# INDIA SUGARS & REFINERIES v. AMRAVATHI CO-OP. SOCIETY

- **Citation:** [1976] 2 S.C.R. 740
- **Court:** Supreme Court of India
- **Decided:** 1975-11-19
- **Case number:** Civil Appeals Nos. 2070 to 2074 of 1970
- **Bench:** A. N. Ray, N. L. Untwalia
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/india-sugars-refineries-v-amravathi-co-op-society-6877
- **Pages:** 7

## Headnote

Natural Justice-Duty to act judicially and according to natural justice
depends on nature of interest to be affected-Circumstances for exercise of powers
and sanctions illl'O/ved-Sugar Cane Control Order, 1966 Clause 5(1), 5(3)
and 5(5)-[Sugar Cane Control (Additional Powers)Act 1962]-Sugarcane growers to be heard both while fixing quantum of additional price as well as while
granting exemption from payment of additional price.
The re5pondent are co-operative societies of growers of sugarcane. who
supplied sugarcane to the appeilant which is. a sugar manufacturing factory.
The use and supply of sugaDcane is controlled under the provi;;ions of the
Essential Commodities Act, 1955. The Sugarcane
Control
Order,
1955
empowers the Government to fix the minimum price payable by the manufacturer of sugar to the grower of sugarcane. In 1962, the Sugarcane Control
(Additional Powers) Act, 1962 came into existence. Pursuant to the powers
conferred by the 1962 Act, the Central Government amended the 1955 Control
Order by intrQ_ducing clause 3A providing for payment of additional price for
sugarcan.e purchased by the producers of sugar. The 1955 Control Order was
repealed and replaced- by the Sugarcane Control Order 1966. The respondents
are recognised by the Government of India and the appellant for the purpose
of 1966 Control Order. Under the 1966 order the Government was competent
to denote an area where sugarcane is grown as a reserved area for factory.
The sugarcane grown in that area is required to be sold to the allotted f'actory.
The Government controls all aspects of the use of sugarcane grown in the
reserved area. The 1966 order provides for fixation of minimum price of sugarcane payable by manufacturers of sugar to the growers. Jn determining the
minimum price the Government is required to take into account (i) cost of
production of sugarcane, (ff) return to the grower rrom alternative crops and
the general trend of prices 9f agricultural commodities; (iii) the availability of
su,gar to the consumer at a fair price; (iv) the price at which sugar is sold by
the producers; and (v) the recovery of sugar from sugarcane.
The 1966 Control Order further provides for payment of additional price
in addition to the minimum pr~. On determination of the price the same
is required to be intimated in writing to the producers of sugar, growers, C9operative Societies of Growers or the local Growers' Association.
An appeal
is provided to the Government of India against the determination cf the additional price. Clause 5(3) of the 19'66 Control Order provides that if
the
Central Government is satisfied that during any year a factory has made no
profit or has made inadequate profit. that Go.vernment may exempt either wholly
or partially any producer of sugar from payment of the additional price. The
relevant authority under the 1966 Control Order fixed additional price payable
by the appellants to the respondent. No appeal w.as preferred either by the
appellant or the respopdent.
The appellants did not pay the additional price. Appellant made applications seeking exemption on the ground that the appellants had made inadequate
profits. The Government exempted the appellants from paying whole of the
additional price for the year 1961-62 and reduced the additional price for the
year 1960-61 without giving any opportunity of being heard to the respondents.
Th!! r~s11<?ndei:its challe.nged the validity of the grant of exemption by filing a
~nt petition m )he High Court.
The High Court allowed the said writ petihov on the ground that the order of the Central Government was violative of
principles of natural justice, since no opportunity was given to the respondent~
to be heard in the matter.
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INDIA SUGARS & REFINERIES V. AMRAVATHI CO-OP. SOCIETY
(Ray, C.J.}
pismissing the appeal by certificate,
741
HELD: (1) Clause 5(11 provide~ for the payment of additional price and
clause 5 (3) provides for exemption from the payment of additional price.
Claus

## Text

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INDIA SUGARS & REFINERIES LTD.
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AMRAVATHI SERVICE CO-OPERATIVE SOCIETY LTD.
November 19, 1975
[A. N. RAY, C.J. AND N. L. UNTWALIA, J.]
Natural Justice-Duty to act judicially and according to natural justice
depends on nature of interest to be affected-Circumstances for exercise of powers
and sanctions illl'O/ved-Sugar Cane Control Order, 1966 Clause 5(1), 5(3)
and 5(5)-[Sugar Cane Control (Additional Powers)Act 1962]-Sugarcane growers to be heard both while fixing quantum of additional price as well as while
granting exemption from payment of additional price.
