Case: Bhopal Sugar Industries Limited Vs. State of Madhya Pradesh and Others

The appellant-company crushes sugarcane in its factory at Sehore in Madhya Pradesh. For its business it purchases sugarcane from "reserved area" as well as from outside both directly from the cane-growers as well as through respondent No. 3, a Cane-growers Co-operative Society, Sehore. Section 21 of the Act imposes an obligation upon the appellant-company to pay commission on all its purchases of cane at prescribed rates and it has to pay such commission in respect of purchases made through the Society to the Society and the Development Council and in respect of purchases made directly from the cane-growers to the Development Council. According to the appellant-company judicial decisions rendered by Madhya Pradesh High Court as well as this Court have settled the position that the commission chargeable under s. 21 of the Act is in the nature of a fee the imposition of which is supported on the basis of quid pro quo in the shape of services rendered by the Development Council to a factory (vide: Jaora Sugar Mills (P) Ltd. v. State of Madhya Pradesh and others. It appears that during the seasons 1960-61 to 1964-65 the appellant-company purchased cane directly from the cultivators of "reserved area" as well as from the cultivators of "non-reserved area" and respondent No. 2 (Development Council, Sehore) made a demand of commission from the appellant-compan y in respect of such purchases both from "reserved area" as well as from "non-reserved area." Similarly, during the crushing seasons 1963-64 to 1966-67 the appellant-company made purchases of cane from or through respondent No. 3 (Co-operative Society) in respect whereof a demand of commission was made by respondent No. 3 from the appellant company. By a writ petition (being Misc. Petition No. 246 of 1967) filed in the Madhya Pradesh High Court at Jabalpur the appellant-company challenged the validity of the demand made by respondent No. 2 insofar as it related to purchases made from non-reserved area on the ground that it (Council) was established for the reserved area of the appellant-companys factory and its functions were confin ed to that area and as such no commission (fee) could be recovered by it in respect of purchases made by appellant-company from non reserved area; similarly, the demand made by respondent No. 3 (Co-operative Society) was challenged on the gr ound that no services of any kind whatsoever were rendered by it to the appellant company, and the charge would be invalid in the absence of any quid pro quo. The High Court negatived both the contentions and dismissed the petition. It is this decision of the High Court that is challenged before us

Court's reasoning:
It is thus clear from the aforesaid statutory provisions that every factory is under an obligation to pay commission on all its purchases of cane at the prescribed rates and it has to pay such commission at t he rate of 2 Naya Paise per maund to the Society and 3 Naya Paise to the Council in respect of purchases made through a Cane-growers Co-operative Society and at the rate of 3 Naya Paise per maund to the Council where the purchases are made directly from the cultivators or cane-growers. It cannot be and was not disputed by Counsel on behalf of the respondents that the levy under s. 21 of the Act though called "commission" is really in the nature of a fee, the imposition of which is supportable only on the basis of quid pro quo in the shape of rendition of services to the factory in the matter of cane purchased by it and Counsel accepted this position as emerging from this Courts decision in Jaora Sugar Millsfor the appellant-company contended that respondent No. 2 Council has been established for the "reserved area" of the appellants factory so declared under s. 15 of the Act, that respondent No. 2 Council is required to discharge its statutory functions and duties under s. 6 of the Act confined to the "reserved area" meant for the appellants factory and as such the demand for commission (fee) in respect of purchases of cane ma de by the appellant-factory from non-reserved areas (which it is entitled to make along with its purchases from the "reserved area") would be illegal and without any authority of law because in respect of such purchases there is no quid pro quo in the shape of rendering of services by respondent No. 2 to the appellant- factory.It is not possible to accept this contention for more than one reason. In the first place there are no qualifying words to be found in s. 21 of the Act which li mit the imposition of commission (fee) to purchases of cane made by a factory from reserved area only; the imposition is on every maund of cane purchased by factory irrespective of the area from where such purchases may have been made. Secondly, and this is important, if the relevant provisions of ss. 5 and 6 of the Act are carefully examined it will appear that the functions and duties of the Development Council are not confined to the "reserved area" of a factory as urged by the Counsel for theregards the demand and recovery of commission (fee) by respondent No. 3 under s. 21(1)(a) in respect of purchases of sugarcane made by the appellants factory through it, the contention of Counsel for the appellant- company has been that respondent No. 3 is the concerned Cane-growers Co-operative Society in the area, one of the objects of which is to sell cane grown by its members to the appellants factory, that the said Society does not render any services to the appellants factory under the Act or otherwise and hence is not entitled t o recover any fee from the appellant-company. It is pointed out that respondent No. 3 is meant for helping its members and in fact renders various types of services to its cultivator-members so that they are not exploited. In fact in the matt er of supplies of cane made through the respondent No. 3 it is the Society which deals with its members who receive their price from the Society. Counsel pointed out that even in the return filed by respondent No. 3 to the writ petition, respon dent No. 3 enumerated four types of services which it claimed was rendering to the appellants factory, namely, (a) it made arrangements for lump-sum cane supply on lump- sum demand from the factory; apart from convenience this resulted in econo my to the factory as it had to maintain less staff; (b) it undertook equitable distribution of quota and the factory had not to undertake this function; (c) it undertook the maintenance of the records of individual growers for cane supplies a nd the factory had not to undertake this function and (d) it made payment to the suppliers though the factory is required to make payments for supplies effected immediately and in actual practice mostly the factory made payments late at i ts convenience but the Society made payments to the suppliers regularly according to the programme drawn by it; the appellants factory thus benefited by the existence of thisscheme of the Act is that under sections 15 and 16 a declaration of reserved and assigned areas for purchase and supply of sugarcane is made by the Cane Commissioner for every factory after consulting in the manner prescrib ed the occupier of the factory and the Cane- growers Co-operative Society, if any, in that area and upon declaration of such areas an obligation is cast upon the occupier of the factory, in the case of "reserved area", to purchase all cane grown i n such area which is offered for sale and in respect of "assigned area" to purchase such quantity of cane grown therein and offered for sale for the factory as may be determined by the Cane Commissioner. Further, under s. 19 the State Gover nment can by order regulate the distribution, sale and purchase of cane within any "reserved and assigned area" as also from areas other than "reserved and assigned areas" and under cl. (b) of sub- sec. (2) such order made by the State Government ma y provide for the manner in which cane grown in the "reserved area" or the "assigned area" shall be purchased by the factory and the cane grown by a cane-grower shall not be purchased except through a Cane-growers Co-operative Society. In ot her words the scheme of Act contemplates situations where the appellants factory may have to purchase cane from within reserved or assigned areas only through the respondent No. 3 Society. Moreover in its Return the respondent No. 3 has averred that under its bye-laws the Society is established to develop scientific methods of sugar cane growing and calls on its members to introduce modern means of implements for cultivating sugarcane which unquestionably makes for assured bulk supply of uniformly good quality cane through its members to the appellants factory. In other words this function undertaken by respondent No. 3 is of a nature or kind similar to that undertaken by the council and theref ore it cannot be said that no services conferring special benefit on the appellants factory in the matter of its purchases of cane are rendered by respondent No; 3 to the appellants factory. Having regard to the aforesaid position it is not possible to accept the contention that in respect of purchases of cane made through the respondent No. 3 Society there is no element of quid pro quo in the shape of rendering services by respondent No. 3 to the appellants factory.