{"id":119078,"date":"1995-04-18T00:00:00","date_gmt":"1995-04-17T18:30:00","guid":{"rendered":"https:\/\/www.legalindia.com\/judgments\/maharashtra-rajya-sahkari-sakkar-vs-state-of-maharashtra-ors-etc-on-18-april-1995-2"},"modified":"2016-03-18T16:55:34","modified_gmt":"2016-03-18T11:25:34","slug":"maharashtra-rajya-sahkari-sakkar-vs-state-of-maharashtra-ors-etc-on-18-april-1995-2","status":"publish","type":"post","link":"https:\/\/www.legalindia.com\/judgments\/maharashtra-rajya-sahkari-sakkar-vs-state-of-maharashtra-ors-etc-on-18-april-1995-2","title":{"rendered":"Maharashtra Rajya Sahkari Sakkar … vs State Of Maharashtra & Ors. Etc. … on 18 April, 1995"},"content":{"rendered":"
Supreme Court of India<\/div>\n
Maharashtra Rajya Sahkari Sakkar … vs State Of Maharashtra & Ors. Etc. … on 18 April, 1995<\/div>\n
Equivalent citations: 1995 SCC, Supl. (3) 475 JT 1995 (3)\t581<\/div>\n
Author: R Sahai<\/div>\n
Bench: Sahai, R.M. (J)<\/div>\n
           PETITIONER:\nMAHARASHTRA   RAJYA  SAHKARI  SAKKAR  KARKHANA\tSANGH\tLTD.\n\n\tVs.\n\nRESPONDENT:\nSTATE OF MAHARASHTRA  & ORS. ETC. ETC.\n\nDATE OF JUDGMENT18\/04\/1995\n\nBENCH:\nSAHAI, R.M. (J)\nBENCH:\nSAHAI, R.M. (J)\nJEEVAN REDDY, B.P. (J)\nSEN, S.C. (J)\n\nCITATION:\n 1995 SCC  Supl.  (3) 475 JT 1995 (3)\t581\n 1995 SCALE  (2)772\n\n\nACT:\n\n\n\nHEADNOTE:\n\n\n\nJUDGMENT:\n<\/pre>\n
R.M. SAHAI, J.\n<\/p>\n
1.   These are two sets of appeals filed by various Sahakari
\nSakkar\t Karkhanas,  that  is,\tCo-operative  Societies\t  of
\nSugarcane   Growers,  Private  Undertakings,   Joint   Stock
\nCompanies  producing sugar in the State of  Maharashtra\t and
\nthe  State itself one, directed against direction by a\tFull
\nBench  of  the Bombay High Court in Satara  Sahakari  Sakhar
\nKarkhana  Ltd.\t& Anr. v. Stale of Maharashtra &  Ors.,\t AIR<\/a>
\n1989 Bombay 53 that the cane growers who were not members of
\nany  Co-operative  Society but who were required  to  supply
\ntheir  cane  under reservation order or\t Control  Orders  to
\nsugar factories with which they were attached were  entitled
\nto  market price instead of price fixed by  the\t Government,
\nand  other  directed against fixation of  market  price\t for
\n1993-94\t by the High Court at Rs. 740\/- as against  Rs.340\/-
\nto Rs.400\/- fixed by the Government.\n<\/p>\n
2.   The directions issued by the Full Bench are as under:\n<\/p>\n
\t      “We  are\ttherefore of the view,\tthat  unless
\n\t      provisions  for the following arc made in\t it,
\n\t      the State Order will not be valid\n<\/p><\/blockquote>\n
\t      (i)   The\t  sugarcane  &rowers  who  are\t not
\n\t      members  of the factory or factories to  which
\n\t      they  are required to supply  their  sugarcane
\n\t      shall  be paid for the sugarcane\tsupplied  by
\n\t      them  the price calculated at the market\trate
\n\t      prevailing in the locality at the date of\t the
\n\t      sale;\n<\/p><\/blockquote>\n
\t      (ii)  The market rate may be as agreed between
\n\t      the parties, namely, the sugarcane grower\t and
\n\t      the factory or factories concerned.  If  there
\n\t      is  any  dispute over it, the same  should  be
\n\t      resolved by an independent authority which may
\n\t      be  created  under the Order such as  the\t one
\n\t      under clause’12 of the present Order.  The au-
\n\t      thority  concerned should decide\tthe  dispute
\n\t      expeditiously after hearing the parties and by
\n\t      a speaking order,\n<\/p><\/blockquote>\n
\t      (iii) No\t unauthorised  deductions   on\t any
\n\t      account should be made by the factory from the
\n\t      price  to\t be  paid to  the  sugarcane  grower
\n\t      without  his consent.  The State Order  should
\n\t      provide  for a machinery similar to the  above
\n\t      to  hear\tand grant to the  sugarcane  grower,
\n\t      expeditious relief if he has any complaint  in
\n\t      that behalf.”\n<\/p><\/blockquote>\n
\t      585<\/span><\/p>\n
The reasons for these directions were twofold, one, the\t non
\nmembers\t were not bound by the price fixed under  bye-\tlaws
\nframed under the Cooperative Sugar Act and other that  there
\nwas  no\t machinery in the Zoning Order issued by  the  State
\nGovernment  to\thear the non-members before  the  price\t was
\nfixed.\t Before\t examining whether these  reasons  are\twell
\nfounded\t in  law leading to the impugned  directions  it  is
\nnecessary  to narrate in brief the necessity which  impelled
\nthe Central Government to grant protection to sugar industry
\nand consequently to control, supply and distribution of\t the
\nsugarcane without sacrificing the interest of canegrower.\n<\/p>\n
3.   Sugar is an item of daily use in every household,\trich
\nor  poor.  Use of white sugar has increased with rolling  of
\nyears,\tgrowth of population, rise in income etc.  Today  it
\nis somewhere 134 lakh tonnes.  Even in 1931 the\t requirement
\nwas more than 9 lakh metric tonnes.  But the production\t was
\nnearly 1.8 lakh metric tonnes only.  And there was an import
\nof  more  than\t8  lakh\t metric\t tonnes.   The\t Government,
\ntherefore,   decided  to  grant\t protection  to\t the   sugar
\nindustry.  The Bhargava Commission appointed by the  Central
\nGovernment in 1970 in Chapter 1 of Part I of its report\t has
\ntraced the growth and development of the sugar industry\t and
\nobserved  that\ttill  1930-31  there  were  only  29   sugar
\nfactories  producing  1.22  lakh  tonnes  of  sugar  in\t the
\ncountry.   That\t was,  however, not  adequate  to  meet\t the
\ninternal  requirement and nearly 8 lakh tonnes of sugar\t was
\nimported  in that year.\t In 1932 protection was\t granted  to
\nthe  sugar industry.  Following this there was a  phenomenal
\nexpansion of the industry and the number of sugar  factories
\nincreased  to  111 in 19-3334 and to 137  in  1936-37.\t The
\nsugar  import which was about 8 lakh tonnes in\t1930-31\t was
\nalmost\tstopped\t from 19-3637. Thereafter there\t was  little
\ndevelopment  of the industry upto 1951-52.  The\t development
\nand regulation of the sugar industry came under the  control
\nof Government of India for the first time from May 1952 when
\nthe  Industries (Development and Regulation) Act, 1951\tcame
\ninto force.  All the 138 sugar factories which were  working
\nbefore\t 1952  were  registered\t under\tthe  provisions\t  of
\nIndustries (Development and Regulation) Act, 1951. New sugar
\nfactories were established thereafter under licences granted
\nby  the\t Central Government.  Another important\t feature  of
\npost-1951 development noticed by the Commission was  setting
\nup of sugar factories largely in the cooperative sector\t due
\nto  Government\tpolicy of giving preference  to\t cooperative
\nsocieties  in the matter of licensing.\tIn respect of  State
\nof  Maharashtra the Commission observed that sugar  industry
\nin  Maharashtra\t was  progressing very fast  and  the  sugar
\nproduction  in Maharashtra was expected to reach 16.37\tlakh
\nmetric\ttonnes\tand  the State was  to\tbecome\tthe  largest
\nproducer of sugar in the country.  Today the State  accounts
\nfor nearly 30% of the sugar output.  The national output  of
\nsugar  for 1991-92, 19-9293 and 1993-94 was 134 106  and  96
\nlakh metric tonnes respectively.  The output of\t Maharashtra
\nwas 42, 36 and 27 lakh tonnes for the corresponding years.\n<\/p>\n
4.While\t granting  protection  to  the\tsugar  factory\t the
\nGovernment did not ignore the interest of sugarcane growers.
