PETITIONER:
LINGO SULPHATE CORPORATION OF INDIA LTD. & ORS.
Vs.
RESPONDENT:
U.P. STATE SUGAR CORPORATION LTD.,UNIT, BIJNOR & ORS.
DATE OF JUDGMENT27/01/1982
BENCH:
MISRA, R.B. (J)
BENCH:
MISRA, R.B. (J)
FAZALALI, SYED MURTAZA
CITATION:
1982 AIR 786 1982 SCR (3) 66
1982 SCC (1) 539 1982 SCALE (1)34
ACT:
Uttar Pradesh Sheera Niyantran Adhiniyam, 1964 (U.P.
Act No. 24 of 1964), sections 8 and 9 read with rule 22(1)
and 22(2) of the Uttar Pradesh Sheera Niyantran Niyamavali,
1974-Scope of-Classification made with regard to molasses
covered under rule 22(1) and 22(2) is reasonable and docs
not offend Article 14 of the Constitution-Estoppel by
conduct-Here, there is no question of contracting out of
law.
HEADNOTE:
Molasses, the basic raw-material for the manufacture of
lingo-sulphite, basic refractories, steel plants, cement
factories, carbon black plants and many other important
industries and also used for distillation, has become a
valuable commodity on account of its multi-use. The
preservation, distribution and prices of the molasses were,
therefore, controlled by the Uttar Pradesh Sheera Niyantran
Adhiniyam, 1964 (U.P. Act 24 of 1964) and also the rules
made thereunder called Uttar Pradesh Sheera Niyantran
Niyamavali, 1974. Section 8 of tho Act authorised the
Controller to direct the occupier of any sugar factory to
sell and supply in tho prescribed manner such quantity of
molasses to such persons as may be specified in the order
and the occupier shall notwithstanding any contract comply
with the order. Section 10 provided that the occupier of a
sugar factory shall sell molasses in respect of which an
order under section 8 has been made at a price not exceeding
that prescribed in the schedule attached to section 10.
United Commercial Syndicate, Allahabad is the
purchasing agent of M/s. Lingo Sulphite Corporation and M/s.
Audubon Trading and Export Corporation of Allahabad and
Calcutta, entered into an agreement with the U.P. State
Sugar Corporation Ltd. whereunder the latter agreed to sell
28,300 quintals of molasses of 1977-78 production at the
statutory price of Rs. 9 per quintal and duties etc.
provided the former agreed to pay the total amount of Rs. 3
lacs being the total cost of molasses as estimated at the
said statutory price. It was further stipulated that in case
the said price was not valid in law, The United Commercial
Syndicate will have to pay the price at the rate of Rs. 25-
10 por quintal inclusive of administrative charges and other
taxes and duties etc. as agreed to by the Syndicate. A sum
of Rs. 2 lacs had been paid in pursuance of the agreement
and the balance of Rs: I lac was to be paid at the earliest.
The Sugar Corporation however sought to calculate the price
of the molasses in question at the rate of Rs. 25-10 per
quintal on the ground that the molasses agreed upon was not
covered by an order under section 8. Syndicate filed two
petitions in the High Court of Allahabad for a writ of
mandamus or any other
67
appropriate writ or direction declaring that Corporation was
not entitled to charge the price for tho molasses in excess
of the price fixed by the Act, namely, Rs. 9 per quintal.
Tho High Court by its order dated 21st October, 1979
dismissed the petitions in limine. Hence the appeal by
special leave by the Syndicate and the writ petition by tho
principal M/s. Lingo Sulphite Corporation.