The re5pondent are co-operative societies of growers of sugarcane. who
supplied sugarcane to the appeilant which is. a sugar manufacturing factory.
The use and supply of sugaDcane is controlled under the provi;;ions of the
Essential Commodities Act, 1955. The Sugarcane
Control
Order,
1955
empowers the Government to fix the minimum price payable by the manufacturer of sugar to the grower of sugarcane. In 1962, the Sugarcane Control
(Additional Powers) Act, 1962 came into existence. Pursuant to the powers
conferred by the 1962 Act, the Central Government amended the 1955 Control
Order by intrQ_ducing clause 3A providing for payment of additional price for
sugarcan.e purchased by the producers of sugar. The 1955 Control Order was
repealed and replaced- by the Sugarcane Control Order 1966. The respondents
are recognised by the Government of India and the appellant for the purpose
of 1966 Control Order. Under the 1966 order the Government was competent
to denote an area where sugarcane is grown as a reserved area for factory.
The sugarcane grown in that area is required to be sold to the allotted f'actory.
The Government controls all aspects of the use of sugarcane grown in the
reserved area. The 1966 order provides for fixation of minimum price of sugarcane payable by manufacturers of sugar to the growers. Jn determining the
minimum price the Government is required to take into account (i) cost of
production of sugarcane, (ff) return to the grower rrom alternative crops and
the general trend of prices 9f agricultural commodities; (iii) the availability of
su,gar to the consumer at a fair price; (iv) the price at which sugar is sold by
the producers; and (v) the recovery of sugar from sugarcane.
The 1966 Control Order further provides for payment of additional price
in addition to the minimum pr~. On determination of the price the same
is required to be intimated in writing to the producers of sugar, growers, C9operative Societies of Growers or the local Growers' Association.
An appeal
is provided to the Government of India against the determination cf the additional price. Clause 5(3) of the 19'66 Control Order provides that if
the
Central Government is satisfied that during any year a factory has made no
profit or has made inadequate profit. that Go.vernment may exempt either wholly
or partially any producer of sugar from payment of the additional price. The
relevant authority under the 1966 Control Order fixed additional price payable
by the appellants to the respondent. No appeal w.as preferred either by the
appellant or the respopdent.
The appellants did not pay the additional price. Appellant made applications seeking exemption on the ground that the appellants had made inadequate
profits. The Government exempted the appellants from paying whole of the
additional price for the year 1961-62 and reduced the additional price for the
year 1960-61 without giving any opportunity of being heard to the respondents.
Th!! r~s11<?ndei:its challe.nged the validity of the grant of exemption by filing a
~nt petition m )he High Court.
The High Court allowed the said writ petihov on the ground that the order of the Central Government was violative of
principles of natural justice, since no opportunity was given to the respondent~
to be heard in the matter.
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INDIA SUGARS & REFINERIES V. AMRAVATHI CO-OP. SOCIETY
(Ray, C.J.}
pismissing the appeal by certificate,
741
HELD: (1) Clause 5(11 provide~ for the payment of additional price and
clause 5 (3) provides for exemption from the payment of additional price.
Clause 5(5) provides for filing .an appeal to the Central Government by
anY
person feeling aggrieved by the -decision of the fixation of additional price.
The power to grant exemption cannot be said to be independent of the provisions of clause 5 of the order. The object of 1966 Control Order is to promote sugar industry and to eliminate unnecessary impediments in the production or sugar. It also ensures a fair deal to the growers of the sugarcane.
The provisions of the Control Order are intended to maintain harmony between
the growers of sugarcane and the producers of sugar and to enable both of them
to share profits reasonably. It is necessary to give opportunity to be heard
both to the growers of the sugarcane as well as the producers of sugar when
the Government exercises powers under 1966 Control Order for determining
the additional priee and granting
exemption
from
payment
of
additional
price.
[744 H, 745 A-El
(2) The grant of exemption from payment of price aft'ects rights and interests of the growers of sugarcane.
The order of exemption takes away rights
which had accrued in favour of the growers of sugai'cane.
It is, therefore.
necessary for the Government to consider the points of view or objections of
the grmyers on the application made by the factories producing sugar seeking
exemption from payment of additional price.
[745F, G, 746A]
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(3) The situations in whicih a duty will arise to act judicially according
to natural justice· cannot be exhaustively enumerated. A duty to act judicially
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will arise in the exercise of power to deprive a person of legitimate interest
or expectation that additional price would be paid.
