No 134 of 1958
Writ Petition under Article 32 of the Constitution of India for the Enforcement of Fundamental Rights
N C Chatterjee K P Mukherjee P D Himatsinghka and B P Maheshwari for the petitioners
M C Setalvad Attorney General for India B Sen and R H Dhebar for the respondent
K P Khaitan K P Mukherjee and B P Maheshwari for Interveners 1 to 10
G section Pathak K P Mukherjee and B P Maheshwari for Interveners 11 to 13
January 23
The Judgment of the Court was delivered by  WANCHOO J
This petition under article 32 of the Constitution challenges the legality of the notification dated July 30 1958 hereinafter called the impugned notification issued by the Government of India fixing the ex factory price per maund of sugar produced in Punjab Uttar Pradesh and North Bihar
It has been supported by two sets of interveners consisting of sugar factories in these areas who did not join the petition
The case of the petitioners is that the X of 1955
hereinafter called the Act was passed by Parliament in 1955 for the control of the production supply and distribution of and trade and commerce in certain commodities which included sugar
By section 3 of the Act the Central Government was given the power if it was of opinion that it was necessary or expedient so to do for maintaining or increasing supplies of any essential commodity or for securing their equitable distribution and 125 availability at fair prices to provide by order for regulating or prohibiting the production supply and distribution thereof and trade and commerce therein
Section 32 further provided inter alia for controlling the price at which any essential commodity might be bought or sold
In exercise of these powers the Central Government promulgated the Sugar Control Order 1955 hereinafter called the Order on August 27 1955
Clause 5 of the Order gave power to the Central Government by notification in the Official Gazette to fix the price or the maximum price at which any sugar might be old or delivered and different prices might be fixed for different areas factories or different types or grades of sugar
Such price or maximum price had to be fixed with due regard to various factors with which we shall deal later
On June 27 1958 the Central Government promulgated the Sugar Export Promotion Ordinance No V of 1958 empowering it to appoint an export agency for carrying out the work of buying sugar in the Indian market and exporting the same to foreign markets and fixing the quantity of sugar for export
The Central Government was also authorised by that Ordinance to fix quotas apportioning the quantity of sugar to be supplied by each factory for export and levy an additional excise duty at the rate of Rs 17 per maund on any factory failing to deliver its quota of sugar for export
On the same day three notifications were issued i fixing 50000 tons of sugar as the quantity to be exported out of India during the period ending October 31 1958 2 appointing the Indian Sugar Mills Association Calcutta as the export agency and 3 delegating the powers conferred on the Central Government to the Chief Director of Sugar and Vanaspati Ministry of Food and Agriculture also
Then followed the impugned notification fixing ex factory prices of sugar produced by the factories in Punjab Uttar Pradesh and North Bihar
It is being challenged on the ground that the price fixed is considerably below the cost of production and ignores various factors affecting the cost of production and distribution of sugar including charges incidental to sale and 126 distribution
The impugned notification is also attacked on the ground that it did not fix any price at which the persons purchasing sugar from the mills would sell it so that it was open to the middleman who bought sugar from the factories to sell it at any price thus creating discrimination between factories and factories and between the producers selling sugar and the middlemen who buy sugar selling the same in their turn
It is also alleged that fixing of the price was arbitrary and did not take into account the cost of production of a large number of units in the country and did not provide for a fair and equitable distribution of sugar in the country at a price in any way related to the price at which the factories were compelled to sell their products
Consequently the petitioners prayed for an appropriate order direction or writ in the nature of mandamus or any other writ quashing the Sugar Control Order 1955 and all orders made in pursuance of it including the impugned notification
The petition has been opposed by the Central Government
It is contended on their behalf that the entire object of fixing the price of sugar was a to make it available at a reasonable price to the consumer and b to ensure adequate and smooth flow and supply of sugar which is an essential commodity for the life of the people to all parts of the country according to their needs and requirements checking the speculative tendency of the market and destroying the creation of an artificial shortage by unscrupulous persons
Prices of sugar were first put under control as far back as 1942 and this control continued up to 1947 when it was withdrawn on December 8 1947
It was however  found that internal prices were raised during the de control period on the pretext of subsidizing export which never materialised
