1972 (11) TMI 91 - SC - Indian Laws

Whether the price fixed under the impugned order i.e. Rs. 124.63 is in consonance with s. 3(3C)? Held that - The claim for additional interest at Rs. 2.29 per quintal does not appear to be sustainable nor also the claim for deterioration of stock owing to the stock lying stored up beyond the normal period the loss by way of deterioration during such period being the normal incidence of the trade which the manufacturer must anticipate. Regarding the claim of 63 paise owing to increase in freightage (i.e. of 54 paise by road and 9 paise by rail) the Tariff Commission refused to concede that claim. Even before us there are no adequate materials to come to any precise conclusion as to the extra burden which the appellants had actually to bear though increase in freightage during the year is admitted. There is no doubt that if the sales after May 24 1971 which were all in free market were to be taken into account the average realised would come to much more than Rs. 130.77. There is therefore no doubt that taking the picture as a whole the Haryana factories got in any event a reasonable return on the capital employed. Thus on the construction of sub-section 3C adopted by us and such of the materials produced before us we are of the opinion that no case for quashing the impugned order has been made out nor has the price fixed by Government been shown to be inconsistent with the sub-section. Appeal dismissed.

Issues Involved:
1. Interpretation of Section 3(3C) of the Essential Commodities Act.
2. Whether the price of Rs. 124.63 per quintal was in accordance with the provisions of Section 3(3C).

Issue-wise Detailed Analysis:

1. Interpretation of Section 3(3C) of the Essential Commodities Act:

The appeals arose from writ petitions challenging the Sugar (Price Determination) Order, 1971, under Section 3(3C) of the Essential Commodities Act, 1955. The primary issue was the interpretation of Section 3(3C). The Act empowers the Central Government to control the production and distribution of essential commodities, including sugar, to maintain supply and ensure equitable distribution. Section 3 authorizes the Central Government to require sugar manufacturers to sell part of their stock at a fair price fixed by the government. The sub-section 3C was introduced to provide a mechanism for determining the price of sugar required to be sold to the government.

The court examined the historical context of sugar control, noting that statutory control over sugar production and distribution dates back to 1934. The control mechanisms evolved over the years, with various expert bodies like the Tariff Commission and the Sugar Enquiry Commission recommending cost schedules and fair prices based on factors like the cost of production, return to growers, and fair price to consumers. The court observed that the legislature, while enacting sub-section 3C, was aware of these methods and incorporated a similar formula for determining the price of sugar.

The court emphasized that the price to be determined under sub-section 3C is not confined to the stock required to be sold to the government but refers to the price of sugar in general. The sub-section mandates the government to consider four factors: (a) the minimum price of cane fixed by the government, (b) manufacturing cost of sugar, (c) duty and tax paid or payable, and (d) securing a reasonable return on the capital employed in the business of manufacturing sugar. The court clarified that the reasonable return mentioned in clause (d) pertains to the entire business of sugar manufacturing, not just the levy sugar.

2. Whether the price of Rs. 124.63 per quintal was in accordance with the provisions of Section 3(3C):

The appellants contended that the price of Rs. 124.63 per quintal fixed by the government did not comply with Section 3(3C). The court examined the Tariff Commission's report, which worked out the ex-works price for Haryana zone for 1969-70 to 1971-72 at Rs. 128.69 per quintal, including Rs. 2 for rehabilitation. The government, however, deferred its decision on rehabilitation, resulting in an ex-works price of Rs. 126.69.

The court noted that the government, in its additional affidavit, stated that the price should be Rs. 126.93, considering factors like increased purchase tax and wages. The High Court, while not finding the price of Rs. 124.63 realistic, added Rs. 3.22 for increased wages, depreciation, and packing charges, arriving at a price of Rs. 127.85. The Solicitor General did not challenge this addition.

The appellants argued for further additions, including increased interest, freightage, and deterioration in quality. The court, however, found that the claim for additional interest was not sustainable as the production in 1970-71 was lower than in 1969-70, and the factories had not purchased cane above the minimum price. The court also dismissed claims for increased freightage and deterioration in quality, noting that these were normal trade incidences.

Finally, the court concluded that the Haryana factories received a reasonable return on the capital employed, as the average price realized for levy and free sugar was Rs. 130.77 per quintal, higher than the calculated cost of Rs. 130.13. Thus, the price fixed by the government was consistent with Section 3(3C).

Conclusion:

The appeals were dismissed, with the court holding that the price of Rs. 124.63 per quintal was in accordance with Section 3(3C) of the Essential Commodities Act. The parties were directed to bear their own costs, and liberty was granted to file applications regarding bank guarantees furnished during the stay orders.

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