right to control education including medical education so long as the field is not occupied by any Union Legislation. Secondly, the State cannot, while controlling education in the State, impinge on standards in institutions for higher education. Because this is exclusively within the purview of the Union Government. Therefore, while prescribing the criteria for admission to the institutions for higher education including higher medical education, the State cannot adversely affect the standards laid down by the Union of India under Entry 66 of List-I. Secondly, while considering the cases on the subject it is also necessary to remember that from 1977 education including, inter alia, medical and university education, is now in the Concurrent List so that the Union can legislate on admission criteria also. If it does so, the State will not be able to legislate in this field, except as provided in Article 254.

81. Old Entry 11 of List II, as earlier existing in the Constitution of India, read as under:

Education including Universities, subject to the provisions of entries 63, 64,65 and 66 of List I and entry 25 of List III.

While Entry 25 of List III as now existing in the Seventh Schedule of the Constitution reads as under:

Education, including technical education, medical education and Universities, subject to the provisions of entries 63, 64,65 and 66 of List I; vocational and technical training of labour.

A conjoint reading of these entries makes it clear that as per Entry 11 of List II which then existed on the statute book, all aspects of education, including University education, were within the exclusive legislative competence of the State Legislatures subject to Entries 63 to 66 of List I and the then existing Entry 25 of List III. The then existing entry 25 of the Concurrent List conferred power on the Union Parliament and State Legislature to enact legislation with respect to vocational and technical training of labour. Thus, the said Entry 25 of List III had nothing to do with medical education. Any provision regarding medical education, therefore, was thus covered by Entry 11 of List II subject of course to the exercise of legislative powers by the Union Legislature as per Entries 63 to 66 of List I. In the light of the aforesaid relevant entries, as they stood then, a Constitution Bench of this Court in Gujarat University, Ahmedabad v. Krishna Ranganath Mudholkar AIR1963SC703, speaking through J.C. Shah, J., for the majority, had to consider whether the State Legislature could impose an exclusive medium of instruction 'Gujarati' for the students who had to study and take examination conducted by the Gujarat University. It was held that "If a legislation imposing a regional language or Hindi as the exclusive medium of instruction is likely to result in lowering of standards, it must necessarily fall within Item 66 of List I and be excluded to that extent from Item 11 of List II" as it then stood in the Constitution. Medium of instruction was held to have an important bearing on the effectiveness of instruction and resultant standards achieved thereby. In this connection, pertinent observations were made at pages 142 and 143 of Supp SCR: at p. 717 of AIR of the aforesaid report:

...If adequate text-books are not available or competent instructors in the medium, through which instruction is directed to be imparted, are not available, or the students are not able to receive or imbibe instructions through the medium in which it is imparted, standards must of necessity fall, and legislation for co-ordination of standards in such matters would include legislation relating to medium of instruction.

If legislation relating to imposition of an exclusive medium of instruction in a regional language or in Hindi, having regard to the absence of text-books and journals, competent teachers and incapacity of the students to understand the subjects, is likely to result in the lowering of standards, that legislation would, in our judgment, necessarily fall within item 66 List I and would be deemed to be excluded to that extent from the amplitude of the power conferred by item No. 11 of List II.

However, after the deletion of Entry 11 from List II and redrafting of Entry 25 in the Concurrent List as in the present form, it becomes clear that all aspects of education, including admission of students to any educational course, would be. covered by the general entry regarding education including technical and medical education etc. as found in the Concurrent List but that would be subject to the provisions of Entries 63 to 66 of List I..................................

82...........................The State can make adequate provisions on the topic by resorting to its legislative power under Entry 25 of List III as well as by exercising executive power under Article 162 of the Constitution of India read with Entry 25 of List III. Similarly, the Union Government, through Parliament, may make adequate provisions regarding the same in exercise of its legislative powers under Entry 25 of List III. But so long as the Union Parliament does not exercise its legislative powers under Entry 25 of List III covering the topic of short-listing of eligible candidates for admission to courses of post-graduate medical education, the field remains wide open for the State authorities to-pass suitable legislations or executive orders in this connection as seen above. As we have noted earlier, the Union Parliament has not invoked its power under Entry 25 of List III for legislating on this topic. Therefore, the field is wide open for the State Governments to make adequate provisions regarding controlling admissions to postgraduate colleges within their territories imparting medical education for ultimately getting postgraduate degrees."

66. In 1988 (Supp) SCC 82 National Engineering Industries Limited versus Shri Kishan Bhageria and others, Hon'ble Supreme Court after considering almost all the earlier judgments has followed the case of Deep Chand(supra) and Hoechst Pharmaceuticals Limited (supra) and held as under :

"13. In Deep Chand v. State of U.P. Subba Rao, J., as the learned Chief Justice then was observed that the result of the authorities indicated was as follows:

"Nicholas in his Australian Constitution, 2nd Edition, p. 303, refers to three tests of inconsistency or repugnancy:

1. There may be inconsistency in the actual terms of the competing statutes;

2. Though there may be no direct conflict, a State law may be inoperative because the Commonwealth Code is intended to be a complete exhaustive code; and

3. Even in the absence of intention, a conflict may arise when both State and Commonwealth seek to exercise their powers over the same subject matter."

14.Quoting the aforesaid observations, this Court in M/s. Hoechst Pharmaceuticals Ltd. and others v. State of Bihar and others, [1983] 4 S.C.C. 45 at page 87 where A.P. Sen, J. exhaustively dealt with the principles of repugnancy and observed that one of the occasions where inconsistency or repugnancy arose was when on the same subject matter, one law would be repugnant to the other. Therefore, in order to raise a question of repugnancy two conditions must be fulfilled. The State law and the Union law must operate on the same field and one must be repugnant or inconsistent with the other. These are two conditions which are required to be fulfilled. These are cumulative conditions. Therefore, these laws must tread on the same field and these must be repugnant or inconsistent with each other. In our opinion, in this case there is a good deal of justification to hold that these laws, the Industrial Disputes Act and the Rajasthan Act tread on the same field and both laws deal with the rights of dismissed workman or employee. But these two laws are not inconsistent or repugnant to each other. The basic test of repugnancy is that if one prevails the other cannot prevail."

67. In (2010) 5 SCC 246 Zameer Ahmed Latifur Rehman Sheikh versus State of Maharashtra and others, Hon'ble Supreme Court after considering earlier cases held that entries in the List being fields of legislation must receive liberal construction inspired by a broad and generous spirit and not a narrow or pedantic approach. To quote relevant portion :

".38. It is a well-established rule of interpretation that the entries in the List being fields of legislation must receive liberal construction inspired by a broad and generous spirit and not a narrow or pedantic approach. Each general word should extend to all ancillary and subsidiary matters which can fairly and reasonably be comprehended within it. [Reference in this regard may be made to the decisions of this Court in Navinchandra Mafatlal v. Commr. of I.T. [AIR 1955 SC 58], State of Maharashtra versus Bharat Shantilal Shah [(2008) 13 SCC 5]].

39.It is also a cardinal rule of interpretation that there shall always be a presumption of constitutionality in favour of a statute and while construing such statute every legally permissible effort should be made to keep the statute within the competence of the State Legislature [Reference may be made to the cases of Charanjit Lal Choudhary v. Union of India [AIR 1951 SC 41], T.M.A. Pai Foundation v. State of Karnataka [(2002) 8 SCC 481], Karnataka Bank Ltd. State of AP [(2008) 2 SCC 254]].

40. One of the proven methods of examining the legislative competence of a legislature with regard to an enactment is by the application of the doctrine of pith and substance. This doctrine is applied when the legislative competence of the legislature with regard to a particular enactment is challenged with reference to the entries in various lists. If there is a challenge to the legislative competence, the courts will try to ascertain the pith and substance of such enactment on a scrutiny of the Act in question. In this process, it is necessary for the courts to go into and examine the true character of the enactment, its object, its scope and effect to find out whether the enactment in question is genuinely referable to a field of the legislation allotted to the respective legislature under the constitutional scheme. This doctrine is an established principle of law in India recognized not only by this Court, but also by various High Courts. Where a challenge is made to the constitutional validity of a particular State Act with reference to a subject mentioned in any entry in List I, the Court has to look to the substance of the State Act and on such analysis and examination, if it is found that in the pith and substance, it falls under an entry in the State List but there is only an incidental encroachment on any of the matters enumerated in the Union List, the State Act would not become invalid merely because there is incidental encroachment on any of the matters in the Union List.

42 Again, a Constitutional Bench of this Court while discussing the said doctrine in Kartar Singh v. State of Punjab [(1994) 3 SCC 569] observed as under:

"60. This doctrine of `pith and substance' is applied when the legislative competence of a legislature with regard to a particular enactment is challenged with reference to the entries in the various lists i.e. a law dealing with the subject in one list is also touching on a subject in another list. In such a case, what has to be ascertained is the pith and substance of the enactment. On a scrutiny of the Act in question, if found, that the legislation is in substance one on a matter assigned to the legislature enacting that statute, then that Act as a whole must be held to be valid notwithstanding any incidental trenching upon matters beyond its competence i.e. on a matter included in the list belonging to the other legislature. To say differently, incidental encroachment is not altogether forbidden."

43.It is common ground that the State Legislature does not have power to legislate upon any of the matters enumerated in the Union List. However, if it could be shown that the core area and the subject-matter of the legislation is covered by an entry in the State List, then any incidental encroachment upon an entry in the Union List would not be enough so as to render the State law invalid, and such an incidental encroachment will not make the legislation ultra vires the Constitution."

Hence, liberal construction should be given to Entries 14 and 27 of List II of Seventh Schedule.

68. While considering Article 254 of the Constitution in the case of Zameer Ahmad Latifur Rehman Sheikh ( supra), Hon'ble Supreme Court reiterated the principle emerging from M. Karunanidhi (supra)(para 55, 56 and 57), followed by Shri Kishen Bhageria(supra) and held that in case both the provisions can stand together then there shall be no inconsistency between the law made by the Parliament and the State.

69. Keeping in view the aforesaid broader principle with regard to repugnancy, argument advanced by the petitioner's counsel with regard to legislative competence of the State seems to be not sustainable. Entries 14 and 27 of List II of Seventh Schedule with regard to agriculture should be given wider meaning. The cane being agriculture produce, shall be covered under Entry 14 of List II and being a State subject, the State has got legislative competence to fix cane price.

70. However, price control under Entries 33 and 34 being falling under Concurrent List (List III of Seventh Schedule) and keeping in view the fact that FRP has been fixed by Union of India, State while fixing SAP cannot fix lower price than what has been fixed by the Union of India under Entry 33 read with Entry 34. Moreover, as submitted by learned Addl. Solicitor General, FRP being a "floor price" keeping in view the facts and circumstances of the cane growers and sugar mills and sugar price of the entire country and also being a well fair legislation, though the State is ligislatively competent to fix cane price but it shall not be lesser than the FRP which, according to learned Addl. Solicitor General of India is 'floor price' for the entire country. Otherwise also, being well fair legislation and keeping in view the ground reality of the State, the State Government has got right to fix SAP but not lower that what has been fixed by the FRP by the Government of India.

To sum up, under Entry 14 and 27 of List II of the Seventh Schedule. State has legislative competence to legislate law with regard to cane price, being an agriculture produce. Learned counsel on behalf of petitioners cited some other cases, being not relevant, does not require discussion.

(III) REGULATORY POWER OF THE STATE

71. Much argument has been advanced by the learned Senior Counsel appearing for the petitioners that the regulatory power does not include the SAP under the changed circumstances whereby the Union of India itself fixed fair and remunerative price after considering the private arrangement made by the sugar mills from the sale of by-product like molasses, bagasse and press mud or their imputed value. Merely because some power has also been conferred by the Government of India. Whether under the regulatory power conferred by 1953 Act, the State shall lose its right to fix cane price subject to finding recorded (supra). Whether the regulatory power does not include fixation of cane price ?

72. The aims and object of 1953 Act provide that it was enacted to secure the equitable distribution and availability of cane at fair price. To quote the aims and object :-

"An Act to regulate the supply and purchase of sugarcane required for use in sugar [factories and Gur, Rab or Khandsari Sugar Manufacturing Units].

Whereas it is expedient to regulate the supply and purchase of sugarcane required for use in sugar [factories and Gur, Rab or Khandsari Sugar Manufacturing Units] and other connected matters;

It is hereby enacted as follows :"

73. Section 15 deals with declaration of reserved area and assigned area whereas Section 16 empowers the State Government to regulate the purchase and supply of cane in reserved and assigned areas (supra). It empowers the State Government to regulate the distribution, sale or purchase of any cane in any reserved or assigned area.

74. It is settled proposition of law that while interpreting the statutory provisions, meaning should be assigned to each and every word and statute should be considered word by word, phrase by phrase, para by para, section by section and whole of the statute.

III(A) STATUTORY INTERPRETATION

75. According to Maxwell, the golden rule of interpretation is to adhere to the ordinary meaning of the words used unless it is in direct conflict with the intention of the Act. In this connection, the author in his book 'Interpretation of Statutes' (l2th Edition) observes thus:

It is a corollary to the general rule of literal construction that nothing is to be added to or taken from a statute unless there are adequate grounds to justify the inference that the legislature intended something which it omitted to express.

220. The authorities-on the question of interpretation of the constitutional provisions may roughly be divided into four categories which may not exactly be absolutely separate or independent so as to be confined in a watertight compartment but in some cases may overalp, yet they generally lay down the law on the subject categorised by us:

Categories (A) Where the language of a statute is plain, explicit and unambiguous, no external aid is permissible.

(B) Where the language is vague and ambiguous or does not clearly spell out the object and the spirit of the Act, external aids in the nature of parliamentary debates, reports of Drafting or Select Committees may be permissible to determine and locate the real intention of the legislature.

(C) Where certain words are omitted from the statute, the court cannot supply the omission or add words to the statute on a supposed view regarding the intention of the legislature.

(D)Any speech made by a Minister or a Member in the Parliament is not admissible or permissible to construe a statutory or a constitutional provision."

Relevant portion from to Maxwell on the Interpretation of Statutes (12th edition page 36) is reproduced as under:-

"A construction which would leave without effect any part of the language of a statute will normally be rejected. Thus, where an Act plainly gave an appeal from one quarter sessions to another, it was observed that such a provision, though extraordinary and perhaps an oversight, could not be eliminated."

76. Privy Council in Emperor versus Benoari Lal 1913 PC 36 held that the history of legislation and the facts which give rise to the enactment may usefully be employed to interpret the meaning of the statute, though they do not afford a conclusive argument.

