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TMI Blog1971 (11) TMI 159X X X X Extracts X X X X X X X X Extracts X X X X ..... We have been suggested a number of formulae on behalf of the manufacturers as also the government but we shall indicate at a later stage what, in our opinion, is the best and the simplest method of providing for escalation and deescalation. We are satisfied, however, that a provision should be made and ought to have been made by the Commission in this behalf. According to the principles discussed or to be discussed in the matter of fixing of a fair price the main objective is to protect the interest of the consumer while at the same time provide a reasonable margin of profit to the producer. The general approach has to be to determine the ex-works cost and then to arrive at the fair price after examining other claims of the industry and providing a reasonable return. We, therefore, find no such principle which has been demonstrated to be wrong in the report of the Commission so far as the fixation of the return is concerned. We are, therefore satisfied that the capacity for production of Hindustan Motors should have been assessed at the figure given by the technical team, namely, 30,000 cars and 5,000 trucks per year. Import licenses, which were granted have also not been shown to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 4 Door Rs. 14,003.00 These prices were inclusive of dealer's commission but did not include the excise duties, Central Sales tax and local taxes, if any, and transport charges. The manufacturers or dealers were prohibited from selling or offering for sale or otherwise transferring or disposing of the motor cars for a price exceeding the price given in the Order. The order was made after taking into consideration the recommendations of the Tariff Commission to whom the question of determination of a fair price of motor cars had been referred by the Central Government under clause (d) of s. 12 of the Tariff Commission Act 1951. On May 5, 1970 after hearing the, petitions for some days this Court recommended to the Government to appoint a Commission for the purpose of suggesting a fair price for the three cars by taking into consideration all relevant matters. On May consisting of Shri Sarjoo Prasad a retired Judge of the Patna High Court as Chairman, Shri R. K. Khanna Chartered Accountant and Brig. V. Minhas Director of Inspection (Vehicles), Department of Defence Production as Members. By a notification dated June 5, 1970 all the provisions of the Commission of Enquiry Act 1952 w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... have a healthy effect on the development of the industry. The interest of the consumers could be properly protected if investigations were held after certain intervals in order to see that excessive prices were not actually charged although the manufacturers were left free to charge prices at their discretion. The Government took a decision to enforce an "informal price control" on automobiles which was accepted by the manufacturers. The manufacturer was free to revise the price from time to time according to the variation in the cost but had to give a month's notice of any variation to the Government so that if the change proposed was prima facie unreasonable the Government could intervene. The net dealer's price was not to exceed the ex-works cost by more than 10%. Within a few years of the imposition of the informal price control the situation in the country changed owing to the scarcity of foreign exchange. The Government had to curtail foreign exchange allocation for the import of automobile components with the result that only three out of the then existing six models of passenger cars were left in regular production. The Government considered it necessary to introduce a Dis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... three petitioners. The procedure followed by the Commission may be briefly noticed. It invited by means of a detailed questionnaire full information from the car manufacturers, dealers, consumers and others interested in the inquiry. It appointed a team of Cost Accountants and another team of technical experts besides a Chartered Accountant. These teams studied and collected data from each of the three manufacturing units and examined their manufacturing processes. The cost structure and activities of some of the ancillary producers and dealers of automobiles were also studied apart from visits to the manufacturing units. The Commission examined witnesses who were produced by the Union of India, the consumers, the dealers and the manufacturers. We may next refer to the principles and methods of costing which were followed by the Commission. The cost of a commodity consists of these elements : direct material, direct wages, services, depreciation and manufacturing, administrative and selling overheads. In case of an automobile a large number of components which undergo different manufacturing processes have also to be taken into account. The Commission decided to recommend a fair p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... udgment on examination of correct and rational principles and should direct deviation from the report of the Commission which was an expert body presided over by a former judge of a High Court only when it is, shown that there has been a departure from established principles or the conclusions of the Commission are shown to be demonstrably wrong or erroneous. The following table will illustrate the price of Fiat