West U.P. Sugar Mills Association & Ors. vs The State of Uttar Pradesh & Ors.

33 and 34 – Power to fix price of sugarcane – Held: By virtue of Entries 33 and 34, List III, Seventh Schedule, both the Central Government as well as the State Government have power to fix the price of sugarcane – Central Government having exercised the power and fixed the minimum price, the State Government cannot fix the minimum price of sugarcane – However, it is always open for the State Government to fix the advised price which is always higher than the minimum price – U.P. Sugarcane (Regulation of Supply and Purchase) Act, 1953 – s.16 – Sugarcane (Control) Order, 1966.

Sugarcane (Control) Order, 1966 – Held: 1966 Order issued u/s.16, 1953 Act confers power upon the State Government to fix the remunerative/advised price at which sugarcane can be bought or sold – This price shall always be higher than the minimum price fixed by Central Government – U.P. Sugarcane (Regulation of Supply and Purchase) Act, 1953 – s.16.

U.P. Sugarcane (Regulation of Supply and Purchase) Act, 1953 – s.16 – If repugnant to s.3(2)(c), 1955 Act and Clause 3 of 1966 Order – Held: No – Essential Commodities Act, 1955 – s.3(2)(c) – Sugarcane (Control) Order, 1966 – Clause 3. Constitution of India – Art.254; List III of Seventh Schedule – Repugnancy in laws – Held: Question of repugnancy in List III, Seventh Schedule, where both the Union and the States have the power to enact a law, arises only where there is an actual irreconcilable conflict between the two laws.

Answering the reference, the Court

HELD: 1.1 From the legislative history and the relevant provisions of Essential Commodities Act, 1955, U.P. Sugarcane (Regulation of Supply and Purchase) Act, 1953, U.P. Sugarcane (Regulation of Supply and Purchase) Order, 1954, Sugarcane (Control) Order, 1955, Sugarcane (Control) Order, 1966 which fell for consideration by this Court in the case of Tika Ramji and U.P. Coop. Cane Unions Federations, it appears that as such there has been a sea change in the law. [Para 9][562-C]

1.2 The question involved in Ch. Tika Ramji & Ors., etc. v. The State of Uttar Pradesh & Ors. AIR 1956 SC 676 was concerning the validity of the Uttar Pradesh Sugarcane (Regulation of Supply and Purchase) Act, 1953 and notifications dated 27.9.1954 and 9.11.1955 issued by the Government of Uttar Pradesh thereunder. The notification dated 27.9.1954 was issued in exercise of the powers/ conferred under sub-section 1(a) read with sub-section 2(b) of Section 16 of the Act of 1953 which provided that not less than 3/4 of the cane growers of the area of operation of a Cane Growers Cooperative Society to be members of the society. The occupier of the factory for which the area is assigned shall not purchase or enter into an agreement to purchase cane grown by a cane grower except through such Cane Growers Co-operative Society. The notification dated 9.11.1955 which was issued in exercise of the powers conferred by section

15 of the Act of 1953, reserved or assigned to the sugar factories mentioned in column 2 of the Schedule annexed to it, the cane purchasing centers, with the authorities attached to them, specified against them in column 3 for the supply of sugarcane during the crushing season 1955-56. Thus, it is apparent that the notification dated 27.9.1954 related to the agency of supply of sugar cane to the factories and the notification dated 9.11.1955 related to the creation of the zones for particular factories were questioned. [Paras 12, 13][577-G-H; 578-A-C]

1.3 This Court held that the State of Uttar Pradesh had the legislative competence to enact the Act, and there was no repugnancy of the Act of 1953 with the Act of 1951 or the Essential Commodities Act, 1955. This Court upheld the validity of the Act and notifications and also held that there was no unreasonable restriction imposed. There was no violation of fundamental right under Article 19(1)(f) and (g) and Article 31 of the Constitution. The question of fixation of price by the State Government under the Act of 1953 did not fall for consideration in Ch. Tika Ram. This Court noted that the Uttar Pradesh Government had never fixed the price of sugarcane to be purchased by the factories by the time the decision was rendered. While examining the repugnancy, passing reference has been made to the provisions contained in the Act of 1954. During the pendency of petitions, the Sugar Control Order, 1955, was issued on 27.8.1955, which was referred to in the judgment. It was not even submission raised or considered that the power of regulation under Section 16 of the Act would include the power to fix the advised price of sugarcane. The concept of fixation of minimum price by Central Government vis a vis to State Advised Price to be fixed by State Government, never fell for consideration of this Court in the said decision. The ratio of decision has to be considered in the light of questions considered and answered. In Tika Ramji, it was held that there was no repugnancy in the Act of 1953 with Act of 1955 or with the Act of 1951, and notifications which were impugned did not infringe the fundamental rights. [Paras 15-17][578-G-H; 579-A-D]

