# ' •, SUKHNANDAN SARAN DINESH KUMAR & ANOTHER ETC. ETC v. UNION OF INDIA & ANOTHER ETC. ETC. March 3, 1982'

- **Citation:** [1982] 3 S.C.R. 371
- **Court:** Supreme Court of India
- **Decided:** 1982-03-03
- **Bench:** D.A. Desai, A. Varadarajan
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/sukhnandan-saran-dinesh-kumar-another-etc-etc-v-union-of-india-another-etc-etc-8329
- **Pages:** 24

## Headnote

371
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Sugar Cane (Control) Order 1966, Clauses 3, 3A, 4 and 4A & U.P. State
C
Government Notification dated September 3, 1980.
Sugar Cane brought in bundles-Binding material-Grant of rebate-Whb
ther valid and reasonable.
The raw material for manufacturing sugar or Khands~ri sugar is sugarcane.
When the vacuum pan process is employed the end product is called sugar and
when the open pan process is employed the end product is called Khandsari
sugar. In order to extend protectiOn to the farmers who had undertaken raising
of sugarcane crop, the Central Government issued the Sugarcane (Control) Order
1966. Clause 3 of this Order conferred power on the Central Government to fix
minimum price of sugarcane to be paid by produ~rs of sugar for sugarcane purchased by them. C1ause 4 conferred similar power to fix the minimum price to be
paid by th" producers of khandsari sugar for the sugarcane purchased. Clause 3A
which was introduced on September 24, 1976 conferred power on the Central
Government and various other authorities to allow a suitable rebate in regard to
the weight of the binding material not exceeding 0.62S Kg. per quintal of sugarcane, when sugarcane was purchased by the producer of the sugar. Later,
Clause 4A ·was introduced on March 20, 1978,. to provide for the rebate that can
be deducted from the price paid for sugarcane by prp<jucers of kbandsari
sugar.
The State Government issued a notification on September 3, 1980 to provide
that where sugarcane is brought in !:undies and is weighed as such, a rebate in
regard to the binding material at 0.650 Kg. per quintal should be allowed. As
there waS a printing error in mentioning the figure '0.650 kg.' a corrigendum was
issued to correct it, to '0.625 kS: per quintal in the notification.
The petitioners in the writ petitions who were manufacturing khandsari
sugar by the open pan process assailed the decision of the State Government
allowing rebate. They cootcoded that : (I) the power to prescribe the rate of
rebate under the third proviso to clause 4 is conditional upon the fixing of the
minimum priae of sugarcane and as the pre~condition for exercise of that power
was not satisfied, the authorities canQQ\ ~xercise Power to prescribe the 111te of
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SUPREME COURT REPORTS
[1982] 3 s.c.R.
rebate, (2) if the p\lrchaser and seller of sugarcane are free agents to negotiate
the price no useful purpose would be served by prescribing the rate of rebate
statutorily. If higher rebate is to be allowed, the producer of khandsari sugar
and the grower of sugarcane would work out the price accordingly and if Jess
rebate is allowed, it will have a direct i~pact on the negotiated ptj,cc, (3) assuming that the power to prescribe the rate of rebate under clause 4A read
with the third proviso could also be exercised where the price of sugarcane was
left to be negotiated between the growers of sugarcane and the producers of
kbandsari sugar, the quantum of rebate determined must have a reasonable relation to the reality of market situation as well as to prevalent trade practice, (4)
assuming that the Central Government was influenced by the report m::i.de by the
Director, National Sugar Institute the report suggests that the average works out
at 0.741 kg
~er quintal, and consequently there was no justification for
further reducing it to 0.625 kg, (5) the notification places a restriction on the
freedom of trade guaranteed under Article 19(1) (g) and as it is neither
reasonable nor imposed in public interest, it is violative of freedom of trade and
therefore void, and (6) in order that a restriction may be reasonable it must have
a reasonable relation to the object which the statute seeks to achieve and must
not be in excess of that object.
Dismissing the writ petitions.
HELD: The State Government notification dated September 3, 19BO
directing that where sugarcane is brought in bundles and is weighed as such a
rebate in regard.to the binding material at 0.625 kg per qui

## Text

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j
' •,
SUKHNANDAN SARAN DINESH KUMAR &
ANOTHER ETC. ETC.
v.
UNION OF INDIA & ANOTHER ETC. ETC.
March 3, 1982'
[D.A. DESAI, AND A. VARADARAJAN, JJ.]
371
A
B
Sugar Cane (Control) Order 1966, Clauses 3, 3A, 4 and 4A & U.P. State
C
Government Notification dated September 3, 1980.
Sugar Cane brought in bundles-Binding material-Grant of rebate-Whb
ther valid and reasonable.
The raw material for manufacturing sugar or Khands~ri sugar is sugarcane.