car in Bombay based on July 1970 figure payable by a consumer as also the comparison with the prices contended for by Premier Automobiles and the government. Description As recommended by the Commission As per submissions made by the Petitioner Premier Automobiles) As contended by the government Ex-factory price Rs.14,787.00 Rs.15,793.00 Rs.14,017.00 dealer's mark-up Rs.900.00 Rs.900.00 Rs. 900.00 Retail price Rs.15,687.00 Rs.16,693.00 Rs.14,917.00 excise duty on built-up car Rs.1,478.70 Rs.1,579.00 Rs.1,401.70 Surcharge on excise duty Rs.492.90 Rs.526.00 Rs.467.23 Maharashtra sales tax on built-up car Rs.2,011.03 Rs.2,147.84 Rs.1,906.31 PRICE TO THE CONSUMER Rs.19,669.63 Rs.20,946.57 Rs.18,692.24 It has not been disputed that 46% of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... adequate on the admitted and proved facts. 6. Depreciation of plant and machinery has been allowed on the basis of original cost whereas it should have been allowed on the replacement value or on the peculiar facts of the case. We propose to deal with the first point relating to production capacity last. On point no. 2 the Commission was of the view that warranty expenses and bonus should appropriately be included in the return and not in the exworks cost. It is well known that the car manufacturers in India as elsewhere furnish a warranty covering the cars sold. Under the warranty all defects on account of faulty manufacture in workmanship have to be set right and the defective parts have to be replaced, free of cost by the manufacturer or his dealer Within a specified period or a given distance traveled by the car. During the period of warranty which is now for one year three free services have to be rendered. The car owner has to pay the cost of consumable items like oil, grease, packing etc. during those free services. The car manufacturers enter into an agreement with the manufacturers of components providing for a warranty so far as the components supplied are concerned. As ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... charges to the customer". The effect of the above direction cannot be ignored although it may not be conclusive in the matter of fixing a fair price. We find the statement of the Commission unexceptionable that if the warranty is to be made out of the profits every manufacturer will try to minimise warranty cost by improving the quality of his product. If it is to be included in the ex-works cost it means virtually passing it on to the consumer. A good deal has been said on behalf of the Premier Automobiles with regard to figures taken by the Commission as warranty charges. It has been pointed out that although the cost of parts amounting to Rs. 80/or 81/per car has been taken into account in the return but the labour charges which would amount to Rs. 120/per car and which, according to the Commission's report, have to be borne by the manufacturer have not been taken into account even in the return. It has been urged that if the manufacturers have to bear the labour charges the amount of Rs, 120/per car should have. been taken into account. The position is much simpler about the Standard Motors because there the cost as well as the labour charges amount to Rs. 80/-per car. As reg ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e wage structure. According to the Government in the past bonus was never Allowed as a part of the cost of manufacture. In the previous Tariff Commission Report on the Fair Selling Price of Automobiles 1968, bonus was included in the return. The Tariff Commission has been dealing with various industries according to the circumstances peculiar to that industry. It accepted minimum bonus as part of cost in the Fibre and Rayon industry. But it included it in the return in its report on alcohol and catguts. It is said that if bonus is added to the cost it will be a part of the working capital and so the manufacturer will get the benefit twice over. In our judgment the question whether bonus is linked with profits or cost stands concluded by the, provisions of the Bonus Act itself as also the decision of this court in Jalan Trading Co (P) Ltd. v. Mill Mazdoor Union ([1967] 1 S.C.R. 15). According to s. 10 of that Act every employer shall be bound to pay to every employee in an accounting year a minimum bonus which shall be 4 % of the .salary or the wage earned by the employee during the accounting year or forty rupees whichever is higher whether there are profits in the accounting year ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in peace and harmony between the three agencies, (capital management and labour) which contribute to the earning of profits (See Jalan Trading Co. (P) Ltd. v. Mill Mazdoor Union([1967] 1 S.C.R. 15). The Commission came to the correct conclusion that bonus is connected with profits and it cannot be included in the exworks cost. A good deal of criticism has been levelled on behalf of the manufacturers on the method followed by the Commission for determining the ex-works cost in September 1969 and July 1970. It has been submitted that for September 1969 the cost has been worked out on what may be called the historical method and for July 1970 the actual prices have been taken into account but the projected and estimated cost for the future has been ignored. It has been pointed out that historical costs are determined on the basis of the material which is already in the pipeline and which has been acquired at cheaper rates. Such a method has never been adopted and there is absolutely no justification