1.4 Thus, the factual matrix and the relevant provisions which fell for consideration before this Court in the case of Tika Ramji and which fell for consideration by this Court in the case of U.P. Coop. Cane Unions Federations were altogether different. Clause 3 of 1955 Order empowered the Central Government to fix “the price or the minimum price”. The aforesaid Clause 3 of 1955 Order was under consideration by this Court in the case of Tika Ramji. However, subsequently, 1955 Order has been repealed by 1966 Order and Clause 3 of 1966 Order provides that the Central Government may fix “the minimum price” of the sugarcane. Therefore, when the legislature consciously deleted the word “the price” and retained the power with the Central Government to fix “the minimum price”, some meaning has to be given to such a deletion. The intention of the legislature is also required to be considered when certain words in the provisions of a statute are deleted or added and/or substituted. In the case of Tika Ramji, this Court though specifically observed and held that in the field of sugar and sugarcane, both, the Parliament and the State legislature would have the concurrent Jurisdiction as the same will fall under Entry 33 in the Concurrent List of seventh Schedule. Considering the fact that the State Government did not exercise the power of fixing the price, though the powers were available and the Central Government fixed the price/minimum price which came to be adopted by the State Government, this Court in Tika Ramji’s case held that in such a situation there is no conflict and the question of repugnancy does not arise. Therefore, as such there is no apparent conflict between the decisions in Tika Ramji’s case and U.P. Coop. Cane Unions Federations, which require to be referred to a larger Bench of seven Judges. Under clause 3 of the 1966 order, the minimum price can be fixed. Under Clause 3A of the said order, as amended in 1978, the agreed price is to be mentioned in the agreement, which can be higher than the minimum price and not less than that. Under Clause 3(2), no person shall sell or agree to sell sugarcane to a producer of sugar or his agent, and no such producer or agent shall purchase or agree to purchase sugarcane at a price lower than that fixed under sub-clause (1). Thus, the price fixed under Clause 3(1) has to be treated as a minimum price. Under Clause 3(A), as inserted on 2.2.1978, agreement in writing is required, and the price has to be paid as agreed to within 14 days. [Paras 18, 19][579-D-H; 580-A-D]

1.5 Even otherwise and on merits, this Court is in complete agreement with the view taken in the case of U.P. Coop. Cane Unions Federations, which lays down that the inconsistency or repugnancy will arise if the 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, there 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 the State Government would automatically comply with the provisions of Sub-clause (2) of Clause 3 of 1966 Order. Therefore, any price fixed by the State Government which is higher than that fixed by the Central Government cannot lead to any kind of repugnancy. [Para 20][580-E-F]

1.6 Question of repugnancy under Article 254 of the Constitution:

Concerning laws in List III of the Seventh Schedule of the Constitution of India, where both the Union and the States have the power to enact a law, the question of repugnancy arises only in a case where there is an actual irreconcilable conflict between the two laws. Inconsistency between the two laws is irreconcilable, then the question of repugnancy arises. It is necessary to find the dominant intention of both the legislatures, partial or incidental coverage of the same area in a different context, and to achieve a different purpose, does not attract the doctrine of repugnancy. Clause (1) of Article 254 of the Constitution gives primacy to central legislations in case of conflict with State laws whether enacted before or after. The central law operates only in case of repugnancy and not in a case of mere possibility when such an order might be issued under state law. [Paras 20.1, 20.3][580-GH; 581-A; 584-C-D]

Rajiv Sarin v. State of Uttarakhand (2011) 8 SCC 708; M. Karunanidhi v. Union of India (1979) 3 SCC 431 : [1979] 3 SCR 254; Belsund Sugar Co. Ltd. v. State of Bihar & Ors. (1999) 9 SCC 620 : [1999] 1 Suppl. SCR 146; Punjab Dairy Development Board & Anr. v. Cepham Milk Specialities Ltd. & Ors. (2004) 8 SCC 621; Southern Petrochemicals Industries Ltd. v. Electricity Inspector and ETIO & Ors. (2007) 5 SCC

447 : [2007] 6 SCR 955; Bharat Hydro Power

Corporation Ltd. & Ors. v. State of Assam & Anr. (2004)