The factors which point
to an exercise of power judicially are the nature of interest to be affected_
the circumstanc-es in which the power falls. to be exercised and the nature of
the sanctions, if any, involved.
[746 CJ
( 4) It is c[ear that the purpose and purport of the 1966 Control Order
point~ to the inescapable conclusion that the sugarcane growers are to be· heard
E
not only when additional J?rice is fixed but also when exemption is granted to
factories from payment of additional price.
[746 DJ
·
CIVIL APPELLATE JURISDICTION : Civil Appeals Nos.
2070 to
2074 of 1970.
From the Judgment and Order dated 4th day of May 1970 of the
Bangalore High Court in Writ Petitions Nos. 3958, 4035/68, 18 and
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19 <)f J.969.
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V. S. Desai, P. C. Bhartari, J. B. Dadachanji, 0. C. Mathur and
R. Narain for the app~llant.
A. K. Sen and S. S. Javali and B. P. Singh for Respondent No. 1.
S. N. Prasad and S. P. Nayar for Respondent-Union of India.
The Judgment of the Co~rt was delivered by
RAY, C.J.
These appeals are by certificate from the judgment of
the High Court of Mysore dated 4 May, 1970. The several respondent Co-operative Societies filed writ petitions in the High COurt for
quashing orders dated 11 September 1968 passed by the Government
of Jndia.
The impeached orders granted
exemption,
partially or
wholly, to the appellant under clause 5 (3) of the Sugar Cane Control Order, 1966 (hereinafter referred to as the 1966 Control Order)
6-J59SCI/76
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SUPREME COURT REPORTS
(1976] 2 S.C.R,
from the payment of additional cane price fixed by the Price Fixation
Authority under clause 5 ( 4)
of the 1966 Cd11trol
Order. The
High Court quashed the orders challenged by the respondents.
The use and supply of sugarcane is controlled under the
provisions of the Essential Commodities Act, 1955.
The Government of
India promulgated the Sugar Cane Control Order on 27 August 1955.
The 1955 Control Order empowered the Government, inter alia, to
fix the minimum price payable by the manufacturer of sugar to the
grower of sugarcane.
The Government was competent to fix different prices depending on the areas and qualities of sugarcane or on
the basis of recovery of sugar from sugarcane.
In 1962 the Sugar
Cane Control (Additional Powers) Act, 1962 came in existence. In
pursuance of powers conferred by the 1962 Act the Central Government amended the 1955 Control Order by
introducing clause
3A
providing for payment of additional price for sugarcane purchased by
producers of sugar during each of the four successive years beginning
from 1 November 1958.
The 1955 Control Order was repealed and replaced by the Sugarcane Control Order, 1966 to which reference has already been made.
The 1966 Control Order saved all orders made and actions
taken
under the repealed order. Under clause 6 of the 1966 Control Order
the Government was competent to denote an area where sugarcane is
grown as a reserved area for a factory.
The sugarcane grown in that
area is required to be sold to the factory allotted. The Central Government determines the quantity of sugarcane to be supplied by the
growers in the reserved area and the quantity of sugarcane which the
factory requires for, crushing during any year.
The growers are required to enter into agreements with the factory to supply sugarcane
of the quantity fixed under the provisions of the 1966 Control Order.
Restrictions arc placed on the growers from using sugarcane grown
by them for other purposes.
The Government tlms controls all aspects of the use of sugarcane grown i'a the reserved area. It can prob ibit or restrict or otherwise regulate export of sugarcane from any
area except under and in accordance with a permit issued in that
behalf.
Clause 3 of the 1966 Control Order provides for fixation of minimum price of sugarcane payable by manufacturers of sugar to
the
growers.
In determining the minimum price, the Government is required to take into account (a) cost of production of sugarcane, (b)
return to the grower from alternative crops and the general trend of
prices of agricultural commodities; ( c) the availability of sugar to the
consumer at a fair price; (d) the price at which sugar produced from
sugarcane is sold by producers of sugar; and (e) the recovery of sugar
from sugarcane.
Clause 5 of the 1966 Control Order provides for payment of additional price.
Sub-clause ( 1) of clause 5 provides that in respect of
sugarcane purchased by producers of sugar during each of the four
successive years beginning from 1 November 1958 the producer is
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INDJA SUGARS & REFINERIES V. AMRAVATHI CO-OP. SOCIETY
7 43
(Ray, C.J.)
required to pay an additional price in addition to the minimum price
fixed under clause 3 ( 1) of the 1966 Control Order. The additional
price is fixed in accordance with the provisions of the Schedules to
the Order.
