# AND ANOTHER v. THE UNION OF INDIA AND ANOTH"ll~R

- **Citation:** [1960] 1 S.C.R. 39
- **Court:** Supreme Court of India
- **Decided:** 1957-04-22
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/and-another-v-the-union-of-india-and-anoth-ll-r-1766
- **Pages:** 54

## Headnote

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S.C.R.
SUPREME COURT REPORTS
39
before the Tribunal was to produce the statements
x959
recorded by the manager during what we have called Phulbari Tea Estati
investigation. This left the matters where they were
v.
and Das had never an opport.unity of questioning the
Its Workmen
witneRRes after knowing in full what they had stated
against, him. In these circumstances we are of opinion
that the fiw.ling of t.he •rrilmnal that the enquiry i11
this case was uot proper is correct and must Htand.
'Ve therefore dismiss tlw appeal.
We should,
howeYer, like to make it elear tlrnt the order of tlw
Tribunal fixing grant of compcnsa,tion till the date of
payment must be taken to be limited to the sum of
Rs. 11,125, which has been deposited in this Court in
pursuance of this Court's order of April 22, 1957 and
Das will not be entitled t.o anything more, as further
stay of payment was pursuant to the order of this
Court. In the circumstances we are of opinion that
the parties should hear their own eosts of thits Court.
Appeal dismis8ed.
THE I.ORD KRISHNA SUGAR MILV3 LTD.,
AND ANOTHER
v.
THE UNION OF INDIA AND ANOTH"ll~R
(and connected petition)
(B. l:'. SINHA, .J AFER IMAM, ,J. L. KAP(TR, A. K. SARKAR,
SUH"HA RAO AND M. HIDAYATULLAH, ,TJ.)
Constitution--Fundami:ntal Rights-Rcsirictions on-Reasonableness, relei·anf. considerations for fudging-Enactment obliging
sugar manufacturers to s11.pply sugar for export ,,f loss-Notijicat-ion
tinder another enactment increasing price of sugar for internal sale
for recouping loss--Whether can
be tulwn into considerationDiscrimination-Sitgar Export Promotion Act, I958 (30 of I958),
ss. 5, 6, 7, 8, and 9-Constifation of India, Arts. I4 and I9Essential Commodities Act, I955 (IO of I955), s. 3--Sugar (Control)
Wanchoo J.
1959
May 6.
, •
Order, I955. cl. 5·
The petitioners challenged the constitutionality of the Sugar
Export Promotion Act, 1958, which was enacted for the purpose
of exporting sugar with a view to earning foreign exchange. The
impugned Act imposed the following restrictions on the owners of
40
SUPREME COURT REPORTS
[1960(1))
z959
factories producing sugar by the vacuum pan process: (i) it
-. .
obliged them to deliver to the export agency specified by the
The Lord E.rishna Central Government the quota of sugar allocated to them; (ii) it
Sugar Mills Ltd .• made them suffer a loss on this delivery of sugar; and (iii) it
and Another
exposed them to a penalty in case the delivery \vas short of the
v.
quota. By a notification issued under the Sugar (Control) Order,
Thi! trnion of India 1955, which was made under·the Essential Commodities Act, 1955,
and Another
the Central Government increased the price of sugar for internal
sales by 50 nP. per maund to enable the owners to recoup the
loss suffered by them by the delivery of the sugar for export.
The petitioners contended that it was not permissible to take the
notification issued under another statute into consideration and
that the impugned Act offended Arts. 14 and l9(1)(f) and (g) of
the Constitution.
Held, (per Sinha, Imam, Kapur, Sobba Rao and Hidayatullah, JJ., Sarkar, J. dissenting) that the impugned Act was
constitutionally valid.
Per Sinha, Imam, Kapur and Hidayatullah, JJ. The
restrictions placed by the Act upon the fundamental rights of the
petitioners under Arts. 19(1)(0. and (g) were not unreasonable as
arrangements \Vere made to save them frotn Joss by increasing
the price of sugar for internal sales, thus passing on the loss to
the consumers in India. The reasonablrness of the restriction
and not of the law was to be determined, and if the restriction
was under one la\v but countervailing advantages were created
by another law passed as part of the same legislative plan, the
Court must take that other law into account. The reasonableness
of the restriction was to be judged at the time it was challenged
and in the context of the circumstances then existing. The
notification of the Central Government increasing the price of
su

## Text

_Characters 0–39,670 of 122,918. This is a partial read: ask again with offset=39670 for what follows._

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I
•
S.C.R.
SUPREME COURT REPORTS
39
before the Tribunal was to produce the statements
x959
recorded by the manager during what we have called Phulbari Tea Estati
investigation. This left the matters where they were
v.
and Das had never an opport.unity of questioning the
Its Workmen
witneRRes after knowing in full what they had stated
against, him. In these circumstances we are of opinion
that the fiw.ling of t.he •rrilmnal that the enquiry i11
this case was uot proper is correct and must Htand.
'Ve therefore dismiss tlw appeal.
We should,
howeYer, like to make it elear tlrnt the order of tlw
Tribunal fixing grant of compcnsa,tion till the date of
payment must be taken to be limited to the sum of
Rs. 11,125, which has been deposited in this Court in
pursuance of this Court's order of April 22, 1957 and
Das will not be entitled t.o anything more, as further
stay of payment was pursuant to the order of this
Court. In the circumstances we are of opinion that
the parties should hear their own eosts of thits Court.