\nIt is the basic rather the only raw material for sugar.\t  It
\nis  grown  by cultivators who were usually exploited  or  at
\nleast  were  in danger of being exploited.   Therefore,\t the
\nGovernment agreed for fixing price of cane.\n<\/p>\n
586<\/span><\/p>\n
At  a conference called by the Government of India  in\t1933
\nrepresentatives\t of cane growers asked for a  minimum  price
\nThe  Government\t accepted the demand an in 1934\t passed\t the
\nSugarcane  Act,\t 193  which conferred  powers  on  the\tthen
\nprovincial  governments to fix minimum price for  the  cane.
\nSince 1950 it is being don under Control Orders issued\tfrom
\ntime the time.\tThe last Order known as Sugarcane  (Control)
\nOrder  was  ‘Issued by the Central Government in  1966.\t the
\nmain  feature  of  the\tOrder arc  two-fold   one,  that  it
\nbroadened the base for price fixation by providing that\t the
\nminimum\t price\tof can shall be fixed having regard  to\t the
\ncost  of production of sugarcane, the return to\t the  grower
\nfrom  alternative  crops,  the\tavailability  of  sugar\t  to
\nconsumer  at fair price, the price at which  sugar  produced
\nfrom sugarcane is sold by producer of sugar and the recovery
\nof  sugar  from sugarcane.  The other is that  it  regulates
\ndistribution  and  movement of sugarcane by  empowering\t the
\nGovernment  to\tnotify in the Gazette and reserve  any\tarea
\nwhere sugarcane is grown for a factory having regard to\t the
\ncrushing  capacity  of\tthe  factory,  the  availability  of
\nsugarcane  in the reserved area and the need for  production
\nof  sugar with a view to enable the factory to purchase\t the
\nquantity  of  sugarcane\t required by  it.   The\t Order\tthus
\nattempts  to  assure supply of cane to sugar  factories\t and
\nensure minimum price to cane growers.\n<\/p>\n
5.The  Bhargava Commission in Chapters 1 and 11 of  Part  11
\ndealing\t with price fixation and stabilisation of supply  of
\ncane after examining pros and cons of the various  competing
\ninterests  was of the opinion that the need for\t steady\t and
\nadequate  supply of cane to the sugar industry from year  to
\nyear could not be over- emphasised.  It felt that an assured
\nand of\t  adequate  supply  of cane was\t essential  for\t the
\nworking\t of the sugar industry on an efficient and  economic
\nlevel.\t The  Commission observed that\tsharp  increase\t and
\ndecrease  in cane supply from year to year were the bane  of
\nthe  Indian sugar industry.  Therefore, it felt that it\t was
\nimperative  that  some kind of stability in  the  matter  of
\nsupply\tof raw material to the industries should be  brought
\nabout.\tIt, therefore, recommended that provisions should be
\nmade for agreement between cane growers and factories.\t The
\nCommission  suggested  that where  Cane\t Growers’  Societies
\nUnion  operated\t it would be desirable\tto  have  tripartite
\nagreements  involving  factories,  the\tsocieties  and\t the
\ngrowers.   It  suggested  that minimum price  be  fixed\t for
\nsugarcane related to a basic recovery of 8.5% with a premium
\nfor every 0. 1% increase in recovery on proportionate basis.
\nIt  also recommended that the sales realisation\t from  sugar
\nafter  expenses should be shared with the cane\tgrowers\t who
\nexecute\t agreement  for\t supply of  cane  and  fulfil  their
\ncontract.   Both these recommendations were  accepted.\t The
\nlatter\thas  been  incorporated\t as  paragraph\t5A  in\t the
\nSugarcane  (Control)  Order, 1966 order\t  for  short).\t The
\nminimum\t price for cane is fixed for growers throughout\t the
\ncountry and recommendations of Bhargava Commission are being
\nfollowed  both in fixing minimum price of cane, and  payment
\nof additional price in accordance with formula framed by  it
\nappended as Schedule 11 to 1966 Order.\n<\/p>\n
6.   In\t the State of Maharashtra it was the  experience  of
\nthe  Government\t that  there were cyclic ups  and  downs  in
\nsugarcane  production in the State which adversely  affected
\nsome of the sugar factories, par-\n<\/p>\n
587<\/span><\/p>\n
ticularly   those   which  were\t identified  as\t  sick\t and
\nfinancially  weak.   The Government found that in  times  of
\nshortage  of  sugarcane crop, in the  absence  of  statutory
\nprovisions  earmarking\tareas for drawal of cane  it  became
\ndifficult for certain factories to get adequate quantity  of
\ncane  thereby affecting their obligations towards  the\tcane
\ngrowers for payment of cane price, employees and workers for
\npayment of their salaries and wages etc.  In such situations
\nthe  State Government was required to assist  the  factories
\nwith  huge  amounts  for enabling them\tto  discharge  their
\nobligations by diverting funds with considerable stress\t and
\nstrain on the State Exchequer.\tThe Government found that at
\ntimes  some  of the factories starved of  sugarcane  whereas
\nothers\texceeded their crushing capacity.  In order to\tfind
\nout  some  solution to these problems the  State  Government
\nappointed   a  Committee  as  an  Experts  Committee   under
\nGovernment Resolution dated 28th April, 1980 in exercise  of
\nthe  powers  delegated to it by Notification issued  by\t the
\nCentral\t  Government  in  1966.\t  The  said  Committee\t was
\nrequested  to  take review of the work done in the  past  in
\nregard\tto  the formation of zones for Sugar  factories;  to
\nidentify  the  limitations  due\t to  which  the\t object\t  of
\nformation  of  zones could not be achieved; and\t to  suggest
\nremedial   measures  in\t various  matters.   The   Committee
\nsubmitted its Report in October 1983.  After considering the
\nReport\tthe State Government on 12th September\t1984  issued
\nthe  Maharashtra Sugar Factories (Reservation of  Areas\t and
\nRegulation  of Crushing and Sugarcane Supply)  Order,  1984.