In consequence control was again imposed on September 2 1949 but it was lifted in 1952 when it was found that there was sufficient stock available at the end of the 1951 52 season
In 1953 54 however production fell and control had again to be imposed for that season
It was however lifted a year later
In November 1956 127 there was a considerable surplus of sugar and the Central Government permitted export of 153 lakh of metric tons in 1957
The Central Government was again approached in 1958 to make the export of sugar a permanent feature and it agreed to allow export during 1958 in view of the carry over from the previous season and also for earning foreign exchange in the interest of the country
Therefore the Central Government promulgated the Sugar Export Promotion Ordinance No V of 1958 on June 27 1958
But as this Ordinance was expected a tendency developed in the sugar industry to push up prices after the month of April 1958
As a result of this tendency prices went up by about a rupee per maund in May and June 1958 and it was feared that they might go up further in view of the quota for export announced on June 27 1958
In view of this apprehension the industry assured Government that the sugar factories would offer to sell their released stocks freely at prices prevalent before the export policy was announced ie in the week before June 27 1958
In spite however of this assurance there was a general rise in prices during the four weeks preceding the impugned notification
This rise was particularly marked in Northern India
It was in these circumstances that the Government decided to control ex factory prices of sugar in Punjab Uttar Pradesh and North Bihar
The Government took all relevant factors into account in fixing the price
This was done in the interest of the general public in order that sugar might be available at fair prices
As Uttar Pradesh and North Bihar are the main surplus areas and feed the deficit areas of the country it was not necessary to control prices elsewhere nor was it necessary to control prices beyond the ex factory stage as the prices in the whole
sale or the retail markets are governed by ex factory prices
There was in the circumstances no question of discrimination or any unreasonable restriction on carrying on trade in sugar
The Government did not admit that the price fixed was below the cost of production generally
Consequently it was prayed that the petition should be dismissed
128 the interveners raise the following points in support of their contention that the impugned notification is illegal and invalid 1 a The impugned notification is beyond the ambit of authority conferred on the Central Government under section 3 of the Act and clause 5 of the Order and in any case it is bad as it cannot possibly subserve the purposes of the Act ensuring equitable distribution of the commodity to the consumer at a fair price b The impugned notification merely fixes ex factory prices and is bad firstly on the ground that the Act and the Order do not authorise the Central Government to fix ex factory prices and secondly on the ground that even if ex factory prices can be Axed under the Act and the Order the impugned notification is still bad as it fails to fix prices for the ultimate consumer which must be done under the Act 2 The impugned notification imposes an unreasonable restriction on the right to trade under Article 19 1 g inasmuch as i it compels factories to sell sugar at a loss ii it fixes the price arbitrarily and iii there is no reasonable safeguard against the abuse of power and no provision for a check by way of appeal or otherwise 3 The impugned notification is bad inasmuch as it is discriminatory because it fixes ex factory prices only for factories in Punjab Uttar Pradesh and North Bihar and not for factories in other parts of India and there is no reasonable classification discernible on any intelligible differentia on the basis of which prices have been controlled in certain regions only
1 a
The Act deals with essential commodities which have been defined therein
The preamble shows that it has been passed in the interest of the general public for the control of the production supply and distribution of and trade and commerce in certain commodities
Section 3 of the Act gives power to the Central Government to pass orders under the Act if it is necessary or expedient so to do for maintaining or increasing supplies of any essential commodity or for securing 129 their equitable distribution and availability at fair prices
No attack has been made on the vires of the Act but the vires of the Order relating to sugar passed under the Act and particularly of the impugned notification fixing ex factory prices in Punjab Uttar Pradesh and North Bihar have been attacked
The Order in our opinion merely carries out the purposes of the Act and cl 5 thereof gives the ambit of the powers of the Central Government in fixing prices and lays down the manner in which it should be done and the factors which should be taken into consideration in doing so
Though in the petition the Order was attacked on the ground that it gave uncontrolled unguided and unfettered  power to the executive and imposed unreasonable restrictions on the right to carry on trade no arguments were addressed to us on the constitutionality of the Order itself
We are in this case concerned only with that part of the Order which deals with the fixation of price