Appeal dismis8ed.
THE I.ORD KRISHNA SUGAR MILV3 LTD.,
AND ANOTHER
v.
THE UNION OF INDIA AND ANOTH"ll~R
(and connected petition)
(B. l:'. SINHA, .J AFER IMAM, ,J. L. KAP(TR, A. K. SARKAR,
SUH"HA RAO AND M. HIDAYATULLAH, ,TJ.)
Constitution--Fundami:ntal Rights-Rcsirictions on-Reasonableness, relei·anf. considerations for fudging-Enactment obliging
sugar manufacturers to s11.pply sugar for export ,,f loss-Notijicat-ion
tinder another enactment increasing price of sugar for internal sale
for recouping loss--Whether can
be tulwn into considerationDiscrimination-Sitgar Export Promotion Act, I958 (30 of I958),
ss. 5, 6, 7, 8, and 9-Constifation of India, Arts. I4 and I9Essential Commodities Act, I955 (IO of I955), s. 3--Sugar (Control)
Wanchoo J.
1959
May 6.
, •
Order, I955. cl. 5·
The petitioners challenged the constitutionality of the Sugar
Export Promotion Act, 1958, which was enacted for the purpose
of exporting sugar with a view to earning foreign exchange. The
impugned Act imposed the following restrictions on the owners of
40
SUPREME COURT REPORTS
[1960(1))
z959
factories producing sugar by the vacuum pan process: (i) it
-. .
obliged them to deliver to the export agency specified by the
The Lord E.rishna Central Government the quota of sugar allocated to them; (ii) it
Sugar Mills Ltd .• made them suffer a loss on this delivery of sugar; and (iii) it
and Another
exposed them to a penalty in case the delivery \vas short of the
v.
quota. By a notification issued under the Sugar (Control) Order,
Thi! trnion of India 1955, which was made under·the Essential Commodities Act, 1955,
and Another
the Central Government increased the price of sugar for internal
sales by 50 nP. per maund to enable the owners to recoup the
loss suffered by them by the delivery of the sugar for export.
The petitioners contended that it was not permissible to take the
notification issued under another statute into consideration and
that the impugned Act offended Arts. 14 and l9(1)(f) and (g) of
the Constitution.
Held, (per Sinha, Imam, Kapur, Sobba Rao and Hidayatullah, JJ., Sarkar, J. dissenting) that the impugned Act was
constitutionally valid.
Per Sinha, Imam, Kapur and Hidayatullah, JJ. The
restrictions placed by the Act upon the fundamental rights of the
petitioners under Arts. 19(1)(0. and (g) were not unreasonable as
arrangements \Vere made to save them frotn Joss by increasing
the price of sugar for internal sales, thus passing on the loss to
the consumers in India. The reasonablrness of the restriction
and not of the law was to be determined, and if the restriction
was under one la\v but countervailing advantages were created
by another law passed as part of the same legislative plan, the
Court must take that other law into account. The reasonableness
of the restriction was to be judged at the time it was challenged
and in the context of the circumstances then existing. The
notification of the Central Government increasing the price of
sugar to enable the recoupment of the loss occasioned by the
export could
be taken
into consideration
in
judging the
reasonableness of the restrictions.
State of Madras v. V. G. Row [ro52j S.C.R. 597; Virendra v.
The Slate of Pmijab, [1958] S.C.R. 308; Aru11achalam Nadar ''·
State of Madras, 1959 S.C.J. 297; Attorney-General for Alberta v.
Attorney-General for Canada, (1939) A. C. II7; Ladore ,., Bennet,
(1939) A.C. 468 and Pillai v. Mudanayake, (1953) A. C. 514, relied
on.
The foreign export served the national interest by stabilising·
the sugar market and stabilised national economy by earning
foreign exchange.
The loss, if any, was spread over many
factories and was so small as not to amount to an unreasonable
restriction.
The Act did not offend Art. r4 of the Constitution in selecting sugar produced by the vacuum pan process for export and in
leaving out sugar produced by other methods and other
commodities from the mischief of the Act. The Government was
the best judge as to which commodities were most likely to earn
. '
·'
•
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S.C.R.
SUPREME COURT REPORTS
41
foreign exchange and the selection made was justifiable as a
I959
reasonable classification which was related to the object of the
Act of earning foreign exchange.
The Lord Krishna
Per Subba Rao, J.
In testing the reasonableness of the Sugar Mills Ltd.,
restrictions imposed by the impugned Act it was not permissible
and Another
to take into consideration the notification under the Sugar
v.
(Control) Order, 1955, increasing the price of Sugar for internal The Union of India
sales by 50 nP. per maund. The test of reasonableness of one Act
and A11other
could be made to depend upon the impact of another Act on it
only when the earlier Act was made part of later :\ct or when
both Acts were parts of the same legislative scheme t..r plan. To
go beyond this would be to destroy the stability of legislation
and to introtluce an uncertain element. To go further and to
depend upon a notification of a transitory natui·e issued under an
unconnected Act would be to place the statute in a fluid state.
The impugned Act and the Essential Commodities Act were
enacted for different purposes.