77. District Mining officer vs. Tata Iron and Steel co. (2001) 7 SCC 358:Hon'ble Supreme court has held that function of the court is only to expound the law and not to legislate. A statute has to be construed according to the intent of them and make it the duty of the court to act upon true intention of the legislature. If a statutory provision is open to more than one interpretation, the court has to choose the interpretation which represents the true intention of the legislature.

78.In Dadi Jagannadhan vs. Jammulu Ramulu (2001) 7 SCC 71: while interpreting a statute the court must start with the presumption that legislature did not make any mistake and must interpret so as to carry out the oblivious intention of legislature, it must not correct or makeup a deficiency, neither add nor read into a provision which are not there particularly when literal reading leads to an intelligent result.

79.In Easland combines vs.CCE (2003) 3 SCC 410, it has been held that where language is clear, court can not abstain from giving it effect to it merely because it would lead to some hardship.

80. In Delhi Financial Corpn. Vs. Rajiv Anand (2004)11 SCC 625, it has been observed that the legislature is presumed to have made no mistake and that it intended to say what it said. Assuming there is a defect or an omission in the words used by the legislature , the court can not correct or make up the deficiency , especially where a literal reading there of produces an intelligible result .the court is not authorized to alter words or provide a casus omissus.

81. In Deevan Singh vs. Rajendra Pd. Ardevi (2007)10 SCC528, Hon'ble Supreme Court held that while interpreting a statute the entire statute must be first read as a whole then section by section , clause by clause , phrase by phrase and word by word .the relevant provision of statute must thus read harmoniously.

82. In State of West Bengal versus Union of India AIR 1963 SC 1241, Hon'ble Supreme Court observed that the statement of Objects and Reasons may be used for limited purpose of understanding the background and the antecedent state of affairs leading up to the legislation.

83. In AIR 1987 SC 138 Kameswar Singh versus Addl. Dist. Judge, Lucknow, Hon'ble Supreme Court has widened the scope of object and reasons and observed that the court may strive to so interpret the statute as to protect and advance the object and purpose of the enactment. Any narrow or technical interpretation of the provisions would defeat the legislative policy. The courts must therefore, keep the legislative policy in mind in applying the provisions of the Act to the facts of the case.

84. In (1984)2 SCC 183 R.S. Nayak versus A.R. Antulay, while considering the purpose of Prevention of Corruption Act, 1947 and mode of construing a provision of the Act, their Lordships observed that the purpose of Act is to make more effective provisions for prevention of bribery and corruption. To quote :

"18.The 1947 Act was enacted, as its long title shows, to make more effective provision for the prevention of bribery and corruption. Indisputably, therefore, the provisions of the Act must receive such construction at the hands of the court as would advance the object and purpose underlying the Act and at any rate not defeat it............. The question of construction arises only in the event of an ambiguity or the plain meaning of the words used in the statute would be self-defeating. The court is entitled to ascertain the intention of the legislature to remove the ambiguity by construing the provision of the statute as a whole keeping in view what was the mischief when the statute was enacted and to remove which the legislature enacted the statute. This rule of construction is so universally accepted that it need not be supported by precedents. Adopting this rule of construction, whenever a question of construction arises upon ambiguity or where two views are possible of a provision, it would be the duty of the court to adopt that construction which would advance the object underlying the Act, namely, to make effective provision for the prevention of bribery and corruption and at any rate not defeat it."

85. In a case reported in AIR 1986 SC 1499 M/s. Girdhari Lal & Sons versus Balbir Nath Mathur and others, Hon'ble Supreme Court observed that while interpreting the statutory provisions, the Court has to ascertain the intention of the legislature, actual or imputed and the Court must strive to interpret the statute as to promote and advance the object and purpose of the enactment. To reproduce relevant portion, to quote :

"9. So we see that the primary and foremost task of a court in interpreting a statute is to ascertain the intention of the legislature, actual or imputed. Having ascertained the intention, the court must then strive to so interpret the statute as to promote or advance the object and purpose of the enactment. For this purpose, where necessary the court may even depart from the rule that plain words should be interpreted according to their plain meaning. There need be no meek and mute submission to the plainness of the language. To avoid patent injustice, anomaly or absurdity or to avoid invalidation of a law, the court would be well justified in departing from the so-called golden rule of construction so as to give effect to the object and purpose of the enactment by supplementing, the written word if necessary."

86. Hon'ble Supreme Court in a case reported in AIR 1957 SC 29 State versus Govindan Thampi Bhaskaran Thampi observed that resort to the history of the legislation to construe the meaning of any provisions therein is more often taken exception to than not. At the same time it is common knowledge that when the words of a statute are ambiguous, attempts are not infrequently made to ascertain their true meaning by reference to the state of the law at the time the statute was passed, the mischief sought to be avoided and the stages through which the concerned legislation passed.

87. Allahabad High Court in a case Kunwar Murli Manohar versus State of U.P. AIR 1957 All 159, observed that in the interpretation of a statute, the history of the legislation and the surrounding circumstances which existed at the time and demanded a change of law or the enactment of a new one, can all be taken into consideration.

88. While considering the recent trend evolved by Courts in statutory representation to remove absurdity, some of the cases and discussion given in 'Bennion Statutory Interpretation" shall be appropriate to be reproduced, which is as under :

"The modern attitude is indicated by a dictum of Mustill J that 'a statute.....cannot be interpreted according to its literal meaing without testing that meaning against the practical outcome of giving effect to it. Some modern judges have gone so far as to suggest that the correct course is to start by considering which result would be desirable, and then see if the law permits it. Thus Lord Radcliffe said :

'...............it sometimes helps to assess the merits of a decision, if one starts by noticing its results and only after doing that allots to it the legal principles upon which it is said to depend.' Lord Radcliffe went on to say that in the instant case he had begun by considering the consequences of the apparent meaning of the enactment, and found these disquieting. He went on : ' I start then with the assumption that something must have gone wrong in the application of legal principles that produce such a result.

Prima facie, as we have seen, the ordinary meaning of the words is to be followed. If the consequences are adverse, this presumption may be displaced. As Donaldson MR put it:

"Our task, as I see it, is to construe [the Act], and in so doing the prima facie rule is that words, have their ordinary meaning. But that is subject to the qualification that if, giving words their ordinary meaning, we are faced with extraordinary results which cannot have been intended by Parliament, we then have to move on to a second stage in which we re-examine the words....

The so-called 'golden rule' The 'prima facie rule' referred to in the above dictum of Donaldson MR was called by Viscount Simon the 'golden rule'. He said : 'The golden rule is that the words of a statute must prima facie be given their ordinary meaning'. However, the terms golden rule is more usually applied to the precept Lord Blackburn described as 'what Lord Wensleydale used to call the golden rule. Lord Blackburn went on to express this so-called rule as :

'...........that we are to take the whole statute together, and construe it all together giving the words their ordinary signification, unless when so applied they produce an inconsistency, or an absurdity or inconvenience so great as to convince the Court that the intention could not have been to use them in their ordinary signification.' This was an attempt by Lord Blackburn to provide in a few words an all-embracing single prescription for the task of statutory interpretation."

Learned author (supra) noted that by passage of time, the intention of the originator of the statute loses its effectiveness and become irrelevant but even then the statutory provisions continue to operate. With the change of social condition and keeping in view that the Constitution is living organism an Act may also be treated "living statute" and may be constructed in such a manner which may remove the absurdity. The old enactments should be read in the light of the dynamic processing received over the years with such modification of current meaning of its language as will now give effective legislative intention. Learned author observed that updating principle may be applied in mind while interpreting the statutory provisions after passage of time.

89. Learned author (supra) further proceeded to observe as under :

"With the updating principle in mind, the competent drafter frames the language in terms suitable for constinuing operation into the unforseeable future. The drafter does not conspicuously compose the Act as at the date of the draft. Rather the aim is to employ a continuous present tense, using the word 'shall', as Thring enjoined, as 'an imperative only, and not as a future'. Yet, since language (like human society) is continually in flux, the formula expressed in the words of one age may not feel comfortable as current law to its subjects in another. It might even fill them with the consciousness of governance from the grave : an always absurd, and sometimes intolerable, infliction. Where the words have changed their meaning, an interpreter may find it impracticable to apply the original sense. Imagination and historical awareness are here required.

Each generation lives under the law it inherits. Constant formal updating is not practicable, so an Act takes on a life of its own. What the original framers intended sinks gradually into history. While their language may endure as law, its current subjects are likely to find that law more and more ill fitting. The intention of the originators, collected from an Act's legislative history, necessarily becomes less relevant as time rolls by. Yet their words remain law. Viewed like this, the ongoing Act resumbles a vessel launched on some one-way voyage from the old world to the new. The vessel is not going to return; nor are its passengers. Having only what they set out with, they cope as best they can. On arrival in the present, they deploy their native endowments under conditions originally unguessed at.

In construing an ongoing Act, the interpreter is to presume that Parliament intended the Act to be applied at any future time in such a way as to give effect to the true original intention. Accordingly, the interpreter is to make allowances for any relevant changes that have occurred, since the Act's passing, in law, social conditions, technology, the meaning of words, and other matters. Just as the US Constitution is regarded as 'a living Constitution', so an ongoing British Act is regarded as 'a living Act'. That today's construction involves the supposition that Parliament was catering long ago for a state of affairs that did not then exist is no argument against that construction. Parliament, in the wording of an enactment, is expected to anticipate temporal developments. The drafter will try to foresee the future, and allow for it in the wording.

Example 288.5 On one view of the definition of 'superior court' in the Contempt of Court Act 1981 s 19, it applied to a type of court that did not yet exist in 1981. Lord Diplock said :

'I should......have reached the same conclusion on the construction of the definition of "superior court" in s 19, even if it were impossible to point to any existing court which complied with the description and one were driven to the conclusion that the draftsman was making anticipatory provision for possible new courts that might be subsequently created with the status of superior courts of record.' An enactment of former days is thus to be read today, in the light of dynamic processing received over the years, with such modification of the current meaning of its language as will now give effect to the original legislative intention. The reality and effect of dynamic processing provides the gradual adjustment. It is constituted by judicial interpretation, year in and year out. It also comprises processing by executive officials."

Learned author(supra) observed that if the original terminology referred to has been allotted a different meaning, the court will look at the substance behind the wording. The fact that the term referred to by the enactment is still in use does not mean the enactment will apply if the current use gives the term an essentially different meaning(page 898).

90.Accordingly, while construing Section 16 of 1953 Act, it should not be considered in piecemeal, but right from aims and objects to Section by Section and word by word should be taken into account.

III(B) REGULATORY 91. Much emphasis has been given by the learned counsel for the petitioners that the power to regulate does not include the power to fix cane price.

92. According to Law Lexicon Vol. 4, the expression 'regulate' occurs in many statutes, as for example, the Essential Commodities Act, 1955, and it has been found difficult to give the word a precise definition. It has different shades of meaning and must take its colour from the context in which it is used having regard to the purpose and object of the relevant provisions, and as has been repeatedly observed, the court while interpreting the expression must necessarily keep in view the object to be achieved and mischief sought to be remedied.

93 According to Shorter Oxford Dictionary, the word, "regulate" means "to control, govern, or direct by rule or regulation; to subject to guidance or restrictions'.

94. In Stroud's Judicial Dictionary of Words and Phrases (Seventh Edition) Volume 3, the word, "regulate" has been defined as under :

REGULATE . To "regulate" a supply of water does not mean to shut it off altogether. Therefore, when an Act required the consumers of water to provide "proper ball or stop-cocks, or other necessary apparatus, for regulating" the supply, that did not include an out-of-door screw-down valve, whereby the water could be shut off from coming into a consumer's house (Ward v. Folkestone Water-works Co, 24 Q. B.D. 334) A power to make a by-law to "regulate and govern" a trade does not authorise the prohibition of such trade; "there is a marked distinction between the prohibition or prevention of a trade and the regulation or governance of it; and, indeed, a power to 'regulate and govern' seems to imply the continued existence of that which is to be regulated or governed" (Toronto v Virgo (1896) A.C.88; Ontario vs. Canada [1986] A.C.348). See Peace.

Whenever an Act authorised the making of rules for "regulating" matters under it, that does not validate a rule which creates a new jurisdiction (King v Henderson [1898] A.C. 720).

"Regulating...procedure" (Supreme Court of Judicature (Consolidation) Act 1925 (c.49). s. 99 (1). As the benefit which a defendant derives from the Statutue of Limitations is procedural, R.S.C. Ord. 20 r. 5, which empowers the court to allow the plaintiff to amend his pleadings, is a rule for "regulating"procedure within the meaning of the section (Rodriguez v Parker (R.J.) [1967] 1 Q.B. 116).

"Regulating the marketing" (Agricultural Marketing Act 1931(c.42), s. 1 (1). A scheme "regulating the marketing" of an agricultural product had to be one which introduced some orderly system of marketing. One which was from start to finish purely discretionary did not suffice (Tuker v Ministry of Agriculture fisheries and Food(1960) 1 W.L.R. 819).

"Regulating the movement of traffic" (Highways Act 1959 (c.25), s. 65). The power given by this section to the highway authority to construct works at road junctions for "regulating the movement of traffic", does not extent to closing the central reservation of a dual carriageway, thus causing a long diversion (Birmingham and Midland Motor Omnibus Co v. Worcestershir CC [1967] 1 W.L.R. 409).

95. In Words and Phrases Permanent Edition 36B (page 289), regulatory power has been defined as under :

REGULATORY U.S.Okla. 1994. To obtain conviction under National Firearms Act section criminalizing possession of unregistered "firearm," including "machine gun", which is defined as weapon that automatically fires more than one shot with single pull of trigger, givernment must prove beyond reasonable doubt that defendant knew his firearm had characteristics that brought it within statutory definition of machine gun; offense in question, which was punishable by ten year term of imprisonment, was not "public welfare" or "regulatory" "offense" as to which congressional silence concerning mental element of offense could be interpreted as dispensing with conventional mens rea requirements, and lack of mens rea requirement potentially would impose criminal sanctions on class of persons whose mental state made their actions entirely innocent.

C.A. 9 (Cal.) 1986. California statutes requiring physicians to keep records of manufacture, sale, purchase, or disposition of dangerous drug have purpose of regulating dispensation of dangerous drugs, and thus are "regulatory," for purposes of required records exception to Fifth Amendment privilege, even though records kept for regulatory purpose might be useful in criminal grand jury investigation.

Md. App. 1990. Exclusions in insolvent savings and loan association's directors' and officers' liability policy for "regulatory" liability, which excluded coverage for liability arising from claim brought by the depository insurance organization, and "Insured vs. Insured exclusion," which excluded coverage for claims against a director or oficer by a director or officer of savings and loan association, except shaereholder derivative actions, were contrary to public policy, and thus were void and unenforceable against association and Maryland Deposit Insurance Fund (MDIF) in its capacity as conservator and receiver for association.