Clause 5 provides for factors that the Government will take into account in fixing prices and these are i price or minimum price fixed for sugarcane ii manufacturing cost iii taxes iv reasonable margin of profit for producer andor trade and v any incidental charges
It is amply clear from this that price is to be fixed after taking into account all reasonable factors which go into the consideration of price fixation
In view of this it cannot be said that the Order gives uncontrolled unguided and unfettered  power to the executive to fix prices arbitrarily
We shall proceed therefore on the basis that the Act and the Order so far as they are concerned with the fixation of price are valid
This brings us to the question whether the impugned notification is beyond the authority conferred on the Central Government by section 3 of the Act and clause 5 of the Order  Reading section 3 of the Act with the preamble it would be obvious that the object of the Act is to provide for control of the production supply and distribution of trade and commerce in essential commodities in the interests of the general public so that the 17 130 supplies of such commodities may be maintained or increased their equitable distribution secured and they may be available to the general public at fair prices
Considering the history of sugar control and the trends which appeared in the market from April 1958 it cannot possibly be said that the impugned notification does not subserve the purposes of the Act and the Order
There can be little doubt that fixation of ex factory prices of sugar mills in the main surplus areas would have the effect of stabilising sugar prices for the general public which is the consumer at a fair level and make sugar available at fair prices
In the affidavit filed on behalf of the Government it is stated that as a result of this action prices have come down to normal levels
This is demonstrable proof if such was needed that the impugned notification subserves the purposes of the Act
This contention therefore fails
1 b
The argument under this head is two fold
It is said that in the first instance  section 3 of the Act requires that prices for the consumer only should be fixed
The object of section 3 is undoubtedly to secure essential commodities at fair prices for the general public ie the consumer
It is well known that there are three kinds of prices prevalent in the market for a commodity like sugar namely ex factory price wholesale price and retail price
It is the last that the consumer has to pay
It is urged that when section 3 provides for availability of essential commodities at fair prices to the general public it means that price can only be fixed at the stage where the consumer is the purchaser
In particular our attention was invited to clause c of section 3 2 which provides for control of price at which any essential commodity may be bought or sold
Now there is no doubt that the object of the Act is to secure essential commodities for the consumer ie the general public at fair prices but it does not follow from this that this object can only be achieved if retail prices are fixed and that there is no other way of achieving it
In any case clause c of section 3 2 which speaks specifically of control of price is very general 131 in terms
It provides for fixation of price at which any essential commodity may be bought or sold  it does not specify the stage at which the price should be fixed
Therefore we are of opinion that the control provided under clause c of section 3 2 is control at any of the three stages mentioned above
There is no reason to cut down the generality of the words used in clause c so as to make them applicable only to the last stage namely the retail price
This contention therefore that section 3 only authorises the Central Government to fix the retail price ie the price for the consumer fails
It is then urged that even if the power is there to fix prices at all stages the Act requires that the price must be fixed for the consumer whether it is fixed at an earlier stage or not
There are no words in section 3 1 or section 3 2 c of the Act which compel such an interpretation
It is true that the object of the Act is to ensure fair prices for the consumer but if fair prices for the consumer can be ensured by fixing the ex factory price there is no reason why the Government should go on also to fix the wholesale or retail price
It is well known that the wholesale and retail prices depend upon ex factory price in the case of a commodity like sugar
Therefore if fixation of price at the ex factory level is enough to ensure a fair price for the consumer there is no reason why the Government should not stop at that and should go on also to fix wholesale and retail prices
It is urged that the middleman who buys from the factory is not controlled and he can sell at any price and therefore the object of the Act may not be achieved
Theoretically this may be so and a middleman may abuse his position
If he does so we have no doubt that the Government will intervene as it has ample power to fix wholesale and retail prices also
But if the purpose is served by merely fixing the ex factory price we see no reason why the Government must fix wholesale and retail prices also