State of Madras v. V. G. Row [1952] S.C..R. 597; AttorneyGeneral for Alberta v. Attorney-General for Canada (1939) A. C. u7;
Ladore v. Bennet (1939) A. C. 468 and Pillai v. Mudanaya/1e,
(1953) A. C. 514, distinguished.
The restrictions imposed by the impugned Act were not
unreasonable as the j_ct served the national interest by earning
foreign exchange for the State and building up foreign markets
for the future prosperity of the sugar industry.
Per Sarkar, J. The impugned Act which made the petitioners
suffer a loss on the sale of a part of their produce imposed
unreasonable restrictions on their fundamental right to carry on
their business and was
invalid.
Though in
deciding the
reasonablene1>s of the restrictions imposed by the impugned Act
all the prevailing conditions and circumstances had to be
considered, the notification increasing the home price of sugar
could not be taken into consideration. The impugned Act neither
made it obligatory on, nor empowered the Government to take
any steps to recoup the loss caused to the petitioners. The
increase in the price dependetl solely on the arbitrary discretion
or generosity or sense of fair play of the Government. It would
be intolerable in any legal system that a statute should be legal
when the Government chose to do a thing and illegal when it
undid it and so on from time to time at the choice of the Government.
Besides, there was nothing in the Essential Commodities
Act or the Sugar (Control) Order which authorised the Government to increase the price for the sake of recouping to the
manufacturers the loss caused to them by the impugned Act, and
the validity of the notification increasing the home price of sugar
was doubtful.
State of Madras v. V. G. Row [1952] S.C.R. 597, distinguished.
The impugned Act caused loss to the petitioners which was
not negligible and thus imposed unreasonable restrictions on
6
42
SUPREME COURT REPORTS [1960(1 )]
'959
their right to carry on their business.
The restrictions could not
be fustified on tlie ground til<:it they resulted in stablising the
The Lord J<rishn(' sugar industry as the industry did not require any stabilisation.
Sugar Mills Ltd., The export \Vas not to b<· n1adc out of the excess of production
and Another
over internal consumption and in fact production in India had
v.
al\vays been less than internal consumption.
The Union of Jndir'
and A no titer
0RIGINAI. ,JuRISDIC'rION: Petitions Nos. 9 and 14 of
1959.
Petitions under Article :J2 of the Constitution of
India for the enforcement of Fundamental Rights.
. '
A. V. Viswa,'rw,thv Sastri, and G. C. "o/Iathur, for the
petitionern in Petition No. 9 of 1959.
31. C. Setalvad, Attorney-General of India, B. Sen
and R.H. Dhebar, for respondent No. 1 in both the
petitions.
J}[ .C. Setalvad, Attorney-General of Ind,ia, B. Sen
and B. P. Jlfaheshwari, for respondent No. 2 in Petition
No. 9 of 1959.
N. C. Chatterjee and G. C. jfathur for the petitioners
in Petition No. 14 of 1959.
B. Sen and B. P. Jlfahesk1m.ri, for respondent No. 2
in Petit-ion No. 14 of 1959.
1959. l\fay 6. The judgment of R P. Sinha, Jafar
Imam, J_ L. Kapur and l\L Hidayatul!ah, JJ,, was
delivered by M. Hidayatu!l,1h, .J. A. K. Sarkar, J.,
and K. Snbba Rao, J., delivered separate judgments.
Hidayatullah JHIDAYATULLAH J.-W'rit Petition No. 9 of 1959
has been filed by the Lord Krishna Sugar Mills, Ltd.,
Saharanpnr and Shri Sushi! Kumar, a Director of the
said Mills. It was heard along with "' rit Petition
No. 14 of 1959, which has been tiled by Shiva Prasad
Banarsidas Sugar Mills, Bijnor, through Seth Munnalal
and also by him in his own name. These Mills are
hereinafter referred to as the L. IC S. Mills and S. P, R
Mills, respectively. The petitions raise the same contentions, but in 'Writ Petition No. 14 of 1959, there is
one more circumstance, which will be mentioned later.
The petitions are directed against the Union of India
and the Indian Sugar M.ills Association (Export Agency
Division) Calcutta. The petitioners challenge inter alia
-'
S.C.R.
SUPRE:\IE COURT REPORTS
the constitutionality of the Sugar Export Promoz959
tion Act, 1958 (30 of 1958), which shall hereafter be
"'
1
J A
"'h
·
l
h 1
]"
The Lord Krishna
re1erre( to as t ie
ct.
_i. .ey quest10n a so t c ega Ity Sugar Mills Ltd.,
of certain orders passed by the second respondent
and Another
purporting to be under the Act.
v.
Before describing how this matter came before the The Union °1 India
C ·
· ·
·
h
J
f' I
A
aud .lnnllter
ourt, It IS convenient to give t e RC rnmo o
t 10 d.Ct
and to set out some of it8 provi,-;ions.
On June 27,
Hidayatul/ahf.
1958, the President promulgated the Snga.r Export
Promotion Ordinance, 1958, which wa.8 repealed by
and re-enacted as the Act on September 16, 1958.
The Ordinance was in the 8ame terms as the Act, and
it is not necessary to refer to the Ordinance separately.
more so because bys. 14 of the Act which repealed
the Ordinance, anything done or any action taken
under the Ordinance is rleemed to have been done or
taken under the Act, a.nd the Act itself is deemed to
have commenced on the 27th day of June, 1938.