Mass. 1975. Decision of port authority not to file Environmental Impact Report in connection with expansion of airport was neither "adjudicatory" nor "regulatory" within meaning of Massachusetts Administrative Procedure Act, so that the Act was not applicable to review of that determination."

96. The word, "regulatory agency" has been dealt with and defined in Words and Phrases Permanent Edition 36B, page 290 as under :

REGULATORY AGENCY:

C.A. 9 (Cal.) 1994. Resolution Trust Corporation (RTC) was "regulatory agency" within meaning of regulatory exclusion in directors and officers liability policy, because RTC had some powers of conservatorship and receivership as Federal Deposit Insurance Corporation (FDIC0, which was specially listed in exclusion, and exclusion encompassed agencies similar to those listed; thus, claims brought by RTC were excluded from coverage by regulatory exclusion.

D.Kan. 1994. Resolution Trust Corporation (RTC) constituted "regulatory agency," within meaning of endorsement to officers' and directors' liability insurance policy excluding from coverage those claims brought by certain named agencies or any other national or state "regulatory agency".

Cal. Appl. 2 Dist. 1990. Division of Labor Standards Enforcement was "regulatory agency" within meaning of statute which allows award of reasonable litigation expenses including attorney fees in civil action between small business or licensee and state regulatory agency, where action of agency was undertaken without substantial justification.

Tex.App. Austin 1995. Even if zoning ordinance could be "permit" within meaning of statute fixing applicable law for construction project as that in effect when first permit application is filed, zoning change approved by city council could not be first permit in series of permits inasmuch as city council was not "regulatory agency" within meaning of statute defining agency, as that definition did not include governing body of municipality engaged in legislative acts.

Keeping in view the dictionary meaning of the word, "regulatory power", the State Government seems to have got ample power to fix the cane price. However, it would be subject to FRP. The price may be higher but not lower than FRP.

97. The word, "regulate" has been considered by Hon'ble Supreme Court in catena of judgments and definition given in Oxford Dictionary has been relied upon.

98. In AIR 1964 SC 1781 V.S. Rice and Oil Mills and others versus State of Andhra Pradesh etc, Hon'ble Supreme Court held that the word "regulate" is wide enough to confer power on the authority to regulate either by increasing the rate or decreasing the rate, the test being what is it, i.e. necessary or expedient to be done to maintain, increase, or secure supply of essential articles in question and to arrange for its equitable distribution and its availability at fair prices.

99. In the case reported in (1973)1 SCC 227 Himat Lal K. Shah versus Commissioner of Police, Ahmedabad and another, Hon'ble Supreme Court held that the word "regulating" in Section 33(1)(o) would include the power to prescribe that permission in writing should be taken a few days before the holding of a meeting on a public street. The word, "regulate", according to Shorter Oxford Dictionary, means, "to control, govern, or direct by rule or regulations to subject to guidance or restrictions".

100. In AIR 1985 SC 660 K. Ramanathan versus State of Tamil Nadu and another, their Lordships of Hon'ble Supreme Court have considered the word, "regulatory power" and ruled that it does not mean prohibitory. Their Lordships held that it is a word of broad import and having broad meaning. To quote relevant portion :

"18. The word 'regulation' cannot have any rigid or inflexible meaning as to exclude 'prohibition'. The word 'regulate' is difficult to define as having any precise meaning. It is a word of broad import, having a broad meaning, and is very comprehensive in scope. There is a diversity of opinion as to its meaning and its application to a particular state of facts, some Courts giving to the term a somewhat restricted, and others giving to it a liberal, construction. The different shades of meaning are brought out in Corpus Juris Secundum, vol. 76 at p. 611 :

Regulate" is variously defined as meaning to adjust; to adjust, order, or govern by rule, method, or established mode; to adjust or control by rule, method, or established mode, or governing principles or laws; to govern; to govern by rule; to govern by, or subject to, certain rules or restrictions; to govern or direct according to rule; to control, govern, or direct by rule or regulations.

"Regulate" is also defined as meaning to direct; to direct by rule or restriction; to direct or manage according to certain standards, laws, or rules; to rule; to conduct; to fix or establish; to restrain; to restrict.

19.It has often been said that the power to regulate does not necessarily include the power to prohibit, and ordinarily the word 'regulate' is not synonymous with the word 'prohibit'. This is true in a general sense and in the sense that mere regulation is not the same as absolute prohibition. At the same time, the power to regulate carries with it full power over the things subject to regulation and in absence of restrictive words, the power must be regarded as plenary over the entire subject. It implies the power to rule, direct and control, and involves the adoption of a rule or guiding principle to be followed, or the making of a rule with respect to the subject to be regulated. The power to regulate implies the power to check and may imply the power to prohibit under certain circumstances, as where the best or only efficacious regulation consists of suppression. It would therefore appear that the word 'regulation' cannot have any inflexible meaning as to exclude 'prohibition'. It has different shades of meaning and must take its colour from the context in which it is used having regard to the purpose and object of the legislation, and the Court must necessarily keep in view the mischief which the legislature seeks to remedy.

23. The power to regulate or prohibit the production, supply and distribution of, and trade and commerce in, essential commodity may be exercised in innumerable ways. One of the ways in which such regulation or control over the production, supply and distribution of, and trade and commerce in, an essential commodity like foodstuffs may be exercised by placing a ban on inter-State or intra-State movement of foodstuffs to ensure that the excess stock of foodstuffs held by a wholesale dealer, commission agent or retailer is not transported to places outside the State or from one district to another with a view to maximise the procurement of such foodstuffs from the growers in the surplus areas for their equitable distribution at fair prices in the deficit areas. The placing of such ban on export of foodstuffs across the State or from one part of the State to another with a view to prevent outflow of foodstuffs from a State which is a surplus State prevents the spiral rise in prices of such foodstuffs by artificial creation of shortage by unscrupulous traders. But such control can be exercised in a variety of ways otherwise than by placing compulsory levy on the producers, for example, by fixing a controlled price for foodstuffs, by placing a limit on the stock of foodstuffs to be held, by a wholesale dealer, commission agent, or retailer, by prohibiting sales except in certain specified manner, etc. /These are nothing but regulatory measures."

102. In a case reported in AIR 1989 SC 788 Jiyajeerao Cotton Mills Limited and another versus The Madhya Pradesh Electricity Board and another, Hon'ble Supreme Court dealt with the word, "regulate". It has been held that Section 22-B permits the State Government to issue an appropriate order for regulating the supply, distribution and consumption of electricity. The expression "regulate" occurs in other statutes also, as for example, the Essential Commodities Act, 1955, and it has been found difficult to give the word a precise definition. It has different shades of meaning and must take its colour from the context in which it is used having regard to the purpose and object of the relevant provisions, and the court while interpreting the expression must necessarily keep in view the object to be achieved and the mischief sought to be remedied.

103. In West U.P. Sugar Mills case(supra), a wide meaning has been given to regulate power used in Section 16 of 1953 Act, relevant portion of which is reproduced as under :

"26.............In such circumstances, the irresistible conclusion which can be drawn is that the regulatory power possessed by the State Government shall also include the power to fix the price of the sugarcane. If it is held that the State under its power of regulation cannot fix the price, then the statutory provision contained in the 1953 Act, the Rules and 1954 Order will become completely one sided, operating entirely for the benefit of sugar factories giving them many advantages with no corresponding obligations and leaving the canegrower in a lurch with host of restrictions upon him. This can never be the intention of the Legislature. It will not be fair to read the Act and the Rules in such a restrictive manner, whereby the provisions made for the benefit of the canegrowers become wholly illusory.

104. The aforesaid proposition of regulatory power has been followed by Hon'ble Supreme Court in the case reported in (2006)13 SCC 542 Union of India and others versus Asian Food Industries. To quote relevant portion :

"43. We are, however, not oblivious of the fact that in certain circumstances regulation may amount to prohibition. But, ordinarily the word "regulate" would mean to control or to adjust by rule or to subject to governing principles whereas the word "prohibit" would mean to forbid by authority or command. The expression "regulate" and "prohibit" inhere in them elements of restriction but it varies in degree. The element of restriction is inherent both in regulative measures as well as in prohibitive or preventive measures."

105. Their Lordships of Hon'ble Supreme Court have also reiterated the definition given by it in the case of State of U.P. Versus Hindustan Aluminium Corporation AIR 1979 SC 1459.

106. In one another case reported in (2009)6 SCC 235 U.P. Power Corporation Limited versus National Thermal Power Corporation Limited and others West U.P. Sugar Mills case is followed and regulatory word has been dealt with, elaboratory by Hon'ble Supreme Court while dealing with the provisions contained in the aforesaid Act, 2003 and the provision contained in Central Electricity Regulatory Commission Regulation 2001. To quote relevant portion :

"48. The power to regulate may include the power to grant or refuse to grant the licence or to require taking out a licence and may also include the power to tax or exempt from taxation. It implies a power to prescribe and enforce all such proper and reasonable rules and regulations as may be deemed necessary to conduct the business in a proper and orderly manner. It also includes the authority to prescribe the reasonable rules, regulations or conditions subject to which the business may be permitted or may be conducted."

107. Keeping in view the aforesaid dictionary meaning of word, "regulatory" or regulate or regulation given in 1953 Act in the light of dictionary meaning as well as interpretation given by Hon'ble Supreme Court from time to time (supra), there appears to be no doubt that the regulatory power vested in the State Government under 1953 Act includes power to fix cane price and regulate the sale and purchase of cane in accordance with statutory provisions.

(IV) WHETHER THE AMENDMENTS (SUPRA) PROHIBIT THE STATE GOVERNMENT TO EXERCISE POWER FOR SAP ?

108. Learned Senior counsel Shri Rakesh Dwivedi and Shri Pinaki Mishra both vehemently argued that after insertion of words, "fair and remunerative price" through the amendment (supra), now it is not open for the State Government to fix SAP. Fair and remunerative price is exhaustive and leaves no room for the State Government to exercise power to fix State Advised Price (SAP). In any case, the advisory price does not mean the price to compel the mill owners to pay higher price to the cane growers than FRP.

109. Learned counsel further submitted that the Minister while introducing the Bill for amendment in Essential Commodities Act expressed the view that the purpose of the amendment is to fix the cane price leaving no scope for the State Government to interfere with the matter.

110. The argument advanced by the learned counsel for the petitioners that after FRP, it is not open for the State Government to enter into the matter does not seem to be correct for the reason given hereinafter.

111. Shri Jaideep Narain Mathur, learned Addl. Advocate General has rightly relied upon the explanation II and the complete statement given at the floor of House which reveals that the price fixed by the Government of India under FRP is not full and final. The explanation II inserted in Sub Section (3-C) in Section 3 of Essential Commodities Act by Essential Commodities (Amendment) Act, 2010(supra) leaves open to the Statement Government to exercise power with regard to fixation of price.

112. Parliament to its wisdom while interpreting "fair and remunerative price", manufacturing cost of sugar and reasonable return of the capital specifically provided that it does not include the price paid or payable under any order or enactment of the State Government and any price agreed to between the purchaser and supplier. Keeping in view the Explanation II of Section 3(3C), the State seems to have got power to fix cane price in addition to FRP.

113. While deciding a writ petition No.7825(M/B) of 2011 Sadhana Sharma versus State of U.P and others by judgment and order dated 11.1.2012 decided by a Division Bench of this Court, delivered by one of us (Hon'ble Devi Prasad Singh, J), after considering various pronouncements of Hon'ble Supreme Court, it has been held that preferably note including objects and reasons of an enactment are relevant and may be considered as extrinsic while interpreting statutory provisions. A plain reading of the aims and reasons of Amending Act No.35 of 2010 reveals that Explanation II of Section 3(3-C) of the Essential Commodities Act was inserted to give liberty to the State Government to fix cane price in addition to FRP keeping in view the ground realities, facts and circumstances of each State. Accordingly, the State possessed jurisdiction to fix SAP higher than FRP.

114. Apart from above, learned Addl. Advocate General invited attention to full text of the Minister's speech filed as Annexure No.CA-6 to the State counter affidavit at the time of introducing the Essential Commodities Amendment Bill, 2010. At the floor of House, the Minister concerned Prof. K.V. Thomas had given reason for introducing Explanation II in Section 3 of the Essential Commodities Act. It shall be appropriate to reproduce relevant portion of the statement given by Prof. K.V. Thomas, Minister of State while introducing 2010 Bill, to quote :

"The Minister of State in the Ministry of Agriculture and Minister of State in the Ministry of Consumer Affairs, Food and Public Distribution (Prof. K.V. Thomas) moving the motion for the consideration of the Bill, said : The Essential Commodities Act, 1955 was last amended in December, 2009, to remove the ambiguity as regards the factors that should be taken into consideration by the Central Government for the determination of the price of levy sugar and to validate actions taken under the principal Act. Sub-section (3C) of section 3 of the principal Act dealing with determination of price of levy sugar was amended in two parts. In the first part a new Explanation II was inserted under sub-section (3C) with retrospective effect from I "October, 1974 Page 8 to remove any doubt regarding the meaning of expressions of cost components mentioned therein. In the second part the said sub-section 3C and the Explanations thereunder, including the newly inserted Explanation-II, was substituted by a new sub-section 3C on and From I "

October, 2009 to introduce the concept of "fair and remunerative price of sugarcane" payable to the growers of sugarcane by replacing the earlier expression "minimum price of sugarcane".

Explanation-II inserted retrospectively with effect from 1.10.1974 was not retained in the substituted sub-section 3C' which came into force on 1.10.2009. Through the amendments to the Sugarcane (Control Order 1966, a new clause 3B was inserted, which put the liability on the State Government regarding the payment of difference between the "fair and remunerative price of sugarcane" fixed by the Central Government and "State advised price of sugarcane" fixed by the State Government concerned. Since this provision had given rise to certain misgivings, it was agreed to delete the said clause 3B altogether. The assurance given in this regard was implemented by deleting the said clause by amending the Sugarcane (Control) Order, 1966. Consequent to the deletion of said clause 3B from the Sugarcane (Control) Order 1966, the necessity for having an Explanation on the lines of said Explanation-II under the newly substituted sub-section 3C of section 3 of the principal Act has been felt. Since the absence of such an explanation may again lead to ambiguity in law, which the Essential Commodities Act 2009 had sought to solve. The proposed amendment to the Essential Commodity Act, 1995 in no way will affect or disturb the status regarding the powers of the State Governments to announce the State Advised Price of sugarcane."