2 SCC 553 : [2004] 1 SCR 284 – relied on.

1.7 In U.P. Cooperative Cane Unions Federations, Constitution Bench has rightly opined that under section 16 of the Act of 1953, there is the power to fix a price with State, which is State advised price. It cannot be said that the Central legislation occupies the field, the Essential Commodities Act, 1955, and the Order of 1966 issued thereunder deals with minimum price. The Central Government has the power to fix the minimum price in clause 3. The State Government is not denuded of the power under the Act of 1953 to fix the “State Advised Price” under section 16 as held in U.P. Cooperative Cane Unions Federations. The power to regulate includes the power to fix the price. But State advised price has to be higher than the minimum price fixed by Central Government. In a given case, the SAP price may be an agreed price. But the exercise of the power under section 16 of the Act of 1953 to fix State Advised Price, cannot be said to be irreconcilable with the minimum price fixation under section 3(2)(c) of the Essential Commodities Act, 1955 and clause 3 of the Sugarcane (Control) Order, 1966. The power of fixation of State advised price under section 16 of the Act of 1953 cannot be said to be arbitrary or illegal in any manner. [Paras 20.4][584-EH; 585-A]

1.8 This Court took into consideration the effect, scope and impact of Section 16 under the Act. This Court considered in detail Section 16 of the Act – the provision to regulate purchase and supply of sugarcane in the reserved and assigned area, under which the State Government is vested with the power to regulate the distribution, sale or purchase of sugarcane in any reserved or assigned area and purchase of cane in any area other than a reserved or assigned area by issuing an order to that effect. Thereafter, this Court has held that the power to regulate includes the power to fix the SAP. This Court has also specifically observed and held that there was no repugnancy. This Court took into account the relevance, importance, purpose and object, its impact, implication and reasons for enacting Section 16 of the Act and after taking into account all the relevant considerations this Court has specifically held that the SAP is a price higher than that determined by the Central Government which is known as Statutory Minimum Price (SMP). Thus, in the case of U.P. Cooperative Cane Unions Federations, this Court has specifically upheld the power of the State Government to fix the SAP under Section 16 of the Act. [Paras 20.4.2, 20.4.3][585-D-G]

1.9 The following factors are the relevant facts for determination of SAP.

(i) The cost of cultivation of sugarcane.

(ii) The cost of transport of sugarcane by cane growers from the field to purchase center or to mill gate as the case may be.

(iii) A reasonable return on the aforesaid amount of his produce to cane growers.

(iv) Availability of the cane area, demand of sugarcane by industries, profitability of the industries by selling sugar, and other bye products etc.

(v) The price of sugarcane paid by sugar factories in the proceeding year.

(vi) The factors necessary to avoid diversion of sugarcane from sugar industries to other consumers like Kolhu and Khandsari Units.

It appears that determination and fixation of the SAP is a Cabinet decision which has been fixed after considering several factors, including the cost of cultivation/production of the sugarcane etc. and after taking into consideration the relevant factors as above and including increasing of national economic growth, cost of production of sugarcane, increase in the cost of seeds, fertilizers, labour charges, irrigation etc., including the profit earned by sugar factories from the produces from byeproducts, power projects etc. Thus it appears that authority is guided by all relevant factors while determining such price – SAP. [Para 20.5][585-H; 586-A-E]

1.10 In the 1966 Order the word “the price” has been deleted and Clause 3 of 1966 Order provides that the Central Government may fix “the minimum price” of the sugarcane to be paid by the producer of sugar. There is a difference between “the price” and “the minimum price”. The aforesaid shall be apparent from the relevant Clauses of the 1966 Order. The provision of State advised price has been made to protect the interests of the sugarcane growers who are not in a position to negotiate. Clause 3(1) empowers the Central Government to fix the minimum price of sugarcane to be paid by the producers of sugar or their agents for the sugarcane purchased by them. Clause 3(2) provides that no person shall sell or agree to sell sugarcane to a producer of sugar or his agent, and no such producer or agent shall purchase or agree to purchase sugarcane, at a price lower than that fixed under sub-clause (1). As per Clause 3(3), where a producer of sugar purchases any sugarcane from a grower of sugarcane or from a Sugarcane-grower’s Co-operative Society, the producer shall, unless there is an agreement in writing to the contrary between the parties, pay within fourteen days from the date of delivery of the sugarcane to the seller or tender to him the price of the cane sold at the rate agreed to between the producer and the sugarcane- grower or Sugarcane- growers’ Co-operative Society or that fixed under sub-clause (1), as the case may be. Clause (3-A) provides that a producer of sugar or his agent shall pay, for the sugarcane purchased by him, to the sugarcane grower or the sugarcane growers’ coopearative society, either the minimum price of sugarcane fixed under Clause 3, or the price agreed to between the producer or his agent and the sugarcane grower or the sugarcane growers’ cooperative society, as the case may be (agreed price). Agreed Price to be paid under the Agreement may be even SAP fixed and/or determined by the State Government. Clause (5-A) provides that where a producer of sugar purchases sugarcane, from a sugarcane-grower during each sugar year, he shall be liable to pay, in addition to the minimum sugarcane price fixed under Clause 3, an additional price. Subclause (2) of Clause 5-A authorizes the appropriate authority to determine the additional price. Sub-clause (5) further provides that no additional price determined under sub-clause (2) or subclause (3) is required to be paid by a producer of sugar who pays a price higher than the minimum price fixed under Clause 3 to the sugarcane-grower, provided that, “the price so paid is not less than the total price comprising the minimum sugarcane price fixed under Clause 3 and the additional price determined under sub-clause (2) or sub-clause (3).” [Paras 20.7, 20.7.1, 20.7.2][588A-C; 589-E-H; 590-A-D] Sukhnandan Saran Dinesh Kumar & Ors. v. Union of India & Ors. (1982) 2 SCC 150 : [1982] 3 SCR 371 – relied on.