The petitioners have not even alleged that as a matter of fact the wholesalers and retailers are profiteering and making it impossible for sugar to be available for the general public at a fair 132 price
In the circumstances it was not necessary in fact for the Government to fix wholesale or retail prices
In law we see no warrant for holding that under section 3 1 and section 3 2 c of the Act the Government must not only fix ex factory prices but also wholesale and retail prices
What prices the Government will fix depend upon their estimate of the situation which would serve the object of the Act
We are therefore of opinion that there is no force in this contention either
The contention under this head is that the impugned notification is invalid as it is an unreasonable restriction on the petitioners  right to carry on trade under article 19 1 g
The argument is urged in three ways namely i factories are being compelled to sell at below the cost of production ii the price fixed is arbitrary and iii there is no safeguard Against abuse of power
The argument that the factories are being compelled to sell at below the cost of production is put in two ways
It is said that the press note issued by the Government on July 30 1958 shows that the Government was of the view that prices should be pegged at the level at which they were in the week preceding June 27 1958 and inasmuch as they fixed prices below that level or even below the level at which they were at the end of May 1958 the prices were below the cost of production
We must say that this is a complete misunderstanding of the press note of July 30 1958
All that that press note said was that prices had risen even before June 27 1958 in expectation of a large export quota
Thereafter the Government were assured by the industry that prices would not rise further after June 27  but this assurance was not kept and prices went up further by one rupee per maund by the end of July
It was in these circumstances that the Government intervened
There was however no commitment in this press note by the Government that if they intervened they would fix prices at what they were either in the week before June 27 1958 or in the last week of May nor is there anything in the press note to suggest that the 133 prices prevalent on either of these two days were proper prices and that any price below them would not even meet the cost of production
The press note had nothing to do with the cost of production nor were the Government bound to fix the prices at the level of the end of June or the end of May
When they eventually decided to intervene at the end of July they were free to take action under the Act and the Order and so long as the prices fixed were in accordance therewith the action could not be challenged on the ground that it was an unreasonable restriction on the right to carry on trade under article 19 1 g
Clause 5 of the Order lays down the factors which have to be taken into consideration in fixing prices
These factors include among other things a reasonable margin of profit for the producer andor trade and any incidental charges
This was kept in mind when prices were fixed by the impugned notification
The petitioners have certainly filed with their affidavit a schedule giving the cost of production
According to them their cost of production is above the price fixed by the impugned notification
This schedule has not been admitted by the Government
We see no reason to accept the ipse dixit of the petitioners as to their cost of production
The sugar crushing season begins about the end of October and finishes about the end of May so that fixation of price in July 1958 would be on the basis of the 1957 58 season
Market prices were available to the Government when they fixed the prices by the impugned notification
In the case of the three States  namely Punjab Uttar Pradesh and North Bihar the prices fixed by the impugned notification were above the prices prevalent in the beginning of April and also above the average prices for the month of April though in the case of Punjab and West Uttar Pradesh they were slightly below the prices of the 30th of April
These prices were prevalent in the free market and must certainly have taken account of a fair margin of profit for the producer though in the case of an individual factory due to factors for which the producer might himself be responsible the cost of production might have been a little more
134 Therefore the prices fixed by the Government by the impugned notification can in no circumstances be said to have been proved to be below the cost of production
The petitioners were also not unaware of this state of affairs and therefore in the rejoinder came out with the story of distress sales by the mills in the early part of the crushing season
We are not impressed by this story and in any case there could hardly be any question of distress sales in April when the crushing season was almost coming to an end
We see therefore no reason to hold that the prices fixed were below the cost of production and were therefore an unreasonable restriction on the petitioners  right to carry on trade under article 191g
This also disposes of the second ground of argument under this Head namely that the prices were arbitrary
All relevant factors prescribed under el
5 of the Order were apparently taken into consideration and the prices fixed themselves show that they were not arbitrary