Both the Ordinance and the Act were passed to
provide for the export of sug~ir in the pi.1blic interest.
and for t-he levy and collection in certain cirrumRtances
of an additional duty of excise on sugar prodneed in
India.
To achieve this objective, the Act; :111thorises
the Centl'al Government (as did the Orcliuance previously) to specify an export agency to perform the
functions mentioned in the Ad., and the Central
Government by a not.ification issued the r-;amc day,
specified the Indian Sugar Mills Association (Export
Agency Division) Calcutta, as the export agency.
The Aet next provides that the Central Government
may by notification in the Officia.l Gazette, fix the
quantity of sugar to be . exported during any period
taking into consideration :
(a) the quantity of sugar available in the country;
(b) the quantity of sugar rec1uired for consumption in the country ; and
;
(c) the necessity of exporting sugar with a view to
earning foreign exchange in the public interest,
but, so as not to exceed 20 per cent. of the quantity to
be produced in India in the season eudin,g with the
month of October falling within that year. The Central
44
SUPREME COURT R.EPORTS [1960(1)]
I959
Government fixed 50,000 tons as the quantity to be
-
exported up to December 31, 1958, later extended to
The Lord Kriohna J
31 19"9
Th"
ffi t"
1
·
d
5,.gar Mill' Ltd..
anJuary
27
,
195
n
8
.
IS no 1 ca Ion was a so Issue
and Another
O!l une
'
·
v.
Section 5 of the Act enables the Central Govemment
The Union of India to apportion, by order in writing, the quantity to be
and Another
exported among " owners " of factories, the word
Hidayatullah 1. "factory" being confined to a factory where sugar is
produced by the vacuum pan process. The term
"owner " is defined to include transferees, and agents
and managers under Industries (Development and
Regulation) Act, 1951.
The apportionment of the
quantity of sugar to be exported is to be in proportion
to the quantity of sugar produced or likely to be
produced by the owners during the season referred to
earlier. On the communication of the m-der to an
owner, the quantity so apportioned is deemed to be
the export quota for the factory ofthat owner.
Section 6 then provides that on demand by the
export agency, every owner shall deliver to it from
time to time, sugar procluced in his factory in such
quantities (not exceeding in the aggregate his export
quota fixed for the factory or group of factories, as the
case may be), of such grade, in such manner, within
such time and at such place, as may be specified by the
export agency in this behalf. If the sugar is delivered
by a:-1 owner in accordance with the provisions of this
section, he retains no rights in such sugar except his
rights to receive ·payment therefor under s. 9 of the
Act.
Section 7 provides for levy of additional excise duty
on sugar despatched from the factory for consumption
in India, if the owner of a factory does not fulfil the
demands under s. 6. It provides:
"(1) Where sugar delivered ·by any owner falls
short of the export quota fixed for it by any quantity
(hereinafter referred to. as the said quantity), there
shall be levied and collected on so much of the sugar
despatched from the factory for consumption in India
as is equal to the said quantity, a duty of excise at
the rate of seventeen rupees per maund.
..
S.C.R.
SUPREME corRT REPORTS
45
(2) The duty of excise referred to in sub-section (1)
I959
shall be in addition to the duty of excise chargeable on
-
d
h
1
c
th
.
b .
.
c
The Lord Krishna
sugar un er an.y ot er aw ior
e time emg 111 .iorce, Sugar Mills Ud.,
and shall be paid by the owner to such authority as
and Another
may be specified in the notice demanding the payment
v.
of duty and within such period not exceeding ninety The Union ~1 India
days as may be specified in such notice.
and Another
(3) If any such owner does not pay the whole or Hid1iyatullah J.
any part of the duty payable by him within the period
referred to in sub-section (2), he shall be liable to pay
in respect of every period of thirty days or part thereof during which the default continues a penalty which
may extend to ten per cent. of the duty outstanding
from time to time, the penalty being adjudged in the
same manner as the penalty to which a person is liable
under the rules made under the Central Excises and
Salt Act, 1944 (I of 1944), is adjudged."
By sub-s. (4) of this section, the provisions of the
Central Excises and Salt Act, 1944 and the rules made
thereunder are made applicable as far as may be,
including those relating to refunds ·and exemptions
from duty in relation to the duty mentioned in this
section or any other sum due as a penalty.
Section 8 then deals with the export by the export
agency of sugar delivered to it.
The section also
authorises the sale of such sugar within India under
certain circumstances. The section may be rcproducerJ
in full here, as its terms will torm the subject of consideratfon in the sequel.
8(1) "The export agency shall take all practical
measures to export sugar delivered to it under this
Act:
Provided that, if the export agency is of opinion
that having regard to the quality of the sugar delivered to it by any owner, or to the expenses involved in
transporting. the sugar from one place to another, or
to the delay likely to be involved in exporting it,.or to
the conditions prevailing in the markets for sugar,
whether in or out of India, or to any other relevant
circumstance, it is expedient so to do, the export agency
may sell the whole or any part of the sugar in India
46
SUPREME COURT REPOHTS [1960(1)]
'959
>md may, if it thinks fit, purchase such quantity of
-
sugar as it may co1'.sider necessary for export at the
-
TheLordf\.rishna
· t t''
•
Sugar ,1till8 Ltd., <.1})J.)ro11r1a e .1n1e.
and Ano""'
(2) l•'or the purposos of sub-section (1), the export
_ . v.
