Case: H.S.S.K. Niyami and Another Vs. Union of India and Another

2. The writ petitions were dismissed by the High Court and the appellants in these circumstances have approached this court challenging the judgment of the High Court. The material contentions raised by the appellants in the affidavit and adumbrated in the grounds of appeal in this court are that the appellants factories are part of the entire State of Mysore (now Karnataka) as was notified preceding the impugned notification. The factors like price of sugarcane, taxes, duties, sugar recovery percentage, labour charges, cost of production or fair return to the produce are same or similar in the entire State but due to the impugned notification by including in Zone No. 1 the appellants are put to hugeThe country was divided into five zones. Zone No. 1 consists of all the factories in Maharashtra, Gujarat, North Mysore, North Andhra Pradesh, Zone No. 2 consists of all the factories in Orissa, rest of Andhra Pradesh. South Mysore (rest of Mysore), Madras, Pondicherry and Kerala. On account thereof the appellants are stated to be subjected to heavy losses. The details have been mentioned in the affidavit and the grounds of appeal but for the purpose of disposal of the point involved in the appeals, it is not necessary to adumbrate all the material particulars in that regard. The contention that Section 3 (3-C) of the Act is ultra vires their fundamental rights enshrined under Article 19(1)(g) and right to property under Article 19(1)(f) as was available in the year 1968 (but since deleted under Constitution Forty-fourth Amendment Act) is no longer available. The Act received the protective umbrella of Article 31-C of the Constitution read with Ninth Schedule as it has been included therein as Item No. 126. It is, thereby, immune from attack on that score Moreover it is covered by a recent Constitution Bench judgment of this Court in Shri. Sitaram Sugar Company Ltd. v. Union of India ( 1990 (3) SCC 223 ). Therefore, the point is no longer res integra. Section 3 (3-C) is constitutionally valid andThe next contention raised in the High Court as well as reiterated before us is that the appellants are entitled to a notice and hearing before placing them in Zone No. 1. Clubbing with other factories in the State of Maharashtra etc. is uneconomical and kept the appellants under constant loss. Therefore, it is violative of the principles of natural justice. To appreciate the contention it is necessary to look into the notification issued. The Government of India, in exercise of the power under Section 3 of the Commission of Inquiry Act, 1952 appointed "Sugar Inquiry Commission" by notification No. S.O. 2670 dated August 3, 1964 which consists of Dr. S. R. Sen, the Advisor and Additional Secretary of Government of India, Planning Commission as Chairman and four other economic expert as members of the Commission to inquire into (a) the determination of the prices and the system of distribution of sugar and (b) the policy regarding licensing of new sugar factories or the expansion of existing sugar factories. They made a detailed inquiry, after examining the persons connected with industries including many an owner of the sugar factories or representatives of the associations of the sugar factories and co-operative Sugar Factories Associations etc. In paragraph 4 they discussed the proliferation of zones as against the four zones recommended by the previous Tariff Commission. The representatives of the State Government and the sugar industry submitted their detailed memoranda on the various problem including zoning and cost schedules. The commission made in depth enquiry and in paragraph 4.3, it was stated that as against the four zones recommended by the Tariff Commission, government has gradually increased the number to twenty two. The Commission has stated each zone should be large enough to ensure that the principle of price fixation does not degenerate into a cost plus basis as the latter discourages efficiency and perpetuates inefficiency. In paragraph 4.4 it was stated that the Sugarcane Breeding Institute, Coimbatore has divided the whole country into five regions on the basis of agro-climatic and other considerations details of which were given in Chapter IV : Region (1) consists of Gujarat, Maharashtra, North Mysore, North Andhra Pradesh and Sough Madhya Pradesh. In Paragraph 4.6 it was stated that apart from considerations relating to agro-climatic factors and comparative economic advantage, it is worthwhile to consider the variations in duration of crushing and sugar recovery also. On this basis some revision in the zones as suggested by the Coimbatore Institute appears to beIn paragraph 4.7, it was stated that "on the basis of the above considerations, the Commission recommended five zones for the purpose of fixation of ex-factory prices of sugar". Zone No. 1 as stated earlier, which is relevant for the purpose of these appeals, consists of factories in Maharashtra, North Mysore etc. Accepting the recommendation, the Government of India in exercise of the power conferred upon them by sub-rule (2) of Rule 125 of the Defence of India Rules, 1962 and clause 6 of the sugar (Control) Order, 1963 issued under Section 3 (3-c) of the Act and in supersession of the notification of the Government of India, Notification No. GSR 1145 dated August 6, 1965 issued the impugned notification in GSR No. 463 dated March 24, 1966 and the factories were specified in Schedules 2 and 3 annexed. The notification has been issued and was published in the Gazette of India for the purpose of fixing prices in column 2 of Schedule I annexed hereto as the maximum ex-factory price. Thus, that the appellants factories came to be included in Zone No. 1 as recommended by the expert Economic Commission appointed by the Government of India. The notification as stated earlier is a statutory notification issued in exercise of the powers referred to herein before

Court's reasoning:
e have no hesitation to conclude that the contention of the appellants that they are entitled to individual representation and notice and hearing before placing them in Zone No. 1 is devoid of force and is rejected. It is also equally true that the government did not file any counter-affidavit even till date, refuting the allegations made in the grounds of appeal regarding the alleged costs structure and the consequential loss that the appellants are being put to. But in view of the finding that it is a legislative policy but not an executive action, we cannot draw an adverse inference against the State for not denying those allegations and to conclude that the appellants factories are to be placed in a particular zone. In other words this Court cannot interfere with the legislative policy of zoning particular factories in a particular region, namely, in Zone No. 1 of the appellants factories by merely the State having omitted to file the counter-affidavit refuting the allegations of the alleged loss. In an individual case of administrative action, if no counter-affidavit has been filed an adverse inference may be drawn and relief may be moulded as per given situation. Likely that some loss may be caused to individual factory but as pointed out by this Court in Anakapalle Coop. Agrl. and Industrial Society case ( 1973 (3) SCC 435 : 1973 (2) SCR 882 ) that the price fixation cannot be made unitwise and it is not practicable to make unit as a base to fix the price or to place in a particular zone. The very relief in the writ petition to fix the price at Rs. 161 per quintal cannot be ordered as was already negatived by this Court.