Dismissing tho appeal and tho writ petition, tho Court,
^
HELD: 1. Sections 3 to 8 and 10 of tho Adhiniyam and
Niyamavali 12,13, 22, 23 and 24 make it clear that the
occupier of a sugar factory can sell molasses to a person
specified in the order of the Controller at the controlled
price. The occupier of every sugar factory has to give an
estimate of the molasses to be produced in tho sugar factory
as also the estimate of requirement of molasses for
distillation and industrial purposes. If there is any
surplus after meeting the requirements of the persons in
whose favour there is an order of the Controller, the same
will be released in favour of tho occupier. [71 H, 72 A-B]
2. Section 10 makes it clear that the occupier of a
sugar factory is obliged to sell molasses at the price not
exceeding that prescribed in the schedule only in respect of
which an order under section 8 has been made. But sub-clause
(2) of rule 22 authorises the Controller to release any
stock of molasses in favour of an occupier of a sugar
factory only when the same is not required for distilleries
or for other purposes of industrial development. If a
certain quantity of molasses has been released in favour of
tho occupier, because the same was not required for
distilleries or for other purposes of industrial
development, it is open to the occupier to sell that
quantity of molasses in free market to any person at a price
prevalent in tho market. Section 10 of tho Act requires an
occupier of a sugar factory to sell molasses at a price not
exceeding that prescribed in the schedule only in respect of
which an order under section 8 has been made. No limitation
or fetter has been put on the occupier of a sugar factory to
sell molasses which was released in his favour. It was,
therefore, open to the occupier to sell the molasses
released in his favour at the free market price. [73 B-E]
3. The classification made with regard to molasses
covered under rule 22(1) or rule 22(2) is a reasonable
classification. [73 B-E]
4. The Syndicate entered into an agreement with the
Corporation and agreed to pay the price of the molasses at
the rate of Rs. 25-10 per quintal. Having entered into such
an agreement with its eyes wide open it cannot now turn
turtle and contend that it was liable to pay only at the
rate of Rs. 9 per quintal. tho statutory price. [73 P-G]
5. It is true that the parties cannot be allowed to
contract themselves out of law. It is not the law that no
molasses released in favour of the occupier of the sugar
factory could be sold at a price higher than the controlled
one. The controlled price was applicable only to the
molasses for which an order had been passed by the
Controller in favour of a specified person either for the
purpose of distillation or for other industrial purposes.
But so far as the molasses released i n favour of the
occupier of a sugar factory is concerned, there is no
requirement of the law that the occupier should sell it only
at the controlled price [73 G-H, 74 A-B]
68
6. The terms of the agreement between the parties
entitles the Corporation for administrative charges. [74 B-
C]
JUDGMENT:
ORIGINAL JURISDICTION ON: Writ Petition No. 391 of
1981.
(Under Article 32 of the Constitution of India)
WITH
Civil Appeal No. 651 of 1980
(Appeal by special leave from the judgment and order
dated the 31st October, 1979 of the Allahabad High Court in
Civil Misc. – Writ No. 8091 of 1979)
R.K. Garg, Pramod Swarup and D. R. Gupta for the
Petitioner in Writ Petition.
O. P. Rana and P.K Pillai for Respondent Nos. 1 & 2 in
WP.
G. N. Dikshit and Miss A. Subhashini for Respondent No.
5 in W.P.
Mubarak Mazdoor Appellant in person in C.A.
G. N. Dikshit, B. P. Maheshwari and Miss Asha Jain for
the Respondent in Civil Appeal.
The Judgment of the Court was delivered by
MISRA, J. Writ petition No. 391 of 1980 under Article
32 of the Constitution and Civil Appeal No. 651 of 1980 by
special leave raise common question of law and, therefore,
we propose to dispose them of by a common judgment.
The circumstances leading to the writ petition and the
appeal lie in a narrow compass. The appellant, United
Commercial Syndicate, is the purchasing agent of M/s. Lingo
Sulphite Corporation, the petitioner in writ petition No.
391 of 1980 and M/s. Audubon Trading and Export Corporation
of Allahabad and Calcutta, who are the manufacturers of
lingo-sulphite in India.
Molasses is the basic raw material for the manufacture
of lingo-sulphite which is an essential raw material for all
basic refractories, steel plants, cement factories, carbon-
black plants and many
69
Other important industries Molasses is also used for
distillation. . Over the years molasses has become a
valuable commodity on account of its multi-use. The
preservation, distribution and prices of the molasses were,
therefore, controlled by a legislation, the Uttar Pradesh
Sheera Niyaatran Adhiniyam, 1964 (U.P. Act No. 24 of 1964),
hereinafter referred lo as the Act.
United Commercial Syndicate used to purchase molasses
for their principals from the open market. Later on it
decided to make direct purchase from the U.P. State Sugar
Corporation Ltd., Unit Bijnor (A State Government
Undertaking). It entered into an agreement with respondent
No. 1, the U.P. State Sugar Corporation Ltd., whereunder
respondent No. I agreed to sell 28,300 quintals of molasses
of 1977.78 production at the statutory price of Rs. 91 per
quintal and duties etc. provided the appellant agreed to pay
the total amount of Rs. 3 lakhs, being the total cost of
molasses as estimated at the above statutory price. It was
further stipulated that in case the above price was not
valid in law, the appellant will have to pay the price at
the rate of Rs. 25.10 per quintal inclusive of
administrative charges and other taxes and duties etc., as
agreed to by the appellant. There were other terms of the
agreement but it is not necessary for the purposes of
disposal of these cases to refer to them. A sum of Rs. 2
lakks had been paid in pursuance of the agreement and the
balance of Rs. 1 lakh was to be paid at the earliest. The
respondent No. 1, however, sought to calculate the price of
the molasses in question at the rate of Rs. 25.10 per
quintal. The appellant felt aggrieved and it took the stand
that the respondent No. 1 could not charge more than the
statutory price in spite of the fact that the appellant had
offered the price of Rs. 25.10 per quintal to respondent No.