\nIn  the\t Preamble  to the Order it  is\tmentioned  that\t the
\nNotification was issued to implement the recommendations  of
\nthe  Experts  Committee appointed by it and also  to  ensure
\neconomic viability of large number of sugar factories.\t The
\norder  mentions\t that  since the  Government  of  India\t had
\ngranted\t letters  of intent for establishment of  new  sugar
\nfactories and has stipulated therein that the conversion  of
\nthe letters of intent into industrial licences shall,  inter
\nalia, depend on the State Government notifying the zones for
\ndrawal\tof  sugarcane  by new sugar  factories.\t  The  Order
\ndefines\t ‘cane\tgrower’ either as ‘owner’ or  as  a  ‘tenant
\nincluding  a  body corporate such as  a\t company  registered
\nunder  the  Companies  Act,  1955 (1  of  1956),  a  society
\nregistered under the Maharashtra Cooperative Societies\tAct,
\n1960  (Mah.XXIV of 1961), any body corporate, set  up  under
\nany   law  for\tthe  time  being  in  force,  including\t  an
\nOrganisation  owned or controlled by the Government  of\t any
\nState  or  Government of India’.  It defines  the  ‘reserved
\narea’ to mean, the area reserved for a factory as  specified
\nin  the schedule pertaining to that factory.  Clause (3)  of
\nthe  Order  provides  that having  regard  to  the  crushing
\ncapacity  of sugar factories and the yield of  sugarcane  in
\nthe  reserved areas, and the need for production  of  sugar,
\nthe area as specified in the schedule, shall be reserved for
\nthe  sugar  factory with a view to enabling it\tto  purchase
\nquantity  of  sugarcane required by it.\t Sub-clause  (2)  of
\nClause\t3  prohibits any sugar factory to purchase  cane  or
\naccept\tsupplies of cane from cane growers except  from\t the
\narea reserved for that factory.\t The only exception to It is
\ncontained  in Clauses 4 and 5 of the Order.  Clause 4  deals
\nwith  grant  of\t licence and Clause 5  regulates  supply  of
\nsugarcane  empowering  a  permit officer to  allow  a  sugar
\nfactory to purchase cane from areas other than the  reserved
\nfor  it\t under Clause 3 provided he is\tsatisfied  that\t the
\ncircumstances  mentioned in the clause existed.\t  The  order
\nwas amended in 1987,
\n588<\/span>
\n1988  and 1989.\t Sub-clause (1A) was added after  sub-clause
\n(1)  in\t Clause\t 3  of\tthe Order  issued  in  1984  by\t the
\nMaharashtra  Sugar  Factories  (Reservation  of\t Areas\t and
\nRegulation   of\t Crushing  and\tSugarcane  Supply)   (Second
\nAmendment)  Order,  1987 and it is-provided  that  the\tarea
\nspecified  in  each of the schedules and  reserved  for\t the
\nfactory\t mentioned in that schedule in accordance with\tsub-
\nclause\t(1)  of the clause shall be reviewed  by  the  State
\nGovernment  after  every three years and in Clause  4,\tsub-
\nclause\t(6A) was added after sub-clause (6) which  empowered
\nthe  licensing\tauthority  to  allow  a\t sugar\tfactory\t  to
\nmanufacture  sugar from the sugarcane to be purchased by  it
\nfrom non- members which is grown in the area reserved for it
\nwhich is overlapping or common with other factories if\tsuch
\nfactory has entered into contracts for purchase of cane from
\nsuch  growers  and  if the sugarcane  does  not\t exceed\t the
\nrequirements  of the factory based on its licensed  crushing
\ncapacity during any crushing season.\n<\/p>\n
7.   Trouble appears to have started after the\tNotification
\nwas issued by the State Government in 1984.  Writ  petitions
\nwere  filed by cooperative societies and  sugarcane  growers
\nchallenging  the Order as being beyond the scope of the\t Act
\nand  the  1966\tOrder.\tIt was claimed that  the  Order\t was
\nviolative of the rights guaranteed under Articles 14 and  19
\nof the Constitution.  The challenge on behalf of the growers
\nthat  the Order in preventing the cane growers from  selling
\ntheir  sugarcane  at  the best price  available\t imposed  an
\nunreasonable restriction.  It was claimed that in process of
\nreservation  they have been derived of the highest price  in
\nthe  area,  therefore,\tit  was liable\tto  be\tstruck\tdown
\narbitrary.  The prohibition in the Order on enrolment of the
\nmembers was also challenged.  A Division Bench of the Bombay
\nHigh  Court  in The Bahuri Sahakari Sakkar Karkhana  Ltd.  &
\nAnr.  v.  State of Maharashtra & Ors., AIR 1987\t Bombay\t 248
\nheld  that the Order was not violative of the provisions  of
\nthe Constitution or the Central Government Order of 1966 and
\nthe  Essential Commodities Act (hereinafter referred  to  as
\n‘the  Act’).  Nor did the Bench find any merit in the  claim
\nthat   the   reservation  policy  was\tviolative   of\t any
\nconstitutional guarantee as the Orders having been issued in
\nview  of the scarcity or non-availability of  sugarcane\t and
\nfor  securing  the  equitable  distribution  the  Order\t was
\nsquarely covered in the Directive Policy unfolded by  clause\n<\/p>\n
(b)  of Article 39 of the Constitution.\t The Bench  did\t not
\nfind  any  merit  in  the claim\t that  the  distribution  of
\nsugarcane  on the licensing capacity of the sugar  factories
\nwas violative of any statutory provision or the Constitution
\nas the licence for,crushing the sugarcane was granted by the
\nCentral Government merit under the provisions of  Industries
\n(Development and Regulation) Act, 1951.\t The Bench  repelled
\nthe  challenge that the order was arbitrary or violative  of
\nArticle 14 of the Constitution.\t Nor it agreed with claim of
\nnonmembers of the cooperative societies that the prohibition
\nin  the Order from becoming members or obligation to  supply
\ncane to the factory in the reserved area was unreasonable or
\narbitrary.  The Bench observed
\n\t      “With the sole intention of avoiding cutthroat
\n\t      competition   between  the   different   sugar
\n\t      factories\t as well as the\t sugarcane  growers,
\n\t      the  impugned order has been issued.  In\tthis
\n\t      context,\tit cannot be forgotten that the\t Co-
\n\t      operative\t Societies  Act\t has  been   enacted
\n\t      keeping  in view the Directive Principles\t and
\n\t      the State Policy as
\n\t      589<\/span>
\n\t      enshrined\t  in  the  Constitution.   The\t co-\n<\/p>\n
\t      operative movement in the ultimate analysis is
\n\t      socio-economic  and moral movement.  It  is  a
\n\t      part  of\tthe scheme  of\tdecentralisation  of
\n\t      wealth  and power.  Cooperative capitalism  is
\n\t      neither  co- operation nor socialism.  On\t the
\n\t      other  hand, co-operation is a substitute\t for
\n\t      self-interest  of an individual or  groups  of
\n\t      individuals  for\tthe  benefit  of  the  whole
\n\t      society.\t Wealth\t has  no meaning  if  it  is
\n\t      concentrated in few hands.  In the absence  of
\n\t      decentralisation or equitable distribution  of
\n\t      wealth  or property, it  becomes\timpropriety.
\n\t      Therefore\t  equitable  distribution   is\t the
\n\t      essence  of equality.  If for  achieving\tthis
\n\t      object  the  impugned order  has\tbeen  issued
\n\t      under  the powers conferred by  the  Essential
\n\t      Commodities  Act and the\tSugarcane  (Control)
\n\t      Order, 1966, then it cannot be said that\tthis
\n\t      equitable distribution results in inequity  or
\n\t      arbitrariness.   In  our\tview,  the  criteria
\n\t      adopted  and  the\t guidelines  laid  down\t are
\n\t      reasonable.  They have a nexus with the object
\n\t      sought  to  be  achieved.\t  Without  reserving
\n\t      areas  qua  each factory\tand  regulating\t the
\n\t      supply  of  sugarcane to the members  or\tnon-\n<\/p>\n
\t      members,\tthe  object of distribution  of\t the
\n\t      essential commodity viz. the sugarcane,  would
\n\t      not have been achieved.  Therefore, we find it
\n\t      difficult\t to accept the challenge  raised  by
\n\t      the  petitioners which is based on Art. 14  of
\n\t      the Constitution of India.  ”\n<\/p>\n
\t\t\t   [Emphasis supplied]
\nGrievance was also made by the non-members of absence of any
\nhearing\t by the Permit Officer.\t It was stated on behalf  of
\nthe  State that it was intended to follow a fair  procedure.
\nNote 1 to 7 incorporating the procedure was produced  before
\nthe Bench.  It was found to be reasonable but the Bench\t was
\nof the view that it required to be given statutory shape  by
\namending  1984 Order.  Since the necessary  amendments\twere
\nnot  made  another Bench a Aurangabad held  that  since\t the
\nState  Government did not carry out the amendment in  clause
\n5(1)(d) of the 1984 Order as pointed out by the Bench in the
\nearlier decision the sugarcane growers had a right to supply
\nsugarcane  grown by them to the factory of their  choice  as
\nthey  were  likely to receive better value in  the  from  of
\nprice  for  the sugarcane grown by them.   A  contrary\tview
\nappears\t  to  have  been  taken\t by  another   Bench.\t The
\ncontroversy  was referred to a larger Bench which  in  para-
\ngraph  9  of  the Judgment has noticed the  views  taken  by
\ndifferent  benches.   It then observed that in none  of\t the
\nearlier\t decisions given by the Division Benches  they\twere
\ncalled upon to test the validity of the Order on the  ground
\nof  deprivation\t of  sugarcane\tgrower\tof  the\t best  price
\navailable to them.  The Bench observed that its validity was
\nchallenged  only on the ground of the alleged illegality  of
\nthe  restrictions  on the freedom to sell and  purchase\t the
\nsugarcane except to and by the factories in whose favour the
\nReservation Order was issued.  The Bench held that the Order
\nissued by the Central Government in 1966 did not provide for
\nfixation of the maximum price of sugarcane to be supplied by
\nthe sugarcane grower to the sugar factories.  The Full Bench
\nobserved that the Aurangabad Bench had issued the directions
\npermitting  the growers to sell their sugarcane at the\tbest
\nprice  to  different  factories only because  there  was  no
\nmachinery  to hear the sugarcane growers before\t fixing\t the
\nprice  and  redress their grievance.  The Bench\t found\tthat
\nthis  direction had not been complied.\tIt  thereafter\tcon-
\nsidered\t the question of fixation of price by  dividing\t the
\nsugarcane growers in two categories  one, who are members of
\nany co-operative society and the others who are\t nonmembers.
