Case: Union of India and Another Vs. Messrs Brij Fertilizers Private Limited and Others

Two other questions that arise in this connection are if the High Court committed any error in exercise of its extraordinary jurisdiction to interfere at the stage of show cause if a report prepared by the Project Development India Limited (in brief PDIL) behind the back of the respondents could be relied for rejecting the specification of standard fertiliser produced by the respondents2. Before adverting to these issues we consider it necessary to mention that the payment of subsidy to manufacturers of fertilisers was introduced in 1982 under a scheme framed by the Government of India in pursuance of which every manufacturer was required to give a written undertaking to the President of India. In 1985 Government of India issued a Fertiliser (Control) Order under the Essential Commodities Act. Sub-clause (h) of Clause (2) of the Order defined fertiliser tosubstance used or intended to be used as a fertiliser of the soil and/or crop and specified in Part-A of Schedule I and includes a mixture of fertiliser, mixtures of micro-nutrient fertilisers and special mixture of fertilisers."(q) of the same clause explains prescribed standard of fertiliser asstandard means -(i) in relation to fertiliser included in Column 1 and Part A of Schedule I, the standard set out in the corresponding entry in Column 2, subject to the limits of permissible variation as specified in Part B of that Schedule; and(ii) in relation to a mixture of fertilisers, the standard set out in respect of that mixture under sub-clause (1) of Clause 13 by the Central Government, subject to the limits of permissible variation as specified in Part B of Schedule I;(iii) in relation to a (mixture of NPK fertilisers, mixture of micro-nutrient fertilisers and combination thereof), the standard set out in respect of that mixture under sub-clause (2) of Clause 13 by the State Government, subject to limits of permissible variation as specified in Part B of Schedulestandard specified of single super phosphate (SSP) sulphur manufactured by the respondents is described in Schedule I of the Order asSuper Phosphate (16% P2O5 Granulated) -(i) Moisture, per cent by weight, maximum(ii) Free phosphoric acid (as P2O5) per cent by weight, maximum(iii) Water soluble phosphates (as P2O5) per cent by weight, maximum(iv) Particle size - Not less than 90 per cent of the material shall pass through 4 mm IS sieve and shall be retained of 1 mm IS sieve. Not more than 5 per cent shall pass through 1 mm IS sieve."Control Order further deals in detail with price control, distribution, restriction on manufacturers and sale etc. of fertiliser. Chapter VII deals with enforcement authorities. Paragraph 27 empowers the State Government and the Central Government to appoint inspectors of fertilisers. Paragraph 28 empowers the inspectors to secure compliance of the Order by requiring the wholesaler or retail dealer to give any information in his possession with respect to manufacture, draw samples of any fertiliser, enter upon and search any premises etc. How the samples has to be analysed has been provided by Schedule II of the Order3. The basic raw material for manufacture of fertiliser is rock phosphate. There are various mines spread all over the country from where these rocks are obtained. They are canalised through State mineral corporations. One of such mines is located in Hirapur in the State of Madhya Pradesh. The Government of the State requested the PDIL to undertake laboratory test of these rocks and submit a report for determining disability allowance payable to SSP producers. The conclusion of the report is extractedworld reserve of good quality rock phosphate is gradually depleting making the use on non-standard and low grade phosphate, in the manufacture of phosphatic fertiliser as essential. In India, compared to other countries, the availability of usable quality rock phosphate is rather limited, though available in abundanceThis study was made, at the request of Madhya Pradesh Government, with a view to effectively utilise, to extent possible the lower grade indigenous rock phosphate from Hirapur Mines for SSP production. Experiments in PDIL laboratory has shown that this rock phosphate cannot be processed in the conventional route to produce SSP, as such, and it is imperative to make blends with any standard rock phosphate."report establishes that the rock phosphate available in our country whether it is in Madhya Pradesh or Jaipur appears to be incapable of producing SSP unless it is blended with imported rock. Proportion of the two depends on the strength of rock obtained from different mines. The PDIL conducted the test for those rocks whose strength varies from 20% P2O5 to 25% P2O5 and opined that blending of rock with 24% should