When the vacuum pan process is employed the end product is called sugar and
when the open pan process is employed the end product is called Khandsari
sugar. In order to extend protectiOn to the farmers who had undertaken raising
of sugarcane crop, the Central Government issued the Sugarcane (Control) Order
1966. Clause 3 of this Order conferred power on the Central Government to fix
minimum price of sugarcane to be paid by produ~rs of sugar for sugarcane purchased by them. C1ause 4 conferred similar power to fix the minimum price to be
paid by th" producers of khandsari sugar for the sugarcane purchased. Clause 3A
which was introduced on September 24, 1976 conferred power on the Central
Government and various other authorities to allow a suitable rebate in regard to
the weight of the binding material not exceeding 0.62S Kg. per quintal of sugarcane, when sugarcane was purchased by the producer of the sugar. Later,
Clause 4A ·was introduced on March 20, 1978,. to provide for the rebate that can
be deducted from the price paid for sugarcane by prp<jucers of kbandsari
sugar.
The State Government issued a notification on September 3, 1980 to provide
that where sugarcane is brought in !:undies and is weighed as such, a rebate in
regard to the binding material at 0.650 Kg. per quintal should be allowed. As
there waS a printing error in mentioning the figure '0.650 kg.' a corrigendum was
issued to correct it, to '0.625 kS: per quintal in the notification.
The petitioners in the writ petitions who were manufacturing khandsari
sugar by the open pan process assailed the decision of the State Government
allowing rebate. They cootcoded that : (I) the power to prescribe the rate of
rebate under the third proviso to clause 4 is conditional upon the fixing of the
minimum priae of sugarcane and as the pre~condition for exercise of that power
was not satisfied, the authorities canQQ\ ~xercise Power to prescribe the 111te of
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SUPREME COURT REPORTS
[1982] 3 s.c.R.
rebate, (2) if the p\lrchaser and seller of sugarcane are free agents to negotiate
the price no useful purpose would be served by prescribing the rate of rebate
statutorily. If higher rebate is to be allowed, the producer of khandsari sugar
and the grower of sugarcane would work out the price accordingly and if Jess
rebate is allowed, it will have a direct i~pact on the negotiated ptj,cc, (3) assuming that the power to prescribe the rate of rebate under clause 4A read
with the third proviso could also be exercised where the price of sugarcane was
left to be negotiated between the growers of sugarcane and the producers of
kbandsari sugar, the quantum of rebate determined must have a reasonable relation to the reality of market situation as well as to prevalent trade practice, (4)
assuming that the Central Government was influenced by the report m::i.de by the
Director, National Sugar Institute the report suggests that the average works out
at 0.741 kg
~er quintal, and consequently there was no justification for
further reducing it to 0.625 kg, (5) the notification places a restriction on the
freedom of trade guaranteed under Article 19(1) (g) and as it is neither
reasonable nor imposed in public interest, it is violative of freedom of trade and
therefore void, and (6) in order that a restriction may be reasonable it must have
a reasonable relation to the object which the statute seeks to achieve and must
not be in excess of that object.
Dismissing the writ petitions.
HELD: The State Government notification dated September 3, 19BO
directing that where sugarcane is brought in bundles and is weighed as such a
rebate in regard.to the binding material at 0.625 kg per quinta:I be allowed, is
valid and legal. The rebate was statutorily prescribed to ensure that' sugarcane
growers were not at the mercy of the producers of sugar and kbandsari sugar.
The statutory rebate serves two-fold purpose: (i) it ensures price of sugarcane
avoiding impermissible deductions and (ii) it circumvents fraud by making such
deductions as would render illusory even the negotiated price, if not fixed price.
The restriction is undoubtedly reasonable and is imposed in the interest of the
general pub1ic and the guarantee of freedom of trade is not violated.
[376 E; 392 H; 393 A-C]
1. (i) Though1clause 3A was inserted in the Control Order in 1976 conferr·
ing powerlon the Central Government or with the approval of the Central Government, on the State Government to allow rebate at 0.625 kg. per quintal of sugarcane purchased by manufacturers of sugar, such rebate was being prescribed
by the Central Government since 1968. [379 G]
(ii) Clause 4 confers power on the Central Government or a State Gove~
ment with the concurrence of the Central Government to fix the minimum price
or ihe price of sugarcane to be paid by producer.,s of khandsari sugar for sugarcane purchased by them. Third proviso to clause 4 provides that· the Central
Government or with the approval of the Central Government the State Government to allow. a suitable rebate in the price so fixed. If the provision were to
end with clause 4, the question may arise whether the power to determine rate of
rebate can be exercised de hors the power to fix minimum price or price of sugarcane or can be unilaterally exercised. But the language of the third proviso" ... as
it may specify. allow a suitable rebate of the price so fixed", indicates that the
rebate is :o-related to lhe price fixed. {381 C-F]
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SUKHNANDAN SARAN V. UNION
373
(iii) The rebate contemplated by the third proviso to clause 4 is not necessarily con6ned to rate of rebate for binding material only but permissible rate of
rebate from the price or minimum price fixed under the substantive provision of
clause 4 can be prescribed. [381 H; 382 A)
(iv) Clause 4A stands on an independent footing and it is independent
of clause 4. Clause 4A is neither inter-dependent nor interrelated to clause 4.