. agency may itself sell sugar or permit the owner to sell
Tiu·""'"" of 1"'1'"the whole or >:Lny part of the export quotn. in his
aud Anolha
. t . d
t
.· '
d ·1
•t
} ' ·
h t h
cus .o y a a pnce approve
)y 1 on cone 1t10n t a. t e
srilc-riroceeds arc' rniyable to it."
Hidayatullah ].
~
Section 9 deals with payments to owners who have
delivered sugar for export. It provides n.s follows:
(l) "The export agency shn.11, at such time as it
thinks fit, make to the owners who ha.ve delivered
sugar to it urnler this Act, payments dc,tc.rmined in
accordance with the provisions hereinafter in this
section contained.
(2) From the tot.al sale-proceeds in respect of the
quantity fixed for export under sec1 ion 4 for any year,
there shall be deducted the total expenditure incurred
by tho export. agency in respect of the sugar, whether
by way of administrative expenses or otherwise, and
the balance shall be apportioned among the owners in
proportion to the quantity nf sugn.r deli\·ered by them
respectively during tlmt ye»1".
(3) In making any distribution under this section,
the export 1igency shall make such adjustments as
may he necessary having rc,gard to the grade of sugar
t!elivcred hy tiny owner, the >tdjustnwnts being made
on the basis of sugar of ISS-E-2fl grade and with
reference to the price difforential schedule for different
grades of sugar which the Central Government may,
by notification in the OJficial Gazette, publish in this
bC>half.
(4) Notwithstanding anything eontn.ined in this
section and subject to the rules which ma.y be nrnde in
this behn.lf, the export agency may make on account
payments to owners against documents of delivery of
sugar furnished by them, and such payments shall be
adjusted at the time of final payment."
In the remaining five sections, the Act provides for
aucilhtry matters, the hist (s. 14) incorporating the
repeal of the Ordinance and sa vmgs.
Section 10
-
S.C.R.
SUPl~EME COURT REPORTS
47
reserves to the Central Government the power to give
x959
directions to the export agency, and s. 11 allows the
1 '
l ('
d l
b"
d" ·
The Lord Krishna
ventra ..-overnment to e egate, su 1ect to c011 1t10ns Sugar ill ills Ltd .•
if any, its functions under the Act to an officer or
and Another
authority specified by notification. It may be pointed
v.
out that the Chief Director, Directorate of Sugar and The i:nion of lndia
Vanaspati, Ministry of :Food ttnd Agriculture, was
and Another
specified aH such in a notification issued on Juno 27,
c
·
f'
l
llidayatullah J.
1958. Section 12 provides ior protect10n o ant 10rities,
ands. 13 confers on tl].eCentral Government the power
to make rules and includes a power to make a breach
of any rule ·an offence punishable with fine extending
to five thousand rupees.
All such rules must be laid
before Parliament, and may be modified by Parliament.
Xo rules, however, have been made.
We next proceed to the facts of these two cases. By
an order No. 6(53)/58-SC, dated ,June 27, 1958, the
Chief Director, Directorate of Sugar and V anaspati,
fixed 461 ·05 and 412·04 tons of sugar as the quantities
apportioned to the L. K. S. Mills and the S. P. B. J\fills
respectively. On July 17, 1958 the export agency
wrote to the two owners informing them of the quotas
and their equivalents in bags, intimating nJ1m that the
supply would be required in Grade C-29, and/or Grade
D-29 and/or Grade E-29. Inquiry was made as to the
grades and quantities in stock with them. It was also
stated in these letters - that a further communication
would be sent in due course giving detailed despatch/
delivery/disposal instructions for the export quota.
They were also informed that the Central Board of
J{evenue had issued detailed instructions to the Collectors of Central Excise, and that it had been agreed
that the order of the Chief Director (Sugar) served on
the owners with copy to the Central Excise Officer of
the fo,ctory concerned would also be the release order
from the Sugar Directorate.
Different replies were sent by the two petitioners.
The L. K. S. Mills replied that they had only sugar of
D-28 grade, while the S. P. B. Mills replied that they
had E-29. On August 24, 1958, the export agency wrote
to them that the export quota was diverted for internal sale.
They were told that they were permitted to
48
SUPREME COURT REPORTS [1960(1)]
'959
sell the "quotn, sug:tr" for iuternal consumption at the
-
price of Rs. 36, per maund for Grade D-29, fixed by
The LordKr;dma the Government. The export agency asked the two
5
"!:~~;:!;";:a., Mills to Jet it know by telegram the grade in which the
v.
export quota was available, so that documents could
The un;on of 1n<1;a be sent to enable (,hem to deliver sugar to their
a11d A11othcr
respective buyers. The export agency described the
documents as follows :
flidayatulla-11 J.
"(1) A delivery order authorising the Central
Excise Officer of your factory to deliver the quantity
sold.
(2) This delivery order will be sent through the
Punjab National Bank Ltd., attached to a demand
draft drawn on you for the tJ.mount of the sale proceeds
payable to us.
