# U.P. COOPERATIVE CANE UNION FEDERATION v. WEST U.P. SUGAR MILL ASSOCIATION AND ORS

- **Citation:** [2004] Supp. 2 S.C.R. 238
- **Court:** Supreme Court of India
- **Decided:** 2004-05-05
- **Case number:** Civil Appeal No. 460 of 1997
- **Bench:** Rajendra Babu Cj, K.G. Balakrishnan, Venkatarama Redd!, B.N. Srikrishna Ano G.P. Mathur
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/u-p-cooperative-cane-union-federation-v-west-u-p-sugar-mill-association-and-ors-20075
- **Pages:** 122

## Headnote

Sugarcane Act, 1934; Sections 5 and 7/UP. Factories Act, 1938;
C Sections 21 and 22-AIU.P. Sugarcane (Regulation of supply and Purchase)
Act, 1953; Sections 16 & 17/U.P. Sugarcane (Supply and Purchase) Order,
1954/Sugarcane (Control) Order, 1955/Sugarcane (Control) Order, 1966;
Clause 2(g). 3, and 5-A!Essential Commodities Act, 1956; Section 3 :
Fixation of price of sugurcane-Central Government/State
D Government-Jurisdiction of-State Government fixing the price!Stute
Advised price over and above the statutory minimum price fixed by the
Central Government Challenge to---Order of the State Government
quashed by High Court-However, in another matter, on the similar issue
the High Court al/ou•ed the writ petition in favour of the State-On appeal,
E Held:
Per majority ·
The provincial Governments could fix price of sugarcane taking into
account local conditions and empowered to make rules thereof-Sugar
f
Control Order stipulates price could either be the minimum price as fixed
by the Central Government or as agreed between the growers and the
producers and includes additional price as well-Thus, there could be a
price other than the minimum price fixed by the Central Government and
it could be higher than the minimum price so fixed-Repugnancy would
G arise if the State Government fixes a price lower than the minimum priceBy fixing higher price the provisions of 1966 Order stood complied with
by the State Government.
Regulator; of the State Government-State Government imposing
statutory conditions on sugarcane growers for continuous supply of fresh(v
H hurvested sugarcane of mi//s--lmplications-State Government in exercise
238
U.P. CO-OP. CANE UNION FEDERA T!ON v. WEST U.P. SUGAR MILL ASSON. 239
of its regulato1y power could also fix higher price of the sugarcane for the A
benefit of the cane growers-Fixation of higher price by the Sate Government
by itself could not have any major or substantial impact on the fixation
of price of the levy sugar by the Central Government-State Government
frxed the prices uniformly and not factorywise as was the impact of fixation
of the statutory price of the sugarcane by the Central Government-Hence, B
State Advised Price more just and equitable-Essential Commodities ActSection 3; Constitution of India, 1950-Article 254.
Agreement between the sugarcane growers and sugar producersTerms-Enforcing of-Agreement is the single composite transaction-It
is not open to the producers to enforce the terms thereof to their advantage C
and refuse the State Advised Price on the ground that their consent was
not obtained voluntarily.
Words and Phrases
'Price', 'minimum price', 'agreed price '-Meening of in the context
of Sugarcane Supply and (Control) Order, 1966.
'goods '-Meaning of in the context of Sales of Goods Act.
D
'Regulate '-Meaning of in the context of UP. Sugarcane (Regulation E
of Supply and Purchase) Act, 1953.
Per minority :
Central Government is empowered under the Essential Commodities F
Act to regulate the production, supply and distribution of the essential
commodities and provide for controlling the price thereof-Power to
control includes power to fix the minimum price-Power of the Central
Government under the Central Act and that of the State Government under
1953 Act are mutually exclusive-Since the State Legislation does not
contain provisions even for fixation of minimum price of sugarcane, the G
State Government cannot possess power to fix a price higher than the
minimum-Fixation of price higher than the minimum price by the State
executive. hit by Article 14 of the Constitution and renders its constitutionality
open to challenge-Such fixation of price of sugarcane by the State
amounts to violation of the fundamental right guaranteed under Article H
240
SUPREME COURT REPORTS (2004] SUPP. 2 S.C.R.
A 19(1){3) of the Constiturion--Stute Advised Price unnounced by the State
Government despite protest by the sugar producers--Hence. it cunnot be
termed as consensual price between the purties-

## Text

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A
B
U.P. COOPERATIVE CANE UNION FEDERATION
V.
WEST U.P. SUGAR MILL ASSOCIATION AND ORS.
MAY 5, 2004
[RAJENDRA BABU CJ., K.G. BALAKRISHNAN,
VENKATARAMA REDD!, B.N. SRIKRISHNA
ANO G.P. MATHUR, JJ.]