Clause 4A visualises a situation in which either the minimum price of Sugarcane is fixed under clause 4 or ·where no such price if fixed, the price agreed
to between the sugarcane grower and the producer who purchased sugarcane and
even in this latter situation the power to prescribe rate of rebate only in respect
of binding material was conferred on the authoiities set out in the third proviso
to clause 4A. Therefore, fixing of the minimum price may be a p1e--condition
to the exercise of power under the third proviso of clause 4, as far as clause 4A
is concerned, even where the price to be paid by the producer to the sugarcane
grower is the one negotiated between the two, the producer or his agent will
have to allow that much rebate and no more for binding material if notified
under the third proviso. This literal construction accords with the intendmcnt of
the provision. [382 B-E; 383 G)
2. (i) Sugarcane is a perishable commodity. The grower of the sugarcane
is at the mercy of producers of sugar or khandsari sugar. It would be uneconomic
for him to transport sugarcane to a long distance. The product, .being perishable
and transport over a distance being uneconomic, the grower of sugarcane has
limited choice in selecting the producer to whom it coUld be sold. Between the
producer of khandsari and the grower of sugarcane, the first one is primarily in
a position to dominate and dictate and they do not operate on the level of equality. The grower of sugarcane in relation to the producer of the khandsari
sugar would therefore be weaker and requires to be protected. If the protection of fixing of minimum price is not resorted to because the authorities
have information that the grower of sugarcane would be able to obtain a 'reasonably fair price for his labour, the only thing which is required to be protected
against is inequitous. un3.uthorised and impermissible deductions. In the States
of Uttar Pradesh and Bihar the weight of the binding-material When sugarcane
is brought in bundles to the producer bas been a fruitful s~urce for the producers
of khandsari sugar to make deductions from the weight of sugitrcane delivered
to them in an exorbitant quantity so as to deny in real money worth the ncgoti·
ated price. [382 H; 388 A-DJ
(ii) While retaining the power to fix minimum price -0r price to be paid
and also in a given situation leaving it to the purchaser of sugarcane to
negotiate the price in order to eschew any exploitation of the weaker section
between the two, th~ power to prescribe thC rate of rebate was acquired and it
can be rightly enforced. There is therefore no merit in the submission that
unless the power to fix the price or minimum price is exercised there is no power
to prescribe the rate of rebate. [383 F-G]
3. The rate of rebate has been determined by the law of averages after
wllectin~ infor1DMioD from all over th~ \09Ynt'i', and tile ~resent rate of r•bllt~
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SUPREME COURT REPORTS
(1982} 3 s.c.R.
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is in vogue for over a quarter of a century. It is therefore difficult to accept the
submission that the fixation of-rate of rebate for bindin~ material at 0.625 kg. for
th~ whole country is either arbitrary or unreal or unrelated to trade and practice.
[386 G-H]
4.
(i) The differential between what is prescribed and what is calculated
as average by the study of the National Sugar Institute is not so wide as to render
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the prescribed rate arbitrary or unrealistic. The differentials being within a
narrow range, the one which is in vogue for over a quarter of a century cannot
be rejected as arbitrary or unrelated to trade and practice. Nor is the Court
competent to work out the exact permissible rebate with mathematical accuril.cy.
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[387D-E]
(ii) The rate of rebate set out in the impugned notificaiion bears resemblance to the sample testing of actual weight of binding. material used in binding
sugarcane when brought in bundles to the khandsari factory. [388 E]
(iii) This does not however imply that no case has been made for upward
revision of the rebate. The Central Government may realistically .el!'.amine the
same before the next crushing season commences. [_388 G]
5. (i) It would be open to the producer of khandsari sugar to buy sugar-
-cane from the grower who may be asked to bring sugarcane not bound in bundles. The rebate for binding material is to be aliowed only when sugarcane is
brought to the khandsari sugar producing unit bound io bundles. It is always
open to the purchaser of sugarcane to insist upon the grower bringing the sugarcane not bound in bundles and he is free to negotiate the price of sugarcane is
not fixed and the impugned notification wiIJ not even remotely impinge upon his
ffeedom to carry on his trade. The restriction Complained of therefore does not
directly and proximately interfere with the exercise of freedom of trade and
Article 19(1) (g) is not attracted. [389 E-G]
(ii) Producers of sugar and khandsari sugar constitcte powerful trade
lobby, and this can be taken judicial notice. Sugar being an essential commodity
occasionally kept in short supply and being a commodity needed for consumplion by almost the entire population, the pOwerfut industry magna tcs are in a
position to dominate both the growers of sugarcane as also the consumers of the
essential commodity. Number of regulations have been enacted to regulate this
powerful combination of manufacturers of sugar and khandsari sugar all over the
country for the ultimate benefit of consumers, the farmers-the growers of
sugarcane. The marginal farmers, are unable to stand up againsfthe organised
industry and need protection for selling at fair price their meagre agricultural
produce. [391 D·G]
(iii) Sugarcane gro~ers who are farmers cannot negotiate on the footing
of equality with the producers of sugar· and khandsari sugar. The State action
for the protection of the weaker sect-ions is not only justified but absolutely
necessary unless the restriction imposed is excessive. If price or minimum price
"of sugarcsne is fixed. the producers of sugar would try to circumvent the price
or minimum price by unrealistic and impermissible deductions. The reb8.te for
weight of binding material seems to be a source for indulging in this nefarious,
if not wholly fr,audulent. conduct,
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suKHNANi>AN SARAN v. UNION (besai, J.)