for making a discrimination between the methods to be adopted for ascertaining the ex-works cost in September 1969 and in July 1970. The method which has always been adopted is of either ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ar provision for escalation was made in the Tariff Commission report 1966 on the price structure of catgut ball bearing and several other industries. There are a number of increases, according to the manufacturer,,;, over which they have absolutely no control. Mostly these consist of increases in excise duties, taxes, increase in the cost of imported and indigenous steel, in wages, dearness allowance, contributions to the provident fund, gratuity, employees State insurance and other emoluments to the employees who are governed by the Industrial law. In addition to the increases in the cost of materials the cost of bought out components electricity, income tax etc. have also to be taken into consideration. The manufacturers have pointed out with a good deal of force that they have -no control whatsoever over the increase in the prices of components which they have to buy from the ancillary manufacturers as the same are not subject to price control. The Verghese Committee which was appointed under s. 15 of the Act for investigation into the working of the Standard Motors observed in its report that general price level has been increasing in recent years and therefore the control of c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ur charges which when taken out of the return will reduce it substantially. The calculation made, according to the company on the figures worked out by the Commission, was that the surplus left will provide a dividend of approximately 7% on the equity capital. The additional argument on behalf of the Hindustan Motors is that in computing the return the Commission has accepted the position that the following outgoing should go out therefrom : (a) interest on borrowings; (b) minimum bonus of 4%; (c) other financial charges; (d) warranty claims; (e) dividend on preference shares; (f) tax liability. According to the Commission if a return of 16% on the capital employed is given the corresponding dividend to the equity shareholders will work out at 10%. The Hindustan Motors has to pay total bonus for the years 1969-70 at the rate of 8%. It is essential that the company sets aside a minimum of 3% on the capital employed for the purpose of replacement and rehabilitation for which no provision has been made. After taking out all these items it will be impossible to give a 10% dividend to the equity shareholders. The Standard Motors have put in a chart showing that after ,deducting all th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng employed. The Tariff Commission in its report of 1968 in respect of fair selling price of automobiles considered that a return of 12% of the capital employed would be reasonable and fair. The Commission was of the view that profit margin to be allowed to an industry has little or no direct relation to the cost of the product. If the profit is determined as a percentage on the ex-works cost the higher the cost the higher will be the profit. This will leave little or no incentive to manufacturer to effect economies in the cost of production or exercise control over the manufacturer's expense. In determining a fair margin of profit consideration has to be given to the capital employed and a fair return for such capital including a provision for outgoing like interest on loans, minimum bonus etc. must be assured. The quantum of return has essentially to vary from industry to industry. This would require ascertainment of capital employed with regard to production of cars. The Commission took the figures from authentic sources i.e. the report of the Reserve Bank of India and an analysis carried out by the Economic and Scientific Research Foundation with regard to the return which was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... We are, however, unable to accede to this submission. We have given our careful thought to the principles which the Commission has followed in fixing the return and in our judgment the return granted is a reasonable one keeping in view the entire circumstances. At the same time we consider return at 12% wholly inadequate when all the items that the Commission has mentioned have to be paid out of it. Moreover a total return at 16% will leave some margin if proper economies are effected by the manufacturers for replacement and rehabilitation and improvement of the plant and machinery. According to the principles discussed or to be discussed in the matter of fixing of a fair price the main objective is to protect the interest of the consumer while at the same time provide a reasonable margin of profit to the producer. The general approach has to be to determine the ex-works cost and then to arrive at the fair price after examining other claims of the industry and providing a reasonable return. We, therefore, find no such principle which has been demonstrated to be wrong in the report of the Commission so far as the fixation of the return is concerned. The next question is whether th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssion said "if the manufacturers were to keep apart not only the amount of depreciation but also the development rebate and other reserves to which they are entitled under the various tax and other laws and invest them separately or even in their business the question of there being any difficulty later on does