\nIt held that since those
\n590<\/span>
\ngrowers who were members of the Society had to enter into an
\nagreement  under the bye-laws framed which were the same  in
\nall co-operative societies they could not make any grievance
\nagainst\t fixation  of price.  It found that  even  otherwise
\nbefore\tthe  Government\t which fixed  the  price  they\twere
\nrepresented   by  their\t elected  Board\t of  Directors\t who
\nprotected their interests.  In respect of nonmembers it\t was
\nheld   that  since  they  were\tnot  heard  nor\t they\twere
\nrepresented by any one before the Committee they were placed
\nin a double jeopardy and in absence of any machinery to hear
\nthem  before  the  price was fixed they were  put  to  grave
\ninjustice.   The Bench further held that since there was  no
\npower in the State Order to fix the maximum price payable to
\nthe  cane  growers, therefore, those growers who  were\tnon-
\nmembers\t of any sugarcane co-operative society or they\twere
\nsuppliers to non-debtor factories they were not bound by the
\nprices\tfixed by the State Government.\tThe  price  fixation
\nwas  binding  only  on the members of  the  debtor  factory.
\nHaving\treached the conclusion that the price  fixation\t was
\nnot  binding  on the non-members, therefore,  “they  have  a
\nchoice\teither\tnot  to\t supply the  sugar  to\tany  of\t the
\nfactories  or to sell it to the highest bodies”,  the  Bench
\nheld  that,  “the latter freedom of the members\t is  however
\nrendered nugatory by the provisions of clause 3 of the State
\nOrder”,\t the effect of which was that the non-members  would
\nbe  placed in a situation where either they had\t the  option
\nnot  to\t supply the sugarcane to the factory  owners  or  to
\nresign themselves to their fate by allowing their crop to go
\nwaste.\t To  get  over\tthis  difficulty,  what\t the   Bench
\ndescribed   as\tHobson’s  choice  it  resorted\tto   Section
\n(3)(2)(f) of the Act read with Section 3(3)(c) and held that
\nthe  supply by the growers being in nature of  a  compulsory
\nsale, they were entitled to supply the sugarcane at the mar-
\nket rate.\n<\/p>\n
8.   How  far this conclusion of the Full Bench\t is  legally
\nsustainable  and  whether the reasons in support of  it\t are
\nproperly  founded  is the crux of the matter  that  requires
\nconsideration.\t Varied\t submissions on wide  spectrum\twere
\nadvanced touching   upon not only the provision of the\tAct,
\nthe  Central and the State Orders but also  the\t Cooperative
\nSocieties  Act,\t the limited’ scope of interference  by\t the
\ncourts in policy decision and the principles of price  fixa-
\ntion  in  controlled  economy.\tIf  Sri\t F.S.  Nariman,\t the
\nlearned\t senior counsel appearing for the Sahkari  Karkhanas
\napprehended the effect of decision to be collapse of  zoning
\nsystem\tand gradual erosion of cooperative movement  in\t the
\nState,\tthen  Sri G. Ramaswamy, the  teamed  senior  counsel
\nappearing for the State could not see any justification\t for
\nthe court to interfere in matters of economic policy and the
\ndirection  of the Full Bench according to him was  violative
\nof the scheme of the Act.  Sri Dholakia, yet another  senior
\ncounsel\t appearing for the State did not find any  rationale
\nto distinguish between controlled price and the market price
\nas  once the price, of any commodity was  statutorily  fixed
\nunder  the orders issued by the Government then\t that  alone
\nbecame\tthe market price.  Sri Venugopal the learned  senior
\ncounsel\t appearing for private undertakings urged  that\t the
\nAct visualised water tight compartmentalisation of the Order
\nissued\tunder it to balance the interests of  consumers\t and
\nwhen  the  Government  did not fix  any\t maximum  price\t but
\nprovided  for  payment of minimum price only  there  was  no
\nscope to import the concept of higher price or market price.
\nAccording to him
\n591<\/span>
\nthe  rationale\tfor price fixation did no  suffer  from\t any
\ninfirmity  nor it caused an prejudice to the  cane  growers.
\nSri  R.\t Nariman the learned senior  counsel  appearing\t for
\njoint  stock  companies urged that payment of  market  price
\nwould  result  in  closing down of smaller  units  as  price
\nstructure  was\tco-related with yield and  not\tthe  market.
\nElaborating their submissions, the learned counsel submitted
\nthat the Government of Maharashtra has been encouraging\t the
\ncooperative  movement  in the State over  the  last  several
\ndecades.  As a result of its effort more than hundred  sugar
\nfactories  have\t come to be established in  the\t cooperative
\nsector.\t  These\t cooperatives  societies  span\tthe   entire
\nspectrum of the State’s agricultural sector.  All the sugar-
\ncane-growing   areas  arc  covered  by\tone  or\t the   other
\ncooperative  society  which has established  its  own  sugar
\nfactory.   This development has not only enhanced the  sugar
\nproduction  but\t has  changed the very\tface  of  the  rural
\nMaharashtra. It has brought prosperity and awareness to vil-
\nlagers besides providing several amenities.  The cooperative
\nsocieties supply seeds, fertilizers, agricultural implements
\nand many other goods at comparatively cheaper rates to their
\nmembers.   Many\t of them run schools and  other\t educational
\ninstitutions  providing\t education to the  children  of\t the
\nsugarcane  growers.   The  interest of\tthe  State  and\t the
\ninterest  of  the  public  demands  that  this\t cooperative
\nmovement is kept alive and is not allowed to be weakened  or
\nstultified.  On the contrary, every effort should be made to
\nencourage  and promote it since the fate of these  factories
\nis indivisibly connected with the well-being and survival of
\nmillions  of  farmers  who are\ttheir  members.\t  After\t the
\namendment  of  the  Maharashtra\t Cooperative  Societies\t Act
\n(reference is to the 1985 Amendment which came into force on
\nand  from  May 12, 1985) any and every person who  seeks  to
\nbecome\ta  member of the society will be enrolled  as  such.
\nWhat  is  called the concept of ‘universal  membership’\t has
\nbeen  introduced  by the said amendment.   Every  grower  is
\nwelcome to join the cooperative society of his area.  Nobody
\nwho  applies will be refused, but if somebody wants to\tstay
\nout  he\t cannot complain at the same time that he  is  being
\npaid  the same price as the members of the society.   It  is
\nopen  to him either not to raise sugarcane or to  raise\t and
\nsell  the same to the cooperative factory concerned  at\t the
\nsame  price as the members.  He cannot claim a\tpreferential
\nstatus.\t  He  too can become a member of the society  if  he
\nlikes and avail of all the benefits provided by the  society
\nbut  nobody  can  help\thim  if\t he  chooses  to  stay\t out
\nvoluntarily.   While the members are under an obligation  to
\nraise  sugarcane in the specified area year after year,\t the
\nnonmembers  are under no such obligation; they are, free  to
\nraise  such crops as they choose.  The argument further\t was
\nthat  the  economy of each sugar factory was  different\t for
\nvarious\t reasons  it  was also not  possible  to  ensure  an
\nuniform\t price\tby all the factories.  And  if\tevery  sugar
\nfactory\t is compelled to pay price at Rs. 700\/- a tonne,  as
\nsome  factories\t are paying, most of them would\t go  out  of
\nmarket\twhich would cause incalculable damage to  the  rural
\neconomy\t of  the State.\t If these societies are to  be\tkept
\nalive,\tit is necessary that a separate price is  fixed\t for
\neach  factory  having regard to its own\t economy  and  other
\nrelevant  factors.  Neither the members can complain  of  it
\nnor  the non- members.\tSo far as the questions of  law\t are
\nconcerned,  the learned counsel submitted that\tneither\t the
\nCentral\t Government nor the State Government made any  order
\nun-\n<\/p>\n
592<\/span><\/p>\n
der Section 3(2)(f) of the Act; hence, the was no obligation
\nupon  them  to ensure the price as contemplated\t by  Section
\n3(3)(c).  It was urged that even if it assumed for the\tsake
\nof  argument  that  a order under Section  3(2)(f)  must  be
\ndeemed to have been made by necessary implication, even then
\nSection 3(3)(c) must be held to have been satisfied for\t the
\nreason\tthat the expression ‘locality’ in clause (c)  means,
\nin the context, the reserved area (zone) in which the grower
\nis  situated.\tThe price paid by the sugar factory  to\t its
\nmembers in that zone must be deemed to be and is the  market
\nprice\tthere  is no other price in the said  locality\t and
\nsince  that  is\t paid to the non-members  as  well,  Section
\n3(3)(c) is satisfied.\n<\/p>\n
9.Dr. Rajiv Dhawan, the learned senior counsel appearing for
\nthe non-members, however, found compulsion flowing from\t the
\nzoning\torder both in supply and price which  was  arbitrary
\nand the basis for it being the efficiency of factory it\t was
\nwholly\textraneous to price fixation for cane growers.\t Dr.