6. To strike the balance between the conflicting interests not only the State
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acquired power to fix minimum price of sugar and khandsari sugar but that this
wholesome effort may not work to the disadvantage of the sugarcane growers
another weaker section of th~ society, the power to prescribe rate of rebate was
acquired. And the power to fix price or minimum price comprehends the power
to so regu1ate supply as to ensure the price so fixed and to ensure that in the
name of unauthorised and unwarranted deduction the price fixed or negotiated
is not rendered illusory. [393 G-H; 394 A)
B
ORIGINAL JURISDICTION : Writ Petition
Nos.
0443-44/80,
•
8829-30, 9123-24, 370·87, 777•796, 658·62, 732·63, 824-31, 847-62,
1080-1103, 1131-52, 8916, 9071-74., 9130-32, 9176·79, 8965, 8971-72,
9347-48, 9352-67 of 1981.
(Under Article 32 of the Constitution of India)
AND
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Writ Petitions Nos.
14-19/82, 333-25,
458-96,
1307-17,
D
1410-13, 1595, 8268-72 of 1981 and 152 of 1982.
· (Under article 32 of the Constitution of India)
C.M. Lodha. in
W. P. No. 6443-44/80, Shanti Bhushan,
in WP. Nos. 732·63, 3423-25/81-S.N. Kackar, in W.P. 777-96 &
1131-52 of 81, R.K. Jain, S. Mitter, K.K. Mohan, N.S. Das Bahl,
Rameshwar Dial and Madan Gopal Gupta for the Petitioners.
G.N. Dikshit and Mrs. Shobha Dikshit for Respondents.
Girish Chandra and Miss A. Subhashini for Union of India in
W.l'. Nos. 6443-44/80.
(>
The Judgment of the Court was delivered by :
DESAI, J. Even an innocuous marginally regulatory measure
affecting the sugar trade at fringes is sufficient for this powerful
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ipdustry to invade the courts with petitions galore almost proG
claiming that there should be hands off policy in respect of this trade.
The filimsty albeit untenable grievance made in this group of petitions would underscore the truth of what is just stated.
In exercise of the power conferred by clause ( 4) third proviso
of the Sugarcane (Control) Order, 1966, ('Control Order' for short),
the 2nd respondent-State ofUttar Pradesh, with the permission of
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SUPREME COURT RBPORts
[ 1982] 3 s.c.il.
the 1st respondent Union of India, issued Notification dated September 3, 1980, which ·is impugned in
these petitions. The
impugned Notification reads as under :
"Sr. No. 398 A (Ka)
Government Gazette, U.P.
Extraordinary
Legislative Supplement
Part 4, Seciion (b) (Kha)
... Order
13-38-16, 56
Lucknow, Wednesday, 3rd. September, 1980.
Notification
P.As.~306
In exercise of the powers conferred by clause 4 proviso 3 of
the Sugarcane Control Order, 1966, the Governer, with the permission of the Central Government, allows in Uttar Pradesh in respect
of Khandsari units, producing Gur, rab or Khandsari sugar, where
sugarcane is brought in
bundles
and is weighed as such, a
rebate in regard to the binding material at 0.650 kilograms per
quintal.
•
By Order,
R. Basudev,
Secretary"
It was stated that there was a printing error in mentioning the figure
'0.650 kg.' and a corrigendum bas been issued to correct it to
'0.625 kg.' per quintal in the Notification.
Tbe allegations in all the petitions are identical and, therefore,
we would state a few representative facts from the writ petition ,
filed by M/s. Sukhnandan Saran Dinesh Kumar and Another. The
petitioners are producers of sugar by open pan process, the product
being described as Khandsari sugar. This term is to be understood in
contra-distinction to the marketable commodity called 'sugar' -which
is produced by vacuum pan process. The raw material for manu-
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silkllNANbAN SARAN v. UNION (Desai, i.)
factoring sugar or Khandsari sugar is sugarcane. The petitioners
have set up a factory for manufacturing khandsari sugar by open
pan process. The petitioners buy sugarcane from the sugarcane
growers. In order to extend protection to the farmers who · have
undertaken raising of sugarcane crop, tbe Central Government
issued the Control Order in exercise of the power conferred by
section 3 of the Essential Commodities Act, 1955.