be in proportion of 20% and 80%. The extract from the report runs aschemical analysis has shown 24.85% P2O5 and 30.03% Silica plus insoluble besides other impurities like high R2O3 (sic) compared to 32.4% P2O5, 4.56% Silica plus insoluble and 0.75% R2O3 (sic) in standard Jordon variety. Many proportions of blends were tried in laboratory to find out the optimum blend which would produce SSP of specification laid down by FCO and finally it was concluded that a bled of 20% Hirapur rock matrix and 80% Senegal will be a suitable proportion. This was confirmed even in pilot plant trials where for a comparison purpose two blends were tested e.g. 30 : 70 and 20 : 80 for Hirapur : Senegal rock phosphates. It found from analytical results that 20 : 80 proportion was most suited. Accordingly study was concentrated towards this 20 : 80 Hirapur : Senegal blend :" *

Court's reasoning:
Further no rock phosphate has been or could be purchased by any manufacturer expect through a corporation of the State. this fact is admitted in the counter-affidavit of the appellant extracted earlier. It is also clear from the letter of Assistant General Manager that Brij Fertilisers did not use any rock except Grade A. it is claimed by the respondents that on a technical assessment conducted by Bhabha Research Institute for Lalitpur rocks that the water soluble in rock phosphate with P2O5 with 29% to 32% is more than 16%. Even if this report is ignored the letter of Assistant Mines Inspector establishes that water soluble phosphate Hirapur mines of Grade A was 16%. Each respondent has filed details of rock phosphate consumed by its unit from various corporations. The average grade mentioned is 31%. No one has used grade II. Even Avadh Fertiliser has not used rock phosphate below 27%. From the chart appended in respect of Hirapur mines the blending in proportion of 50% indigenous and 50% indicates that even with rock of 30.66% the water soluble actually was 17.57%. These figures could not be disputed in the reply filed on behalf of Union of India. From the PDIL report it is clear that it had undertaken test of rock with 24.85% P2O5 and 30.03% Silica and suggested that the most suited blend with such rock was 20% indigenous and 80% imported. It could not furnish any guideline or material to reject the rock phosphate used by the respondents which varies between 27% P2O5 to 31% P2O5. In absence of any reliable data or any material the inference drawn by the appellants in the notice was baseless. The counter-affidavit filed in the High Court by the appellant did not explain the basis for concluding that for producing SSP of 16% W.S. P2O5 the rock phosphate should contain a minimum of 31% P2O5. It is contrary to the letter of Assistant General Manager, Mines. In any case PDIL could not furnish any basis for it. In absence of any valid justification the entire exercise undertaken by the appellant was vitiated being tainted with arbitrariness8. Failing in his effort to assail the order on merits the learned Additional Solicitor General vehemently urged that the department was not precluded from issuing show-cause notice and requiring the manufactures to appears and explain their claim. It was urged that the High Court was not justified in quashing the show-cause notice and issuing the directions for paying the subsidy without giving an opportunity to the department to verify if the respondents had in fact complied with Control Order. True, the High Court should normally not interfere at the stage of cause notice. But where, from the facts it is apparent that there was no material available with the department to doubt the statement on behalf of the respondents and their own officers at every point of time had issued the certificate the correctness of which could not be disputed or doubted except by raising unfounded suspicion or drawing on imagination it would be failing to exercise jurisdiction if the Court does not discharge its constitutional obligation of protecting the manufacturers who, as is apparent from the counter-affidavit filed in this Court and the various letters issued from different authorities are in perilous condition as they are not able to meet their liabilities to pay to financial institutions and various other authorities and are facing proceedings on various counts and have virtually closed their unit. We are pained to say that the authorities did not realise either the purpose of granting subsidy or the harassment to which the manufacturers have been exposed. Entire litigation appears to be a sad plight for those who have set up small-scale units in the hope that they will stand on their own on the subsidy given by the Government as admittedly the price of manufacturing fertilisers is much more than the price fixed by the Government for which it assured to pay subsidy