\nAbhishek  Singhvi, the learned senior counsel, did not\tfind
\nany  justification  for apprehending collapse of  zoning  or
\ncooperative movement.  Dr. Rajiv Dhawan submitted that\tnon-
\nmembers\t were  not  bound by the bye-laws  of  the  society.
\nThose  bye-laws\t are between the society  and  its  members.
\nBecause the society is indebted to the State, it is  obliged
\nto  agree to the price advised by the State Government,\t the
\ncreditor.   But\t so far as the\tnon-members  are  concerned,
\nthere  was no reason why they should be bound by  the  price
\nfixed by the creditor for its debtor.  The provisions of the
\nMaharashtra  Reservation  of Areas Order in  effect  and  in
\ntruth  create a situation contemplated by  Section  3(2)(f).
\nLooking\t from the point of view of the\tnon-member  growers,
\nthe  situation is no different from the one obtaining had  a
\nformal\torder been made under Section 3(2)(f) requiring\t the
\ngrowers\t to  sell their stock to the factory of\t that  zone.
\nThe  Government\t cannot simply create  such  compulsion\t and
\nleave  the growers to the mercy of the factory.\t In  such  a
\nsituation,  the\t factory would be free to exploit  and\ttake
\nadvantage of their helplessness.  A mere condition in  their
\nlicence\t that  they shall pay the same\tprice  to  nonmember
\ngrowers\t as is paid to member growers is not  sufficient  to
\nsecure their legal rights.  While the factory can wait,\t the
\ngrower cannot, for the reason that if not harvested and used
\nat  the\t appropriate time, the cane dries up,  becomes\tless
\nyielding and then dies.\t The Government is bound to  ensure,
\nin such a situation, price for sugarcane as contemplated  by
\nSection\t 3(3)(c).  The Reservation Order cannot be  used  to
\npromote or perpetuate the cooperative movement in the  State
\nnor  can it be used as a lever to compel growers  to  become
\nmembers\t of  the cooperative societies.\t There\tis  no\tsuch
\ncompulsion  under the Cooperative Societies Act and  such  a
\ncompulsion  cannot  be brought about by the  Reservation  of
\nAreas  Order.  The nonmembers cannot be punished by  compel-
\nling  them to sell their cane to uneconomic and\t inefficient
\nfactories at the price such factories can afford, i.e., at a
\nprice far lower than the true value and market price of\t the
\ncane.  The members may be so compelled because they may have
\na stake in the survival of those societies but the  non-mem-
\nbers have no such ties to the factory.\tArticle 19(1)(c)  of
\nthe Constitution of India entitles a citizen of this country
\nnot to join a society or an association if he does not\twish
\nto.   He cannot be compelled by law to join a society or  an
\nassociation.  No
\n593<\/span>
\nperson can be compelled to walk into these societies,  which
\nare  in truth “debtor colonies”.  Inasmuch as the State\t has
\nfailed\tto  provide  or\t to  ensure  the  market  price\t  as
\ncontemplated  by Section 3(3)(c) of the Act, the Full  Bench
\nwas right in declaring that the non-members are entitled  to
\nsell their sugarcane to whomsoever they like and at whatever
\nprice they can obtain.\tEven with respect to non-members who
\nhave entered into agreements with the factories, Dr.  Dhawan
\nurged, the situation created by the Government is such\tthat
\nthe  non-members  are also being forced to enter  into\tsuch
\nagreements.   He explains the position thus: even if a\tnon-
\nmember does not obtain a loan, he will be paid the very same
\nprice for sugarcane as a member of the society.\t If so,\t why
\nshould\ta  non-member forego the facility of loan  which  is
\nnormally advanced at a lower rate of interest.\tBy foregoing
\nthe  loan  facility, he would be losing at both\t ends.\t The
\nvice lies, says Dr. Dhawan, in the very system that has been
\ngenerated  by  the  statutory  orders  made  by\t the  State.
\nTherefore,  he\tsays, the nonmembers cannot be\tdeprived  of
\ntheir liberty to sell their product freely just because they
\nhave  entered  into loan agreements.  It is  another  matter
\nthat  they may be liable for damages for breach of  contract
\nwith  the sugar factories but that is a matter\tbetween\t the
\nfactory\t and that person.  So far as the Government is\tcon-
\ncerned,\t it  cannot take note of that agreement\t and  compel
\nsuch  person  to sell his cane at the SAP since\t that  would
\nmean  enforcing\t a  private  contract  between\tthe  parties
\notherwise  than through court of law.  Dr. Dhawan says\tthat
\nin  other  States (other than Maharashtra and  Gujarat)\t the
\nGovernments  have not only issued statutory orders  creating
\nzones for each of the sugar factories but have also notified
\nthe  price  at\twhich the sugarcane is to  be  sold  by\t the
\ngrowers\t to  the factories and this price is common  to\t the
\nentire\tState though it may vary corresponding to the  sugar
\ncontent in the case.\n<\/p>\n
10.  Since  entire thrust on the price\tstructure  operating
\nunfavourably to nonmembers of cooperative society  proceeded
\non  assumption\tthat price fixation by\tthe  Government\t for
\ncooperative society was influenced with creditor and  debtor
\nrelationship  between the two it is necessary to  understand
\nthe mechanism of pricing for cane prevalent in the State and
\nwhether\t it  works  harshly and\t unreasonably  against\tnon-
\nmembers.   The\tentire\tprocess of  price  fixation  can  be
\ndivided in three stages.  The first is the fixation of\twhat
\nis  known  as the minimum ex-factory price  by\tthe  Central
\nGovernment  under 1966 Order for entire sugar  factories  in
\nthe  country linking it with basic recovery of 8.5%  with  a
\nproportionate  increase\t for  every 0.\t1%  extra  recovery.
\nTherefore,  normally the minimum price of cane paid  by\t two
\nfactories cannot be same.  For instance, the normal recovery
\nin  the State of Maharashtra is stated to bell.05%.  In\t the
\nyear 1987-88 the minimum price fixed was Rs. 19.50 per quin-
\ntal.  The highest and lowest price paid for the sugarcane in
\nthe  Ahmednagar\t District during 1987-88  was  Rs.366\/-\t and
\nRs.240\/\t  by Sangamner Sahkari Sakkar Karkhana and  Jagdamba
\nSahkari\t Sakkar\t Karkhana  respectively.   The\trecovery  of
\nSangamner  SSK\tLtd.  was 11.64%  whereas  the\trecovery  of
\nJagdamba  SSK  Ltd.  was  10.36%.  It  was  explained\tthat
\ndifference  of\t1.28% between recovery of sugar by  the\t two
\nfactories  resulted  in difference of sugar  production\t per
\ntonne  to  extent of 12.8 kg. and the  realisation  too\t was
\nRs.64\/- per tonne more.\t This difference got reflected
\n594<\/span>
\n 594<\/span>
\nin the price fixation.\n<\/p>\n
11.  The next is the State Advised Price.  Every  State\t has
\nits own method to determine it.\t The power is assumed  under
\nActs  of  the  State Legislature or  orders  issued  by\t the
\nGovernments.   For  instance,  in the  State  of  Haryana  a
\nSugarcane  Central Board is constituted under -Section 3  of
\nthe Punjab Sugarcane (Regulation of Purchase and Supply) Act
\n1953  headed by the Chief Minister and other high  officials
\nof the Agricultural and Cooperative Department, the Director
\nof  Sugar Mills etc. to advise the Government and  the\tCane
\nCommissioner on various matters including the price of\tcane
\nto be paid to growers.\tSimilarly in U.P. and Andhra Pradesh
\nit  is\tdone under orders issued under\tthe  U.P.  Sugarcane
\n(Regulation of Supply and Purchase) Act 1953 and the  Andhra
\nPradesh\t Sugarcane (Regulation of Supply and  Purchase)\t Act
\n1961.\tIn  Maharashtra 95% of sugar factories\tare  in\t the
\ncooperative  sector.  They are governed by  the\t Cooperative
\nSocieties Act and the bye-laws framed thereunder.   Bye-laws