115. However, in response to the question raised by certain Members of Parliament, Prof. K.V. Thomas opined that the State Government shall no longer be burdened. To quote relevant portion of the reply given at the floor of House by Prof. K.V. Thomas :

"Prof. K.V. Thomas replying, said : Regarding the question of the functioning of Commission for Agriculture Cost and Prices. (CACP). I would like to say that CACP is an independent organization where representatives of the farmers are there and it consults everybody connected with agricultural products and pricing. Another question which has been asked is how pricing is done under FRP System. Determination of FRP is done by considering some of the major aspects like cost of production of sugarcane, return to the growers from alternative crops and the general trend of prices of agricultural commodities, availability of sugar to the consumers at a fair price, the selling price of sugar and the last aspect of sugar from sugarcane and realization made from sugar by products.

Another question that has been asked is about the sugar control and decontrol. The policy of the Government of India is to balance the interest of the farmers, industry and the consumers. If there is going to be any framing or changes in the policy, definitely, this House will be taken into confidence. Another question asked is about the export of sugar. Whatever we export, there will be import of equivalent quantity of raw sugar. Another question is about the burden on the State Governments to pay any amount to the farmers on account of difference between SAP and FRP. No longer that burden exists and limited purpose, that is, to clear the legal ambiguity that has arisen because of the Amendment we made last time. I would request the august House to support this Bill."

116. Learned counsel for the petitioners while raising argument, has invited attention to the later part of the statement given by the Minister at the Floor of House in response to the question raised by the Members of Parliament but not taken into account the beginning of the speech by which the Minister opined at the floor of House that the Bill shall not affect the status regarding the power of the State Government to enhance the State Advised Price of the sugarcane.

117. Mr. J.N. Mathur, learned Addl. Advocate General invited attention of this Court to Clause 5-B of Sugarcane Control Order, 1966 and submits that the statement given by the Minister in response to the question raised by the Members of Parliament at the floor of House is keeping in view Clause 3-B of Sugar Control Order, 1966 which was deleted by notification dated 22.10.2009 in the Sugarcane Control order, 1966 in pursuance to power conferred by Section 3 of the Essential Commodities Act, 1955. Clause 3-B as added by notification dated 22.10.2009 is reproduced as under :

"3B. Price of sugarcane fixed above the fair and remunerative price.

If any authority or State Government fixes any price above the fair and remunerative price fixed by the Central Government under clause 3, such authority or State Government, shall pay the amount, which it fixes above the fair and remunerative price as fixed by the Central Government, to the grower of sugarcane or to the sugarcane growers' cooperative society, as the case may be."

Clause 3B was repealed and omitted by notification dated 7.1.2010.

118. Keeping in view subsequent amendment in the Sugarcane Control Order, learned Addl. Advocate General submits that the Minister in the later part of speech by using the words, " No longer that burden exists and limited purpose, is, to clear the legal ambiguity that has arisen because of the Amendment made last time." While adding these words, the Minister has referred the amendment done through notification dated 7.1.2010. It does not mean that the State has been held to be not entitled to fix SAP. The argument advanced by the learned Addl. Advocate General seems to carry force. Overall reading of the Minister's statement refers to the previous amendment done vide notification dated 7.1.2010, the submission made by the learned Senior Counsel seems to be unfounded.

119. The statement given at the Floor of House should not be considered in piecemeal; rather the overall statement from line to line is to be considered in tune with the amendment made in the Act. Keeping in view the Explanation II added in Section 3(3C) of the Essential Commodities Act by the Bill read with overall statement of the Minister at the Floor of House, there appears to be no room of doubt that the intention of the Legislature was not to deprive the State Government to fix the State Advised Price of sugarcane.

120. Attention of this Court has been invited by learned Addl. Advocate General to a case of House of Lords, reported in 1993 AC 593 Pepper (Inspector of Taxes) versus Hart, whereby House of Lords took a view that the statement given by the Minister at the Floor of House may be considered in the event of ambiguity. The House of Lords took a view that absolute prohibition against any reference to the Parliamentary record as an extrinsic aid to statutory interpretation ought to be abolished on various grounds. To quote relevant portion:

"The absolute prohibition against any reference to the Parliamentary record as an extrinsic aid to statutory interpretation ought to be abolished for the following main reasons. (1) The purpose of using the Parliamentary record is to help give better and informed effect to the legislative outcome of Parliamentary proceedings: see the Law Commission of New Zealand Report 1990 (Report No. 17), p. 45, para. 113. It is irrational for the courts to maintain an absolute rule depriving themselves of access to potential relevant evidence or information for this purpose.

(2) The history of a statute, including the Parliamentary debates, may be relevant (i) to confirm the meaning of a provision as conveyed by the text, its context and purpose; (ii) to determine the meaning where the provision is ambiguous or obscure; or (iii) to determine the meaning where the ordinary meaning is manifestly absurd or unreasonable.

(3) The Parliamentary record may be of real assistance to the court (a) by showing that Parliament has considered and suggested an answer to the issue of interpretation before the court, (b) by showing the object and purpose of the legislation and the mischief which the Act was designed to remedy, (c) by explaining the reason for some obscurity or ambiguity in the wording of the legislation and (d) by providing direct evidence of the origins, background and historical context of the legislation.

(4) Where a statutory provision has been enacted following an authoritative ministerial statement as to the understanding by the Executive of its meaning and effect, such a statement may provide important evidence about the object and purpose of the provision and the intention of Parliament in agreeing to its enactment, and may create reasonable expectations among Members of Parliament and those affected by the legislation.

(5) Such ministerial statements are of particular relevance and weight in relation to financial matters which may only be introduced on behalf of the Crown by a Minister.

(6) The courts do not consider themselves confined exclusively by the text for the purpose of interpreting a statute. There is no basis in principle or logic for the courts to be willing to have regard to extrinsic aids contained in White Papers, reports of official committees, and the travaux prŽparatoires to international treaties, while rigidly excluding any recourse to Parliamentary debates, except for "special" categories of legislation. The reports of Parliamentary debates, and especially of authoritative statements by Ministers or other Members of Parliament responsible for the introduction of legislation, are as much matters of public knowledge and as much to be taken as shared by those whose conduct the statute regulates and as influencing their understanding of the meaning of ambiguously enacting words, as are White Papers, reports of official committees, or travaux prŽparatoires: see Black-Clawson International Ltd. v. Papierwerke Waldhof-Aschaffenburg A.G. [1975] A.C. 591, 638F-H, per Lord Diplock. Parliament is as likely to legislate on the faith of a ministerial assurance of a provision's meaning, as on the basis of a statement of its purpose in a White Paper.

It is illogical to have regard to Parliamentary debate and ministerial assurances for the purpose of directly construing regulations (Pickstone [601] v. Freemans Plc. [1989] A.C. 66), introduced without amendment, and for interpreting consolidation Acts (Beswick v. Beswick [1968] A.C. 58, 73D-74C) but to refuse to consider them at all for the purpose of construing other legislation.

(7)It is artificial for the courts to continue to draw a distinction between mischief and remedy in defining circumstances in which reference may be made to extrinsic aids to interpretation. In Attorney-General's Reference (No. 1 of 1988) [1989] A.C. 971 the House considered a White Paper to ascertain the mischief in need of a remedy, but not the remedy itself. The New Zealand Law Commission rightly points out (Report No. 17, p. 43, para. 103) that in that case, "the remedy is probably clearly identified by the statement of the mischief."

The aforesaid proposition has been reiterated by House of Lords in the cases reported in 1993 AC 498 Stubbings versus Webb, 1993 AC 754 Chief Adjudication Officer versus Foster.

121. Hon'ble Supreme Court has reiterated and followed the judgment of House of Lords in the case of Pepper versus Hart (supra) in 1982 Vol. 2 SCC 150 Sukhnandan Saran Dinesh Kumar and others versus Union of India and others, 1999 Vol. 4 SCC 306 Surana Steels Pvt. Limited versus Dy. Commissioner of Income Tax and others, (2000)3 SCC 250 Haldiram Bhujia Wala and another versus Anand Kumar Deepak Kumar and another.

122. In Haldiram's case (supra), Hon'ble supreme Court held that to remove ambiguity, external aid may be taken which includes the statement given by the Minister at the Floor of House, aims, object and reasons. Similarly, in Surana Steels (supra), Hon'ble Supreme Court has taken into account the speech given by the Minister of Finance during budget session relying upon Pepper versus Hart.

123. Justice G.P. Singh in Principles of Statutory Interpretation (page 218 (11th Edition) 2008) has considered the Pepper versus Hart and observed that it is the recent school of thought to use Parliament debate in construing statutes. After considering various cases of House of Lords, foreign courts and Indian Supreme Court, learned author (supra) observed that the Minister's speech including the report of Law Commission, explanatory notes issued by the department concerned before a Bill is introduced in Parliament though not forming part of Bill may also be admitted in so far as they cast light on the objective setting or contextual scene of the statute and the mischief attached its aim.

124. Entry 33 List III extends power to the Union of India as well as State to legislate law on the subject. That apart, under Entry 14 List II of Seventh Schedule, 'agriculture' being the State subject, extends comprehensive power on the State to legislate law with regard to agriculture including its produce like cane (supra). Both Union of India and State Government possesses power to legislate law subject to repugnancy under Art. 254 and legislative competence under Art. 246. Under Art. 246, in case of inevitable conflict between the Union and State power, the Union powers as enumerated in List I shall prevail over the State powers as enumerated in Lists II and III and in case of overlapping between List III and II, the former shall prevail vide AIR 1969 SC 59 Sudhir Chandra Nawn versus W.T.O. (para 62), (2005)3 SCC 212 Government of A.P and another versus J.B. Educational Society and another (para 9), AIR 1970 SC 228 Indu Bhusan Bose versus Sundari Devi, Rama, (2007)6 SCC 236 Bombay Coop. Bank Limited versus United Yarn Tex (para 92).

125. Virtually, Article 246 of the Constitution creates federal supremacy under the Indian Constitution but Hon'ble Supreme Court from time to time ruled that the federal supremacy cannot be resorted to unless there is irreconcilable conflict between Entries in the Union and State Lists. In the case of seeming conflict between Entries in the two Lists, the entries should be read together without giving a narrow or restricted sense to either of them and attempt should be made to see whether the two Entries can be reconciled so as to avoid a conflict of jurisdiction. It should be considered whether a fair reconciliation cannot be effected by giving to the language of the Union Legislative List a meaning which, if less wide than it might in another context bear, is yet one that can properly be given to it and equally giving to the language of the State Legislative List a meaning which it can properly bear vide AIR 1983 SC 1019 Hoechst Pharmaceuticals Limited versus State of Bihar (para 41), (1991)3 SC 358 Viswanathiah & Co. B. versus State of Karnataka(para 9), AIR 1990 SC 85 India Cement versus State of Tamil Nadu, AIR 1990 SC 1637 Federation of Hotel and Restaurant Association of India versus Union of India.

Hon'ble Supreme Court in a case reported in ITC Limited versus Agricultural Produce Market Committee (2002)9 SCC 232 (paras 58, 59) relying upon S.R. Bommai versus Union of India (1994)3 SCC 1 held that though there appears to be no doubt that the parliamentary legislation has supremacy in view of Article 246(1) and (2) but it is of relevance when the field of legislation is on the Concurrent List. However, while maintaining parliamentary supremacy, one cannot give go-by to the federalism which has been held to be a basic feature of the Constitution. The Constitution of India deserves to be interpreted, language permitting, in a manner that it does not whittle down the powers of the State Legislature and preserves the federalism while also upholding the Central supremacy as contemplated by some of its articles.

126. Keeping in view the aforesaid broader principle as well as Explanation and statement given by the Minister, there appears to be no conflict in FRP and SAP. As submitted by learned Addl Solicitor General of India Dr. Ashok Nigam while convassing the stand of the Government of India, FRP is a floor price, i.e. moderate price and while fixing SAP, State has got right to fix higher price.

127. There is one other aspect of the matter. Section 16 of 1953 Act has not been impugned. Learned Addl. Advocate General has rightly submitted that till Section 16 survives, State will have right to fix SAP. A combined reading of Sections 12, 13, 14, 15 and 16 of 1953 Act (supra) reveals beyond doubt that the State has right to fix SAP but cannot be less than FRP. In case the State fixes higher price than FRP, then both can stand together and there shall not be any conflict in terms of Art. 246 read with Art. 254 of the Constitution of India.

128. Another aspect of the matter is that the whole Scheme under 1953 Act or Essential Commodities Act is founded on the principle of welfare/beneficial legislation. Benefit extended through welfare legislation by the Government of India or the State Government is to ensure public good. Price fixed by the Government of India under FRP is for whole of the country without considering the local ground realities of the State. Hence, it is rightly said by the learned Additional Solicitor General of India that it is a floor price for whole of the country and being a welfare legislation, the State Government has got right to fix higher price under SAP than what has been fixed by the Government of India as FRP.

129. Shri J.N. Mathur, learned Addl. Advocate General further submits that earlier the price was fixed under Clause 5-A of the Sugarcane Control Order through a pattern called Bhargava Formula. Clause 5-A has been deleted. It is vehemently argued that under Rule 57 of U.P. Sugarcane Regulation Supply and Purchase Rules, 1954, the Cane Commissioner is the Registrar of the Cooperative Society. He exercises power under Rule 57 of Sub Rule and has got ample power to issue appropriate direction and order to ensure payment of price to the cane growers. It has been emphasised that Form-C appended with rule is an agreement with cane society whereas Form-B is an agreement with cane growers. After signing of the agreement, it shall be obligatory on the part of the sugar mill to ensure payment of price as agreed in terms of Form C or Form B. Learned Addl. Advocate General termed the cane supply as 'bonded cane' in terms of agreement entered into between the parties under Form C or Form B. Form C contains the SAP, i.e. agreed price and quantity.

130. While defending the State's right through the Cane Commissioner to compel the sugar mill to pay cane price under SAP, attention has been invited to paras 16, 19, 30, 31, 33 of the Constitution Bench judgment of Hon'ble Supreme Court in the case of West UP Sugar Mills Association(supra) whereby Hon'ble Supreme Court has rejected the plea of Sugar Mills with regard to forcible agreement under Form C. We have been informed that out of 125 sugar mills, 59 sugar mills have not approached the court challenging the price fixed by the State Government; rather one mill has welcomed the State price and being a statutory authority under the rule, the Cane Commissioner has ample power to take action and direct the sugar mills to pay the cane price in terms of SAP. It is submitted by the learned Addl. Advocate General that because of amendment in Essential Commodities Act or Control Order, power of the State Government is untravelled. Though, it has been submitted by the learned Addl. Advocate General that the Union exercise power under subordinate legislation and the State in pursuance to statutory provisions under 1953 Act, the State law shall prevail over the central law but the argument seems to be not sustainable for the reason that subject to repugnancy test and Art. 246, law framed by Parliament cannot be scuttled down even if it is a subordinate legislation. The question is of exercise of jurisdiction. The jurisdiction and effect of law should be just keeping in view the ambit and scope of Article 246 read with Art. 254 of the Constitution. Even if it is a subordinate legislation exercised by the Union of India under List I or Concurrent List, it shall prevail over the State law subject to limitation discussed hereinabove.