not arise. Depreciation funds with the amount thus provided for can be built up and these can be invested whether inside or outside the business"; (main report p. 65). The Commission referred to the opinion of the Institute of Chartered Accountants in England which was against the proposal to base the charge for depreciation on replacement cost. The Tariff Commission had also not accepted the contention of the manufacturers that depreciation allowance should be calculated on replacement cost. The depreciation which is allowed under the tax laws is very liberal and we see no reason to pass on the burden to the present consumer who is not likely to get any benefit out of the replacement proposed to be provided for by the manufacturers. Moreover capital reserves with the Hindustan Motors and the Standard Motors are substantial. Although the position of the Premier Automobiles i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or sold. While fixing a fair price under S. 18G no question can arise about the optimum or achievable capacity of production which would be relevant only for the purpose of ss. 15 and 16 of the Act. A lot of emphasis has been placed on the different objects and purposes for which ss. 15, 16 and 18G respectively have been enacted. This provision, it is said, is meant to prevent profiteering and what is intended is that the actual production and the quality of articles which are being produced have alone to be taken into consideration and a fair price has to be fixed accordingly. The learned Attorney General says that s. 18G does not contain any limitations which have been suggested on behalf of the car manufacturers. It is to be found as the first section in Chapter III-B which is headed "control of supply, distribution, price etc. of certain articles". In a free market the position is quite different but when fair price has to be fixed the cost of production has to be taken into account and the price should be such that a fair return is provided for. The cost of production must be with a view to economy and efficiency. Moreover the non-obstante clause in s. 18G(1) shows that this ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . It is claimed that the cost has been reduced by the above process by Rs. 301/per car for July 1970. On behalf of the Premier Automobiles it had been urged before the Commission that its average level of production per year was 12,000 cars and 5,000 commercial vehicles and this was likely to be the future capacity so long as there was no expansion of plant and machinery. According to the government, however, the existing capacity of Premier Automobiles was not less than 15,000 to 16,000 cars and 7,000 commercial vehicles per year. The Commission relied mainly on certain letters and applications addressed by the Premier Automobiles in the matter of obtaining licenses for import etc. from September 1969 to October 1970 as also the evidence of Brigadier Subramaniam the General Manager of the Company. The Commission fixed the capacity of production of commercial vehicles at 6,000 and that of cars at 14,000 for July 1970. As regards September 1969 it considered that the capacity should be fixed at the level which was 5% less than the level determined for July 1970. The figures thus came to 13,300 cars and 5.700 commercial vehicles per annum. It appears to us that the Commission ignored ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o March 1969 an application was made on July 23, 1968. It was confined only to those components and raw materials which were not covered by the components imported for 18,000 cars under the special credit scheme. The production, it was stated, was again being planned at 1,000 cars per month. This application was also granted. On February 28, 1969 an application was made for the second half of the year April 1968 to March 1969 for 7,200 cars on the basis of 1,200 cars per month. The Development Wing recommended grant for 6,000 cars only, the total minimum being 12,000 cars. On November 28, 1969 an application was made for the first half of the year April 1969 to March 1970. This is stated to be a balancing application for 6,000 cars. On July 28, 1970 an application was made for the production of 7,000 cars in six months for the first half year April 1970 to March 1971. The recommendation of the Development Wing was only for 6,050 cars and the license was apparently granted for the same. On October 28, 1970 an application was made for the second half of the year April 1970 to March 1971 for production of 7,000 cars in six months. This time the recommendation was accepted for 7,000 ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... admittedly granted on that basis. The license for steel has still not been issued and we are informed that it is likely to be issued very shortly. These figures were furnished by the company at a time when hearing of the proceedings before the Commission was taking place and all relevant matters including the question of capacity were under active consideration. It is difficult to understand why its achievable capacity for July 1970 should not be fixed at the figure of 14,000 cars per year. Even if the license for steel had not yet been issued the Premier Automobiles had enough stock. As we stated in the application dated October 28, 1970 the stock position on the date of the application was for production of 4,000 cars. The firm principle which we have all along followed is that the report of an expert body like the Commission should be accepted except