\n63,  64,  64A, 65A and 65B deal with fixation  of  price  of
\ncane.\tBye-Law 64 empowers the State Government to fix\t the
\nprice  of cane so long the amount invested by it in  setting
\nup  of\tsugar factory is not repaid.  The  exercise  is\t un-
\ndertaken by a Committee constituted by the Government  known
\nas  ‘Ministerial  Cabinet Committee’.  It comprises  of\t the
\nChief Minister and other concerned Minister.  It takes\tinto
\naccount\t the ex-gate minimum price declared by\tthe  Central
\nGovernment,   the   estimated  sugar  production   and\t its
\navailability  for  production by the  sugar  factories,\t the
\nestimated average of sugar factory, the estimated conversion
\ncharges\t and the present day levy and free sale sugar  price
\nwhile fixing the price.\t In the written submission filed  by
\nthe appellants it is stated that in the year 1993 while\t the
\nstatutory minimum price fixed by the Government of India was
\nRs.345\/-  per metric tonne the State Advised Price  for\t the
\nState  of  Maharashtra\twas Rs.360\/-  to  Rs.400\/per  metric
\ntonne.\t It is explained that although such price  in  other
\nStates,\t for  instance Andhra Pradesh,\tMadhya\tPradesh\t and
\nUttar Pradesh was Rs.400\/-, Rs.530560\/- and Rs.580-600\/- per
\nmetric\ttonne  respectively but these  prices  were  ex-gate
\nwhereas\t in the State of Maharashtra it was ex-field.\tThat
\nis  a  cane grower apart from the price\t determined  by\t the
\nState  Government  is  paid  harvesting\t and  transportation
\ncharges\t etc.  And when all this is totalled then the  price
\npaid  to the cane grower in the State is the highest in\t the
\ncountry.  The advance cane price or the price for harvesting
\nand transportation is paid to the cane growers\tirrespective
\nof  whether they are members of any cooperative\t society  or
\nnot.   The advance according to the appellants was  paid  by
\nsugar factories under agreement entered with growers whereas
\naccording  to respondents it was paid by the Banks  and\t the
\nnonmembers  did\t not enter into any  agreement.\t  Since\t the
\nparties\t were  at  variance on an issue of  fact  they\twere
\ngranted\t time on 24th February 1995 to file further  affida-
\nvits  clarifying their stand.  From the affidavits filed  it
\nnow  transpires that the loans are normally advanced by\t the
\nvillage\t societies  or\trural banks to the  farmers  on\t the
\ncertificate  issued  by\t the sugar  factories  showing\tcane
\nplantation, acreage, date of plantation, etc.  Although\t the
\nfactum\tof  agreement between the cultivator and  the  sugar
\nfactory\t is  riot  clearly admitted in the  reply  filed  on
\nbehalf\tof the respondent but apart from  those\t cultivators
\nwho do not need any loan for growing the crop whose
\n595<\/span>
\npercentage appears to be negligible, it appears by and large
\nrather the uniform practice is that a tripartite arrangement
\nis  arrived between the cultivator, the loaning society\t and
\nthe  sugar  factory.  The loan is advanced on basis  of\t the
\ncertificate issued by the sugar factory and it is the  sugar
\nfactory\t which\tultimately  repays the\tamount\tdue  to\t the
\nloaning\t society out of the price of cane to be paid to\t the
\ncultivator, Such agreements were recommended by the Bhargava
\nCommission as well.  Even otherwise no bank or society would
\nadvance any loan unless it is assured of its repayment.\t  It
\nis, therefore, reasonable to assume that the advance is paid
\nto  the cultivators by the rural banks or societies  on\t the
\ncertificate issued by the sugar factories.\n<\/p>\n
12.  The  third is the price paid at the end of the  season.
\nThe   Bhargava\t Commission  had  recommended\tpayment\t  of
\nadditional price at the end of season on fifty-fifty  profit
\nsharing basis between growers and factories to be worked out
\nin  accordance\twith Schedule II to the\t 1966  Order.\tEven
\nthough\tin the affidavit filed earlier by the  officials  of
\nthe  Department in the special leave petition it was  stated
\nthat additional price was paid but a doubt had arisen as  in
\nEx.6 filed along with the additional affidavit of Dy.  Secy.
\nto   the  Government  of  Maharashtra  in   C.A.   No.523\/89
\nexplaining  the\t mechanism  of fixation\t of  cane  price  it
\nappeared  that in the State of Maharashtra either the  State
\nAdvised\t Price\tis paid or additional cane  price  is  paid,
\nwhichever is more.  Therefore, the appellant was directed to
\nexplain whether the additional price was paid in addition to
\nState Advised Price but the affidavit filed in pursuance  of
\nthe  Order  dated  24th February  1995\tremains\t vague.\t  It
\nappears\t the practice in the State is to pay the advance  as
\nstated\tearlier at the beginning of the season and then\t the
\ncost  of transportation and harvesting in the middle of\t the
\nseason\tand the price worked out finally at the end  of\t the
\nseason,\t by the Ministerial Cabinet Committee headed by\t the
\nChief\tMinister,   Cabinet  Ministers\tof   the   concerned
\nDepartment etc. on statements submitted by each factory\t and
\nrecommendations\t made by the Committee after discussing\t the
\nmatter with members of State Federation of Cooperative Sugar
\nFactories  and\trepresentatives of  the\t State\tCo-operative
\nBank.\tIn the State of Maharashtra, therefore,\t it  appears
\ninstead\t of additional price it is the State  Advised  Price
\nwhich is paid.\n<\/p>\n
13.  It\t would be appropriate to notice here how  ,he  State
\nAdvised Price and the additional price is worked out and  if
\nit  in any manner prejudice the cane growers  specially\t the
\nnon-members.   In  the\tadditional affidavit  filed  by\t Dy.
\nSecretary  of Govt. of India in Civil Appeal No.523 of\t1989
\nthe mechanism of price fixation is explained as under :\n<\/p>\n
————————————————————<\/p>\n
\nMechanism of fixation\nof cane price\n\t     Receipts -\t\t     Financial Results -\n<\/pre>\n
————————————————————<\/p>\n
\n 1.  Sale of Sugar\n 596<\/span>\nAdd -\t  Value of the\t\t    }\tLevy and Free sale\n\t  closing stocks\t    }\tat assumed prices.\n\t  as on 30\/9 of\t\t    }\n\t  the year.\t\t    }\nDeduct -  value of the opening\t    }\n\t  stocks of the year\t    }\n2.Add or deduct profit or\n  loss from Ancillary Units.\n3.Add - other receipts from\n  a) Sales of molasses Press mud Bagasse.\n  b) Miscellaneous\n     receipts.\n  c) Rebates\n\t\t\t\t\t     --------\n     (1) + (2) + (3)\t\t\t       (R)\n\t\t\t\t\t     -------\nExpenditure\nI. Cane cost\n(a)  Govt. of India minimum price\n     linked with actual recovery\n     deducting the average harvesting\/\n     transport charges.\nII.  Expenditure relating to cane -\n     Commission to Harvesting\n     and Transport contract\n     Khodaki etc.\nIII. Harvesting & Transport charges.\nIV.  Cane Purchase Tax.\nV.   Conversion charges.\n      a)  Store consumption\n      b)  Electrical charges\n      c)  Outside repairs\n 597<\/span>\n      d)  Salaries\/wages\n      e) Overheads\nVI.  Interest Payable.\n       1) Capital loans and deposits (NRD\/RD)\n       2) Working Capital\nVII.  Bonus - Minimum 8.33%\n<\/pre>\n
VIII.Education Fund under section 68 Maharashtra
\n     Cooperative Societies Act.\n<\/p>\n
Audit Fees.\n<\/p>\n
Other Provision.\n<\/p>\n
DSI\/Sakhar Sangh\n<\/p>\n
\t\t\t\t       ———–\n<\/p>\n
Grand Total of\t\t\t\t   'E'\nI to VIII\n\t\t\t R - E = S Surplus\n<\/pre>\n
Deduct : Current Depreciation Investment  |
\n\t Allowance Development Rebate and |    D
\n\t part of accumulated losses\t  |
\n\t\t\t S – D + ‘NS’ Net Surplus.\n<\/p>\n
  Per M.T. ‘NS’ = Additional cane price.\n<\/p>\n
  Govt. of India’s Minimum statutory CP + Addi.\t C. P. = ‘X’
\n  Govt. of\t   – Minimum
\n  Maharashtra\t     Advised CP –\t\t     `Y’