131. Much emphasis has been given by Mr. Rakesh Dwivedi, learned Senior Counsel to the Cabinet note which contains observation pointing out that by the amendments done inserting the words, "Fair and Remunerative Price", for all time to come, there has been no scope to interfere with the cane price by the State Government. Cabinet notes are prepared to take a decision by the Cabinet in its scheduled meeting in terms of agenda. Notes are prepared by the bureaucracy with the consultation of the minister concerned but the Cabinet note is not binding. The Cabinet may modify or reiterate the issue involved while taking a decision. Once, the Cabinet took a decision with regard to an item or issue, only then, it shall be deemed to be a decision of the Cabinet subject to affirmation by the Parliament and during the course of debate in Parliament, the speech given by the minister concerned will have always overriding effect on the Cabinet note since the minister makes a statement in the Parliament keeping in view the collective wisdom of the Cabinet in terms of the decision taken thereon. The minister's statement at the Floor of House may be taken as extrinsic aid while interpreting the statutory provisions in the event of ambiguity in the statute and not otherwise. Ordinarily, the courts have to look into the statutory provisions, notified in terms of the decision taken by the Parliament or the State Legislatures. Accordingly, no finding may be recorded on the basis of Cabinet note as canvassed by the learned Senior Counsel on behalf of the petitioners.

132. In view of above, the State has got right to exercise power under 1953 Act to fix cane price in the form of SAP, to supplement FRP by adjudicating for higher price but not in derogation to it which may amount reduction of FRP (supra).

(V) WELFARE LEGISLATION

133. Not only 1953 Act but the Essential Commodities Act is also a welfare legislation legislated by the Parliament to regulate supply of essential commodities throughout the country. When the matter comes to welfare legislation, then the courts have to interpret statutory provisions as well as the Entries contained in Seventh Schedule of the Constitution after taking into account the broader prospect of the statutory provisions, controversy involved therein and public interest.

134. In the case reported in Sukhnandan Saran Dinesh Kumar (supra) where controversy was related to interpretation of Sugarcane Control Order, 1961 as well as 1953 Act, their Lordships of Hon'ble Supreme Court observed that the provisions have been made for the benefit of sugarcane growers. Their Lordships of Hon'ble Supreme Court noted that the producers of sugar and khandsari sugar constitute a powerful trade lobby, the fact of which one can take judicial notice. Sugar being an essential commodity occasionally kept in short supply and being a commodity needed for consumption by almost the entire population, the powerful industry magnates in this field are in a position to dominate both the growers of sugarcane as also the consumers of the essential commodity. Number of regulations have been enacted almost since the dawn of independence to regulate this powerful combination of manufacturers of sugar and khandsari sugar all over the country for the ultimate benefit of consumers on the one hand and on the other hand the farmers and the growers of sugarcane with their small holdings and raising a perishable food crop. The marginal farmers, are unable to stand up against the organised industry. It does not require long argument in this predominantly agricultural society that the farmers having small holdings need protection for selling at fair price their meagre agricultural produce. With these words, Hon'ble Supreme Court observed as under :

"22...................The proposition is now beyond the pale of controversy that the State can impose a restriction in the interest of general public on the right of a party to contract where in the opinion of the Government the contracting parties are unable to negotiate on the footing of equality. Constitutional validity of statutes prescribing minimum wages has been founded on this proposition. The principle can be effectively extended to the powerful sugar industry and the cane growers because the cane growers admittedly are at a comparative disadvantage to the producers of sugar and khandsari sugar who were described in the course of arguments as sugar barons. It does not require an elaborate discussion to reach an affirmative conclusion that sugarcane growers who are farmers cannot negotiate on the footing of the equality with the producers of sugar and khandsari sugar. The State action for the protection of the weaker sections is not only justified but absolutely necessary unless the restriction imposed is excessive."

With the aforesaid finding, their Lordships proceeded to observe that to strike the balance between the conflicting interests not only State acquired power to fix minimum price of sugar and khandsari sugar but that this wholesome effort may not work to the disadvantage of the sugar-cane growers another weaker section of the society.

135. In (1986) 2 SCC 614 Bharat Singh versus Management of New Delhi Tuberculosis Centre, New Delhi and others, Hon'ble Supreme Court while applying the purposive interpretation with regard to an institute relating to labour matter which is welfare legislation held that the rigid interpretation should not be given where the matter relates to welfare legislation. Their Lordships have observed as under; to quote :

"11................................Now, it is trite to say that acts aimed at social amelioration giving benefits for the have-nots should receive liberal construction. It is always the duty of the Court to give such a construction to a statute as would promote the purpose or object of the Act. A construction that promotes the purpose of the legislation should be preferred to a literal construction. A construction which would defeat the rights of the have nots and the underdog and which would lead to injustice should always be avoided. This Section was intended to benefit the workmen in certain cases. It would be doing injustice to the Section if we were to say that it would not apply to awards passed a day or two before it came into force."

136. In another case reported in (2002)8 SCC 400 Essen Deinki versus Rajiv Kumar, their Lordships of Hon'ble Supreme Court held that the aim and object of welfare legislation is to eradicate social malady and accordingly, broader interpretation should be given to statutory provisions. To reproduce relevant paragraph, to quote :

"14. Whilst it is true that the law seems to be rather well settled as regards the 'bread and butter' statutes and the welfare legislation introduced in the Statute Book for the purpose of eradication of social malady, it is a duty incumbent on to the law Courts to offer a much broader interpretation since the legislation is otherwise designed to perpetration of any arbitrary action and no contra view thus is plausible. American Express affirms such a view."

137. In view of above, the purpose of amendment done by the Union of India of Essential Commodity Act or the provisions contained in 1953 Act as well as the Control Orders (supra) is not to deprive the farmers from reasonable price of the cane keeping in view the cost of production, profit, inflammation and the consumer price index. With the rise of consumer price index or cost of living and keeping in view the meagre amount which the majority of the farmers earn by sowing cane crop which spread in two crop season, the farmers may require higher profit to meet out the requirement of their daily needs and pass a life with dignity. At one point of time, 20 % profit may be sufficient to meet out their requirement but with rise of cost of living including the essential commodities, the percentage of profit may be higher. No mechanical formula may be adopted to fix the cane price without considering the overall requirement of the farmers including the cost of production and cost of living. While interpreting the beneficial legislation (supra), ordinarily, it is not open for the courts to compel the farmers to supply cane on a particular price. In a welfare State, it is for the government to take appropriate action, fix price in accordance with the statutory provisions keeping in view the overall welfare of the farmers making a balance with the necessity of sugar mills. No strict or stereo-type or mechanical construction may be given to statutory provisions while dealing with the welfare legislation. It must have flexibility to keep pace with time.

(VI) FAIR AND REMUNERATIVE PRICE

138. The Government of India has been fixing FRP since last three sessions after the amendment (supra). The FRP and SAP of the Government of India as well as the State Government during last three years are as under :

Session FRP fixed by the Central Government SAP fixed by the State of U.P.

2009-2010 129.84 165 2010-2011 139.12 205.00 2011-2012 145.00 240.00 However, the SAP fixed by the State of U.P is 250 per quintal for early maturing variety and Rs.240/- per quintal for normal variety and Rs.235/- per quintal for rejected variety. During the course of argument, it has been vehemently argued that the FRP fixed by the Government of India is comprehensive in nature, hence it is not necessary for the State to exercise power and fix State Advised Price.

139. Under Clause 3(1) of Sugar Control Order, it has been provided that the FRP should be fixed by considering the cost of production of sugarcane, the return to the growers from alternative crops and general trend of price of agriculture commodities, supply of sugar to consumer at fair price and the price attached the sugar produce from sugarcane is sold by the sugar mills, and the recovery of sugar from sugarcane etc. The Central Government by order dated 29.12.2008 added item (f) to Clause 3(1) along with Explanations 4 and 5 which provides that it shall include the realisation made from the sale of by-products, i.e. molasses, bagasse, press mud or their imputed value. Imputed value has been defined unsold value or the notional or transfer value of such by-products for further value addition in the sugar factory like, alcohol and ethanol production from molasses, use of press mud for making bio-fertilizer and/or distillery effluent treatment, generation of power from bagasse or any other product produced through value addition to the by-products. However, it shall not include bagasse used for running the boiler of the main sugar factory for the production of sugar. The realisation made from the sale of by-products, i.e. molasses, bagasse and press mud or their imputed value means only transfer prices and not the value of or profit from co-generated power, alcohol or ethanol, bio-fertilizers or distillery effluent treatment or any other product produced through value addition to the by-products mentioned therein.

140. Thus, by Explanation 5, virtually the Central Government has excluded the profit earned from co-generated power, alcohol or ethanol, bio-fertilizers or distillery effluent treatment or any other product produced through value addition to the by-products. Only realisation made from the sale of by-products like molasses, bagasse and press mud etc made may be taken into account while fixing cane price.

141. It has been vehemently argued by the respondents' counsel that the unit established for use of by-products is a compact unit sugar mentioned and profit earned by use of such by-products should also be taken into account while fixing cane price. However, since Explanation 5 added by the order dated 28.12.2007 has not been challenged, hence such argument is not open for consideration.

142. While filing counter affidavit, the opposite party No.4 took a stand that while considering the cost of production in the formulation of price policy for sugarcane it refers the cost of cultivation/production estimates generated under the Comprehensive Scheme being implemented by the Directorate of Economics & Statistics, Department of Agriculture and Cooperation for all major sugarcane growing States with a common methodological framework. The estimates of cost of production of sugarcane are made available to the Commission for major sugarcane growing States. Per quintal cost of production taken into account by the respondent No.4 has been given in para 3(XIV) and (XV) of the counter affidavit which is reproduced as under :

"3(XIV) The Commission has arrived at per quintal cost of production for different sugarcane growing States for the 2011-12 and it is estimated at Rs.123.54 per quintal for Andhra Pradesh, Rs.114.57 per quintal for Haryana, Rs.89.66 per quintal for Karnataka, Rs.103.75 for Maharashtra, Rs.104.39 per quintal for Tamil Nadu, Rs.100.61 per quintal for Utar Pradesh, Rs.80.37 per quintal for Uttarakhand. The detail is available in the report of the Commission for the season 2011-12 - already attached with the petition and therefore not being attached now.

(xv)As far as the State of Uttar Pradesh is concerned, in response to a questionnaire from the Commission for sugar season 2011-12, sugar industry and the Cane Development Department, Government of U.P informed in May'2010 the estimated cost of production as Rs.143.30 per quintal for 2011-12 season, relevant extracts of the said information is annexed herewith as Annexure-R/6. "

143. It has been further pleaded by the respondent No.4 that CACP employs a uniform methodology and criteria for calculating cost of production of sugarcane which may be different from those employed by different research institutes. It has been stated that the Commission has submitted a report on 10.8.2011 for session 2011-12 and the government had decided the FRP and notified the same on 14.3.2011. After four months of fixation of FRP and a year after submission of the report of the Commission for fixation of FRP, the State of Uttar Pradesh vide letter dated 6.7.2011 submitted reply to the Commission. It shall be appropriate to quote para 3(xviii) of the counter affidavit of the opposite party No.4, to reproduce :

"3(xviii) It is respectfully submitted that the Commission had already submitted its report on 10th August, 2010 for 2011-12 season and the Government had also decided the FRP for that sugar season and notified the same vide letter No.3(1)/2010-SP-II dated 14.3.2011. Subsequently, four months after the FRP was fixed and a year after the submission of report of the Commission for fixation of FRP for 2011-12 sugar season, in response to the Commission's questionnaire sent to the State Government of U.P for fixation of FRP for coming season 2012-13, UP Government vide letter No.569-70 dated 06th July 2011, while submitting reply to Commission for recommending FRP for 2012-13, submitted a report of the U.P. Council of Sugarcane Research, Shahjahanpur, which revised its earlier estimated cost of rs.143.30 per quintal to Rs.161.33 per quintal for the 2011-12 season. Report of the U.P. Sugarcane Research Council is enclosed with the writ petition as Annexure No.15."

144. Commission took a stand that the FRP is declared for the country as a whole, in view of the efficiency and scale in production of sugarcane, and the Commission does not go by the cost estimate of any particular State alone. Despite the differences in per unit cost of production among States growing sugarcane, it adjusted the overall cost at all India level and not keep cost of production of a particular State. It shall be appropriate to quote para 3(xix) and (xxi) which is as under :

3.xix)As Fair and Remunerative Price is declared for the country as a whole, in view of the efficiency and scale in production of sugarcane, the Commission does not go by the cost estimate of any particular State alone. Despite the differences in per unit cost of production among States growing sugarcane, the Commission arrives at weighted average cost at all India level and it was put at Rs.102.34 for 2011-12 sugar season. The weights considered are shares of production in the total production. The Commission adjusted this overall cost at all India level to a cost of Rs.99.07 per quintal at 9.5% recovery. Accordingly, the overall per quintal total cost of production at all India level worked out to Rs.115.29 per quintal at 9.5% recovery after including transportation cost of Rs.13.36 per quintal plus insurance premium of Rs.2.86 per quintal. "

(xxi) Since FRP so fixed is for the country as a whole, it takes care of the fact that it at least covers the total cost of low cost States and the paid out cost including family labour of high cost States. Keeping this in view, sugarcane growing farmers are assured of adequate margins of risk and profit over and above all India weighted average Margin on account of profit cost. This margin at all India level comes to 25.8 percent."