1. The appellant filed two petitions in the High Court for a
writ of mandamus or any other appropriate writ or direction
declaring that respondent No. I was not entitled to charge
the price for the molasses in excess of the price fixed by
the Act. The High Court by its order dated 31st of October,
1979 dismissed the petitions in limine. The appellant has
come up in appeal by special leave to challenge the order of
the High Court. M/s. Lingo Sulphite Corporation of India Ltd
has also filed a petition under Article 32 of the
Constitution for the same relief on the same grounds as in
the aforesaid appeal.
In order to appreciate the points involved in the case
it would be appropriate to refer to the material provisions
of the Act and the rules framed thereunder,
70
Section 3 of the Act authorises the State Government to
constitute an Advisor-y Committee to advise on matters
relating to the control of storage, preservation, gradation,
price, supply and disposal of molasses. Section 4 provides
for the appointment of a person as Controller of Molasses
for the purpose of exercising the powers and performing the
duties of the Controller of Molasses. – Section 5 enjoins
every occupier of a sugar factory to take precautions for
preservation of molasses. Section 6 prohibits the occupier
of a sugar factory to adulterate or allow to be adulterated
any molasses produced or held in stock by him. ‘Section
7A(1) enjoins any person, who requires molasses for his
distillery or for any purpose of industrial development to
apply in the prescribed manner to the Controller specifying
the purpose for which it is required. Sub-section (2) of
section 7A authorises the Controller to make enquires in the
matter as he may think fit and to pass an order under
section 8 with due regard to the factors enumerated in sub-
section (3) of section 7A.
Section 8(1) authorises the Controller to direct the
occupier of any sugar factory to sell and supply in the
prescribed manner such quantity of molasses to such persons
as may be specified in the order and the occupier shall,
notwithstanding any contract, comply with the order. Sub-
section (2) (a) of section 8 enjoins that the occupier shall
supply, molasses only to a person who requires it for his
distillery or for any purpose of industrial development and
sub- clause(aa) of sub-section (2) directs the person
specified in the order of the Controller to utilise the
molasses supplied to him in pursuance of an order of the
Controller for the purpose specified in the application made
by him under sub-section (I) of section 7A and to observe
all the restrictions and conditions as may be prescribed.
Section 10 provides that the occupier of a sugar factory
shall sell molasses in respect of which an order under
section 8 has been made at a price not exceeding that
prescribed in the schedule attached to section 10.
Rule 12 of the U.P. Sheera Niyantran Niyamavali, 1974
enjoins the occupier of every sugar factory to submit to the
Controller by August 31 each molasses year a statement in
form M.F. 9 specifying an approximate estimate of the
quantity of molasses to be produced in a sugar factory
during the molasses year following, along with such other
information as is required under that form. Rule 13(1)
provides that every distillery in U.P. shall by August 31
each year submit to the Controller a statement in form M.F.
8 specifying its estimated requirement of molasses for the
purposes of distillation during the molasses year following
along with such
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Other information as may be required under that form.
Likewise, A rule 13(2) requires the Director of Industries
to furnish the Controller by August 31 each year the
estimated requirement of molasses for industrial purposes
within the State relating to the molasses year following :
Rule 23 provides:
“(I) All stock of molasses produced in a sugar
factory shall be deemed to have been reserved for
supply to distilleries or other persons requiring it
for purposes of industrial development and no stock of
molasses produced in a sugar factory shall be sold or
otherwise disposed of by the occupier of any sugar
factory except in accordance with an order in writing
from the Controller.
(2) The Controller shall release any stock of molasses
in favour of occupier of a sugar factory only when the
same is not required for distilleries or for other
purposes of industrial development.”
Rule 23(1) provides:
“(I) The State Government may levy administrative
charges exclusive of the price payable to a sugar
factory on the molasses released for sale by the
Controller towards meeting the cost of establishment
for supervision of control over molasses at such rate
or rates as may be notified from time to time.”
Rule 24(1) provides
“(I) Save in pursuance of an order of the
Controller, no person shall purchase any molasses from
any sugar factory, or transport or possess any molasses
purchased from such sugar factory, unless the said
molasses has been released by order of the Controller
as not required for distilleries or other purposes of
industrial development and a declaration to that effect
in form M.F. 13 has been obtained from the occupier of
the sugar factory concerned.”