\n  X or Y whichever is more.\n<\/p>\n
———————————————————–\n<\/p>\n
14.\t The manner of working out additional cane price  is
\nprovided  in  Schedule\t11 of the  Control  Order,  1966  in
\nfollowing manner:\n<\/p>\n
598<\/span><\/p>\n
\t      “The   amount  to\t be  paid  on\taccount\t  of
\n\t      additional  price (per quintal  of  Sugarcane)
\n\t      under  Cl.5-A by a producer of sugar shall  be
\n\t      computed\tin  accordance\twith  the  following
\n\t      formula, namely:<\/p><\/blockquote>\n
\t\t\t    R-L+2A+B
\n\t      x =\t    ——–\n<\/p><\/blockquote>\n
\t\t\t       2C
\n\t      Explanation. – In this formula –\n<\/p><\/blockquote>\n
\t      1.    “X”\t is the additional price  in  rupees
\n\t      per  quintal  of\tsugarcane  payable  by\t the
\n\t      producer of sugar to the sugarcane grower.\n<\/p><\/blockquote>\n
\t      2.    “R”\t is  the amount in rupees  of  sugar
\n\t      produced\tduring the sugar year excluding\t the
\n\t      excise duty paid or payable to the factory  by
\n\t      the purchaser.\n<\/p><\/blockquote>\n
\t      3.    “L”\t is  the value in  rupees  of  sugar
\n\t      produced during the sugar year, as  calculated
\n\t      on the basis of the unit cost per quintal\t ex-
\n\t      factory,\texclusive of excise duty  determined
\n\t      with reference to the minimum sugarcane  price
\n\t      fixed under Cl.3, the final working results of
\n\t      the  year\t and the Cost  Schedule\t and  return
\n\t      recommended  by such Authority as the  Central
\n\t      Government may specify from time to time.\n<\/p><\/blockquote>\n
\t      4.    “A” is the amount found payable for\t the
\n\t      previous year but not actually paid [vide sub-
\n\t      clause (9)].\n<\/p><\/blockquote>\n
\t      5.    “B”\t is  the  excess  or  shortfall\t  in
\n\t      realisations  from actual sales of the  unsold
\n\t      stocks  of  sugar produced  during  the  sugar
\n\t      year,  as on 30th day of September [vide\titem
\n\t      7(ii)  below]  which is  carried\tforward\t and
\n\t      adjusted\tin   the sale  realisations  of\t the
\n\t      following year.\n<\/p><\/blockquote>\n
\t      6.    “C” is the quantity in quintals of\tsug-
\n\t      arcane  purchased\t by the\t producer  of  sugar
\n\t      during the sugar year.\n<\/p><\/blockquote>\n
\t      7.    The\t amount\t “A” referred to  in  Expla-
\n\t      nation 2 shall be computed as under, namely\n<\/p><\/blockquote>\n
\t      (i)the actual amount realised during the sugar
\n\t      year; and\n<\/p><\/blockquote>\n
\t      (ii)the  estimated value of the unsold  stocks
\n\t      of  sugar held at the end of  30th  September,
\n\t      calculated  in regard to free sugar stocks  at
\n\t      the  average  rate of sales  name\t during\t the
\n\t      fortnight 11th to 30th September and in regard
\n\t      to  levy\tsugar stocks at\t the  notified\tlevy
\n\t      prices as on the 30th September.]
\n\t      Explanation. – In this Schedule “Sugar”  means
\n\t      any form of sugar containing more than  ninety
\n\t      per cent. sucrose].”\n<\/p><\/blockquote>\n
————————————————————-\n<\/p>\n
15.A comparison of the two would indicate that there is\t not
\nmuch  difference  the  two.   In the  latter  too  the\tcost
\nincurred  in  producing\t sugar has to be  deducted  fro\t the
\nreceipts.   In\tany case since the grow is paid\t either\t the
\nState Advised Price Additional Cane Price whichever is\thigh
\nno  prejudice can be said to be caused nonmembers.   In\t the
\naffidavit filed on 10 March 1995 it is stated that the final
\nprice  determined for the earlier year is the advance  price
\nfor the next year.  For instance, if amount ‘A’ was fixed as
\nfinal  State  Advised  Price at the end\t of  1993-94  for  a
\nfactory\t then that becomes the advance pn. for 1994-95.\t  It
\nhas  been  explained the the final State  Advised  Price  is
\nfixed  basis  of detailed statement  submitted\t   the\tSugar
\nCommissioner giving a detailed operational financial picture
\nof  the\t working of the sugar factories such as\t sugar\tcane
\ncrushing, sugar recovery, sugar bags
\n599<\/span>
\nproduced, quantity sold as levy and free, income from  other
\nitems,\tcost relating to harvesting and transport  of  cane,
\nsugar  factory\twages,\tpower,\tfuel,  chemical\t and   other
\nexpenses, depreciation provision etc. etc.  According to the
\naffidavit broadly these principles related to, (a) valuation
\nof  closing  stock  of free sale  sugar\t and  molasses;\t (b)
\nfixation  of  Khodki charges (i.e. labour charges  paid\t for
\ncollecting   cane  pieces  remaining  in  the  field   after
\nharvesting);  (c) provision of depreciation  and  investment
\nallowance\/development rebate; (d) sugarcane price to be paid
\nto  the\t members\/nonmembers outside the area  of  operation;\n<\/p>\n
(e)  limit of cash component to be paid to the\t  farmers in
\nthe cane payment where cane   price is on the high side; (f)
\ninterest  rate on non-refundable\/refundable deposits  to  be
\npaid  to members\/non-members; and (g) deductions to be\tmade
\ncompulsorily  from  the\t sugarcane  price  payment  to\t the
\nfarmers.  In effect the price for next year which is paid at
\nthe  commencement of season comprises of not only the  price
\nbased  on  recovery of 8.5% but also the profit\t arrived  at
\nafter sale of sugar.\n<\/p>\n
16.  Few  facts\t are necessary to be stated  in\t respect  of
\nprice  fixed  under the bye-law of the society.\t  One  price
\nfixation  for  the cooperative societies  under\t bye-law  64
\neither\tby  the\t Director  of  Factories  or  by  the  State
\nGovernment  was\t not challenged to be  ultra  vires,  either
\nbefore the High Court or this Court.  It cannot,  therefore,
\nlegitimately  be urged that it was violative of the  Control
\nOrder  or the Zoning Order or it was arbitrary.\t In fact  as
\nexplained  earlier  it is the State Advised Price.   If\t the
\nclaim  of non-members is taken to its logical conclusion  it
\nwould act unreasonably for them.  Let it be tested.  Suppose
\nthe  price fixed for two factories ‘A’ and ‘B’\tis  Rs.400\/-
\nand  Rs.500\/- respectively, ‘X’ being a non-member  in\tarea
\n‘A’ the price for factory ‘A’ is not binding on him.  If  it
\nbe  so the price fixed for ‘B’ is certainly not\t binding  on
\nhim.   And  the factory ‘B’ is not bound to  offer  him\t Rs.
\n500\/-.\tIt may or may not.  That may lead to uncertainty and
\neven exploitation.  And then the price of Rs.500\/- fixed for
\n‘B’  is\t as much State Advised Price as\t Rs.400\/-  for\t‘A’.
\nMuch  argument\twas advanced on how the market\tprice  in  a
\nlocality  should be understood.\t It appears  unnecessary  to
\ndeal with it as any other construction would be\t destructive
\nof zoning and the concept of pricing in controlled  economy.
\nSecond, there is no machinery in the State to determine\t the
\nState  Advised\tPrice for non-members as 95%  of  the  sugar
\nfactories being in cooperative sector the fixation of  price
\nunder  the bye-laws was always considered to be legal.\t And
\nrightly\t so.  Therefore, any determination of  price  by  an
\nauthority  under  the  bye-laws is valid  for  cane  growers
\nattached to a sugar factory in reserved area.  Third, entire
\nconcept of minimum and maximum price for cane appears to  be
\nout  of\t place.\t As pointed out by  the\t Commission  minimum
\nprice  is  fixed  on  quality  formula.\t  Further,   average
\nrecovery  of  the  normal  crushing  period  was   preferred
\naccording  to Commission as against average recovery of\t the
\noptimum\t period.  All this results in payment of  adequately
\nreasonable  price  which  comprises  of\t not  only  cost  of
\ncultivation  but  profit as well.  It does not\tstop  there.