145. The opposite party No.4 has taken into account the cost of sugarcane at the rate of 9.5% recovery, cost of transportation, insurance charges, margin on account of profit, margin on account of risk, grand total which comes to Rs.145/- per quintal. It has been categorically stated in para 4 of the counter affidavit by the opposite party No.4 that the Government of India does not intend to fix a price restraining the State Government to fix higher price. However, the stand of the Government of India is that the State Advised Price should not be less than what has been fixed by the Central Government. The price fixed by the Central Government is applicable all over India and the price fixed by the State Government is limited to that particular State only. To quote para 4 of the counter affidavit filed by the opposite party No.4 :

"It is submitted that any price fixed by the State Govt, that is, State Advised Price, would be the price in terms of statutory power of the State Government. However, the FRP fixed by the Central Govt is essentially floor price and the State advised price cannot be less than the price fixed by the Central Govt. In that case, the price fixed by the Central Govt will prevail as State advised price will be repugnant to the fair and remunerative price fixed by the Central Govt (Art. 254(1) of the Constitution of India). The Price fixed by the Central Govt is applicable all over India and the price fixed by the State Govt is limited to that particular State only. It is relevant to mention here that for all these years State advised price has always been higher than the statutory minimum price/fair and remunerative price. There is not a single instance where the state advised price was lower than the statutory minimum price/fair and remunerative price fixed by the Central Govt. "

146. In view of above, though under nomenclature, the word, "Fair and Remunerative Price" reflects a comprehensive over all price fixed by the Government of India but from the pleading on record as well as statutory provisions, there appears to be no room of doubt that the FRP does not include each and every aspect and ground realities of respective States of the country. It is a moderately fixed price by the Government of India in the form of FRP to check the exploitation of farmers with liberty to fix higher price keeping in view the facts and circumstances of each State.

147. Apart from the aforesaid reasons, keeping in view variation in national climatic, geographical and social condition of the country, prima facie, it does not appear that practically, the Government of India may be able to fix the cane price which may suit to the condition of each and every state.

148. The report submitted by the Commission for Agriculture Costs and Prices (in short, CACP) filed as Annexure No.16 to the writ petition supports this view. One of the factors which is taken into account for fixation of cane price is yield of per hectare sugarcane. The CACP noted in its report that the country requires immediate attention to increase sugarcane production and expand the area of its cultivation. According to the report of the commission, Uttar Pradesh continue as largest State both in area coverage and production in the country but it is a matter of deep concern that per hectare sugarcane yield in Uttar Pradesh is minimum. Though in tropical region, the sugarcane production like Maharashtra may be higher but the realisation of yield in State of U.P is of deep concern which shows some apathy or negligence on the part of the State Govt while dealing with sugarcane purchasers of the State of U.P. To quote relevant portion from the report of the Commission as contained in Annexure No.16 to the writ petition, to quote :

""As regards the performance among the States related to area, production and yield of sugarcane, it exhibited a wide variance. According to the final estimates for 2008-2009, Uttar Pradesh continues as the largest state both in area coverage (49.6 percent) and production (40.2) of the total sugarcane cultivated in the country. Maharashtra comes next with a contribution of 17.4 per cent and 21.3 percent followed by Tamil Nadu at 7 percent and 11.5 percent of the total area and production respectively. It is amply clear that the contribution of Uttar Pradesh in production was considerably lower as compared to its area coverage under the crop because of lower yields. Tamil Nadu and Maharashtra, the two comparatively efficient states, contributed more to the production in spite of lower proportion of their area coverage due to better productivity. As against the all India average yield level (646 qtl/ha). Tamil Nadu ranks first (1062 qtl/ha), followed by Karnataka (830 qtl/ha), Maharashtra (790 qtl/ha) and Andhra Pradesh (785 qut/ha). The states of Bihar (443 qut/ha), Uttar Pradesh (523 qut/ha), Haryana (570 qut/ha) and Punjab (576 qut/ha) having lower crop productivity are trailing considerably behind the All-India yield level. The sugarcane growing states are classified in the tropical region and sub-tropical region based on their topographical conditions. Owing to different climatic situations, the yield level of the tropical region (832 qut/ha) is much higher than the yield levels of sub-tropical region (523 qut/ha). Although the yield level of tropical region has been higher but its growth rate is declining for the last two decades and remained (-) 0.92 percent during 1997-98 to 2008-2009 mainly affected by the negative yields of all its individual states except Gujrat and Andhra Pradesh. In contrast to this, the growth rate of yield of sub-tropical region from 1.97 percent during the earlier period 1987-88 to 1997-98 has turned negative at (-) 0.58 percent during the later period 1997-98 to 2008-09. In a nutshell, it can be viewed that there is a continuous albeit fluctuating erosion of yield levels of sugarcane and needs to take note of it for improving the sector. Therefore, the Commission recommends that there is a need to conduct studies for the states covered under tropical region and sub-tropical region in order to find out the real causes leading to deceleration in yield and to suggest remedial measures to enhance the productivity in a sustainable manner."

149. The Commission further opined that the fluctuation that occur in the production of sugarcane have a direct bearing on the production of sugar also. It is further noted that on domestic front, the sugar price has increased by over 27% during 2008-09 from the average price of preceding year and continued to increase further upto January, 2010, an increase of 65.45 % from corresponding month of previous year. To quote relevant portion, to quote :

"15. On the domestic front, the sugar prices have continuously increased by over 27 percent during 2008-09 sugar season from the average price of the preceding year and continued to increase further upto January, 2010, an increase of 65.45 percent from the corresponding month of the previous year.........................."

150. The commission noted that the wholesale price of sugar increased to some extent. However, the price of gur and khandsari always reflect some premium over the prices of sugar and the prices of gur and khandsari increased by 21% during 2009-10 up to May, 2010 and 30% respectively.

151. Commission also noted the cost of cultivation and production estimates for sugarcane as directed by the Directorate of Economics and Statustics, Minister of Agriculture for the year 2008-09. Report of the Commission reveals that there is substantial difference in the cost of production of sugarcane from State to State. To relevant portion :

"The Commission has received cost of cultivation/cost of production estimates for sugarcane from the Directorate of Economics and Statistics, Ministry of Agriculture for the year 2008-2009 in respect of major sugarcane growing states of Andhra Pradesh, Haryana, Karnataka, Maharashtra, Tamilnadu, Utar Pradesh and Uttarakhand. The comparative analysis of the actual cost estimates for two consecutive years of 2007-2008 and 2008-2009 shows that the per hectare paid out cost including family labour (A2+FL) has registered increase in all the states excepting the states of Andhra Pradesh and Haryana where it has declined by (-) 1.32 percent and (-) 19.91 percent respectively. The highest increase in per hectare paid out cost including family labour has been observed in the state of Karnataka at 109.22 percent, followed by Uttarakhand at 86.55 percent, Tamil Nadu at 6.55 percent, Uttar Pradesh at 5.42 percent. With the highest increase in cost per hectare in the state of Karnataka there has been increase in yield by 11.15 percent during 2007-2008 to 2008-2009. Uttarakhand has also recorded increase in yield during this period by 11.39 percent. The two states of Karnataka and Uttarakhand have also experienced increase in cost per quintal by 79.18 percent and 46.48 percent respectively. Majority of states have experienced poor performance on productivity during the highest decline in yield during this period is said to have occurred for the state of Haryana at (-) 15.92 percent followed by Maharashtra at (-) 15.01 percent, Uttar Pradesh at (-) 14.23 percent. Andhra Pradesh has recorded decline in yield by (-) 3.14 percent and Tamil Nadu, by (-) 8.44 percent. The per quintal implicit price at the time of harvest for the year 2008-2009 was maximum at Rs. 167 for the state of Haryana and minimum at Rs. 119 per quintal for Tamil Nadu. The rest of the sugarcane growing states reported implicit price around Rs. 120-140 per quintal."

At the face of record, the cost of cultivation varies from State to State and is with increasing trend.

152. According to the report of the Commission, overall per quintal cost of production of sugarcane at All India level has been worked out to Rs.115.29%. The commission further opined that considering the cost, there shall be distribution for marginal increase of sugarcane for 2011-12 over government announced FRP of Rs.139.30 per quintal in 2010-11 and hence, fixed Rs.145/- per quintal.

153. Keeping in view the substantial change of geographical, climatic condition, yield per hectare and ground realities of the sugar producing States, it appears that ordinarily, it may not be possible to fix FRP befitting to local condition of different States of the country. The cost of production and living condition of the farmers/cane growers seems to be drastically varied from State to State. Accordingly, the Government of India took a stand and made it open to the State Govt to fix cane price under the SAP in pursuance to power conferred by local Act keeping in view the ground realities and conditions of the respective States by Amending Act No.35 of 2010 adding Explanation II to Section 3(3C) of Essential Commodities Act.

(VII) SUGARCANE CONTROL ORDER

154. Learned Senior Counsels appearing for the petitioners vehemently argued that in view of the amendment made in the Sugarcane Control Order, now, it is not open for the State Government to fix SAP. Shri Rakesh Dwivedi, learned Senior Counsel submits that Clause 3(1) of the Sugarcane Control Order, 1966 read with the words, "Fair & Remunerative Price" is suggestive of the fact that no other price may be fixed for supply of sugarcane to sugar mills. He submits that at the time of Tika Ramji (supra), certain amendment done in the Sugar Control Order as well as Essential Commodities Act(supra) were not on statute book and now with the lapse of time because of amendments done (supra), the FRP fixed by the Government of India is full and final.

155. He invited attention to Class (3) of Explanation 1 of the Sugar Control Order stating that the State cannot look to their own area by fixing different price than FRP. He submits that a government can give rebate under Clause 3(1) of Sugar Control Order (in short, SCO) only with approval of the Government of India. Explanation to Clause 3 excludes consideration of value or profit from cogenerated ethanol and alcohol, bio- fertilizers and other products produced through value addition. Under Clause 3, higher price under SCO may be given only with the agreement between the parties. He submits that Clause 3(3)(3A) expressly provides that the liability of sugar producers is to pay only FRP or agreed price and not any other price. Rebates may be fixed only by the Government of India. State Government may exercise only delegated power under Clause 11 of the Sugar Control Order.

Keeping in view the argument advanced by the petitioner's counsel, it shall be appropriate to have a look on the SCO.

156. The Sugarcane Control Order, 1966 was notified by the Government of India in pursuance to power conferred by Section 3 of the Essential Commodities Act, 1955 on 16.7.1966. Thus, the SCO has been notified after judgment of Hon'ble Supreme Court in Tika Ramji's case(supra). Section 6 of the Essential Commodities Act makes the SCO mandatory and makes it also statutory.

157. Section 5 of the Essential Commodities Act empowers the Central Government to delegate its power to State or its authorities. Under Section 2(b) of the Essential Commodities Act, sugarcane has been included under definition of foodgrains. Thus, all foodgrains fall within the definition of agriculture or agricultural crop, hence shall be covered by Entry 14 of List II of the Constitution of India.

158. Under Clause 2(cc), Fair & Remunerative Price of sugarcane has been defined as price fixed by the Central Government under Clause 3 of SCO.

159. Clause 2(a) further defines the price means price or FRP fixed by the Central Govt from time to time for sugarcane delivered to a sugar factory at the gate of factory or at a sugarcane purchase centre.

Reserved area has been defined under Clause 2(j) as any area where sugarcane is grown and reserved for a factory under Sub Clause (1)(a) of clause 6.

Year means the year commencing on the first day of July and ending with the thirtieth day of June of next year. Clause 3 deals with Fair & Remunerative Price of sugarcane payable by the producer of sugar.

160. A plain reading of the aforesaid provision under Clause 3 reveals that while calculating the FRP, the value of or profit from co-generated power, alcohol or ethanol, bio-fertilizers or distillery effluent treatment or any other product shall not be included.

161. One of the important factors which borne out from Clause 3 under Explanation 1 is that different price may be fixed for different areas or different qualities or varieties of sugarcane. Under Fair & Remunerative Price as well as State Advised Price, the price has been fixed keeping in view the qualities of sugarcane. Under SAP, sugarcane price has been fixed dividing it into three varieties (supra). The other aspect is that keeping in view the Explanation 1, different price may be fixed for different areas means there may be variation of sugarcane price from State to State keeping in view the cost of production and yield.

162. The other important aspect is return to the grower from alternative crop and general trend of price of agriculture commodities. This includes the yield of sugarcane crop in the area concerned depending upon climatic condition and geographical situation.

163. Under Clause 3(3), option has been given to purchase cane on higher price than what has been prescribed under FRP. Thus, FRP is not final cane price but sugar mills have been given option to purchase cane on agreed higher price, I.e through agreement between the cane growers or Sugarcane Growers Cooperative Society. The payment of higher price, i.e more than FRP is also supplemented by Clause 3(8).

164. Under Clause 3 (3A) of the SOC, provision has been made for rebate which can be deducted from price paid for sugarcane from FRP or price agreed between the purchaser and the sugarcane growers. The provision was inserted subsequent to the Constitution Bench judgment of Hon'ble Supreme Court in Tika Ramji(supra). It further provides that with the approval of the Central Government, State or the Director of Agriculture may allow suitable rebate with regard to weighing of binding material not exceeding 1000kg per quintal of sugarcane.

165. Under clause 5 of SOC, provision has been made for payment of an additional price for sugarcane purchase in addition to FRP fixed under Sub Clause (1) of Clause 3 to the growers or Cane Cooperative Society in terms of First Schedule of the SOC. Clause 6 of the SCO confers power on the Central Government to regulate distribution and movement of sugarcane. It shall be appropriate to reproduce Clause 6 of the SOC. To quote :

"6. Power to regulate distribution and movement of sugarcane.

(1) The Central Government may, by order notify in the Official Gazette -

(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) determine the quantity of sugarcane which a factory will require for crushing during any year;

(c) fix, with respect to any specified sugarcane grower or sugarcane growers generally in a reserved area, the quantity of percentage of sugarcane grown by such grower or growers, as the case may be, which each such grower by himself or, if he 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) direct a sugarcane grower or a sugarcane growers' cooperative society, supplying sugarcane to a factory, and the factory concerned to enter into an agreement to supply or purchase, as the case may be, the quantity of sugarcane fixed under paragraph (c);

(e) direct that no khandsari sugar or sugar shall be manufactured from sugarcane except under and in accordance with the conditions specified in the licence issued in this behalf;

(f) prohibit or restrict or otherwise regulate the export of sugarcane from any area (including the reserved area) except under and in accordance with a permit issued in this behalf.

(2) 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 willful failure on the part of the sugarcane grower, sugarcane growers' cooperative society or the factory to do so, shall constitute a breach of the provisions of this Order:

Provided that where the default committed by any sugarcane growers' cooperative society is due to any failure on the part of any sugarcane grower, being member of such society, such society shall not be bound to make supplies of sugarcane to the factory to the extent of such default."

166. The petitioners' counsel vehemently argued with regard to mandatory nature of SOC and submits that the State or its authorities have got no right to fix SAP but nothing has been brought on record to action taken by the Central Government in pursuance to Clause 6 of the SOC to regulate distribution and movement of sugarcane. Entire procedure with regard to distribution, sale and purchase and movement of sugarcane is regulated by the State Government and its authorities in pursuance to the provisions contained in 1953 Act (supra). Thus, it is incorrect to say that the State or its authorities have got no right to regulate distribution, sale and purchase of sugarcane in pursuance to 1953 Act. Reserved or assigned area is also fixed by the Cane Commissioner and not the Central Government under Clause 6 of SCO.

