Case: U.P. Co-operative Cane Unions Federations Vs. West U.P. Sugar Mills Association & Others


Decision reasoning: 1[ds]26. The Preamble of the 1953 Act saysAct to regulate the supply and purchase of sugarcane required for use in sugar factories.......The provisions of the Act referred to above also show that the Legislature has made very elaborate provisions regarding supply of sugarcane by canegrowers, its purchase by the sugar factories and payment of price thereof. In fact, very detailed and exhaustive provisions have been made in the Rules and the 1954 Order to ensure that at the time of delivery of sugarcane by the canegrowers, its weight and price is correctly recorded and the price is paid to them within 14 days, failing which sugar factory is liable to pay interest. 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.27.It has been urged by learned Counsel for respondents that the expressionthe minimum price notified byused in the proforma of the agreement which is to be executed between a canegrower and the occupier of the factory as given in Form B and that which is to be executed between ae society and the occupier of the factory as given in Form C in the appendix to 1954 Order indicates that it is only the minimum price fixed by the Central Government which can be the consideration or price for the sale of sugarcane to the sugar factory.e in support of this submission has been placed upon certain observations made by this Court in Ch. Tika Ramji & Ors. v. State of Uttar Pradesh & Ors., 1956 SCR 393. The proforma of agreement viz. Forms B and C are contained in the appendix to U.P. Sugarcane Supply and Purchase Order, 1954. This order has been made by U.P. Government in exercise of the power conferred by Section 16 of the 1953 Act, which provides that the State Government may for maintaining supplies by Order regulate the distribution, sale or purchase of cane in any reserved or assigned area, etc. The Order having been made by the State Government in exercise of a power conferred by an Act made by U.P. Legislature, the only logical inference which can be drawn is that the wordrefers to State Government. There is no indication in the proforma of the agreement or in the 1954 Order that the wordwould refer to Central Government. If the State Government is prescribing a proforma of an agreement which is to be executed by a canegrower or ae society and the occupier of the factory regarding sale and purchase of sugarcane wherein the wordis used, it can only mean the State Government and not the Central Government unless there is clear indication to the contrary.28. The observations made in Tika Ramji (supra), strong reliance on which is placed by learned Counsel for the respondents, have to be understood in the context in which they were made. 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 betweench is a fixed amount andwhich 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) andthereof contemplate anch in view of the mandate of Clause 3(2) is bound to be higher than theed under Clause 3(1). Naturally it is thisch 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 thefixed by thethe CentralThe 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 belowprice of cane fixed by Government here only meant the pricefixed by theappropriate Government which would bet, 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 frommeaning thereby theCentral Government, theState 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,regard to the factual situation then existing the U.P. Government had not fixed the price of the sugarcane, it was held that the price of the canefixed by theGovernment could only mean. It has not been laid down as a principle of law that the wordsprice notified bymust necessarily mean the minimum pricefixed by theCentral Government or that under no circumstances it can mean the pricefixed by the. Learned Counsel for therespondent had also submitted that in order to constitute a valid agreement, the consent of the parties thereto should be a voluntary consent and not a consent obtained under any kind of compulsion or duress. It has been submitted that after the State Government makes an announcement of a State Advised Price, the occupiers of the sugar factories are compelled to enter into agreements with the canegrowers ande societies in Forms B and C, wherein the State Advised Price is mentioned. The same price is also mentioned in the parchas issued to the canegrowers. It has been urged that the sugar factories cannot be compelled to pay such State Advised Price even though it may have been mentioned in the Forms or in theparchas. It is not possible to accept the contention raised. As discussed earlier, the State Government in exercise of its regulatory power can fix the price of the sugarcane. The mere fact that this price is not to the liking of the sugar factory does not mean that it cannot form the basis for supply of sugarcane by the canegrowers ore society to the sugar factory. It is well settled that even a compulsory sale does not lose the character of a sale.The observations made in Tika Ramji (supra), strong reliance on which is placed by learned Counsel for the respondents, have to be understood in the context in which they were made. 