2005 (1) TMI 668 - SC - Indian Laws

Whether resort to dual price fixation classifying its customers into core sector/linked sector and non-core sector/unlinked sector by the respondent and charging different prices for coal from such customers is discriminatory treating the equals as unequals and therefore violative of Article 14 of the Constitution of India? Held that - There is no such law that a particular commodity cannot have a dual fixation of price. Dual fixation of price based on reasonable classification from different types of customers has met with approval from the courts. Monopolistic organizations like Electricity Boards Petroleum Corporations are having dual price fixation. It is a common feature that Electricity Boards which generate power sell the power at different rates to different types of customers such as domestic agricultural and industrial consumers. Even different types of industries are charged different rates. Keeping in view the law laid down by this Court in Union of India v. Cynamide India Ltd.(1987 (4) TMI 478 - SUPREME COURT) and M/s. Shri Sita Ram Sugar Co. Ltd. v. Union of India (1990 (3) TMI 358 - SUPREME COURT) in our opinion the High Court did not fall into an error in upholding Clause 10 of the Price Notification dated 14.3.1997. The High Court rightly came to the conclusion that Clause 10 of the Price Notification did not violate the equality clause of Article 14 of the Constitution of India. By evolving the dual price policy and charging lesser price from the core-sector industries the respondent has not treated equals as unequals or that the classification made was not rational. For the reasons stated above we do not find any merit in these appeals and dismiss the same.

Issues Involved:
1. Validity of Clause 10 of the Price Notification No. 3/96-97 dated 14.3.1997.
2. Alleged discrimination and violation of Article 14 of the Constitution of India.
3. Legitimacy of dual pricing for core/linked sector and non-core/unlinked sector industries.

Detailed Analysis:

1. Validity of Clause 10 of the Price Notification No. 3/96-97 dated 14.3.1997:
The appellants, proprietors of various coal-based small-scale industries, challenged Clause 10 of the Price Notification issued by the respondent, a state-owned company. Clause 10 mandated that non-core/unlinked sector industries pay 20% additional price over the notified prices. The High Court upheld this clause, and the appellants contested this decision, arguing that the classification for pricing was irrational and discriminatory.

2. Alleged Discrimination and Violation of Article 14 of the Constitution of India:
The appellants argued that the classification between core/linked sector industries and non-core/unlinked sector industries for pricing purposes was discriminatory and violated Article 14 of the Constitution of India. They contended that this classification led to hostile discrimination and dual pricing, which was arbitrary and excessive. The respondent countered that the price fixation was within its discretion, especially since coal was no longer a controlled commodity. The respondent justified the higher price for non-core/unlinked sector customers due to its financial deficit and the additional cost of production.

3. Legitimacy of Dual Pricing for Core/Linked Sector and Non-Core/Unlinked Sector Industries:
The High Court dismissed the writ petitions, finding no infirmity in Clause 10 and ruling that it did not violate Article 14. The court noted that core sector/linked sector industries were given priority due to their intrinsic importance and their role in nation-building activities. The lesser price charged to these industries was justified due to their bulk consumption and the significant impact of coal prices on their finished products and services. The court observed that the classification was rational and based on valid considerations.

Supreme Court's Analysis:
The Supreme Court upheld the High Court's decision, emphasizing that price fixation is generally a legislative activity. The court referenced Union of India v. Cynamide India Ltd., which held that price fixation is not the court's function unless there is hostile discrimination. The court also cited M/s. Shri Sita Ram Sugar Co. Ltd. v. Union of India, which stated that judicial review in economic policy matters is limited to ensuring that the authority's decisions are rational and not arbitrary.

The Supreme Court noted that the respondent's financial deficit and the need to ensure adequate returns justified the dual pricing policy. The core-sector industries, consuming nearly 90% of the respondent's coal production, were given priority due to their significant role in the economy and nation-building. The court found that the dual pricing policy did not treat equals unequally and was based on rational classification.

Conclusion:
The Supreme Court concluded that the dual pricing policy was justified and did not violate Article 14 of the Constitution. The appeals were dismissed, and the parties were directed to bear their own costs. The court affirmed that the respondent's decision to charge different prices for core/linked sector and non-core/unlinked sector industries was rational and within its discretion, considering the financial and operational factors involved.

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