167. Under Clause 9(a), power of entry, search and seizure has been conferred on the Central Government or State Government. The power of the State Government with regard to entry, search and seizure is not conditioned by prior permission of the Central Government. It shall be appropriate to reproduce Clause 9(a) of the SOC which is as under :

"9A. Power of entry, search and seizure:-

(1) The Central Government or the State Government, as the case may be, may authorize ^[any officer not lower than the rank of a Police Inspector or Tehsildar or an officer of an equivalent rank] to enter and search any premises where any accounts, books, registers or other documents belonging to, or under the control of a producer of sugar or his agent, or an owner of a crusher, a power crusher or a khandsari unit or an agent of such an owner, are maintained or kept for safe custody;

Provided that this clause shall not apply to accounts, books, registers or other documents relating to a crusher owned by a grower or a body of growers of sugarcane.

(2) Such person may seize any such accounts, books, registers or other documents if he has reasons to believe that a contravention of this Order has been or is being or is about to be committed.

(3) The provisions of the Code of Criminal Procedure, 1973 *[2 of 1974], relating to searches and seizure shall, so far as may be, apply to searches and seizures made under this clause."

168. In case the argument of the petitioners' counsel is accepted, then the State or its authorities shall not able to enter into premises of sugar mills for search and seizure. Search and seizure relate to account books register maintained for purchase and selling of sugarcane. Such power has also been conferred on the State authorities by 1953 Act. On this ground also, argument advanced by the learned counsel for the petitioners seems to be not sustainable. For search and seizure, it is not necessary for the State or its authorities to obtain prior permission or concurrence of the Central Govt under Clause 9(a) of the Control Order. Clause 11 of the SOC further provides that the power conferred on the Central Government may be delegated to the State or its authorities. The provision contained in Clause 11 of the SOC should be looked into subject to law framed by the State Government in pursuance to List II of Seventh Schedule read with Art. 254 (repugnancy test).

169. SOC cannot be considered in piecemeal in view of the settled provision of law (supra). It should be considered in its totality read with statutory provisions contained in Essential Commodities Act. Explanation II of Section 3(3c) (supra) which categorically provides that the expression, "Fair & Remunerative Price" do not include the price paid or payable under any order or direction of any State Government and any price agreed to between the producer and the grower or a Sugarcane Growers Cooperative Society. The intention of the Legislature is clear and option has been given to the State Govt by the Explanation II (supra) to pass appropriate order or direction under power conferred by the statutory provisions (in the present case, under 1953 Act) and regulate the price of cane. Sugarcane Control Order should be read keeping in view the mandate of Explanation II of Section 3(3C) of the Essential Commodities Act, 1955.

170. Sugarcane Control Order, 1955 is a subordinate legislation. Though, it has got statutory force but it cannot override the statutory provisions conferring power on the State government under Section 3(3C) of the Essential Commodities Act. A subordinate legislation must be in tune with the statutory provisions vide AIR 1962 SC 386 Manilal Jain versus State of Assam, AIR 1967 SC 1910 Sant Ram Sharma versus State of Rajasthan and others, AIR 1961 SC 751 State of U.P and others versus Babu Ram Upadhya, AIR 1981 SC 711 State of Tamil Nadu versus M/s. Hind Stone etc. etc., AIR 1988 SC 2255 Union of India and others versus Sh. Somasundaram Viswanath and others, 1994 SC 2316 Union of India and another versus AmrikSingh and others, AIR 2002 SC 1450 Khet Singh versus Union of India, (2004)2 SCC 297 D.D.A. And others versus Joginder S. Monga and others, Pahwa Chemicals (P) Limited versus Commissioner of Central Excise, New Delhi, AIR 2007 SC 1082 Punjab Water Supply & Sewerage Board versus Ranjodh Singh and others, AIR 2006 SC 1806 Secretary, State of Karnataka and others versus Umadevi (3) and others and (2007)5 SCC 524 Mahadeo Bhau Khilare (Mane) and others versus State of Maharashtra and others.

171. In view of above, argument advanced by the learned Senior Counsel with regard to power exercised by the State Government seems to be not sustainable and the State Governments have got power to fix higher price than the FRP in pursuance to the power conferred by Section 16 of 1953 Act.

172. Learned counsel for either side has not invited attention of the Court towards any order or judgment of Hon'ble Supreme Court or this Court whereby the provision contained in Explanation II of Section 3(3C) inserted by Act No.35 of 2010 has been interpreted or taken into account. It also appears that attention of Hon'ble Supreme Court was not invited to explanation II of Section 3(3c) of the Essential Commodities Act when the identical controversy of earlier year was referred to larger Bench vide order dated 17.1.2012.

(VIII) STATE ADVISED CANE PRICE

173. Learned Senior Counsels appearing for the petitioners assailed the State Advised Price on two grounds - firstly, it has been fixed under political compulsion and reasons keeping in view the election of the State Legislative Assembly. Attention has been invited to the statement made by the Chief Minister of the State as published in the newspaper. While inviting attention to two reports of the U.P. Council of Sugarcane Research, Shahjahanpur, it is submitted that the subsequent report has been obtained almost in a week and is an instance of fudging whereby material has been obtained and records have been created on unfounded grounds. Learned counsel submits that the State Advised Price is an instance of arbitrary exercise of power on unfounded ground, hence hit by Art. 14 of the Constitution of India. The difference in the first report and second report as pointed out by the learned counsel for the petitioners is as under :

FIRST REPORT SECOND REPORT Particulars Plant Ratoon Particulars Plant Ratoon Irrigation 8550 7125 Irrigation 7125 7125 Labour 10211 8484 Labour 11885 8475 Fertilizer & application 1930 2316 Manure fertilizer & application 6250(addi-tion of manure) Rental value 18500 Rental Value 30000 Average cost of production=161.33 187

174. While assailing the aforesaid increase after lapse of a week in State Advised Price, allegation of fudging has been made against the State Government. It is also stated that the sugar mills in the State of U.P are running in loss, hence no increase in the State Advised Price could have been made. Cost of sugar has not been alleged to be increased in the ratio of cost of cane. It is also stated that the recovery rate is about 9.50% or around 10% and in case it is calculated with the proposed SAP, then it shall be beyond the paying capacity of the sugar mills.

175. In response to the argument advanced by the petitioners' counsel, while filing counter affidavit, learned Addl. Advocate General stated that after receipt of the representation from the Cane Growers Society and other farmers, a committee was constituted presided by the Chief Secretary of the State and after hearing representatives of the sugar mills and cane growers, State Advised Price was revised. Apart from Sugarcane Research Institute, Shahjahanpur, the Committee constituted under the Chief Secretary of the State had taken into account the cost of production of some other institutions which are as under :

1. Indian Institute of Sugarcane Research, Lucknow, A Government of India body Rs.197.49 per quntal

2. Directorate of Sugarcane Development, Ministry of Agriculture & Cooperative Department, Government of India Rs.202/- per quintal

3. University of Agriculture and Technology, Meerut Rs.222/- per quintal

176. On the other hand, Shri V.M. Singh, intervener invited attention to the fact that the Sugarcane Research Institute, Shahjahanpur has opined that the yield of sugarcane is 605 quintal per hectare though in both the reports, same yield has been taken into account but the report of the Commission for Agriculture, Cost and Price which is the basis of FRP laying down price policy for sugarcane of the session 2011-201 has opined that the yield has been substantially reduced to 523 quintal per hectare. The intervener further submits that the addition of Rs.6000/- per hectare as cost of manure is neither excessive nor unreasonable. In one hectare, the manure used by the farmers cost more than Rs.7000/-. The local units of gur, rab and khandsari pay the cane price between 220-230. Further submission of the intervener is that the State Government has not fixed SAP keeping in view the actual yield of 523 quintal per hectare and in case the cost is assessed keeping in view the average sugarcane yield in the State of U.P, then the cane price will be Rs.270/- per quintal or more. It is also submitted by the intervener that the cost of diesel has been increased in 2011-12 from Rs.28 to 45 and only 8% area of sugarcane comes within the category of 250 per quintal. It has also been vehemently argued that in 2010-11, the sugar mills had paid cane price upto Rs.255/- per quintal in the State of U.P by entering into agreement with cane growers. Even in 2011-12, the cane price in the State of Uttarakhand is Rs.250-260 per quintal. Attention has been invited to certain purchase slips issued by the sugar mills to point out that the sugar mills paid upto Rs.255/- per quintal last session. Minimum earning of sugar mills even after reduction of price of sugar is not less than Rs.500/- per quintal of cane. The intervener further invited attention to the fact that if the sugarcane purchased from any other place than the factories' own mills's gate, then Rs.5.75 is deducted from cane growers. In consequence thereof, Rs.5.75 per quintal is deducted from the State Advised Price. It is also submitted that during last preceding year, the cost of fertilizers (DAP & NKP) was Rs.473/- and now it has been increased to Rs.985/- per bag of 50 kg.

177. Keeping in view the argument advanced by both sides. It shall be appropriate to consider the report of the Committee constituted under the Chief Secretary of the State, a copy of which has been filed as Annexure No.9 to the counter affidavit. According to the report, in 2010-2011, SAP was Rs.200/-, 205/- and 210/- respectively for all three varieties of sugarcane (supra). The committee also considered FRP and found it to be not reasonable. Sugarcane price in Punjab for 2011-12 has been taken into account which is Rs.220, 225 and 230/- respectively.

178. During preceding five years, the Committee noted sugarcane price of Haryana, Punjab, Uttarakhand and Bihar which is as under :

Sl.No. State Varieties Cane price (Rs/quintal 2006-07 2007-08 2008-09 2009-10 2010-11 1. Haryana Early maturity 138 138 170 180 210 Normal 128 128 165 175 205 Rejected 126 126 160 170 200 2. Punjab Early maturity 132 138 165 185 200 Normal 128 128 160 180 195 Rejected 126 126 155 175 190 3. Uttarakhand Early maturity 132 138 148 197 215 Normal 128 128 143 192 210 Rejected 126 126 135 ------ 205 4. Bihar Early maturity ----- --------- 130 170 210 Normal 110 110 120 160 205 Rejected ----- 110 150 195 179. While considering the comparative rate of different States as well as the cost of production of sugar, the Committee has taken into account the following material : 1. Because of rise of cost of living, increase of cost of irrigation, manure, fertilizers, pesticides and petroleum product including diesel, the cost of production of sugarcane has been increased. 2. In the period during which the cane crop is reaped by the farmers and sent to sugar mills, the farmers can have two other crops of different varieties.

3. In the State of U.P, the sugar mills work for about 114 days. However, in East Uttar Pradesh, they work for 90 days. In 2010-11, the average working day of sugar mills was 103 days. Keeping in view the capacity of sugar mills, it is necessary to increase the production and cultivatory area of sugarcane.

4. Because of reserved area, it is mandatory for the cane growers to supply their sugarcane to the respective sugar mills.

5. Levy of sugar is 10% fixed by the Government of India.

6. In 2009-10, the average cost of sugar was Rs.2869.23 per quintal, in 2010-11, it was Rs.2996.43 per quintal and in 2011-12, it is expected that the sugar price may increase.

7. Sugar Mills are earning profit because of co-production of bagasse, press mud, ethanol, particular board, molasses etc.

8. In October, 2010, cost of sugar was Rs.2860/- whereas in September, 2011, it was Rs.3000/- per quintal. Average cost from October, 2010 to September, 2011 of sugar comes to Rs.3000.47.

9. Some of the farmers of the State like Shyam Lal Singh, President, Cane Development Council, Masurpur assessed the cost of production of sugarcane per quintal as Rs.356/-. The Cane Cooperative Society, Nawabganj, Bareilly assessed the cost of production of sugarcane to Rs.219/-. Some other cane growers assessed the cost of production to Rs.257 and 324/-.

180. Keeping in view the cost of production assessed by different institutes, the farmers, cane growers, the Committee fixed SAP of Rs.235/-, 244/- and Rs.250/- for three varieties of cane supply to sugar mills.

181. From the report of the committee headed by the Chief Secretary of the State submitted on 1.10.2011, it appears that the committee has considered various factors, ground realities, comparative price of cane while fixing SAP. The finding of fact recorded by the committee does not seem to suffer from perversity, impropriety or illegality; rather it appears that the SAP should have been more than what has been fixed by the committee in case the yield of 523 per quintal per hectare which could have been taken into account by the committee including actual cost of diesel, fertilizer etc.

182. Apart from above facts, some of the individual item of which the cost has been increased in its second report by Shahjahanpur Institute should be taken into account. The Directorate of Sugarcane Development under the Government of India, Ministry of Agriculture has assessed the cost of manure, fertilizers, rent on lease as under :

1. Manure cost (FYM) in five tractor load at the rate of Rs.1000/-

Rs.5450/-

2. Cost of fertilizer in its application (DAP-2 bags), Urea-6 bags Rs.5450/-

3. Rent on leased land @ Rs.37500/- per ha. (Annexure-5 of counter affidavit filed by the State Government).

4. Sardar Ballabhbhai Patel Krishi Evam Praudyogic University, Meerut assessed the cost of aforesaid item as under :

Cost of manure Rs.9110/-

Cost of fertilizer Rs.7942/-

Rental value of leased land Rs.40625/- (Annexure-6) Cost of production Rs.212

183. In view of above reports, the State Advised Price may be around Rs.255/- per quintal (Rs.212 + 20% profit = 255/-). However, in case the cost of production of sugarcane is assessed on the basis of the information submitted to committee by different farmers' associations, cane cooperative units, then the price of sugarcane may not be less than Rs.270/- per quintal and in case the vialibility is assessed keeping in view the time involved in production of sugarcane, then, it shall be less profiting than the production of wheat and paddy as appears from some of the reports.