where it has been shown to have demonstrably fallen in err-or on a question of principle or has completely ignored vital and material facts which, if taken into consideration, would have led to a different conclusion. We are not satisfied that with regard to July 1970 taking an overall and general view apart from the material on th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... apart from 1,000 trucks based on six days working week. The technical committee of the Commission found that based on a six day working week of two shifts of 8 hours each the capacity of the factory at the present level of indigenisation was 3,400 cars and 1,000 trucks. In the matter of assessing capacity it has been pointed out that the car production is bound to be less if the production of other parts is increased and that is what has been done from 1965 onwards. According to the observations of the technical team of the Commission the drop in the installed capacity from 1968 (3400 cars to 2500 cars) in 1970 was due to the increased depletion in the Press Shops. After going into the matter fully the technical team indicated its revised calculations which were that working on a two shift 5 day working week (nine hours per shift) the machine shop had an annual capacity for 3400 Herald cars and 1,000 trucks. It was suggested that the company should operate on a six day working week with daily shifts of 8 hours each. In that way it was concluded that the capacity of Standard Motors would be 3,400 cars and 1,000 trucks. Mr. Natesan has emphasised that if the production has to be ach ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . the imported components would have to be progressively indigenised. This is what the Verghese Committee finally concluded: "On an overall assessment we felt it safe to estimate the installed capacity of the factory at 3000 Herald and 1000 Standard 20s". (pages 76-77 of the Verghese Committee Report dated 16th October 1970) It is true that owing to the closure of the factory the technical team could not make verification on the spot and tried to depend largely on the data supplied by the Company. But in the background of the report of the Verghese Committee which had made full and thorough investigation we are unable to uphold the Commission's view. On an overall consideration, however, we would hold that the capacity of Standard Motors would be 3400 cars and 1000 trucks as found by the technical team. The Car Prices Inquiry Commission has excluded the incidence of Royalty from July 1970 cost in view of the fact that the collaboration agreement between the company and its foreign collaborators expired in 1970. It has been brought to our notice by Mr. Natesan that since then the Government of India have given their approval to renew the collaboration agreement on the basis of R ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Iyengar and Rao. The Commission felt it was safer to rely on the manufacturer's own statement made from time to time. It was considered fair and equitable to fix the production capacity at 30,000 cars per annum and that of trucks at 10,500 per annum. Mr. Mitra on behalf of the Hindustan Motors has rightly stressed the point that in a matter of technical assessment the report of the technical team and the experts should be accepted and should not be rejected unless the members of the technical team had been examined by the Commission and called upon to explain any facts or circumstances which have been used by the Commission for rejecting their report. It is pointed out that the Third Tariff Commission in its report on August 1968 came to the conclusion that the costing in respect of the company should be done on the basis of 22,000 and 13,600 trucks per year. This estimate of capacity was not accepted by the government who, by a letter dated May 12, 1969 suggested to the Tariff Commission to rework the ex-works cost of Ambassador cars on the basis of an annual production figure of 24,000 cars and 12,000 trucks. The Tariff Commission then reworked the cost on that basis. Messrs. Iye ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mentioned in letters to the government for the purpose of obtaining additional facilities because the estimates which are given are likely to be inflated. We see no reason or justification for rejecting the opinion of the experts, namely, M/s Iyengar and Rao and the technical team especially when no member of that team was examined as a witness for finding out those facts and data which the Commission has sought to use for rejecting the technical team's report. We are, therefore satisfied that the capacity for production of Hindustan Motors should have been assessed at the figure given by the technical team, namely, 30,000 cars and 5,000 trucks per year. Import licenses, which were granted have also not been shown to have been given on the basis of the figures of production determined by the Commission. For the first half year 1970-71 the recommendation was for the grant of 11,075 cars although in the application the estimated production was stated to be 15,000 cars. It was only for the second half year 1970-71 that the import license was recommended and granted for 15,000 cars. There is no difficulty, therefore, in arriving at the figure of production of cars, namely, 30,000 cars ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ad not kept any regular record of data it was not possible to determine accurately the use of locally purchased and imported steel separately. In these circumstances we do