By clause 3 of
this order, power was conferred on the Central Government to fix
minimum price of sugarcane to be paid by producers of sugar for
sugarcane purchased by them. Clause 4 confers similar power to
fix the minimum price to be paid by the producers of khandsari
sugar for sugarcane purchased by them. Other clauses of the
Order for the present purpose are not relevant. Clause 3A was
introduced by GSR 815 (E)/ESS. COM./Sugarcane dated September 24, 1976, which, inter a/ia, conferred power on the Central
Government and various other authorities mentioned therein to allow
a suitable rebate in regard to the weight of the binding material not
exceeding 0.625 kg, per quintal of sugarcane, when sugarcane was
purchased by the producer of sugar. Subsequently, by Notification
GSR 197 (E)/Ess. Com./Sugarcane dated March 20,1978, Clause 4A
with the marginal note "Rebate that can be deducted from the
price paid for sugarcane by producers of Khandsari sugar" was
introduced. Clauses 4 and 4 A are material for the present discussion and they may be extracted :
"4. Minimum price of sugarcane payable by producers of
[(handsari sugar :~
The Central Government or a State Government, with
the concurrence of the Central Government, may, by notification in the Official Gazette, from time to time, fix the
minim11m price or the price of sugarcane to 'be paid by
producers of khandsari sugar or their agents for the sugarcane purchased by them : .
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Provided also that the Central Government or, with
the approval of the Central Government, the State Government, may in such circumstances and subject to such conA
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SUPREME COURT REPORTS
f 19821 :i s.c.il.
ditions as it may specify allow a suitable rebate in the price
so fixed."
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*"4A. Rebate that can be deducted from the price paid
for sugarcane by producers of Khandsari sugar :
A producer of khandsari sugar or his agent shall pay,
for the sugarcane purchased by him, to the sugarcane
grower or the sugarcane growers' co-operative society,
either the minimum price ·of sugarcane ·fixed under clause
4, or the price ·agreed to between the producer or bis agent'
and the sugarcane grower or the sugarcane growers' co·
operative society, as the case may be (hereinafter referred
to as tbe agreed price : )
Provided that :
x
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(iii) Where the sugarcane is brought bound in bundles
and weighed as such, the Central Gove.rnment, or,
with the approval of the Central Government, the
State Government or the Director of Agriculture or
the Cane Commissioner or the District Magistrate
within their respective jurisdiction, may allow a suitable
rebate in regard to the weight of the binding material
not exceeding 0.625 Kilograms per quintal of sugarcane; and,
x
x
x
Clause 4 c0nferred power on the Central Government or a
State Government with the concurrence of the Central Government
to fix the minimum price or the price of sugarcane to be paid by
producers of khandsari sugar or their agents for the sugarcane purchased by them.
The second and third proviso to clause 4 were
simultaneously introduced with clause 4A.
By the Third proviso
to clause 4, power was conferred on the Central Government or
* Inserted vide Notification No. GSR 197 (B)/Bsi. Com./Sugarcane
dated 20.3. 78,
i
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51.JltllNANl>AN SAl\AN v. UDION (Desai, J.)
319
with the approval of the Central Government on the State Govern·
ment to allow a suitable rebate in the price fixed in exercise of the
power conferred by clause 4. The purpose underlying the proviso is
manifest.
If the minimum price or price of sugarcane to be paid by
producers of khandsari sugar is fixed, it is incumbent upon the producers of khandsari sugar to pay that price and nothing less than
that price on the pain of criminal prosecution. The authorities
clearly envisaged a situation where sugarcane may be brought
in bundles to the unit
manufacturing khandsari sugar and if
the sugarcane is weighed with the binding material used,
the
minimum price or price fixed by the Government to be paid per
quintal of sugarcane would ipso facto include the weight of the
binding material and if the power to grant rebate is not conferred
the producer of khandsari sugar will be under an obligation to
pay the same price even if the part of the payment was for something other than sugarcane, namely, binding material. The raison
d'etre behind conferring this power is thus clearly discernible.
Clause 4A made it obligatory to pay the minimum price of
sugarcane if so fixed under clause 4 or in the absence of price fixation, the negotiated price. Proviso (iii) to clause 4A confers power
to allow rebate not exceeding 0.625 kg. per quinta:I of sugarcane
where sugarcane is brought in bundles and is weighed as such, i.e.
with the binding material. Armed with this power, the 2nd respondent after obtaining approval of the Central Government, as per
letter dated September. 6, 1979, issued the impugned notification
directing tha.t where sugarcane is brought in bundles and is weighed
as such a rebate in regard to the binding material at 0.625 kg. per
quintal be allowed.
Before adverting to the contentions raised in this group of
petitions it may be made distinctly clear that though clause 3A
was .inserted in the Control Order in 1976 conferring similar power
on the Central Government. or with the approval of the Central
Government, on the State Government to allow rebate at 0 .625 kg.
per quintal of sugarcane purchased by manufacturers of sugar, such
rebate was being prescribed by the Central Government since 1968,
The Gazettes oflndia setting out the notifications for tbe years
1968, 1971, 1972 and 1975 were 11bown to us.
