Case: Anakapalle Coop. Agrl. &amp; Industrial Society Ltd. Etc Vs. Union of India &amp; Others

1. These petitions under Article 32 of the Constitution have been brought by or on behalf of the various factories, Co-operative Societies and Mills which carry on the business of manufacturing and selling sugar (hereinafter called compendiously the "sugar producers") challenging the validity and legality of the Levy Sugar Supply Control Order 1972 made under Section 3 of the Essential Commodities Act, 1955, hereinafter called the Act fixing the price of levy sugar in the different zones in the country and praying for various reliefs. Writ Petitions Nos. 279 to 283, 293, 300, 303 and 306 of 1972 are by the sugar producers in Andhra Pradesh zone; Writ Petitions Nos. 297 and 304 of 1972 by the Sugar producers in North Bihar zone and Writ Petitions Nos. 296 and 298 of 1972 by those in the Punjab zone.

Court's reasoning:
The result of accepting an interpretation that profit on the free sale of sugar can be taken into account while considering whether a reasonable return has been allowed on the capital employed by the sugar producers would, it has been stressed, be contrary to the scheme and purpose of the sub-section in question. This aspect of the matter has been fully dealt with in the above connected case. We have held that fair price has to be determined in respect of the entire produce ensuring to the industry a reasonable return on the capital employed in the business of manufacturing sugar. In other words the contentions of the sugar producers have beenfrom the impracticability of fixing the prices for each unit in the whole country the entire object and purpose of controlling prices would be defeated by the adoption of such a system.It must be remembered that during the earlier period of price control the price was fixed on an all India basis. That still is the objective and if such an objective can be achieved it cannot be doubted that it will be highly conducive to proper benefit being conferred on the consumers. According to the Commission the objective to be achieved should be to have only two regions in the whole country, namely, sub-tropical and tropical. Not a single expert body appointed by the Government of India from time to time countenanced the suggestion that price control should be unit-wise. It appears that even before the Tariff Commission such a point of view was understandably not pressed on behalf of the sugar industry. The low cost units demanded the formation of the larger zones. No material has been placed before us to show that there was any serious demand for prices being fixed unit-wise. Even in the arguments it was almost common ground with the exception of one or two dissentient voices that zoning is unavoidable in our country in the matter of fixing of the price of sugar.The criticism that climatic and agro-economic conditions have not been taken into consideration while constituting the zones does not appear to be valid. The climatic conditions in the State of Assam, West Bengal, Orissa and Kerala which are in one zone seem to be substantially similar. The Commission has pointed out that there is only a small number of units in each one of these States and the costs are more or less similar. Bihar has been divided into two zones and U. P. into three zones. The reasons are given in para 8.16 of Chapter VIII of the 1969 report. It has been pointed out that the climatic conditions of the two areas, namely, the Meerut division of the Western U. P. and Gorakhpur Division are different as they are separated by 300 miles. The units in Central U. P. had also, for the same reasons, to be constituted into a separate group. On similar basis the units are in Bihar had been sub-divided into two zones North and South.It is, therefore, altogether futile to say that the zoning should not have been done Statewise. If any other system had been followed it would have become impossible to work out a proper cost schedule for the Zone.For instance if the Chittoor Co-op. Sugar Ltd. which is in Andhra Pradesh towards the extreme and which is very near the State of Tamil Nadu and had been grouped with the factories in Tamil Nadu or if the Nizam Sugar Factory and the Nizamabad Co-op. Sugar Ltd. which are quite near the border of Maharashtra State had been grouped with the factories in Maharashtra, it would have created several problems and difficulties particularly with reference to all the taxes, duties etc. which are levied by each State and also the wages which are payable to the workers in the different States which admittedly vary from State to State.In the elaborate arguments on behalf of the sugar producers, hardly any serious attempts was made to press the question of alleged discrimination, particularly if the adoption of the zonal system could not be demolished. Once it is recognised that prices could be fixed according to the zones the cost schedules that have been worked out by the Commission have necessarily to be different for each zone. The various items which go into cost differ from zone to zone. It is not possible to take out only a few items and find discrimination, disregarding all the other items or components of costs on the basis of which price determination has to be made.We are unable to hold that while classifying zones on geographical-cum-agro-economic consideration, any