A perusal of the relevant provisions of the Act and
rules aforesaid makes it clear that the occupier of a sugar
factory can
72
sell molasses to a person specified in the order of the
Controller at the controlled price. The occupier of every
sugar factory has to give an estimate of the molasses to be
produced in the sugar factory as also the estimate of
requirement of molasses for distillation and industrial
purposes. If there is any surplus after meeting the
requirements of the persons in whose favour there is an
order of the Controller, the same will be released in favour
of the occupier.
The question for consideration in the instant case is
whether the molasses released in favour of the occupier by
the Controller is also to be sold at the controlled rate or
it can be sold at the market price as a free commodity.
Shri Garg, senior counsel contends that from the scheme
of the Act and the rules it is evident that the entire
production of molasses is to be controlled by the Controller
appointed under the Act, at every stage. He is to take into
account the estimated supply and the estimated demand of the
commodity. Thereafter, he is to allot the commodity to a
particular person for a particular purpose at the controlled
statutory price fixed by the schedule to the Act. The Act
and the rules further provide that nobody will store, sell,
transport or use the said commodity without the order of the
Controller and the price and distribution of molasses both
are controlled by the Act and the contravention of the
provisions of the Act have been made penal and the High
Court has gone wrong in assuming that certain quantity of
molasses which are covered by rule 22(2) are immune from the
restrictions and fetters of the Act and the said rules,
which is erroneous and indefensible in law inasmuch as such
a construction as has been put by the High Court will defeat
the very purpose and object of the said Act and the rules.
As a second limb to this argument it was contended that the
classification made between molasses covered by rule 22(1)
on the one hand and rule 22(2) on the other is wholly
irrational and the very purpose of the Act is defeated
According to the learned counsel, it makes no difference
whether the molasses are covered by rule 22(1) or 22(2)
inasmuch as the object of the present legislation is to
ensure that the sale and the distribution of molasses is
controlled in an equitable manner and, therefore, to hold
that section 8 is applicable to rule 22(1) and not to rule
22(2) is arbitrary and violative of Article 14. 3
Shri Rana appearing for respondent No. 1 on the other
hand has contended that on a correct interpretation of the
relevant pro
73
visions of the Act and the rules the interpretation put by
the High Court is ‘fully warranted.
Section 10 of the Act which has been referred to above
enjoins the occupier of a sugar factory to sell molasses in
respect of which an order under section 8 has been made at a
price not exceeding that prescribed in the schedule. A plain
reading of the section makes it clear that the occupier of a
sugar factory is obliged to sell molasses at the price not
exceeding that prescribed in the schedule only in respect of
which an order under section 8 has been made. But sub-clause
(2) of rule 22 authorises the Controller to release any
stock of molasses in favour of an occupier of a sugar
factory only when the same is not required for distilleries
or for other purposes of industrial development. If a
certain quantity of molasses has been released in favour of
the occupier, because the same was not required for
distilleries or for other purposes of industrial
development, it is open to the occupier to sell that
quantity of molasses in free market to any person at a price
prevalent in the market. Section 10 of the Act requires an
occupier of a sugar factory to sell molasses at a price not
exceeding that prescribed in the schedule only in respect of
which an order under section 8 has been made. No limitation
or fetter has been put on the occupier of a sugar factory to
sell molasses which was released in his favour. It was,
therefore, open to him to sell the molasses released in his
favour at the free market price.
The contention that the classification made with regard
to molasses covered under rule 22(1) or rule 22(2) is an
unreasonable classification cannot be accepted There have
been other enactments in which similar provision has been
made, for example, the levy sugar was to be sold only at the
controlled rate but free sugar was to be sold by the
factories at a free market price and that has been always
accepted as a valid classification. The appellant entered
into an agreement with respondent No. I and agreed to pay
the price of the molasses at the rate of Rs. 25.10 per
quintal Having entered into such an agreement with its eyes
wide open it cannot now turn turtle and contend that it was
liable to pay only at the rate of Rs. 9/- per quintal, the
statutory price. It is true that the parties cannot be
allowed to contract themselves out of law. If the law was
that no molasses released in favour of the occupier of the
sugar factory could be sold at a price higher than the
controlled one, than the contention of the appellant would
be correct. On an analysis of the relevant provisions of the
Act we are quite clear that
74
the controlled price was applicable only to the molasses for
which an order had been passed by the Controller in favour
of a specified person either for the purpose of distillation
or for other industrial purposes. But so far as the molasses
released in favour of the occupier of a sugar factory is
concerned, there is no requirement or the law that the
occupier should sell it only at the controlled price.
It was further contended that the respondent was not
entitled to administrative charges. This contention loses
sight of the terms of the agreement between the parties
which includes administrative charges also.
For the foregoing discussion we find no force either in
the appeal or in the writ petition under Article 32. They
are accordingly dismissed. There shall, however, be no order
as to costs.
S.R. Appeal and Petition dismissed.
75