On determination of the price, the same is required !o
be intimated in writing to the producer of sugar, growers, Cooperative Societies of growers Qr the local growers
association.
Subclause (5) of clause 5 of the 1966 Control Order provides for an
appeal to the Government of India from the decision determining
additional price.
The relevant provision for purposes of the present appeals is sub·
...,.clause (3) of clause 5 of the.1966 Control Order. Sub-clause
(3)
is as follows :-
"If the Central Government is satisfied that during any
year a factory has made no profit or has made inadequate
profit, that Government, may by order in
writing, exempt
either wholly or partially, any producer of sugar from payment of the additional price due from him under sub-clause
( 1) in respect of sugarcane purchased for that factory during that year".
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The appeUant in Civil Appeals No.
2070-2074 of 1970 is the
factory situate at Hospet manufacturing sugar.
The appellant buys
sugarcane from growers in the area reserved for the said factory. The
respondent is a co-operative society of growers of sugawane who
have supplied sugarcane to the appellant factory.
The members of
the societies entered into agreement with the appellant factory through
the respondent societies for the supply of sugarcane. The societies
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advanced monies to the grower members for their agricultural operations.
The societies are recognised both by the Governme·nt of India
and the appellant factory for the purpose of the 1966 Control Order.
The minimum price fixed by the Government of India for the
seasons subsequent to 1958-59 was said by the sugarcane growers to
be inadequate.
The growers felt that the· factories
manufacturing
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sugar were making profits from the sale of sugar and that the minimum pcice fixeJ by the Government for supply of sugarcane did not
bear any rational relation to the market price or to the profits made
by the producer~ of sugar.
The growers experienced impact of increase iu the cost of growing sugarcane and the restrictions placed by
the Government preventing them 'from selling sugarcane to persons
or at prices of their choice.
The growers were also prevented from
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converting sugarcane to "gur" except in accordance with the .terms
of a licence to be obtained.
In partial redress of the hardship caused
to the sugarcane growers Parliament introduced clause 3A to
the
Sugar-Cane Control (Additional Powers) Act, 1962 for fixation of
additional prices for sugarcane for four successive years commencing
1 November, 1958.
The provision was thereafter incorporated in
the 1966 Control Order.
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The relevant Authority under the 1966 Control Order on 3 July,
1968 fixed the additional price payable by the appellant to the cane
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SUPREME COURT REPORTS
(1976] 2 S.C.R.
growers for sugarcane supplied ciuring the seasons 1960-61 and 196162 at Rs. 4.16 and Rs. 6.09 respectively per metric ton. This was
made payable in addition to the payments made by the factory to the
growers during the said seasons. No appeal was preferred either by
the appellant factory or by the respondent
Cooperative Societies
under clause 5 ofthe 1966 Control Order. The additional price fixed !-
by the Authority thereby ·became final.
The appellant, however, did not pay the
additional price.
The
respondent received copies of commnnication dated
11 September
i..
1968 sent by the Government of India to the appellant exempting it
from making payment of the aforesaid additional price.
It appears
that the said order was made pursuant to applica_tions made on behalf''
of the appellant on or about 11 July 1968 seeking exemption on the
~
ground that the •appellant had made inadequate profits.
The Govern-
. ruent communication dated 11 September 1968 stated that it was
satisfied that the profits made by the appellant were inadequate. The
Government wholly exempted the appellant from paying· the acfditional price for the season 1961-62 and reduced the additional price
for the season 1960-61 from 4.16 to 0.70 NP per metric ton.
The respondent challenged the validity of the order of the Government granting exemption wholly or partially to the appellant. The
High Court accepted the conteiation of the respondent on the ground
that the impugned order was violative of principles of natural justice,
because the Government failed to afford any opportunity to the
growers to be heoard in the matter.
The respondent contended that the power of exemption affected
the right of growers to get additional price for sugarcane supplied by
them and that the Central Government was required to exercise the
power judicially and in conformity with the principles of natural
justice.
Two questions arise for determination in
these appeals.
First,
whether in view of the 1966 Control Order opportunity should have
been given to the respondent when the Government wanted to grant
~
exemption, wholly or partially, to the appellant from paying additional
price. Second, whether the High Court was right in giving direction
to the Government to consider giving of an opportunity to the res-
;
pondent.
The appellant sugar factory contends that the cane growers were
not required to be heard when the Government grantea exemption to
the factories from payment of additional price. The respondent cane
growers contend to the contrary.