Sugarcane Act, 1934; Sections 5 and 7/UP. Factories Act, 1938;
C Sections 21 and 22-AIU.P. Sugarcane (Regulation of supply and Purchase)
Act, 1953; Sections 16 & 17/U.P. Sugarcane (Supply and Purchase) Order,
1954/Sugarcane (Control) Order, 1955/Sugarcane (Control) Order, 1966;
Clause 2(g). 3, and 5-A!Essential Commodities Act, 1956; Section 3 :
Fixation of price of sugurcane-Central Government/State
D Government-Jurisdiction of-State Government fixing the price!Stute
Advised price over and above the statutory minimum price fixed by the
Central Government Challenge to---Order of the State Government
quashed by High Court-However, in another matter, on the similar issue
the High Court al/ou•ed the writ petition in favour of the State-On appeal,
E Held:
Per majority ·
The provincial Governments could fix price of sugarcane taking into
account local conditions and empowered to make rules thereof-Sugar
f
Control Order stipulates price could either be the minimum price as fixed
by the Central Government or as agreed between the growers and the
producers and includes additional price as well-Thus, there could be a
price other than the minimum price fixed by the Central Government and
it could be higher than the minimum price so fixed-Repugnancy would
G arise if the State Government fixes a price lower than the minimum priceBy fixing higher price the provisions of 1966 Order stood complied with
by the State Government.
Regulator; of the State Government-State Government imposing
statutory conditions on sugarcane growers for continuous supply of fresh(v
H hurvested sugarcane of mi//s--lmplications-State Government in exercise
238
U.P. CO-OP. CANE UNION FEDERA T!ON v. WEST U.P. SUGAR MILL ASSON. 239
of its regulato1y power could also fix higher price of the sugarcane for the A
benefit of the cane growers-Fixation of higher price by the Sate Government
by itself could not have any major or substantial impact on the fixation
of price of the levy sugar by the Central Government-State Government
frxed the prices uniformly and not factorywise as was the impact of fixation
of the statutory price of the sugarcane by the Central Government-Hence, B
State Advised Price more just and equitable-Essential Commodities ActSection 3; Constitution of India, 1950-Article 254.
Agreement between the sugarcane growers and sugar producersTerms-Enforcing of-Agreement is the single composite transaction-It
is not open to the producers to enforce the terms thereof to their advantage C
and refuse the State Advised Price on the ground that their consent was
not obtained voluntarily.
Words and Phrases
'Price', 'minimum price', 'agreed price '-Meening of in the context
of Sugarcane Supply and (Control) Order, 1966.
'goods '-Meaning of in the context of Sales of Goods Act.
D
'Regulate '-Meaning of in the context of UP. Sugarcane (Regulation E
of Supply and Purchase) Act, 1953.
Per minority :
Central Government is empowered under the Essential Commodities F
Act to regulate the production, supply and distribution of the essential
commodities and provide for controlling the price thereof-Power to
control includes power to fix the minimum price-Power of the Central
Government under the Central Act and that of the State Government under
1953 Act are mutually exclusive-Since the State Legislation does not
contain provisions even for fixation of minimum price of sugarcane, the G
State Government cannot possess power to fix a price higher than the
minimum-Fixation of price higher than the minimum price by the State
executive. hit by Article 14 of the Constitution and renders its constitutionality
open to challenge-Such fixation of price of sugarcane by the State
amounts to violation of the fundamental right guaranteed under Article H
240
SUPREME COURT REPORTS (2004] SUPP. 2 S.C.R.
A 19(1){3) of the Constiturion--Stute Advised Price unnounced by the State
Government despite protest by the sugar producers--Hence. it cunnot be
termed as consensual price between the purties-Constitution of India,
19 5 0-Articles 1./ & 19.
B
Words and Phrases :
'minimum price·. 'fair price', 'remunerative price' and 'maximum
price '-Meaning of in the context of Essential Commodities Act, 1955.
'Advised Price '-Meaning of in the context of U.P. Sugarcane
C (Regulation of Supply and Purchase) Act, 1953.
The questions which arose in these appeals and transfer petitions
relate to the competence of the State Government to fix the State
Advised Price for purchase of sugarcane by the manufacturer/occupier
D of sugar factory over and above the minimum price fixed by the
Central Government and validity of the procedure adopted for ensuring
payment of the price to sugarcane growers.
It was contended by the appellant-U.P. Cooperative Cane Unions
E Federation that since the Central Government fixed only the minimum
price, it was op.en for the State Government to fix a higher price for
sugarcane; that the State Government could not only fix a higher price
but could also advise sugarcane growers/factories to agree and pay a
higher price for sugar cane to the sugarcane growers; that the Central
F Government while fixing the minimum statutory price of the sugarcane
did not take into consideration various bye-products produced during
the course of production of sugar; that the sugar mills make considerable
amount of money/profit by selling them; that the State Government
having regard to local conditions and profit earned by the sugar
factories from the sale of the bye products could fix a fair/reasonable
G and realistic price of the sugarcane; and that there is no repugnancy
between the price fixed by the Central Government and State Advised
price as fixed by the State Government.