not consider that the conclusion arrived at by the Commission has been shown to be demonstrably erroneous or wrong. Writ petitions 486 and 487 of 1969 have been filed by the Delhi Automobiles and the Bombay Cycle & Motor Co. respectively. They are dealers of the cars the prices of which are under consideration. The case of the dealers is that before 1955 the dealer's margin was 20 to 25% of the exfactory price. In 1956 the First Tariff Commission recommended a reduction i.e., Rs. 1,000 per car or 10% of the ex-factory price whichever was less. In 1957 the Government accepted that the dealer's margin should be on the basis of 10% ex-factory price. This has remained unchanged during all these, years whereas the operational costs have increased. The existing mark-up or margin of profit of the dealer on ex-factory price of cars is as follows Fiat : Rs. 891.00 Standard : Rs. 859.00 Ambassador : Rs. 1044.00 The various duties and responsibilities of the dealers are (a) to promote sales of vehicles concerned; (b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as not accepted. The Commission considered the desirability of classifying dealers in 2 or 3 categories according to the standard of equipment and service facilities and fixing the amount of mark-up accordingly but it was realised that in the very nature of things this was not feasible. It was, however, noticed that the Hindustan Motors charged a sum of Rs. 50/out of the latter's commission on account of advertising charges and the Premier Automobiles also charged Rs. 10/from each dealer for service facilities. These deductions, in the opinion of the Commission, were unwarranted and should not be allowed to continue. The other additional factors that have been brought to our notice are that the Commission has now held that the labour charges borne by the dealers in doing warranty jobs should be met by the manufacturer. This will give an additional benefit to the dealers. Taking into consideration all these facts the Commission was of the view that the existing margin should remain at the existing level except for marginal adjustment.It arrived at the following figures for the dealer's mark-up Fiat : Rs. 900.00 Standard : Rs. 860.00 Ambassador : Rs. 1050.00 On behalf of the d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and the dealers our decision is as follows :- (i) The amount payable on account of royalty per car in the case of Standard Motors pursuant to the collaboration agreement the renewal of which has been approved by the Government of India will be included in the ex-works cost for July 1970. (ii) The conclusion of the Commission relating to the percentage of the local steel sheets by the Hindustan Motors is correct. (iii) The dealers shall, for the present, be entitled only to the mark-up in terms of the recommendation of the Commission. We consider that the provision for the future relating to escalation and de-escalation should be in these terms. The position will be reviewed by the government every six months in the beginning of the months of January and July. Six weeks prior to first January and first July the car manufacturers shall submit all the necessary data and proof for determining the increases claimed. The, government shall decide about the matter promptly by the first of January and first of July respectively and allow the increases, if found to be genuine and correct provided the total amount of such increases exceeds Rs. 100/per car in ex-works cost since the last f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n recommended by the Commission. For the period September 1969 to the date of the interim order Premier Automobiles have agreed that the maximum prices will be those which have been stipulated in the undertakings obtained by them from the dealers but these shall, in no case, exceed the price to be computed by the manufacturers in accordance with the Commission's report as modified by our decision for the period September 1969 to the end of June 1970 and the price recommended for July 1970 by the Commission (this is same as fixed by our interim order) from first July 1970 till April 16, 1971 (the date of our interim order). It is common ground and counsel for all the parties are agreed that as a result of our decision the impugned Order of September 1969 shall be inoperative and ineffective to the extent the prices fixed by it are not in accordance with our decision. All the writ petitions shall stand disposed of accordingly. The parties shall be left to bear their own costs. Khanna, J. I agree except in two matters. One relates to the production capacity of Standard Motors. The other relates to the value to be attached to the admissions regarding the production capacity contained ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to whether the Court should accept or not the price found by the Commission for the Standard Herald for July 1970. It would appear from the above that as against the price of Rs. 14,003 notified in September 1969 by the Central Government for Standard Herald, the Commission worked out the price of that car to be Rs. 15,373/for September 1969 and Rs. 16,080/for July 1970. Before arriving at the above conclusion, the Commission which had been appointed by the Government under the Commissions of Inquiry Act at the instance of this Court and which included a retired High Court Judge, a chartered accountant and an automobile engineer visited the different manufacturing units. The Commission took into account various factors like manufacturing