Please pay this on presentation.
(3) The sale proceeds payable to us will be calculated as in the following examples :-
Sale price itt Rs. 36 per maund
D-29
Less Excise Duty to be paid by
you
Less 'on acco11nt' payment of
Rs. I 0 per rnaun<l
Amount for which draft will be
drawn on you
Rs.
After receiYing the delivery order you will pay the
Excise duty and deliYcr the sugar to the buyer.
.
" Gmde diffomntials will be allowed as per the
Government Notification GSR. 661 d/30th July fixing
ex-factory prices.
The sale tmnsaction will be as between you and
your buyer and the Export Agency cannot take any
responsibility.
\Ve now await to hear by telegram the grade availn,ble. Please also S<iy in your telegram to which branch
of the Punjab National Bank we should send the
documents."
S.C.R.
SUPREME COURT REPORTS
49
The facts from here progress differently with these
r959
two petit~one.rs, and they are stated separa~e~y. !he The Lord -;rishna
L.K.S. Mills mformed the export agency their mab1hty Sugar Mills Ltd.,
to sell sugar at the controlled rate fixed by the Governand Another
ment by its notification of July 30, 1958, as the market
v.
was very weak, and there were no purchasers of sugar The Union of India
at the controlled rate even out of the releases made by
and Another
the Government for free sales. The export agency Hidayatullah J.
reminded the L.K.S. Mills that the industry had agreed
to finance the Export Agency Division by letting it
have the sale-proceeds of sugar diverted for internal
sale less Rs. 10 per maund as an "on account" payment. The export agency offered to show a concession
to the L.K.S. Mills, and asked them to sell sugar in
instalments of 1,500, 1,500 and 1,565 bags with a week's
interval between each. It asked the L.K.S. Mills to
co-operate and let the export agency send documents
for 1,500 bags at Rs. 35·69 nP. per maund ex-factory.
It appears that a mistake was made in putting down
1,000 bags, but the meaning was perfectly plain. The
L.K.S. Miils, however, insisted that they were unable
to sell sugar at the controlled rate, and that as they
were in financial difficulties, it was not possible to
honour the documents as suggested by the export
agency.
The L. K. S. Mills proving obdurate, the export
agency wrote on November 5, 1958, that it proposed to
send documents for the full quota of 4,565 bags at
Rs. 35·69 per maund. The L.K.S. Mills were requested
to retire the documents immediately, as funds were
needed urgently for purchase of additional quantities
for export to replace the
quota diverted for
internal sale. It enquired the name of the bankers
to whom the documents might be sent by the agency.
The L.K.S. Mills, it appears, did not agree to any of
the courses suggested, and the export agency wrote on
November 27, 1958, that the L.K.S. Mills were requested
to remit a sum of Rs. 1,88,216·63 nP. being the amount
calculated at the rate of Rs. 35·69 nP. per maund in
respect of the total sugar quota, less excise duty to be
paid by the L.K.S. Mills and less "on account" payment
of Rs. 10 per maund as indicated in the e&rlier letters,
'(
50
SUPREME COURT REPORTS [1960(1)]
'959
It also stated that unless the remittance was received
The Lord Krishna by Decem?er 5, 1958, the permission to sell the quota
Sugar Mills Ltd., sugar for mternal consumption would be withdrawn.
aud Another
Subsequent to this too, the export agency wrote to
. v.
. the L. K. S. Mills saying that a demand draft for
The Union °1 India Rs. 61,845·57 nP. was being sent, to which was attached
and Another
th
d l"
d
dd
d
h c
I E
.
e
e ivery or er a
resse
to t e
entra
xcISe
Hidayatullah ]. Officer of the factory for releasing the first instalment
of 1,500 bags. The L.K.S. Mills were asked to pay the
excise duty and to clear the bags from bond and to
intimate to the agency that they had done so. Similar
documents were prepared for the other instalments and
forwarded through the Bank. The L.K.S. Mills, however, did not agree to this, and the export agency
thereafter on December 18, 1958, sent a telegram that
unless the drafts were retired immediately, the quota
sugar should be kept ready for despatch so that
delivery might be taken by the export agency. The
export agency also informed the L.K.S. Mills that
otherwise the name of the Mills would be communicated to the Chief Director, Sugar, as a defaulter. The
export agency also sent an order for delivery of the
quota sugar, and required the L.K.S. Mills to depatch
it by goods train, freight to pay, consigned to the
export agency. It also intimated that the Mills should
draw on the export agency for the amount of excise
duty paid by the Mills plus "on account" payment at
Rs. 10 per maund. Much was made of the error in
describing the quota as of D-29, but in view of what
· had already been understood, it cannot be suggested
that the L.K.S. Mills were in any way misled.
The L.K.S. Mills informed the export agency that
their bank position did not allow them to honour
the drafts, nor despatch the desired quantity of sugar
at the rates mentioned by the agency. They also
stated that they were not able to despatch more than
,
500 bags, as wagons over the Eastern Railway were
•
limited. The export agency, however, did not agree.
•
Finally, the export agency demanded remittance of
the sum of Rs. 1,88,216·63 nP. by the 25th January,
and gave the alternative to the L. K. S. Mills to
despatch the sugar by that date according to the
S.C.R.