It was submitted by the State Government that the Central
H Government in pursuance of the provisions under the Essential
U.P. CO-OP. CANE UNION FEDERATION v. WEST U.P. SUGAR MILL ASSON. 241
commodities Act has made sugar cane (Control) Order; and since the A
purpose of the Sugarcane (Control) order was to ensure uninterrupted
supplies of sugarcahe, it must be construed in the context of policy of
the Central Government to appropriate a portion of the production of
sugar and sell it as levy sugar at controlled price; that the statutory
minimum price as fixed by the Central Government was basically B
linked to fixation of the price of levy sugar and not linked to fixation
of the price of sugarcane; that the additional price could only be paid
to the sugarcane growers when the sugar mills earn profit which is only
a matter of chance; that the production of sugar from sugarcane needs
large investment and price is the main incentive for the farmers,
however, the price fixed by the Central Government was bare minimum C
and not a remunerative price; that the power to determine remunerative
price vested with the State Government under the regulatory provisions
of 1953 Act; that the State Government in exercise of its power under
the 1953 Act could bring about an agreement between the sugarcane
• growers, Sugarcane Growers Co-operative Society and occupiers of D
sugar factories whereby the sugarcane grower would be bound to
supply certain quantity of freshly harvested sugarcane and in case of
non-supply he would be liable to pay penalty; that since the sugarcane
grower is liable to pay penalty by the same analogy the State Government
is obliged to determine and pay the remunerative price to the sugarcane E
growers; and that the price so determined by the State Government
represents the true price.
Respondent-Association submitted that there are no specific
provisions under the 1966 Order which could empower the State F
Government to fix the price of sugarcane over and above the price
fixed by the Central Government; that there exists a clear repugnancy
between the price· fixed by the Central Government and the price fixed
by the State Government, thus, the price fixed by the Central
Government would prevail; that the fixation of higher price by the
State Government would completely dislocate the mechanism for G
determination of the price of the levy sugar by the Central Government
as provided under the Essential Commodities Act, that there was no
agreement between the sugarcane growers/Sugarcane Growers Cooperative Society and the occupiers of the sugar factories for payment
of the State Advised Price; and that levy could not be compelled to pay H
242
SUPREME COURT REPORTS [2004] SUPP. 2 S.C.R.
A the State Advised Price since they had never given their consent thereto
in the agreement.
Disposing of the appeals and transfer petitions, the Court
B
HELD : Per G.P. MA THUR, J. (for himself, Rajendra Babu, CJ.
and K.G. Balakrishnan, J.) :
1.1. The Central Legislature enacted the Sugarcane Act, 1934
with the objective that the initiative in the matter of fixation of prices
C for sugarcane must be left to Provincial Governments so as to suit local
conditions. The purchase of sugarcane intended for use in factory in
D
any controlled area at a price less than the minimum price notified was
made an offence under the provisions of the Act, which conferred wide
powers on the Provincial Government to make rules for the purpose
of carrying into effect the objects of the Act. [265-H; 266-C]
1.2. The Central Government exercising powers under Section 3 of
the Essential Commodities Act made the Sugarcane Control Order, 1955.
This order was repealed by the Sugarcane (Control) Order 1966. The
definition of 'price' given in Clause 2(g) of the Sugarcane (Control)
E Order, 1966 shows that it can either be the price or the minimum price
fixed by the Central Government. So far as the power of the Central
Government is concerned, under Clause 3(1) of the order it can fix only
the "minimum price" of sugarcane to be paid by the producers of sugar
for the sugarcane purchased by them. This is the lowest permissible rate.
F The effect of Clause 3(2) of the order is that a producer of sugar can
under no circumstances purchase sugarcane at a price lower than the
minimum price fixed under Clause 3(1) and there is a similar prohibition
on the cane grower and he cannot sell or agree to sell sugarcane to a
producer of sugar below the said price. But the 1966 Order, in view of
definition of "price" given in Clause 2(g) and also the language used in
G Clauses 3 and 3-A, clearly contemplates that there can be a price other
than the minimum price" ofsugarcane as agreed to between the producer
and the sugarcane grower or the Sugarcane Growers' Co-operative
Society'. The provision as laid down under sub-clause (5) of Clause SA again contemplates payment of price higher than the minimum price
H fixed under Clause 3(1 ). A whole reading of the 1966 Order, thus, would
U.P. CO-OP. CANE UNlON FEDERATION v. WEST U.P. SUGAR MlLL ASSON. 243
show that the Central Government shall fix the minimum price of A
sugarcane but there can be a price higher than the minimum price which
may be in the nature of agreed price between the producer of sugar and
the sugarcane grower or the sugarcane growers co-operative society. So
the field for a price higher than the minimum price is clearly left open
in the 1966 Order by the Central Government.