The last argument in this connection is that there is no reasonable safeguard against the abuse of power and no check by way of appeal or otherwise is provided against the order of the Central Government
It is enough to say that we are here dealing with the power of the Central Government to fix prices in the interests of the general public
It is in these circumstances absurd to expect that there would be some provision by way of appeal or otherwise against this power of the Central Government
So long as the Central Government exercises its power in the manner provided by the Act and the Order and this is what it appears to have done  it cannot be said that any further safeguard is necessary in the form of an appeal or otherwise
The safeguards are to be found in el
5 itself namely that the Central Government must give consideration to the relevant factors mentioned therein before fixing the price and thus these factors are a check on the power of the Central Government if it is ever minded to abuse the power
We are therefore of opinion that the impugned notification is not an unreasonable restriction on the peti tioners  right to carry on trade under Art 191g
135 Re
said that price control is imposed on factories in Punjab Uttar Pradesh and North Bihar and that there is no reasonable basis for such clasSification  factories in other parts of India are left uncontrolled with the result that there is discrimination
From the material supplied it appears that there are 97 sugar factories in Punjab Uttar Pradesh and North Bihar while there are 50 sugar factories in the rest of India of which as many as 18 are in the State of Bombay
In the other States there are very few factories
 the lowest being in West Bengal Orissa and Kerala with one factory each and the highest being in Madhya Pradesh with seven factories
We also understand that the major part of production of sugar in this country is from the factories in Punjab Uttar Pradesh and North Bihar
Of the 97 factories which have been controlled as many as 90 are in Uttar Pradesh and North Bihar and it is these two areas which are what are called mainly surplus areas
The price of sugar in India depends upon the price of the factories in Uttar Pradesh and Bihar
The contention of the Government is that as soon as the price is controlled in Punjab Uttar Pradesh and Bihar the price for the whole of India is fixed for other States are deficit and import sugar from these States particularly Uttar Pradesh and North Bihar
In these circumstances if price is fixed in this area price all over India is practicalLy fixed and it is not necessary to fix prices separately so far as factories in other States which are said to be mainly deficit are concerned
In the circumstances we are of opinion that though in form prices are fixed for factories only in Punjab Uttar Pradesh and North Bihar in effect they are fixed for the whole of India once the production of these three regions is controlled
There is therefore in our opinion no discrimination in effect by the fixation of prices in these three regions
The argument that there is discrimination is purely theoretical in view of the economic factors which control the price of sugar in this country
Thus in fact there is no discrimination after the control of sugar 136 prices in these three regions and the contention that the factories in the other areas are left free to sell at any price is specious and does not merit a moment s consideration
We are therefore of opinion that in effect the impugned notification brought about no discrimination between different regions or between producers and middlemen in view of what we have said already in Re 1 b and consequently it is not necessary to consider the last part of the submission under this head
There is in fact no discrimination by the impugned notification and this contention fails on that ground
There is no force therefore in this petition and it is hereby dismissed with costs
Petition dismissed


Summary:
The appellants were tenants of certain lands which formed part of a Taluqdari Estate
These lands though cul tivable were not cultivated for a continuous period of 3 years prior to the coming into Iorce of the Bombay Taluqdari Tenure Abolition Act 1949
In the tenant s appeal to this Court on the question whether these lands were uncultivated lands within the meaning of Section 6 of the 1949 Act and thus became vested in the State Dismissing the appeals this Court HELD 1
The lands in question are clearly covered by the definition of the expression uncultivated land as set out in the Explanation to Section 6 of the Bombay Taluqdari Tenure Abolition Act 1949
500 F
11 Even according to the appellants themselves the lands were under cultivation for some time prior to the coming into force of the said Act and hence it could not be said that they were uncultivable lands
They were in fact lands which were capable of cultivation and as a matter of fact had been subjected to cultivation for some time but were not cultivated 1or continuous period of three years prior to the coming into force of the Act
Accordingly the lands must be regarded as uncultivated lands for the purposes of Section 6 of the Act and must be deemed to be vested in the State Government
500 E F 499 C
State of Gujarat vs Gujarat Revenue Tribunal 19801 SCR233 held inapplicable
497 498