SUPREME COURT REPORTS
51
despatch instructions communicated earlier.
The
r959
L.K.S. Mills wired saying that the Banks were demand- Th L d K . h
ing interest and that the agency should instruct the su~a:~m;'~1';,
Banks to forego interest. The export agency on
and Another
January 29, 1959, wired as follows :
v.
"Your tel. twentyninth without prejudice and to Ths Union of India
'd
·
l' t'
· t
t•
b
k
·
and Another
av01 serious comp ica ions we ms rue mg an waive
_
interest. Regarding interest Committee will consider Hidayatullah 1.
whose decision will be communicated in due course."
'
The petition (No. 9 of 1959) was, however, filed on
January 27, 1959, that is to say, two days earlier.
The facts relating to the S.P.B. Mills are as follows:
After the letter of August 24, 1958 was sent, nothing
appears to have been heard by the export agency.
On November 27, 1958, the export agency asked the
S. P. B. Mills to remit to it by December 15, 1959,
Rs. 1,69,524. 77 nP. being the amount calculated in
the same way as for the L.K.S. Mills. On December 14,
1958, in continuation of this letter a despatch order
for the entire quota was sent in the same terms as in
the other case. In reply, the S.P.B. Mills pointed out
that they were working the Mills as short-term lessees,
having obtained the lease from the High Court of
Allahabad on payment of Rs. 6,10,000 as lease money
and Rs. 1,00,000 as security on August 6, 1956. They
also pointed out that they were required to purchase
additional machinery, stores etc., for a sum of Rs. 5
lakhs, and that a sum of Rs. 3,43,500 was spent in
connection with the repairs to the factory and wages
for the period during which the factory was re-started.
They further pointed out that they had suffered a loss
of Rs. 2,40,000 in the last season and another loss of
Rs. 50,000 on account of the strike of cane-growers in
March, 1958; that all their sugar stock was pledged
with the Punjab National Bank, Bijnor, against an
advance of 75 per cent. of the price; and that there
were arrears of cess amounting to about Rs. 5,50,000
and that the lease money amounting to Rs. 6,10,000
for the next season was also due. They therefore,
expressed their inability to send any sugar: They also
stated that if they redeemed the pledged sugar even
after paying the "on account" money to the Bank,
52
SUPREME COURT REPORTS
[1960(1))
z959
the Bank would be receiving Rs. 15-2-0 per maund
-
less than the controlled price· of sugar. They further
Ts"' LoMrd Ku,.,L· htdna stated that it was not possible for them to sell sugar
ugar
' s
.,
1
.
fi
b
h
.
d
and Another
at the contro led pnce
xed y t e Drrectorate an
v.
ended by saying that they were not in a position to
The Union of India despatch sugar, pointing out at the same time that
and Another
the Act was unconstitutional and not binding on them.
Hidayotullah ],
The export agency, however, was not agreeable, and
it asked the S.P.B. Mills either to deliver the export
quota or pay the net sale-proceeds for the same,
pointing out that the Mills ran the risk of liability for
the additional excise duty of Rs.17 per maund.
While matters stood at this stage ~nd the S. P. B.
Mills had neither paid the amount demanded nor
agreed to despatch the sugar, a petition was filed in
this Court and a temporary stay was obtained.
The questions that have been raised in these petitions are many, but they can be grouped under two
heads, viz., the vires of the legislation and the propriety
of the action taken under it. The argument about
the vires challenges the Act as a whole and also clause
by clause. In regard to the vires of the Act, the petitioners draw attention to the statement of objects and
reasons, incorporated in one of the affidavits in the
case. According to them, the declared object of the
Act is to earn foreign exchange. They contend that
if foreign exchange is so urgently needed, there should
have been uniform legislation compelling other sugar
manufacturers, who do not manufacture by the vacuum
pan process, also to export sugar. This argument is
based on alleged discrimination and on Art. 14 of the
Constitution. The petitioners further contend that
manufacturers of commodities other than sugar are
not compelled to export in a like manner, and thus
there is further discrimination.
In our opinion, this argument is without substance.
The power of Parliament to make laws in relation to
foreign exchange is manifest. Entry No. 36 of the
Union List specifically confers jurisdiction on Parliament to legislate in relation to foreign exchange. That
Entry, if interpreted widely, would embrace within
J
S.C.R.
SUPREME COURT REPORTS
53
itself not only laws relating to the control of foreign
I959
exchange but also to its acquisition to better the n
L --;;~ . h
economic stability of the country.
The need for s~~ar
0
~1;u;~,;.:
foreign exchange to finance the various development
and Another
schemes was, very properly, not disputed. It is thus
v.
plain. that the object of the Act is in the public interest. The Union of India
If we are to exist as a progressive nation, it is very
and Another
necessary that we carve out a place for ourselves in Hidayat,.llah J.
the International market. The beginning has to be
made, and many a time, it is at a great loss. That the
Central Government has selected the sugar industry
for an export programme does not mean that it cannot
make a classification of the commodities, bearing in
mind which commodity will have an easy market
abroad for the purpose of earning foreign exchange.
During the Suez crisis, sugar was exported in large
quantities from this country, and earned 12·4 crores
as foreign exchange. There is nothing on the record
to show that export of other commodities was not also
undertaken, though it was pointed out in arguments
that manganese ore was also exported in a similar
manner to earn foreign exchange. It is quite obvious
that the Central Government cannot order the export
of all and sundry manufactured commodities from the
country, without being assured of a market in foreign
countries.