184. One of the argument advanced by learned Senior Counsel appearing for the petitioners is that the sugarcane price has been increased under SAP excessively and is disproportionate to the price of sugar. In consequence thereof, the sugar mills shall be in loss in case they are compelled to pay cane price at the present rate in the season 2011-12. In pursuance to the order passed by the Court, the Cane Commissioner, U.P has filed an affidavit and brought on record the price of sugarcane as well as sugar right from 2004-05. A comparative chart (Annexure-2) to the affidavit filed in compliance of the order dated 16.1.2012, passed by this Court is reproduced as under :

mRrj izns'k dh phuh feyksa gsrq izns'k 'kklu +}kjk ijkef'kZr xUuk ewY; o phuh dk vkSlr Fkksd ewY;

ijkef'kZr xUuk ewY; :@dqa o"kZ vuqi;qDr iztkfr;ka lkekU; iztkfr;ka 'kh?kz idus okyh iztkfr;ka gkiqM eaMh esa phuh dk vkSlr Fkskd ewY; :@dq 1 2 3 4 5 2004&05 104-50 107-00 112-00 1807-14 2005&06 112-50 115-00 120-00 2019-90 2006&07 122-50 125-00 130-00 1637-04 2007&08 122-50 125-00 130-00 1615-94 2008&09 137-50 140-00 145-00 2354-17 2009&10 162-50 165-00 170-00 3273-17 2010&11 200-00 205-00 210-00 3000-47 2011&12 235-00 240-00 250-00 3146-31 fVIi.kh & o"kZ 2011&12 esa phuh ds vkSlr Fkskd ewY; fnlEcj 2012 rd ds gSa A

185. From a perusal of the aforesaid chart, it is evident that hike in sugar price is much more than the rise in sugarcane price. There is a jump in the price of sugar in the Season 2008-09 in comparison to 2007-08 whereas rise in sugarcane price is marginal. Otherwise also, rise in sugar price is with increasing trend and the SAP does not seem to be unreasonable or excessive.

186. In view of above, the argument, advanced by the learned Senior Counsel appearing for the petitioners that the State Advised Price is arbitrary, unreasonable or based on unfounded facts or presumptive does not seem to be sustainable. The State Advised Price seems to be on lower side than what was required to be fixed by the government keeping in view the ground realities of the State including the cost of production and yield.

(IX) JUDICIAL REVIEW OF FRP & SAP

187. Since the learned counsel assailed the SAP asserting that it is arbitrary and hit by Art. 14 of the Constitution of India, question cropped up whether the price fixed by the State Government or the Government of India is amenable to judicial review.

188. The 1953 Act or the Sugarcane( Control) Order, 1966 is the welfare legislation and is meant to secure the interest of farmers and save them from exploitation of sugar mills' owners.

189. It is not disputed during course of argument that more than 90% of cane growers are small farmers having few acres or bigha of land and they are not in a position to bargain with the sugar mills' owners for reasonable cane price. They are in urgent need of money not only to maintain their family but to meet out the requirement of medicine, marriages, repairing and construction of houses and other requirements. They are not in a bargaining position. That is why to discharge its welfare obligation under the Directive Principles of State Policy, the State and Central Government intervened to safeguard the interest and while discharging the statutory provision, they struck a balance and also keep an eye to see that the sugar mills are also supplied cane on reasonable price so that they may not run in loss. Price fixation depends upon various factors(supra) as well as ground realities of the States. Cost of sugarcane production and yield varies from State to State depending upon various factors. That is why, the Parliament to its wisdom under Explanation II of Section 3(3c) of the Essential Commodities Act has given liberty to the State to discharge its obligation within its area to safeguard the interest of cane growers as well as mill owners. The case set up by the Government of India while filing counter affidavit (supra) seems to be not only reasonable but also keeping in view the practicability of situation. Ordinarily, courts should not interfere with the fixation of price by the State Government or the Central Government, as the case may be.

190. Learned senior counsel appearing on behalf of the petitioners invited attention to the judgment of this Court whereby it has been held that the writ petitions are maintainable but it appears that the attention of the Court has not been invited to larger Bench judgment of Hon'ble Supreme Court.

191. In the case reported in AIR 1978 SC 1296 M/s. Prag Ice & Oil Mills and another etc. etc., versus Union of India (Bench of Hon'ble seven Judges of Supreme Court), question with regard to fixation of price of mustard oil in pursuance to power conferred by the Essential Commodities Act under the price control order was subject matter for adjudication. Their Lordships observed that it is not possible for the court to take evidence in the matter of fixation of price. It is for the government to take a policy decision based on what could reasonably be the paying capacity of the average buyer and the likely effect of intended price fixation. In a welfare State, it is the duty of the government to secure public interest. Their Lordships observed as under :

"26. Students and observers of economic systems tell us that inflation is no problem in socialist countries because the whole economy is so completely controlled that there is no question of a rise in prices. Under our what is known as a "mixed economy" planning and price fixation are part of that social control which becomes inevitable under certain conditions. Indeed, it seems often quite unavoidable under any system which adopts socialistic measures to achieve the common good. .................................... Fixation at even uneconomic selling price implied temporary loss to the producers, so as to serve their own ultimate interests and those of general welfare. Such sacrifices ought, it was suggested, to be readily borne by producers of mustard oil in a system like ours. If they were not able to bear them, they could close down their factories. They could not claim a right to carry on business or manufacture on their own terms. Such is not the right granted even by Article 19 (1) (g) of the Constitution. However, as we have already indicated, it seems that the Act was put in the Ninth Schedule to prevent the invocation of Articles 14, 19 and 31 for obstructing measures so necessary as price fixation of essential commodities is for promoting the objectives of a socialist welfare economy. This, in our opinion, would be a sufficient answer to all the arguments which had been put forward at considerable length before us on the unconstitutionality of fixing the price of mustard oil below what is claimed to be the cost price,"

192. Hon'ble supreme Court further proceeded to hold that price fixation is a quasi judicial function for specified purpose and is a piece of legislative function. Hon'ble Supreme Court observed as under :

36. We think that unless, by the terms of a particular statute, or order, price fixation is made a quasi-judicial function for specified purposes or cases, it is really legislative in character in the type of control order which is now before us because it satisfies the tests of legislation. A legislative measure does not concern itself with the facts of an individual case. It is meant to lay down a general rule applicable to all persons or objects or transactions of a particular kind or class. In the case before us, the Control Order applies to sales of mustard oil anywhere in India by any dealer. Its validity does not depend on the observance of any procedure to be complied with or particular types of evidence to be taken on any specified matters as conditions precedent to its validity. The test of validity is constituted by the nexus shewn between the order passed and the purposes for which it can be passed, or, in other words by reasonableness judged by possible or probable consequences.

37. It is true that even executive or legislative action must be confined to the limits within which it can operate. It must fall reasonably within the scope of the powers conferred. The scope of the powers conferred depends upon the terms of the empowering provision. As we have already mentioned, the empowering provision in the instant case is widely worded................................."

193. While agreeing with the aforesaid view of then Chief Justice of India Justice Beg and Justice D.A. Desai, writing separate judgment, Justice Chandrachud and four other Hon'ble Judges also declined to interfere with the price fixed by the government and held that the power conferred by Section 3(1) of the Essential Commodities Act is for a purpose requires no interference. Their Lordships observed as under :

"68..................The power conferred by Section 3(1) of the Essential Commodities Act is undoubtedly purposive. But it seems to us incontrovertible that the Price Control Order was promulgated by the Government in order to achieve the purpose set out in Section 3(1) of the Act. The fact that a legislative remedy or an administrative order passed in exercise of a statutory power is ineffective to mitigate an evil may show that it has failed to achieve its purpose, highlighting thereby the paradox of reform. But, as observed in Joseph Beauharnais v. People of the State of Illinois(1951) 96 Law Ed 919, that "is the price to be paid for the trial-and-error inherent in legislative efforts to deal with obstinate social issues". We are, therefore, unable to hold that by fixing a fair price for mustard oil, the Government has committed a veiled and subtle trespass upon private rights or upon a legislative field which is not open to them to occupy."

194. While holding that(supra) the courts should not enter into minute detail of the material taken into account while fixing price, their Lordships of Hon'ble Supreme Court observed as under :

"69. To sum up, it seems to us impossible to accept the contention of the petitioners that the impugned Price Control Order is an act of hostile discrimination against them or that it violates their right to property or their right to do trade or business. The petitioners have taken us into the minutest details of the mechanism of their trade operations and they have attempted to demonstrate in relation thereto that a factor here or a factor there which ought to have been taken into account while fixing the price of mustard oil has been ignored. Dealing with a similar argument it was observed in Metropolis Theater Co. v. City of Chicago 57 Lawyers' Edition 730 that to be able to find fault with a law is not to demonstrate its invalidity. "It may seem unjust and oppressive, yet be free from judicial interference. The problems of government are practical ones and may justify, if they do not require, rough accommodations, illogical, it may be, and unscientific. But even such criticism should not be hastily expressed. What is best is not always discernible, the wisdom of any choice may be disputed or condemned. Mere errors of government are not subject to our judicial review. It is only its palpably arbitrary exercises which can be declared void.... The Parliament having entrusted the fixation of prices to the expert judgment of the Government, it would be wrong for this Court, as was done by common consent in Premier Automobiles (supra) to examine each and every minute detail pertaining to the Governmental decision. The Government, as was said in Permian Basin Area Rate Cases, (supra) is entitled to make pragmatic adjustments which may be called for by particular circumstances and the price control can be declared unconstitutional only if it is patently arbitrary, discriminatory or demonstrably irrelevant to the policy which the legislature is free to adopt. The interest of the producer and the investor is only one of the variables in the "constitutional calculus of reasonableness" and Courts ought not to interfere so long as E-the exercise of Governmental power to fix fair prices is broadly within a "zone of reasonableness". If we were to embark upon an examination of the desperate contentions raised before us on behalf of the contending parties we have no doubt that we shall have exceeded our narrow and circumscribed authority."

195. In a case reported in 2009 Vol. 5 SCC 641 Bihar SAP versus Pulak Enterprises where the controversy before the Hon'ble Supreme Court was fixation of rate of fuel surcharge, their Lordships had reiterated the proposition of law in M/s. Prag Ice & Oil Mills(supra) and held that the fixation of rate on oil surcharge is a legislative function (act) and ordinarily not open to interference by the courts under the process of judicial review. The scope of judicial review would be limited to plea of discrimination.

196. In one other case reported in (2011)1 SCC 640 Bajaj Hindustan Limited versus Sir Shadi Lal Enterprises Limited, Hon'ble Supreme Court has reiterated the principle flowing from M/s. Prag Ice & Oil Mills(supra) and held that there should be judicial restraint in fiscal and economic regulatory measures. Unless the State action is discriminatory, illegal and unconstitutional, the decision taken at the economic front should not be interfered. The economic matters being extremely complicated entails special treatment for distinct social phenomena. The State must, therefore, be left with wide latitude in devising ways and means of imposing fiscal regulatory measures and ordinarily, unless the courts are compelled by the statute or the constitutional mandate, interference in such matters is not required.

197. During the course of argument, learned Senior counsel halfheartedly agreed that the sugarcane price should have been Rs.224/- per quintal. The difference is meagure. On mathematical calculation, it may be higher in case the report of other Central Institutes(supra), universities and cane cooperative unions are considered. Though, we have recorded our finding on merit also on the basis of the material on record but in view of M/s. Prag Ice & Oil Mills(supra), ordinarily, it is not open to interfere under the process of judicial review in the matter of fixation of cane price fixed(supra) by the State while exercising its statutory power being a welfare State through welfare legislation, more so when cane price could have been more than what has been fixed by the State Government under SAP.

198. (X) FINDING (1) It is incorrect to say that the cane price fixation is exclusively occupied by the Union of India. The Legislature of the State has legislative competence to legislate law under Entries 14 and 27 of List II read with Entry 33 of List III whereas the Union of India may exercise its power under Entry 33 of List III. Thus, subject to rider imposed by Art. 254, State Legislatures are competent to legislate law with regard to cane price fixation.

(2) Sugarcane(Control) Order, 1966 should be read along with Explanation II of Section 3 (3C) of the Essential Commodities Act which empowers the State Government to fix State Advised Price which may be higher than FRP fixed by the Government of India. By change of nomenclature in the form of 'FRP', the State Government is not deprived to exercise its statutory function under 1953 Act read with Explanation II of Section 3(3C) of the Essential Commodities Act.

(3) Reserved area is provided by the State Government in pursuance to power conferred by Section 15 of 1953 Act. The Government of India does not fix reserved area. The State Governments exercise its statutory function including the reserved area in pursuance to 1953 Act. Hence, it cannot be said that with regard to price fixation, it lacks jurisdiction but for other issues, it may discharge its obligation under 1953 Act. The regulatory power envisaged by Section 16 of the 1953 Act includes fixation of price for supply of cane by the cane growers to the sugar mills (supra) with the rider that it shall not be less than FRP fixed by the Government of India.

(4) Ordinarily, fixation of price being a legislative function is not open to judicial review unless it is discriminatory or violative of some statutory provisions. It is also not open for the Courts, to re-appreciate the material or evidence relied upon by the government for fixation of cane price under the process of judicial review. In a welfare State, it is for the government to secure the public interest by fixing the price on the basis of available material while discharging its statutory obligation.

(5) State Advised Price(SAP) fixed by the State Government is neither excessive nor unreasonable; rather it is on lower side and the government could have fixed higher price than Rs.250/- on the basis of cost of production and dearness, hike in cost of living, inflation and per hectare yield of sugarcane.

(6) Fair & Remunerative Price is not based on actual cost of production of sugarcane and yield in the State of U.P. It is the moderate price or floor price as stated by the learned Addl. Solicitor General of India and the State has got right to fix higher price keeping in view the cost of production, ground realities, yield of sugarcane etc.

199. In view of the aforesaid finding, there appears to be no reason to interfere with the SAP under the process of judicial review. State has rightly fixed higher SAP than FRP on the basis of the report submitted by the committee headed by the Chief Secretary of the State. Keeping in view the material on record and proposition of law discussed, the writ petitions are liable to be dismissed with exemplary cost.

(XI) COST

200. A bunch of writ petition has been filed without taking note of Amending Act No.35 of 2010 whereby Section 3(3C) which has been inserted with Explanation II. The entire pleading and foundation of the petitioners' case is without taking into account the Amending Act (supra) which is very well applicable for the season 2011-12. It is a fit case in which cost may be imposed in view of law settled by Hon'ble Supreme Court in the case reported in (2005) 6 Supreme Court Cases 344, Salem Advocate Bar Association (II), Vs. Union of India and 2011(8) SCC 249 Rameshwari Devi and others versus Nirmala Devi and others.

(XII) ORDER

201. In view of above, the writ petitions are dismissed with cost quantified to Rs. 50 lacs(Fifty lacs only) which shall be payable by the petitioners in equal proportion and shall be deposited by them in equal proportion within two months to this Court. Out of Rs.50 lacs, an amount of Rs.25/- lacs shall be remitted by the Registry of this Court to U.P. Council of Sugarcane Research, Shahjahanpur to spend for research activities with regard to sugarcane. The institute shall send a report to this Court showing the manner in which the amount is spent. Remaining Rs.25 lacs shall be remitted to Mediation and Conciliation Centre of this Court at Lucknow. In case the cost is not deposited, it shall be recovered as arrears of land revenue by the respective District Magistrates. Registry to take follow-up action.

(Justice S.C. Chaurasia) (Justice Devi Prasad Singh) February 10, 2012 kkb/