B
[266-D, E; 268-C-D-E-F-G; 269-B-C]
1.3. The provisions in the U.P. Sugarcane (Regulation of Supply
and Purchase) Act, 1953, U.P. Sugarcane (Regulation of Supply and
Purchase) Rules, 1954 and the U.P. Sugarcane Supply and Purchase
Order, 1954, have been made for the benefit of the sugar factory so that C
it is assured ofand gets a continuous supply of freshly harvested sugarcane
in quantity according to its crushing capacity and for the whole duration
of the crushing season. No doubt the cane grower also gets some advantage
in the sense that purchase of his yield is assured but at the same time
many limitations and restrictions are imposed upon him. In view of the D
statutory provisions, the position of a cane grower becomes entirely
different from that of a farmer producing any other kind of:;tgricultural
crop where there arc absolutely no restrictions upon him. It is in this
scenario, which is not the creation of the cane grower but of the statutory
provisions operating in the field, that the question whether the State has E
any authority or power to fix the price of the sugarcane supplied to a
producer of sugar (sugar factory) arose. [275-G-H; 276-A-BI
1.4. The various provisions of U.P. Sugarcane (Regulation of
Supply and Purchase) Act, 1953 Act show in unmistakable terms that F
it regulates the supply and purchase of sugarcane required for use in
sugar factories. 'Regulate' means to control or to adjust by rule or to
subject to governing principles. It is a word of broad impact having
wide meaning comprehending all facets not only specifically enumerated
in the Act, but also embraces within its fold the powers incidental to
the regulation envisaged in good faith and its meaning has to be G
ascertained in the context in which it has been used and the purpose
of the statute. [276-C-D-El
VSR & Oil Mills v. State of A.P., AIR (1964) SC 1781; State of
Tamilnadu v. Mis. Hindu Stone & Ors., [198112 SCC 205; K. Ramanathan H
244
SUPREME COURT REPORTS [2004) SUPP. 2 S.C.R.
A v. State of Tamil Nadu & Anr., 11985] 2 sec 116 and Jiyajeerao Cotton
Mills Ltd. & Anr. v. Madhya Pradesh Electricity Board & Anr, (1989]
Suppl. 2 SCC 52, relied on.
1.5. The provisions of U.P. Sugarcane (Regulation of Supply and
B Purchase) Act, 1953 show that the legislature has made very elaborate
provisions regarding supply of sugarcane by canegrowers, its purchase
by the sugar factories and payment of price thereof. In fact, very
detailed and exhaustive provisions have been made in the Rules and
the U.P. Sugarcane Supply Order, 1954 to ensure that at the time of
C delivery of sugarcane by the canegrowers, its weight and price are
correctly recorded and the price is paid to them within 14 days, failing
which sugar factory is liable to pay interest. In such circumstances, the
irresistible conclusion which can be drawn is that the regulatory power
possessed by the State Government shall also include the power to fix
the price of the sugarcane. If it is held that the State under its power
D of regulation cannot fix the price, then the statutory provision contained
in the 1953 Act, the Rules and 1954 Order will become completely one
sided, operating entirely for the benefit of sugar factories giving them
many advantages with no corresponding obligations and leaving the
canegrower in a lurch with host of restrictions upon him. This can
E never be the intention of the Legislature. It will not be fair to read the
Act and the Rul~s in such a restrictive manner. 1281-C-D-E-F-GI
1.6. There is no indication in the proforma of the agreement as
contained in the appendix to U.P. Sugarcane (Supply and Purchase)
F Order, 1954 or in the Order that the word "Government" would refer
to Central Government. If the State Government is prescribing a
proforma of an agreement which is to be executed by a canegrower
or a canegrowers' cooperative society and the occupier of the factory
regarding sale and purchase of sugarcane wherein the word
"Government" is used, it can only mean the State Government and not
G the Central Government unless there is clear indication to the contrary.
The only logical inference which can be drawn is that the word
"Government" refers to State Government. 1282-D-EI
2.1. Sugarcane supplied to sugar factory are "goods" within the
H meaning of Section 2(7) of Sale of Goods Act. Th provisions under sub-
U.P. CO-OP. CANE UNION FEDERATION v. WEST U.P. SUGAR MILL ASSON. 245
sections (1) and (3) of Section 4 and Section 5 of the Act show that price A
is an essential element of sale of goods. 1280-E-F]
Popatlal Shah v. State of Madras, 11953) SCR 677 and State of
Madras v. Gannon Dunkerley, [1958) SCR 379, referred to.
B
2.2. There is a difference between "the price" which is a fixed
amount and "the minimum price" which only indicates the lowest
permissible rate. The 1966 Order, which itself was made by the Central
Government more than a decade ago and was amended in 1978 and
Clauses 3(3) and 3-A thereof contemplate an "agreed price" which in C
view of the mand~te of Clause 3(2) is bound to be higher than the
"minimum price" fixed under Clause 3(1). Naturally it is this "agreed
price" which' is to be mentioned in the agreements for sale and
purchase of sugarcane in Forum B and C otherwise the very purpose
of entering into agreements would be defeated. 1282-G-H; 283-A-B]
Ch. Tika Ram.Ji & Ors. v. State of Uttar Pradesh & Ors., [1956] SCR
393, distinguished.
2.3. The State Government in exercise of its regulatory power can
D
fix the price of sugarcane. The mere fact that this price is not to the E
liking of the sugar factory does not mean that it cannot form the basis
for supply of sugarcane by the canegrowers or canegrowers cooperative
society to the sugar factory. It is well settled that even a compulsory
sale does not lose the character of a sale. [284-E]
Salar Jung Sugar Mills Ltd. v. State of Mysore & Ors., 11971] 1 SCC
23, followed.
F
Indian Steel & Wire Products Ltd. v. State of Madras, [1968) 1 SCR
479; Andhra Sugar Mills Ltd. v. State of Andhra Pradesh, 11968] 1 SCR
705 and Sukhnandan Saran Dinesh Kumar v. Union of India & Ors., G
11982] 2 sec 150, relied on.