The notifications
were issued in exercise of the power conferred by clause 3 of the
Sugarcane Control Order, 1966.
By the notifications hereinabove
referred to minimum price of sugarcane per quintal payable by each
sugar mill enumerated in the Schedule to the notification was fixed.
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SUPREME cOURT REi>OlTS
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While fixing this minimum price the Central Government authorised·
itself as also conferred power on the State Governments or the
Commissioner or Director of Agriculture within their jurisdiction to
allow a suitable rebate in regard to the weight of binding material
not exceeding 0.625 kg. per quintal of sugarcane. It thus clearly
transpires that the power to fix the minimum price of sugarcane
· comprehended the power to fix rebate to be allowed for binding
material where sugarcane is brought to the factory or the producing
centre bound in bundles. However, to avoid any quibbling about
the power to fix such.rates of rebate, clause 3A was added in 1976
and an identical clause 4A was added in 1978 acquiring power to
prescribe rebate to be allowed for binding material where sugarcane
is brought to the khandsari sugar producing units bound in bundles
and weighed as such.
Thi~ would at least show that since 1968
rebate at 0.625 per quintal of sugarcane purchased by producers of
sugar is being allowed. Sugarcane is a raw material both for sugar
and khandsari sugar, the distinction between them being that when
vacuum pan process is employed the end product is called sugar and
when open pan process is employed the end product is called
khandsari sugar. In case of either of them, the grower of sugarcane
has hardly anythi.ng to do with the end product. After the grower
sells his sugarcane, as far as he is concerned, it is immaterial whether
the producer produces sugar or khandsari sugar or rab or jaggery
or shakkar. Therefore, clause 4A was introduced to avoid discrimination between producers of sugar and khandsari sugar in the
matter of rebate to be allowed when the grower of sugarcane brings
the same bound in bundles to be delivered to the producer. The
producers of sugar have without a murmur accepted this position
but once the producers of khandsari sugar are brought within the
purview of an identical provision, they have filed the present
petitions.
Mr. C.M. Lodha who led on behalf of the petitioners contended that the power to prescribe rate of rebate under third proviso
to clause 4 is conditional upon the fixing of minimum price or price
of sugarcane, and as the pre-condition to exercise of power is not
satisfied, the authorities cannot ex~rcise power to prescribe rate of
rebate. The submission is that where minimum price of sugarcane
is fixed by the Government, in order to ensure that that price is paid
for sugarcane and simultaneously to avoid any unauthorised deduction, the' Central Government or the State Government may prescribe the rate of rebate to be allowed beyond which no deduction
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381
under the
camouflage of rebate for binding material can
be.
resorted to by the purchaser; but if the power to fix minimum price
or price o( sugarcane is not exercised, there does not arise a situation in which the power to prescribe rebate to be allowed for binding
material can be exercised. It was urged that the power to fix price
or mfoimum price of sugarcane and to prescribe r~te of rebate are
not independent but they are inter-dependent and one cannot be
exercised without exercising the other.
Clause 4 confers power on the Central Government or a State
Government with the concurrence of the· Central Government to
fix the minimum price or th.e price of sugarcane to be paid by producers of khandsari sugar for sugarcane purchased by them.
Third
proviso to clause 4 provides that the Central Government or with
the approval of the Central Government, the State Government may
in such circumstances and subject to such conditions as it may.
specify, allow a suitable rebate in the price so fixed. If the provision were to end with clause 4, a serious contention would arise whether the power to determine rate of rebate can be exercised de horse
the power to fix minimum price or price of sugarcane or can be unilaterally exercised. Undoubtedly, if the power was exercised under
clause 4 probably the pre-condition to exercise of power of prescrib-·
ing suitable rebate viz. fixing of minimum price or prlce of sugarcane
if not satisfied, the power to prescribe rate of rebate could not have
been exercised because the latter power for its exercise is dependent
npon the power to fix price or minimum price. Both the powers are
interrelated as would be evident from the language of third proviso :
" .. .,as it may specify, allow a suitable rebate in the price so fixed."
The rebate is thus co-related to price fixed.
Therefore prima facie it
appears that the power to fix rate of rebate under the third proviso
to clause 4 cannot be exercised without exercising the power to fix
price or minimum price. It being a conditional power, the satisfaction of condition giving rise to the occasion to exercise of power
is a must. Therefore, before the rate· of rebate is prescribed the
price or the minimum price of sugarcane as provided in the substantive part of clause 4 will have to be fixed. From the price so
fixed a rebate has to be allowed and, therefore, the power was conferred by the third proviso to prescribe the rate of rebate. The
rebate contemplated by the third proviso to clause 4 is not necessarily confined to rate of rebate for binding material only but perA
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missible rate of rebate from the price or minimum price fixed under
the substantive provision of clause 4 can be prescribed.
Clause 4A stands on an independent footing and it is independent of clause 4.