1.11 The State has the competence to determine and fix the State Advised Price fixed under section 16 and therefore fixation of SAP by the State Government cannot be said to be beyond the purview of legislative competence. Once the fixation of State Advised Price has been done, the Cane Commissioner can direct the parties to follow the same as held in U.P. Cooperative Cane Growers Federation. It cannot be said that fixation of price under the regulatory measure provided in section

16 suffers from arbitrariness, nor can it be termed to be uncanalised power. Considering the entire scheme of 1966 Order, it provides for “the minimum price” and “the additional price” or “the advised price”. Considering the aforesaid provisions under 1966 Order, there cannot be any sugarcane price (advised price) below “the minimum price”. As per the agreement entered into the “advised price” necessarily had to be higher than the “minimum price”. Thus, there is a difference between “the price” and the “the minimum price”. As per Clause 3 of 1966 Order, it empowers the Central Government to fix the “minimum price” and the State Government is authorized to fix the Advised Price which as observed hereinabove is always higher than the “minimum price” fixed by the Central Government. [Paras 21, 22][590-E-H; 591-A]

1.12 Thus, it is held that the view taken by the Constitution Bench of this Court in the subsequent decision in the case of U.P. Coop. Cane Unions Federations is the correct law. There is no conflict between the two decisions of this Court in the case of Tika Ramji and in the case of U.P. Coop. Cane Unions Federations and therefore, there is no necessity to refer the matter to the larger Bench consisting of seven Judges. Final conclusions are as under:

a. By virtue of Entries 33 and 34 List III of seventh Schedule, both the Central Government as well as the State Government have the power to fix the price of sugarcane. The Central Government having exercised the power and fixed the “minimum price”, the State Government cannot fix the “minimum price” of sugarcane. However, at the same time, it is always open for the State Government to fix the “advised price” which is always higher than the “minimum price”, in view of the relevant provisions of the Sugarcane (Control) Order, 1966, which has been issued in exercise of powers under Section 16 of the U.P. Sugarcane (Regulation of Supply and Purchase) Act, 1953; b. The Sugarcane (Control) Order, 1966 which has been issued under Section 16 of the U.P. Sugarcane (Regulation of Supply and Purchase) Act, 1953 confers power upon the State Government to fix the remunerative/advised price at which sugarcane can be bought or sold which shall always be higher than the minimum price fixed by the Central Government;

c. Section 16 of the U.P. Sugarcane (Regulation of Supply and Purchase) Act, 1953 is not repugnant to Section 3(2)(c) of the Essential Commodities Act, 1955 and Clause 3 of the Sugarcane (Control) Order, 1966 as, as observed hereinabove, the price which is fixed by the Central Government is the “minimum price” and the price which is fixed by the State Government is the “advised price” which is always higher than the “minimum price” fixed by the Central Government and therefore, there is no conflict. It is only in a case where the “advised price” fixed by the State Government is lower than the “minimum price” fixed by the Central Government, the provisions of the Central enactments will prevail and the “minimum price” fixed by the Central Government would prevail. So long as the “advised price” fixed by the State Government is higher than the “minimum price” fixed by the Central Government, the same cannot be said to be void under Article 254 of the Constitution of India.

d. The view taken by the Constitution Bench of this Court in the case of U.P. Cooperative Cane Unions Federations vs. West U.P. Sugar Mills Association and Others is the correct law. [Para 23][591-D-H; 592-A-F]

U.P. Cooperative Cane Unions Federations v. West U.P. Sugar Mills Association and Others (2004) 5 SCC 430: [2004] 2 Suppl. SCR 238 – held correct law.

Ch. Tika Ramji & Others, Etc. v. The State of Uttar Pradesh & Others AIR 1956 SC 676 : [1956] SCR 393; State of Orissa v. M.A. Tulloch & Co. [1964] 4 SCR 461; Dr. Preeti Srivastava v. State of M.P. (1999)

7 SCC 120 : [1999] 1 Suppl. SCR 249 – referred to.