3. The reservation or assignment of area for growing of the
sugarcane is made for the benefit of a sugar factory. The agreements
executed by the canegrowers or canegrowers cooperative society in H
246
SUPREME COURT REPORTS [2004) SUPP. 2 S.C.R.
A favour of occupier of a factory are also for the benefit of the sugar
factory as by such agreements it gets an assurance of a continuous
supply of freshly harvested sugarcane on the days indicated in the
requisition slips issued by it so that there may not be any problem in
getting optimum quantity of raw material throughout the crushing
B season. In absence of the agreements the sugar factory factory will also
be a loser as it may face great problem in getting the supply of sugarcane
according to its requirement. The occupiers of the factory are themselves
keen for execution of the agreements but their only objection is to the
mention of State Advised Price. The agreement is one composite
C transaction and it is not open to them to contend that the terms thereof
which are to their advantage should be enforced but the term relating
to price notified by the State Government should not be enforced as their
consent in that regard was not a voluntary act. However, having regard
to the advantages derived by the sugar factories, they are fully bound
by the agreement wherein the State Advised Price may be mentioned
D and it is not open to them to assail the clause relating to price of sugarcane
on the ground that their consent was not voluntary or was obtained
under some kind of duress. 1289-B-C-D-EI
4. Under Sub-section (1) of Clause of the 1966 Order, the Central
E Government can only fix a minimum price of sugarcane. This clause
should be read along with sub-clause (2) which creates an embargo or
prohibition that no person shall sell or agree to sell sugarcane to a
producer of sugar and no such producer shall purchase or agree to
purchase sugarcane at a price lower than that fixed under Sub-clause
F (1). The inconsistency or repugnancy will arise ifthe State Government
fixed a price which is lower than that fixed by the Central Government.
But, if the price fixed by the State Government is higher than that fixed
by the Central Government, ther<! will be no occasion for any
inconsistency or repugnancy as it is possible for both the orders to operate
simultaneously and to comply with both of them. A higher price fixed by
G th~ State Government would automatically comply with the provisions
of sub-clause (2) of Clause 3 oft 966 Order. Therefore, the price fixed by
the State Government which is higher than that fixed by the Central
Government cannot lead to any kind of repugnancy. 1292-C-D-EJ
H
M. Karunanidhi v. Union of India, AIR (1979) SC 898; Mis. Hoechst
U.P. CO-OP. CANE UNION FEDERATION v. WEST U.P. SUGAR MILLASSON. 247
Pharmaceuticals Ltd. v. State of Bihar, AIR (1983) SC 1019; National A
Engineering Industries Ltd. v. Sri Kishan Bhageria & Ors., AIR (1988)
SC 329; S. Satyapal Reddy & Ors. v. Govt. of A.P. & Ors., [1994f 4 SCC
391 and Dr. Preeti Srivastava v. State of MP. & Ors., [1999] 7 SCC 120,
relied on.
State of Tamil Nadu v. Kothari Sugars and Chemicals Ltd., [1996]
7 sec 751, distinguished.
B
5.1. One of the main reasons given by the High Court quashing
the Order of fixation of State Advised Price was that the power to fix C
sugarcane price had been given to the State Government under the
Sugarcane Act, 1934 and hence it would be redundancy to say that the
same power also flows from Section 16 of the 1953 Act. It appears that
the correct legal position was not brought to the notice of the High
Court. The Sugarcane Act, 1934 was repealed by U.P. Sugar Factories
Control ,o\ct, 1938 (UP Act to No. l of 1938). Section 26 of D
U.P. Sugarcane (Regulation of Supply & Purchase) Act, 1953 repealed
the U.P. Sugar Factory Control Act, 1938. With the enforcement of
the Government of India Act, 1935, there was distribution of
legislative powers between the Dominion Legislature and the Provincial
Legislature and the entire subject matter of Sugarcane Act, 1934 fell E
within the Provincial Legislative list. It was in these circumstances that
the U.P. Legislature enacted the U.P. Sugar Factories Control Act,
1938 which repealed the Sugarcane Act, 1934 in its application in the
State of U.P. Thus, the reasoning given by the High Court has no legal
basis. [298-D-E, H; 299-A-B-C]
Ch. Tika Ramji & Ors. v. State of Uttar Pradesh & Ors., [19561 SCR
393, referred to.
F
5.2. The second reasoning given by the High Court is that even
ifthe State Government had the power to fix the minimum cane price G
under Section 16 of the 1953 Act, this power came to an end in view
of Article 254(1) of the Constitution on the enactment of the Essential
Commodities Act and the promulgation of the sugarcane Control
Order, 1955 (later replaced by the 1966 Order), which gives exclusive
power to the Central Government to fix the minimum price. Under H
248
SUPREME COURT REPORTS [2004] SUPP. 2 S.C.R.