Necessarily, the Government can only
embark upon an export policy in relation to these
products, for which there is an easy and readily
available market abroad. For this reason also, sugar
produced by the vacuum pan process may have been
selected, because such sugar is perhaps in demand
abroad and not.sugar produced by any other process.
It must be realised that goods manufactured in our
country have to stand heavy competition from goods
produced abroad, and even this export can only be
made at great sacrifice, and is made only to earn
foreign exchange, which would not, otherwise, be
available.
In this view of the matter, it cannot be said that
there is discrimination in so far as sugar manufacturers
by the vacuum pan process are concerned. Government is the best judge as to which commodities are
54
SUPREME COURT REPORTS
[1960(1))
z959
most likely to earn foreign exchange, and the selection
-
.
thus made is justifiable as a reasonable classification
TheLordKrishna
• h ·
1
h
b"
f h A
1
h
Sugar Mills Ltd., wh1c is re ated tot e o iect o t e
ct, name y, t e
and Another
earning of foreign exchange.
v.
The next contention is under Arts. 19(1) (f) and (g)
The Union of India and also 31 of the Constitution.
The petitioners
and Another
Hidayatullah ].
contend that the whole export programme in respect
of sugar amounts to an infringement of their fundamental rights under Arts. 19(1) (f) and (g), and
amounts also to a compulsory acquisition of their property without payment of compensation. The petitioners analyse the scheme of the Act, and state that
it amounts to taking sugar from owners for sale abroad
at such price as it may fetch, the owners being paid
when such money is received, after deducting the
expenses of the export agency and the cost of export.
They state that the owners stand to lose, because,
admittedly, sugar is going to be exported at a loss,
and the loss is to fall on the owners of factories. They
further state that if the necessity for foreign exchange
was felt, the loss entailed in the earning of foreign
exchange should be borne by Government or be distributed among all industries, or at least among all the
sugar producers in the country. It is urged that the
Act is an unreasonable restriction upon the fundamental rights to hold, acquire, and dispose of property and to carry on occupation, trade or business.
In reply, the learned Attorney-General on behalf
of the Union as well as the Directorate of Sugar refers
to the negotiations which took place between the
Government and the sugar industry and the arrangements which were made to save owners of factories
from the loss which is inevitable as a result of this
export programme. We were taken through the
various Control Orders which were passed by Government under the Essential Commodities Act about this
time, fixing the. price of sugar for internal consumption. In particular, referenee is made to the Sugar
(Control) Order, 1955, Notification No. G. S. R. 661/
ESS. Com/Sugar dated July 30, 1958. It is pointed
out that by that Notification the price of sugar was
increased by 50 nP. per maund on all internal sales
..
-
. ,
I
S.C.R.
SUPREME COURT REPORTS
55
to enable the factories giving their export quota to
z959
recoup themselves for the loss, which might be entail- The Lord :.rishna
ed. It was anticipated that the loss would be recouped sugar Mills Ltd.,
if there was an increase of 50 nP. per maund in
and Another
the price of sugar for internal consumption and the
v .
export quota was fixed at 2i per cent. of •the total The Union of India
production of a factory for 1957 -58.
The loss, it was
and Anoth.,
expected, would be more than set off by the excess Hidayatullah J.
price which the producers would be able to get for
every 20 maunds sold for internal consumption. It
is also pointed out that Government at that time did
not wish to take over the work of export on itself
and specified as the export agency, the Indian Sugar
Mills Association, a body composed of 95 per cent. of
the sugar mills in the country. The learned AttorneyGeneral also points out that more than 95 per cent.
of the mills have stood by this arrangement, and did
either supply their quota of sugar or sold it in the
internal market and made available the money for
purchase of sugar for export. Only a few mills in the
country resorted to these devices to get out of the
commitment which the industry as a whole had
entered into. The learned Attorney-General also
contends that the petitioners had obtained favourable
prices for sale of sugar in the country but were not
willing to honour their other commitments which,
after the agreement of the sugar industry, were given
legislative form.
Learned counsel for the petitioners contends that
the vires of the Act should be considered without
reference to other circumstances such as the agreements, price adjustments and price control, as they
have no bearing upon the resonableness of the legislation. In State of Madras v. V. G. Row (1), this Court
laid down that in judging the resonableness of a
restriction upon fundamental rights, the surrounding
circumstances can be looked into. Patanjali Sastri,
C.J., observed as follows :
" It is important in this context to bear in mind
that the test of reasonableness, wherever prescribed,
should be applied to each individual statute impugned,
(1) [1952J s.c.R. 597, 607.
56
SUPREME COURT REPORTS
[1960(1)]
'959
and no abstract standard, or general pattern of reasonTh L
.
ableness can be laid down as applicable to all cases.
su~a:':ti~;·1;~~ The nature of the right alleged to have been infringand Another ' ed, the underlying purpose of the restrictions imv.
posed, the extent and urgency of the evil sought to be
The Union of India remedied •thereby, the disproportion of the imposition,
and Another
the prevailing conditions at the time, should all enter
Hidayatullah J. into the judicial verdict.