'
Clause 5 of the 1966 Control Order relates to additional price for
sugarcane. Clause 5 ( 1) of the Order speaks of payment of additiO'aal price found due in accordance with the provisions of the Schedule. Clause 5 (3) of the 1966 Control Order speoaks of exemption
from payment of additional price.
Clause 5 ( 4) speaks of appointment by the Central Government of persons for determining the additiomil price under clause 5(1) of the 1966 Control Order.
Clause
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INDJA SUGARS & REFINERIES V. AMRAVATHI CO-OP. SOCIETY
7 45
(Ray, C.J.)
5 ( S) states that any producer of sugar or grower of sugarcane or
growers' cooperative society who feels aggrieved by any decision of
the person or authority referred to in sub-clause ( 4) may appeal to
the Central Government.
In the background of these provisions, the appellant contends that
the power to grant exemptio'il is where the qovernment ~s satisfied
that in any year a factory has made no profit or has made madequate
profit and the same should be determined from the balance sheet and
profit and loss accounts of a company and there is no obligation to
. hear any party. It is also said by the appellant that the determination
~of additional price and the exemption from p•ayment of the additional
price are separate matters independent of each other. The appellant
)· further contended that right to additional price could not vest in the
cane growers until the marmer of payment had been decided upon by
the Central Government under clause S ( 6) of the 1966 Control Order,
These contentions are unacceptable.
The provision for granting exemption is
part of the procedure ./
prescribed by clause 5 of the 1966 Control Order.
The power to
grant exemption cannot be said to be independent of !he provisions
under clause 5 of the Order.· The object of the 1966 Control Order
is to promote sugar industry and to eliminate unnecessary impediments
in the production of sugar. It also ensures a fair deal to the growers
of sugarcane.
The provisions of the Control Order are intended to
maintain harmony between the growers of sugarcane and the producers of sugar and to enable both of them to share profits reasonably.
Therefore, the power conferred on the Government is required to be
exercised having regard to the viewpoints of the growers of sugarcane as well as the producers of sugar. It is necessary to give opportunity to the growers of sugarcane as well as the producers of sugar
to be heard when the Government exercises powers under 1966 Control Order for determining the additional price and granting exemption from payment of additional price.
The grant of exemption from payment of price affects rights and
interests of the growers of sugarcane. The Control Order contains
elaborate machinery for fixation of additional price having regard to
all relevant factors.
The additional price fixation authority afforded
opportunity to both the growers of sugarcane as well as the producers
of sugar to be heard in the determination of the additional price. The
subsequent order by the Goverm:rlent granting exemption to the factories for payment of additional price takes away rights which had
accrued in favour of the growers of sugarcane.
The manner of payment of additional price under clause 5 ( 6) of
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the 1966 Control Order does not affect the right and interest of
growers. ln providing for payment of additional price, the additional
price fixation authority takes into account the relevant considerations
relating to the conditions of sugarcane growers as well as the promoH
tion of the sugar industry during the relevant period. The additional
price fixation authority also considers the conditions and circumstances relating to the appellant factory i'n determining the additional
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SUPREME COURT REPORTS
[1976] 2 S.C.R.
price payable. It is, therefore, necessary for the Government to invite the points of view or objections of the growers on the application
made by the factories producing sugar seeking exemption from payment of additional price. It is equally necessary for the Government
to hear the growers of sugarcane in order to satisfy itself as to the
~
bona {ides and accuracy of the appellant's claim for exemption.
The ,,
growers should be given an opportunity to show whether the claim
by the appellant for exemption . from payment of additional price
should or should not be granted.
l
The power to grant exemption to_ factories from
payment of
additional price is intimately connected with the right of sugarcane\'
growers to claim additional price. The situations in which a duty
will arise to act judicially according to natural justice cannot be ex·
haustively enumerated. A duty to act judicially will arise in the exercise of a power to deprive a person of legitimate interest or expectation that additional price would be paid. The factors which point to
an exercise of powers judicially are the nature of the interest to be
affected, the circumstan,ces in which the power falls to be exercised
and the nature of the sanction, if any, involved.
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It is clear that the purpose and purport of the 1966 Control Order,
the scheme of having sugarcane growing areas r~served for factories
and in particular, the payment of additional price point to the inescapable conclusion that the sugarcane growers are to be heard not only r'
when additional price is fixed but also whe11 any exemption is granted
to factories from payment of additional price.
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For these reasons, the judgment of the High Court is affirmed.
The appeals are dismissed.
Each party will pay and bear its own
costs.
P.H.P.
Appeals dismissed.