discrimination was made or that the price fixation according to each zone taking into account all the relevant factors would give rise to such discrimination as would attract Art. 14 of theis not therefore possible to say that the principles which the Tariff Commission followed in fixing the prices for different zones are either not recognised as valid principles for fixing prices or that simply because in case of some factories the actual cost was higher than the one fixed for the zone in which that factory was situate the fixation of price became illegal and was not in accordance with the provisions of sub-sec. (3C).It has not been denied that the majority of sugar producers have made profits on the whole and have not suffered losses. It is only some of them which assert that their actual cost is far in excess of the price fixed. That can hardly be a ground for striking down the price fixed for the entire zone provided it has been done in accordance with the accepted principles. The methods employed by the Tariff Commission 1969 in preparing the cost schedules as also the formula for working out cost schedules for the future are fully set out in the Commissions report and have been also discussed in the connected case (supra). We need not go over the same matters again.In the letter of 8th October, 1970 the Commission pointed out that in order to arrive at the figure of the return on the capital employed of Rupees 10.50 per quintal the Commission had made a study of the various figures in respect of the costed period average of 5 years duration and recovery and pro forma calculation for the capital employed. Thereafter the capital employed had been computed on a uniform basis taking into account the written down value of assets and working capital equal to six months cost of production including depreciation. After deducting the average net fixed assets from the capital employed the working capital came to Rupees 55/- per quintal. It was stated that instead of the figures indicated in para 9.13 of the 1969 report the working capital should be taken at the figure of Rupees 55/- per quintal for regulating additional interest due to carrying on larger stock on account of increased production. It may be mentioned that in the 1969 report the figure of Rupees 42.40 per quintal had been calculated by way of working capital (vide para 9.13 of the report). This meets the criticism made on behalf of the producers that although the rate of interest has increased, the Commission has not allowed any addition on that account.It is unfortunate that nothing has been done to implement the recommendation of the Commission in respect of rehabilitation presumably, we are told, because the question of nationalisation of sugar industry was under consideration. The conditions which prevailed at the time of the 1959 report and the 1965 report were different and the latest view expressed in the 1969 report ought to have received serious consideration. But we are unable to hold that merely because Rs. 2/- per quintal as recommended by the Commission has not been taken into account while fixing the price of levy sugar the price as fixed should be struck down. The non-inclusion of this amount is in no way violative of the provisions of Sec. 3-A of the Act. We have however, no doubt that the Government will give serious and immediate consideration to this matter and take a decision on it without any further delay.A few other matters (covered by question No. 6) may now be considered which were brought to our notice. The first is about gratuity. The first Wage Board had recommended that it should be paid by the sugar producers to its employees. The complaint of the producers was that no account had been taken by the Tariff Commission of this item. Our attention has been drawn to the enactment of recent legislation under which the rate of minimum bonus has been raised from 4 % to 8.33 %. It has been urged that when the prices were fixed by the impugned order the additional amount could not be taken into account while determining the cost of production. As the producers will be bound to pay the bonus at the enhanced rate they will be put to a good deal of loss until some provision is made for addition of that amount for the purpose of working out the levy prices. So far as gratuity is concerned it has been pointed out by the Solicitor General that in Form V appearing at page 192 under Salaries and Wages item 11 relates to gratuity and therefore gratuity had been included. There are hardly any clear pleadings in the writ petitions on this point from which it can be established and gratuity has not been included. We are unable to accept the contention that payment of gratuity or liability thereof has not been taken into account while fixing the price for levyour opinion the prices as fixed by the impugned order cannot be struck down because of the promulgation of the Ordinance by which the amount of minimum bonus has been raised from 4 % to 8.33 % of the salary or wages earned by the employees during the accounting year or Rs. 80/- whichever is higher. But there can be no manner of doubt that the Government will have to take some immediate action by either making some ad-hoc provision in respect of the price or taking some other step which may be open to it to give the necessary relief to the sugar producers in this behalf.