capacity, quality, norms of rejection, bonus, warranty, interest and return and expressed its view with regard to each of them. The Commission also took note of the various items of expenditure which have to be incurred by the manufacturer in the production of the car. In view of the detailed inquiry made by the Commission, the approachadopted by this Court, as mentioned in the main judgment, has been that we should direct deviation from the repo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... throw the burden of inefficiency of a manufacturer on the consumer in working out the figure of 'fair price' of the article manufactured. To put it differently, the authority concerned in determining fair price should not demand from the manufacturer the paragon of excellence in the matter of volume of production but at the same time the authority should not make the consumer bear the margin of high cost resulting from avoidable low production. It is, of course, implicit in that reasonable facilities would be afforded to the manufacturer for procuring material like imported parts and steel which is under the Government control so as to be in a position to manufacture the requisite number of cars. The ,-concept of 'fair price' postulates that the price should be fair not only to the producer but also to the consumer; the goal should be to arrive at just and reasonable rates. To quote from Hanson's book referred to above : "There is a popular idea that the price of a commodity should be fair, but to whom? to consumers or producers ? It is very difficult to define the meaning of fair in this connection. If a service is deliberately run at a loss, it is clearly to the advantage of ev ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ansfer of some capacity from the commercial vehicles side to the car side, and after allowing a capital addition of Rs. 2.5 lakhs towards tooling, it is reasonable to assume that the Company can easily reach the level of production of 4,000 cars and 1,000 commercial vehicles per annum." Regarding the assessment made by the technical team, the Commission observed as under :- "The Technical team of the Commission had assessed the capacity of the Company at 3,400 cars and 1,000 commercial vehicles per year on a six-day week but the assessment of the Technical Team in case of this unit was made when the factory was closed and all the relevant data were not available. The Commission has, therefore, tried to rely more on the assessment made by the Company itself rather than on the estimates of the team." It has been argued on behalf of the petitioner that the Commission should have accepted the report of its Technical Team and not excluded it from consideration. In this respect, I find that according to the report of the Technical Team, it felt handicapped because it found at the time of its visit that the production in the petitioner's company had virtually come to a standstill on a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... V. Varghese, ExChief Secretary of the Government of Tamil Nadu was appointed by the Central Government in exercise of the powers conferred by section 15 of the Industries (Development and Regulation) Act, 1951. The material part of the order regarding the appointment of that Committee reads as under :- "And whereas it has come to the notice of the Central Government that the volume, of production of the articles manufactured in the said industrial undertaking had been gradually going down and the production has now come to a standstill consequent upon the closure of the said industrial undertaking by the management; And whereas the Central Government is of opinion that it is expedient to take urgent measures to remedy the situation arising out of the closure of the said industrial undertaking and to ensure that production in the said scheduled industry does not suffer to the detriment of the public interest; Now, therefore, in exercise of the powers conferred by section 15 of the Industries (Development and Regulation) Act, 1951 (65 of 1951), the Central Government hereby appoints for the purpose of making a full and complete investigation into the circumstances of the case, a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... etitioner-company to the Directorate General of Technical Development, the petitioner-company estimated its production for 1968 at 4,200 cars. Again in its application dated 20th December, 1968, the petitioner-company estimated its production for 1969 at 4,200 cars. The petitioner-company no doubt, showed its production capacity of cars as 3,400 in its letter dated 13-12-1969 but that was after the issue of the impugned notification and during the pendency of the present petition. 1, thus, find that even if the production figure as admitted in the applications dated 19-6-1968 and 20-12-1968 were to be taken into account, the estimate of the Commission regarding the production capacity of the petitioner-company cannot be considered to be excessive. It is well known that admissions constitute a strong piece of evidence against the party making the admissions and it is for that party to show that the admissions are mistaken or are not true. On the material on record, the petitioner-company, in my opinion, has failed to discharge that onus. The argument that the petitioner in order to obtain import licence had to give a bloated figure of estimated production does not appear to be convi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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