Mahalakshmi Sugar Mills Co. Ltd.& Anr vs Union Of India & Ors

4. Section 3(2)(f) of the Act empowers the Central Government to fix compulsory quota of sugar produced by a sugar producer in the manner prescribed by the Central Government including the price thereof at which the same is to be sold. It is known as "levy sugar". The rest of the sugar, however, can be sold by the producers in free market. It is known as "free sugar".

clause (2) or sub-clause (3), as the case may be, 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.

(7)** Subject to the provisions of sub-clause (4), the additional price shall become payable to a sugarcane grower, if he, in performance of his agreement with a producer of sugar, supplies not less than 85% o the sugarcane so agreed:

9. We may notice that in the State of Uttar Pradesh, the Government of Uttar Pradesh enacted Sugar Control Act, 1938. The Legislature of the State of Uttar Pradesh, furthermore, enacted UP Sugarcane (Regulation of Supply and Purchase) Act, 1953.

13. The Central Government, however, appointed a Committee commonly known as Bhargava Commission. It gave its recommendations, inter alia, opining that mopping up of the extra sale realization should be confined to 50%.

14. The Central Government, relying on or on the basis of the recommendations of the said Commission, introduced clause 5A in the said Order as a result whereof additional price came to be paid to the growers of sugarcane (1) over and above the SMP by the sugar producers; (2) equivalent amount from free market sales realization came to be retained by the sugar producer.

16. Post October 1974, therefore, apart from the levy sugar being based on the SMP only, the same was based on the actual cane price payable by the sugar producer. However, according to the sugar mill owners, the Central Government continued with the exercise of determination of the price of levy sugar on the basis of 100% mopping up and had not been considering the said changed scenario.

17. We may also notice that the State of Uttar Pradesh in purported of its power conferred upon it under Section 16 of the 1953 Act enforced a price to be paid by the owners of the sugar mill to the producers known as State Advisory Price (ASP). Indisputably, the SMP as also the ASP for sugarcane varied from year to year.

56. Sub-clause (iv) of Clause 5A of the Order mandates that the additional price determination under sub-clause (ii) shall be paid by the producer of sugar to the sugarcane grower. It is, therefore, mandatory in character and added to the price of the sugarcane. It was clearly held that 50% of the mopping up amount could not be taken into consideration for determination of the price of levy sugar. Admittedly, mopping up of 100% was held to be illegal.

60. The decision in Malaprabha-II that while taking into consideration the unfavourable factor, the Central Government cannot refuse to consider the factor which is favourable to the mill owner assumes significance. We say so for two reasons (1) it is possible that while confining mopping up to the extent of 50%, the fact of additional price paid in terms of Clause 5A of the Order would be neutralized or adjusted but the same would not mean that the exercise shall not be carried into effect; and (2) the effect of payment of an extra amount in terms of State Advisory Price cannot be refused to be taken into consideration.

65. We are of the opinion that the same principle should be applied herein.

72. We are, therefore, of the opinion that Mahalakshmi has wrongly been decided whereas Hari Nagar has correctly been decided.

73. Appeals arising out of SLP (C) Nos.481/2007 and 14130/2007 filed by Mahalakshmi Sugar Mills Co. Ltd. and Govind Nagar Sugar Ltd. respectively are consequently allowed and Appeals arising out SLP (C) Nos.14967-14978 of 2007 filed by Union of India & Ors. are dismissed. No costs.