A Section 3(3C) of the E.C. Act, the Central Government has to determine
the price of the levy sugar having regard to several factors enumerated
in the sub-section and the minimum price fixed under 1966 Order is
only one of the factors. The manufacturing cost of sugar and securing
of reasonable return on the capital employed in the business of
B manufacturing sugar are also relevant factors under Clauses (b) and
(d) of Section 3(3C) of the E.C. Act and the fixation of higher price
for sugarcane by the State Government by itself can not have any
major or substantial impact on the fixation of the price of the levy
sugar by the Central Government. [299-C-D, F-GI
c
6. The order passed by the Central Government fixing the minimum
price of sugarcane for the sugar year 2002-2003, shows that prices have
been fixed for different factories keeping in view the minimum price of
sugarcane linked to a basis recovery of 8.5. per cent sugar subject to a
premium at certain rates with the increase in the recovery above that
D level. In the State of U.P. generally the price fixed for sugarcane for most
of the sugar mills being run by the U.P. State Sugar Corporation or in
cooperative sector (Sahkari) is much lower than the price fixed for the
sugar mills being run by private sector. The prices fixed by the Central
Government clearly indic:;te that a sugarcane grower who falls within
E the reserved area ofa sugar mill run by U.P. State Sugar Corporation or
by cooperative sector gets much less while as one who falls within the
reserved area of sugar mill run by private sector gets much higher.
There is no justifiable reason why a sugarcane grower should suffer only
on account of the fact that he happens to fall within the reserved area of
F a mill run by the U.P. State Sugar Corporation or in the cooperative
sector. The State Government fixes uniform prices and '1~t factory wise.
Such a fixation of price is more just and equitable from the point of view
ofa sugarcane grower. [301-G-H; 302-A; 303-A-B-CI
G
Report of the Sugar Industry Inquiry Commission, 1974, referred to.
Per SRIKRISHNA, J. (dissenting) :
I .I. The observations in Ch. Tika Ranl)i 's case though made in the
context of Sugarcane (Control) Order, 1955, are equally applicable in
H the context of the sugarcane (Control) Order, 1966. Two points of
U.P. CO-OP. CANE UNION FEDERATION v. WEST U.P. SUGAR MILL ASSON.
249
distinction were sought to be down as to why the ratio of Ch Tika A
Ramji 's case would not apply to the present case; that it did not have
the benefit of examining the Sugarcane (Control) Order, 1966; and
that it was only concerned with comparing the power to fix the
minimum price and did not concern itself with the power of the State
Government to fix higher price. However, these distinctions are purely B
chimerical. A comparison between the Sugarcane (Control) Order,
1955 and Sugarcane (Control) Order, 1966 brings out the hollowness
of the first distinction. Under the 1955 Order, 'price' meant the price
fixed by the Central Government from time to time, for sugarcane
delivered at the factory gate. It empowered the Central Government C
to fix in respect of any area 'the price' or 'the minimum price' to be
paid for the sale/purchase of sugar. The only change made in the
Sugarcane (Control) Order, 1966 is that the expression 'price' has been
defined in clause (2)(g) to mean "the price or the minimum price fixed
by the Central Government from time to time'', for sugarcane delivered,
inter alia, to a sugar factor. If the pa_rties have agreed upon a higher D
price, the Sugarcane (Control) Order, 1966 recognises that and obligates
such amount to be paid. This is also recognised by clause (3-A) dealing
with the rebate that can be deducted. Under this clause, the producer
of sugar is required to pay "either the minimum price of sugarcane
fixed under clause (3) or the price agreed to between the producer or E
his agent or. the sugarca'ne grower or the Sugarcane-growers' Cooperative Society,_ as the case may be. The distinction that is sought to
be drawn· has no basis. [327-H; 328-A-B-C-D-E-F-G]
Ch. Tika Ramji & Ors. v. The State of Uttar Pradesh & 01·s., [1956[ F
SCR 393, relied on.
2.2. With regard to the second distinction, this Court examined the
conflict becyveen the provisions of the Central Legislation, the Essential
Commodities Act, 1955 and the U.P. Sugarcane Act, 1953 in Ch.• Tika
Ranyi's case. Under Section 3 of the Essential Commodities Act, 1955, G
the Central Government is specifically empowered, interalia, to 'regulate'
the production supply and distribution of the essential commodity or
trade and commerce therein and also may provide for controlling the
'price' at which the essential commodity may be bought or sold; the
power to 'control the price' is of the wid,,st amplitude and takes into H
250
SUPREME COURT REPORTS [2004] SUPP. 2 S.C.R.
A its fold the power to fix the minimum price, the fair price, the
remunerative price or even the maximum price. It was this power which
was contrasted with the power of the State Government under the U.P.
Sugarcane Act, 1953. After making such a contrast, the Court came to
the specific conclusion that the State Act did not, in any way, impinge
B upon the area covered by the Central Act as the provisions of the two
Acts are "mutually exclusive and did not impinge on each other" there
being r.u trenching upon the field of one legislature by the other. While
contrasting this power of the Central Government and its exercise
under the Sugarcane (Control) Order, 1955, as against the powers of
C the State Government under the provisions of the U.P. Sugarcane Act,
1953, the case discerned no power for price fixation in the State
Government under the provisions of 1953 Act and that is why its
constitutional validity was upheld. In fact, when Ch. Tika Ram.Ji case
fails to discover any provision in the State Legislation for minimum
price fixation with regard to sale/purchase of sugarcane, and upholds
D its constitutional validity on that very ground, it would be futile to
attempt to discover in the State Act a power to fix a price higher than.
the minimum price. 1329-C-D-E-F-G-Hl
Ch. Tika Ramji & Ors. v. The State of Uttar Pradesh & Ors., 119561
E SCR 393, relied on.