Clause 4A is neither inter-dependent nor
interrelated to clause 4.
Clause 4A provides that the producer of
khandsari sugar or his agent shall pay for the sugarcane purchased
by him to the sugarcane grower or the sugarcane growers' cooperative society either the minimum price of sugarcane fixed under
clause 4 or the prico agreed to between the 'producer or his agent
and the sugarcane grower or the sugarcane growers' co-operative
society as the case may be.
Clause 4A thus visualises a situation
in which either the minimum price of sugarcane is fixed under clause
4 or where no such price if fixed, the price agreed to between the
sugarcane grower and the producer who purchased sugarcane and
even in this latter situation the power to prescribe rate of rebate only
in respect of binding material was conferred on the Central Government or the authorities set ont in the third proviso to clause 4A.
Therefore, fixing of the minimum price may be a pre-condition to
the exercise of power under the third proviso of clause 4, as far as
clause 4A is concerned, even where the price to be paid by the
producer to the sugarcane grower is the one negotiated between the
two, the producer or his agent will have to allow that much rebate
and no more for binding material if notified in exercise of the power
conferred by the third proviso. This literal construction accords
with the intendment of the provision as would be presently pointed
out.
Mr. Lodha urged that if the purchaser and seller of sugarcane
are free agents to negotiate the price, what useful purpose would be
served by
prescribing the rate
of rebate statutorily ? Says
Mr. Lodha, that if higher rebate is to -be allowed, the producer of
khandsari sugar and the grower of sugarcane would work out the
price accordingly and if less rebate is allowed, it will have a direct
impact on the negotiated price. This submission proceeds on the
unwarranted assumption that a producer of khandsari sugar and
the grower of sugarcane are capable of negotiatin& the price as
free agoots
and stand on a footing of equality.
Sugarcane
is a perishable commodity. The grower of the sugarcane is at the
mercy of producers of sugar or khandsari sugar. It would be uneconomic for him to transport sugarcane to a long distance. By
the very nature of the product, it being perishable and transport
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SUKHNANDAN SARAN v. UNION (Desai, J.)
383
over a distance being uneconomic, the grower of sugarcane bas
limited choice in selecting the producer to whom it could be sold.
Between the producer of khandsari and the grower of sugarcane, the
first one is primarily in a position to dominate and dictate and they
do not operate on the level of equality. Unquestionably, therefore,
the grower of sugarcane in relation to the producer of the khandsari
sugar would be weaker and it is he who requires to be protected.
Now, if the protection of fixing of minimum price is not resorted to
because the authorities under the Control Order may have information before them that looking to the supply and demand and the
demand and the market economy, the grower of sugarcane would be
able to obtain a reasonably fair price for his labour, the only thing
which is required to be protected against is inequitous, unauthorised
and impermissible deductions. It appears that in the State of
Uttar Pradesh and Bihar the weight of the binding material when
sugllrcane is brought in bundles
to the producer has been
a fruitful source for the producers of khandsari sugar to make
deductions from the weight of sugarcane delivered to them in
such an exorbitant quantity as to deny in real money worth the
negotiated price. This can be demonstrably established by the claim
made in these petitions that the weight of binding material is 2. 5 kg.
per quintal of sugarcane while the authorities have prescribed only
0.625 kg. per quintal of sugarcane and the national average as
worked out by National Sugar Institute, Kanpur is 0.741 kg. per
quintal of sugarcane. If the price of sugarcane is fixed per quintal
and the deduction is made as contended herein, it does not require
imagination or mathematician's intellect to work out the invisible
loss inflicted by the subtle method on the growers of sugarcane.
Therefore, while retaining the power to fix minimum price or price
to be paid and also in a given situation leaving it to the purchaser of
sugarcane and grower of sugarcane to negotiate the price in order
to eschew any exploitation of the weaker section between the two,
the power to prescribe the rate of rebate was acquired and can be
rightly enforced. Therefore, viewed from either angle, there is no
merit in the submission that unless the power • to fix the price or
minimum price is exercised there is no power to prescribe the
rate of rebate. Language of clause 4A on a literal or grammatical construction negatives the submission and it must as well be
rejected looking to the intendment underlying this provision.
Mr. Shanti Bhushan, learned counsel appearing for the petitioners in Writ Petitions No. 734 to 763 urged that assuming thl!t
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power to prescribe rate of rebate under clause 4A read with the
third proviso could also be exercised where price of sugarcane may
be left to be negotiated between the growers of sugarcane and pro-
. ducers of khandsari sugar, yet the quantum as determined must at
least have reasonable relation to the reality of market situation as
well as prevalent trade practice.
