Duncan Industries Ltd. And Anr vs Union Of India

Delay condoned in the Special Leave Petition arising out of CC No. 12164 of 2004. Leave granted in both the Special Leave Petitions.

The Retention Price Scheme M/s Duncan Industries Ltd. (hereinafter "the First Appellant") is engaged in the business of manufacturing and selling urea (a fertilizer). In 1993, the First Appellant acquired the urea plant of M/s Indian Explosives Ltd. (a unit of ICI India Ltd.). The Second Appellant is a shareholder in the First Appellant-Company (hereinafter, collectively "the appellants").

In 1957, the Government notified fertilizers (including urea) as an "essential commodity", under the Essential Commodities Act, 1955 (hereinafter "the EC Act"). The Fertilizer (Control) Order, 1957 (hereinafter "the Fertilizer (Control) Order") was made in exercise of the powers conferred by Section 3 of the EC Act. The Fertilizer (Control) Order has been revised from time to time. Through the Fertilizer (Control) Order, the Government was able to fix the maximum retail price of fertilizers, which was to be complied with by dealers, manufacturers etc. However, since this controlled-price mechanism resulted in losses for manufacturers, it was suggested that the Government provide subsidies to make good the losses. Accordingly, the Government constituted a Committee under the Chairmanship of Mr. S.S. Marathe (hereinafter "the Marathe Committee") to introduce a rational system for the pricing of fertilizers in the country. The Marathe Committee was to suggest a mechanism that would ensure a reasonable return on investment to manufacturers of fertilizer, facilitate the healthy development and growth of the fertiliser industry, and also ensure that the prices of fertilizer were kept within reasonable limits. To this effect, the Marathe Committee made a detailed report suggesting an intricate system of fertilizer subsidies known as the "Retention Price Scheme"

The Scheme was to be administered by an inter-ministerial committee, which also had representatives of the fertilizer industry. This committee was called the Fertilizer Inter-Coordination Committee (hereinafter "the FIC Committee"). The FIC Committee was to have an Executive Director and adequate staff to maintain accounts, make and recover payments, undertake costing, and collect and analyze production data, cost and other inputs, in order to work out the Retention Price periodically and make appropriate adjustments.

The Operation of the Retention Price Scheme The Government's decision to introduce the Retention Price Scheme was formally notified on 1.11.1977 in the Official Gazette. However, even prior thereto, a letter (dated 24.10.1977) was written by the Government to the Managing Director of M/s Indian Explosives Ltd. (later acquired by the First Appellant), wherein the details of the Retention Price Scheme were indicated. It was pointed out in this letter that:

The Litigation A Civil Miscellaneous Writ Petition No. 43934/2001 was moved by the appellants in the High Court of Judicature at Allahabad to challenge the interim revision of Retention Price made on 5.11.2001 and the consequent demand raised upon the First Appellant on 13.11.2001 for recovery of Rs.184.01 crores under the Scheme. Although, the appellants had filed the Writ Petition sometime in 2001, it was actually moved in 2002, by which time the Government had recovered Rs. 127.21 crores by way of adjustments, leaving a balance of Rs. 56.80 crores.

The appellants challenged the working of the Retention Price Scheme by Civil Miscellaneous Writ Petition No. 43042/2002. This Writ Petition was dismissed by the High Court through the impugned judgment dated 7.11.2003. By another order dated 7.11.2003, following the impugned judgment, the High Court also dismissed Civil Miscellaneous Writ Petition No. 43934/2001.

The first contention of Dr. Dhavan must, therefore, fail since the Retention Price Scheme is a mere administrative scheme without any statutory flavour.

Assured Returns It is next contended by Dr. Dhavan that the Government is estopped from formulating a scheme under which the Retention Price fixed would deny the First Appellant the assured 12% post-tax returns. We do not agree.

(emphasis supplied).

In the face of this undertaking, we are unable to accept the contention of Dr. Dhavan that the Retention Price Scheme was something that was compulsorily imposed on fertilizer manufacturers. Indeed, it is not as if the manufacturers are challenging the maximum retail price fixed under the Fertiliser (Control) Order. They are merely challenging the manner in which the Retention Price, which determines the subsidy payable under an agreed arrangement, is determined. In fact, when we read the undertaking which was extracted above, it appears to us that the manufacturers had agreed to abide by the decision of the FIC Committee, on all matters relating to determination of the Retention Price as being "final and binding" upon them. In the light of this, the argument of estoppel is actually the boot on the other foot.

The Final Findings Despite the bulky material and lengthy arguments presented to us, we find that this is a case full of sound and fury, signifying nothing. Indeed, we have found against the appellants on every point that they have chosen to impugn the judgment of the High Court. In the result, these appeals must fail and are hereby dismissed with no order as to costs.