2.3. With regard to the distinction between 'minimum price' fixed,
which is exclusively within the province of the Central Government
under the provisions of the Essential Commodities Act, 1955, and what
F the State seeks to fix is 'fair price' or 'remunerative price', the question
is not one of repugnancy. The question is one of tracing the source of
the power, if, at all, it exists. By merely calling it 'fair price' or
'remunerative price', one cannot wish away the consequences of nonpayment thereof. The consequence of not paying the minimum price is
penal liability incurred under the provisions of the Essential Commodities
G Act, 1955 read with the Sugarcane (Control) Order, 1966. There exists
no corresponding legislative provision for non-payment of the so-called
'fair price' or 'remunerative price' under the U.P. Act of 1953. Even
assuming that such a power of higher price fixation exists, the power
can only be adjudicatory in nature. The minimum price is the price
H which when fixed has to be paid by all purchasers of cane. Anything
UP. CO-OP. CANE UNION FEDERATION v. WEST U.P. SUGAR MILL ASSON.
251
higher than that would require adjudication of rival claims for which A
there exists no machinery under the I 953 Act or under the delegated
legislation made thereunder. There are also no guidelines indicated in
the 1953 Act as to the basis on which the so-called fair price, remunerative
price or State Advised Price is to be arrived at. To fix the State Advised
Price much above the centrally fixed minimum price, and that too by B
an executive fiat, may render the constitutionality of such power open
to challenge as arbitrary and hit by Article 14 of the Constitution.
Looked at from the practical point of view, ifthe contention of the canegrowers is accepted, what is payable in the Sate would, in reality, be
the minimum price payable for sugarcane. Calling it as the 'fair price' C
or 'remunerative price' would merely be a matter of semantics and not
of substance. Except the bald reference to 'regulation of sale and
purchase of cane', there is nothing else in the 1953 Act to indicate the
mode, conditions under which, or the guidelines subject to which such
an exercise of fixing the fair price can be exercised, and that too by a
mere executive fiat. It cannot be inferred that such a power of fixation D
of price higher than the minimum price in a Statute which is utterly
bereft of any adjudicatory mechanism or guidelines, particularly when
the subordinate legislation is replete with references to the 'minimum
price fixed by the Government', which too was interpreted in Ch. Tika
Ramji case as the 'minimum price fixed by the Central Government'. E
The U.P. Sugarcane Order, 1954 did not contemplate anything more
than the minimum price fixed by the Government to be stipulated in
the form of a statutory contract.
1330-B-C-D-E-F-H; 331-C-D; 332-A-Bl
Mis. Crown Aluminium Works v. Their Workmen, relied on.
F
3. That there is sufficient leeway for consensual payment of a rate
higher than the minimum rate is beyond doubt. If such a rate has been
agreed upon, orally or in writing, then that higher rate substitutes itself
in the place of the minimum rate fixed by the Central Government. The G
question before this Court was not as to what could be consensually
done. The question was that in the absence of consensus, does the State
have the power under the 1953 Statute concerned to determine a higher
rate than the minimum rate as the rate payable for the cane supplied;
that fixing of a higher price of sugarcane, compulsorily payable, is a H
252
SUPREME COURT REPORTS (2004] SUPP. 2 S.C.R.
A restriction on the fundamental right guaranteed under Article 19(l)(g)
and cannot be legally done except under a law. 1333-D-E; 334-GI
State uf Madhya Pradesh & Anr. v. Thakur Bharat Singh, 11967) 2
SCR 454, relied on.
B
Rai Sahib Ram Jawaya Kapur & Ors. v. The State of Puniab, [ 1955)
2 SCR 225, distinguished.
4.1. The construction of the 1953 Act has to be made against the
legislative background. Under Section 3(2) of Sugarcane Act, 1934, the
C State Governments were empowered to fix a minimum price or
minimum prices for the purchase of sugarcane in a controlled area
intended for use in any factory. In Section 21 of the U.P. Act l of 1938,
there was a specific power vested with the Provincial Government to
fix the minimum price. In respect of any area, the minimum price to
D be paid by the occupier of the factories or purchasing agents for cane
purchased in that area could be determined by a notification issued by
the Government, after consultation with the Board. In contrast, the
provisions of the U.P. Sugarcane Act, 1953 indicate total absence of
such a power to fix a price. It the I 953 Act intended to grant to the
State the power to fix any price - State Advised Price, remunerative
E price or fair price as is called - the Statute would have in terms
indicated it and not left it to guesswork or inference from the general
words used in Section 16 and 17 of the Act. 1335-D-E-F)
4.2. The Statute lays down no guidelines for exercise of power, if
F any, by the State. Against the background of legislative history, and
the observations made in Ch. Tika Ramji 's case, it is difficult to discern
any such power in the State to fix the State Advised Price, ealled by
whatever name, at a rate higher than the minimum rate fixed by the
Central Government, which could be made binding on the parties.