He urged that viewed from this
angle fixation of rate of rebate at 0.625 kg. per quintal of sugarcane
is unjust and unfair' and therefore the Court should strike down the
impugned notification on the ground that the determination is
arbitrary and utterly unrelated to trade and practice. Simultaneously
he contended that assuming that national average of weight of
binding material works out at 0.741 kg. per quintal as submitted
by the Respondents on the strength of the report of National Sugar
Institute, Kanpur, there was absolutely no justification for reducing
the same to 0.625 kg. per quintal and therefore prescribed rate of
-rebate apart from being arbitrary is unrelated to trade and prac(ice
and deserves to be quashed. In this connection, he referred to
paragraph 6 of the counter-affidavit ·filed by Shri H.A.M.L. Vaz,
Deputy Secretary, Ministry of Agriculture, Department of Food
in which it is stated as under :
"The limit of_ 625 grams per quintal was adopted, as it
was allowed by the States of U.P. and Bihar before the
Cenlial Government took over the control over the price
of sugarcane, and has continued since then. Representations were received from the Associations of the vacuumpan sugar mills etc. again! that limit. A survey was carried
out by the National Sugar Institute, Kanpur, and the
average weight of the binding material worked out to
0. 741 kg., per quintal for the winter season of the selected
factories spread over· the whole country.' Subsequently,
on receipt of a representation from the Madras State
Federation of Co-operative Sugar Factories, views of the
State Governments in the matter were also called for, with
the specific request that they might also ascertain the views
of the cane growers. The major sugar producing State
Governments of U.P., Punjab, Rajasthan, Maharashtra,
Karnataka, Andhra Pradesh, Pondicherry, West Bengal,
Orissa,
Madh~a Pradesh, Kerala and Gujarat, recommF.nded that the limit already prescribed was adequate and
that there was no need to revise it. The Bihar GovernJlle!lt bad alreadr indicated the same view. Hence fixation
SUKHNANDAN SARAN .v. UNION <Desai, J.)
385
of that limit cannot be said to be unreal and arbitrary or
contrary to actualities of trade and practice."
Petitioners countered it by the affidavit in rejoinder of
Shri Prem Parkash Aggarwal; the relevant portion of para 4
reaqs as under :
"With reference to Para 6 of the counter-affidavit I say
that to the best of my information no survey was carried
out at any time after 1976. It is to the best of my information that National Sugar Institute, Kanpur, conducted
some kind of survey in 196.4 or earlier."
This half-hearted lack of knowledge would not be sufficient to
reject what Mr. Vaz stated -in his counter-affidavit. However, to
put this factual averment beyond the pale of controversy Mr. Girish
Chandra, learned advocate who appeared for the Union Government
produced a file of the Department of Food, Sugar Policy Desk, in
which claim for upward revision of allowance for binding material
presently allowed under Sugar (Control) Order, 1966 in the light
of the suggestions received from Indian Sugar Mills Association as
per its letter dated July 14, 1977 has been meticulously examined.
It appears that Indian Sugar Mills Association approached the
Central Government requesting it for upward revision of the rebate
for binding material till then granted under the Control Order.
Indian Sugar Mills Association appears to be the spokesman
of the sugar industry.
Probably a grievance was voiced that while
producers of sugar are under a statutory obligation to grant the
prescribed rate of rebate, the producers of khandsari sugar are under
no such obligation even though they purchase sugarcane from the
the same
market. Accordingly while examining
the. question
whether any upward revision in the rate of rebate shoqld be allowed
to the produc~rsof sugar who purchase sugarcane, it was decided
to simultaneously introduce an i.dentical provision in respect of
purchase of sugarcane by producers of khandsari sugar. That
. is the genesis of the introduction of clause 4A in, the Control Order.
The file meticulously examines the suggestion for upward revision of
the rate of rebate. It clearly transpires from the file that a circular
letter was sent to all the governments of sugar producing states
requesting them to intimate their view on the desirability or other·
wise of any upward revision in the existing quantum of rebate of
0.625 kg. per quintal in respect of the weisht of the binding material'
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where sugarcane is brought bound in bundles and weighed as such.
It may be briefly mentioned that Punjab, Gujarat, Karnataka and
U.P., did not consider it necessary to grant any upward revision.
On the other hand, Tamilnadu, Kerala, West Bengal, Pondicherry,
Haryana, Rajasthan and Orissa were of the opinion that there is
some justification for an upward revision not exceeding I kg.
per quintal. The State of Bibar took a neutral
stand stating
that in Bihar, sugarcane is not supplied hound in bundles and
therefore the question of giving any rebate in respect of binding
material does not arise. After ascertaining the views of the different
State Governments, the departmen_t was of the view that since the
views of the State Governments are sharply divided, a request may
be made to Director, National Sugar Institute, Kanpur to carry out
an independent study in regard to the quantum of l:!'bate that should
be given for binding material, to enable the Government to take a
final decision, on the request of the industry for upward revision of
the existing rebate of 0.625 kg per quintal. This is the genesis of the
report of the Director, National Sugar Institute referred to in Para
6 of the counter-affidavit. The summary of the report of the
Director, ;National Sugar Institute, Kanpur was examined and it
was observed that the percentage of the binding materials varies
from State to State and ranges· between 0.64 to 1.5% except in
Orissa where it is found to be 3.00%.