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 empoweredl Government to fix theprice 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 thatCentral Government mayfix the minimum price of sugarcane to be paid by producers of sugar. There is a difference betweench is a fixed amount andwhich only indicates the lowest permissible rate. The 1966 Order which itself was made bynt more than a decade after the judgment was rendered in Tika Ramji was amended in 1978 and Clauses 3(3) andf contemplate anch in view of the mandate of Clause 3(2) is bound to be higher than theed under Clause 3(1). Naturally it is thisch 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 onlynt had taken a step for fixing the price. It was in these circumstances that it was observed that thefixed by thethe CentralThe 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 thatregard to the factual situation then existing the U.P. Government had not fixed the price of the sugarcane, it was held that the price of the canefixed by theGovernment could only mean. It has not been laid down as a principle of law that the wordsprice notified bymust necessarily mean the minimum pricefixed by theCentral Government or that under no circumstances it can mean the pricefixed by the. As discussed earlier, the reservation or assignment of area is made for the benefit of a sugar factory. The agreements executed by the canegrowers ore society in favour of occupier of a factory are also for the benefit of the sugar factory as by such agreements it gets an assurance of a continuous supply of freshly harvested sugarcane on the days indicated in the requisition slips issued by it so that there may not be any problem in getting optimum quantity of raw material throughout the crushing season. In absence of the agreements the sugar factory will also be a loser as it may face great problem in getting the supply of sugarcane according to its requirement. The occupiers of the factory are themselves keen for execution of the agreements but their only objection is to the mention of State Advised Price. The agreement is one composite transaction and it is not open to them to contend that the terms thereof which are to their advantage should be enforced but the term relating toprice notified bythe State Government should not be enforced as their consent in that regard was not a voluntary act. In our opinion, having regard to the advantages derived by the sugar factories, they are fully bound by the agreement wherein the Stae Advised Price may be mentioned and it is not open to them to assail the clause relating to price of the sugarcane on the ground that their consent was not voluntary or was obtained under some kind of duress.on (1) of Clause 3 of the 1966 Order,Central Government canonly fix a minimum price of sugarcane. This clause should be read along with(2) which creates an embargo or prohibition that no person shall sell or agree to sell sugarcane to a producer of sugar and no such producer shall purchase or agree to purchase sugarcane at a price lower than that fixed under(1). The inconsistency or repugnancy will arise if the State Government fixed a price which is lower than thatfixed by theCentral Government. But if the pricefixed by theState Government is higher than thatfixed by thee will be no occasion for any inconsistency or repugnancy as it is possible for both the orders to operate simultaneously and to comply with both of them. A higher pricefixed by theState Government would automatically comply with the provisions of(2) of Clause 3 of 1966 Order. Therefore, any pricefixed by theState Government which is higher than thatfixed by theot lead to any kind of repugnancy.Learned Senior Counsel for the respondents has placed strong reliance on certain observations made in State of Tamil Nadu v. Kothari Sugars and Chemicals Ltd., 1996 (7) SCC 751 , which is a decision by a Bench of two Judges. In our opinion, this decision can be of no assistance to the respondents as the point for consideration here was entirely different, which will be evident from paras 1 and 3 of the judgment which read as1. The question for decision is : Whether for the purchase of sugarcane from the cane growers, a purchaser is liable to pay purchase tax under the State Sales Tax Act on the amount paid by the purchaser to the canegrower over and above the price fixed under Clauses 3 and5A of theSugarcane (Control) Order, 1966?Para 3. The occasion for payment by the purchaser of the amount in excess of the aggregate of the minimum cane price and the additional cane price so fixed, arises on account of an order of the State Government dated 15.11.1980 purporting to fix a higher revised minimum cane price and directing the sugar factories in Tamil Nadu to pay that price to the canegrowers. Pursuant to the direction, each sugar factory was directed to make that payment and in compliance thereof this sugar factory paid the excess amount as aning advance payment towards cane supply duringseason, against probable additional cane price under Section5A of theSugarcane (Control) Order, 1966.The question in issue here did not come up for consideration before the Bench and some general observations made in the course of the reasoning given in a matter dealing with liability to pay tax on some amount which was paid by sugar factory as