Since U.P. Sugar Mills Associations/factories strongly protested
G against the State Advised Price and filed writ petitions before the High
Court challenged the State Advised Price, there ·.vas no occasion for
the State Governme~t to exercise its diplomacy and bring out a
consensual price between the. parties nor was there any occasion for
the State Government of U.P. to declare a State Advised Price on the
H basis of consensus. 1336-A-B, F-G-HI .
U.P. CO-OP. CANE UNION FEDERATION v. WEST U.P. SUGAR MILL ASSON. 253
Ch. Tika Ramji & Ors. v. The State of Uttar Pradesh & Ors., (1956) A
SCR 393, relied on.
Maharashtra Rajya Sahkari Sakkar Karkhana Sangh Ltd.& Ors. v.
State of Maharashtra & Ors., (1995) Supp. 3 SCC 475; S.K.G. Sugar Ltd.
v. State of Bihar & Ors., (1997) 9 SCC 362; State of MP. v. Jaora Sugar B
Mills Ltd., (19971 9 SCC 207 and State of Tamil Nadu and Ors. v. Kothari
Sugar & Chemicals Ltd. & Ors., (1996) 7 SCC 751, distinguishedPer P. Venkatarama Reddi, J_ (dissenting) :
I.I. There exists no statutory basis for the 'State advised cane C
price'. The very expression 'advised' connotes that the State advised
price has no statutory flavour. If the fixation has been done in exercise
of statutory power traceable to any provision in the U.P. Act, it would
be most inapt to describe it as 'advised price'- The statutorily fixed price
can never take the form of advice. It binds, enforces obedience by D
providing for punishment or penal consequences and does not look for
volition of the persons concerned for its compliance. But, that is not the
case here. From year to year, the State Government has been announcing
the 'advised price' in the hope and expectation that the sugar factories
in the private sector will also agree to pay that price- [344-B-C)
E
1.2. The 'State advised price' cannot be said to have been fixed in
purported exercise of any statutory power and it cannot be elevated to
the level ofa statutory price fixation order. The decisions of this Court
referred to did not hold that the State advised price is statutorily fixed F
and is legally binding on the sugar factories on its own force. (348-D-E)
State of MP. v. Jaora Sugar Mills Ltd., [1997) 9 SCC 207,
distinguished.
1.3. The State advised price, though lacking the sanction of law G
and its compliance cannot be ensured against the will of the factory
owner, it can still serve as a framework with which an agreed price
over and above the minimum price fixed under the Central Order can
be brought about. The law does not prohibit the concerned authorities
of the State Government from advising or recommending a price for H
254
SUPREME COURT REPORTS (2004] SUPP. 2 S.C.R.
A adoption by the sugar factories. The authorities entrusted with the
various functions under the Act conceived in the interests of both
growers and producers can certainly play a role. The very fixation of
State advised price cannot be legally faulted so long as its compliance
is ensured by a voluntary process by which the State advised price can
B very well become an agreed price. [349-A-B-CJ
2.1. Section 16 of U.P. Act carries the heading 'Regulation of
purchase and supply of cane in the reserved and assigned areas'. Subsection (I) lays down the broad parameters of regulatory power
C followed by sub-section (2) which spells out the specific areas to which
such power can extend. The lhation of price of cane is not one of them.
However, sub-section (2) does not exhaust the field of operation of the
regulatory power. The price fixation could still come under the
generality of the power reserved under sub-section (I) of Section 16
of the U.P. Act. The wide meaning given to the expression 'regulate'
D in various cases coupled with the fact that price is an essential
component of sale is harped upon to preserve the power of the State
Government to fix the price. [349-F-G-h, 350-A-BI
2.2. The expression 'regulate' has no precise or fixed connotation
E and it has different shades of meaning. There is no doubt that it is a
word of broad imp.ort. Its width and content may vary according to
the contextual setting in which the expression occurs. The scheme and
thrust of the provisions of the relevant statute, the objective of
legislation, the legislative intent gathered from the legislative history
F and the run of the provisions contained in the enactment can all be
taken into account while appreciating the correct meaning of the
expression 'regulate' in a particular statute. [350-E-F-Gl
2.3. The decision in Tiku Rumji "s case is the main hurdle for giving
an amplified meaning to the expression 'regulate' so as to cover price
G fixation. Though the Constitution Bench did not directly deal with the
question of interpretation of Section 16 vis-a-vis the power of price
fixation, going by the observations made therein and the basis of
reasoning adopted to arrive at the conclusion that there was no
repugnancy, it is fairly clear that the Constitution Bench negatived the
H existence of any provision empowering the State Government to fix the
U.P. CO-OP. CANE UNION FEDERATION v. WEST U.P. SUGAR MILL ASSON.
255
price; and that there was no fixation of minimum price by the State A
Government. On a comparative analysis of the provisions, this Court
found no repugnancy between the impugned Act (U.P. Act of 1953) and
the Sugarcane Control Order of 1955. The provisions were held to be
mutually exclusive and did not impinge upon each other. No doubt, the
content of regulatory power under Section 16 was not discussed by the B
Constitution Bench in Ramji 's case. But, the observations made by the
Court necessarily suggest that the State Government was not invested
with the power to fix the 'price of sugarcane. (350-G-H; 351-A-B-C-Dj
Ch.