\nThe payment of additional price or final State Advised Price
\non  profits  obtained by a factory as indicated\t earlier  is
\nalso  paid.  The price thus being paid on recovery  of\tcane
\nand  profits  made  from sale of sugar is  not\tminimum\t but
\noptimum\t price which is paid to a cane grower.\t The  fourth
\nand the most
\n600<\/span>
\nimportant is that the advance paid to the cultivators at the
\ncommencement  of  the season on final price  determined\t for
\nearlier\t years appears to be reasonable and fair.  The\tmere
\nfact  that such determination is made in exercise  of  power
\nunder bye-law 63 does not render it bad for non-members.  No
\nobjection  could  be  taken  to\t payment  of  transport\t and
\nharvesting charges.  That too is explained to be linked with
\ndistance  etc.\tSo long the determination of price  is\tfair
\nand just and based on relevant material it cannot be held to
\nbe  not\t applicable to one class of  growers,  namely,\tnon-
\nmembers\t in  the zone because they are not  members  of\t the
\ncooperative societies.\tIf the exercise of power is not\t bad
\nfor  members of the society it cannot be held to be bad\t for
\nnon-members,  unless  it is found to be arbitrary.   So\t far
\ncultivation  of cane and payment of price is  concerned\t the
\ntwo are similarly situated.  Further the production of sugar
\nbeing  of  primary concern the Government ensured  that\t the
\ngrowers\t were not denied the minimum.  The  Additional\tCane
\nPrice  or final State Advised Price are paid as\t a mater  of
\nincentive.   And what is incentive for one year becomes\t the
\nminimum\t price for next year.  The concept of market  price,
\nbetter\tprice  or  higher price thus has  no  place  in\t the
\nscheme.\t There is no reason why such fixation should not  be
\nheld  to be binding on nonmembers as in the scheme of  price
\nfixation  no  distinction is made between members  and\tnon-
\nmembers.\n<\/p>\n
17.  The  difference  between  members\tand  non-members  of
\ncooperative societies in relation to cane price may also  be
\nnoticed.   A  cooperative society usually  invests  7.5%  in
\nsetting\t up  of a factory or Sahkari  Karkhana\twhereas\t the
\nbalance\t  is   borne  by  the  State   and   the   financial
\ninstitutions.\t Its  members  under  bye-laws\t are   under
\nobligation to clear every dues of the society otherwise\t any
\namount\tdue from them to the society is first charge on\t the
\nsugarcane  cultivated  by them and is recoverable  from\t the
\nprice  of cane.\t Every member of the society  under  bye-law
\n18A is required to undertake cultivation of minimum of\thalf
\nacre.\tThe  nonmembers\t on  the other\thand  have  no\tsuch
\nobligation.  They are not required to cultivate or grow\t any
\nminimum\t cane.\t But  they derive  all\tthose  benefits\t and
\nadvantages  as are available to the members of the  society.
\nIn the licence for crushing cane issued under clause 4(5) of
\nthe  State Order it is provided in the Form B clause  (xvii)
\nthat the factories shall be bound to pay same cane price  to
\nnon-members  as\t members.  A nonmember is also\tentitled  to
\nshare  the  profits which are worked out at the end  of\t the
\nseason.\t  There is thus practically no difference between  a
\nmember and non-member so far supply of cane or its price  is
\nconcerned.  A member is no doubt entitled to some facilities
\nsuch as running of other business or availing the  education
\nfacility etc. run by the cooperative societies but that\t has
\nnothing to do with cane price or its supply.  As a matter of
\nfact the sale of by-products etc. is shown as receipt  while
\ncalculating additional price or final State Advised price.\n<\/p>\n
18.  With  this\t background it may now be  examined  whether
\nprovision  in  the  State  Zoning  Order  suffers  from\t any
\ndrawback  for  not  providing  any  machinery  to  hear\t the
\nindividual  non-members\t and also whether  the\tfixation  of
\nprice  by  the\tDirector of Sugar  Factories  or  the  State
\nGovernment   under  bye-law  64\t framed\t under\t Cooperative
\nSocieties Act can be said to be binding on members only thus
\nentitling
\n601<\/span>
\nnonmembers to sell their cane at market price.\tThe exercise
\nof pricing is undertaken by a Committee in accordance with
\nguidelines provided after taking into consideration  various
\nfactors\t so  that the price of sugar does not  escalate\t and
\ncane  growers  are not deprived of good return\tto  dissuade
\nthem  from  going for alternative crop.\t  In  the  affidavit
\nfiled  by the Under Secretary of the State it  is  explained
\nthat the price determined by the Committee is notified every
\nyear but no objection was ever received.  No cane grower can
\nthus  legitimately claim that the price fixed for  the\tcane
\nwas not productive.  The affidavit also pointed out that the
\nnon-members  have not organised themselves so as to  entitle
\ntheir  representative  to  be  invited.\t  Hearing  of  every
\nindividual  grower even otherwise is physically\t impossible.
\nPresence  of  representative of\t cane  growers’\t cooperative
\nsociety before the Committee fixing the price makes it broad
\nbased.\t Such representative would bargain for better  price
\nfor cane growers irrespective of whether such a cane  grower
\nis  a member of the cooperative society or not.\t  No  repre-
\nsentative  would  agree for lower price for members  of\t the
\nsociety.   Therefore, absence of individuals or\t non-members
\nof cooperative society before the Committee fixing the price
\ncannot reflect adversely on the price fixation.\t No material
\nhas been placed to demonstrate how the fixation of price  by
\nthe  State  Committee with assistance of Director  of  Sugar
\nFactories has prejudiced the non- members.  In the affidavit
\nfiled  on  behalf of the State it is pointed  out  that\t the
\nprice  of  cane\t fixed\tto be paid  by\tthe  Sahkari  Sakkar
\nKarkhana is even paid by other factories.  Reason being that
\nthe  price fixation having been done by the Committee it  is
\ntaken  to be fair and just.  Same reasoning applies to\tnon-
\nmembers.   Truly  speaking  the\t price\tfixation  should  be
\nobserved  in broad perspective.\t If every individual has  to
\nbe  heard the entire system may fall for  sheer\t non-practi-
\ncality.\t In Maharashtra there are 137 sugar factories.\tWith
\neach  factory nearly five to six thousand cane\tgrowers\t are
\nattached.  Twenty per cent of them are non-members.  If\t the
\nCommittee starts hearing every individual non-member then it
\nshall prove to be an unending purposeless exercise.  One may
\nhave  right to challenge the price fixation on\tground\tthat
\nthe  Committee\tor the authority did not act  in  accordance
\nwith the guidelines for fixation of price in accordance with
\nthe order but that right can be exercised appropriately only
\nafter  publication of the price.  In these appeals since  no
\none  objected, the individual members cannot claim that\t the
\nprice fixed was not fair or just.\n<\/p>\n
19.  Therefore, absence of any machinery in the State  Order
\nfor  hearing nonmembers could not destroy  effectiveness  of
\npricing.  Even otherwise the price fixation in a  controlled
\neconomy may not be bad so long it is in accordance with\t the
\npolicy formulated by the Government and the decision by\t the
\nCommittee  of  Experts\tis not found to\t be  arbitrary.\t  It
\ncannot be assailed only because cane growers of one area are
\ngetting\t better\t price than the other.\t The  difference  in
\nprice  arising due to application of principle uniformly  is
\nneither\t bad nor arbitrary.  It may be that since the  price
\nis  linked  with yield it may cause hardship to one  set  of
\ngrowers\t as  they  might  be deprived  of  better  price  as
\ncompared  to his neighbour due to deficient  functioning  of
\nthe  factory but in a welfare State and\t controlled  economy
\nindividual  hardship  cannot  override\tthe  larger   social
\ninterest.\n<\/p>\n
602<\/span><\/p>\n
20.Reason  for government intervention to fix the price\t has
\nbeen   explained   earlier.   It  was  to   increase   sugar
\nproduction.   It continues even today.\tWhile doing  so\t the
\nGovernment ensured stable and assured income to the growers.
\nThat is why the pricing was devised even before 1950.\tWhen
\nthe First Five Year Plan was drafted in 1951 the control was
\njustified, for smooth functioning of an unregulated economy.
\nWhen  the second Five Year Plan was made it  was  recognised
\nthat  controls were administratively cumbersome but  it\t was
\nfound  necessary  for a developing  economy.   Necessity  of
\ncontrol for sugar and fixing of price for cane is as  neces-
\nsary  today as it was in 1934 or 1951 or 1956.\tThe role  of
\nprice  control\tis not merely to  reduce  distortions  which
\nwould\totherwise   have   been\t  prevalent   resulting\t  in
\nexploitation  of  cane growers particularly when  there\t was
\nsurplus production of cane but to promote his financial\t and
\nsocial condition.  The fruits of controlled economy for\t the
\nweaker and poorer cannot be doubted.  In agricultural sector
\nthe price control as an instrument of policy has boosted the
\neconomy.  To denounce it, therefore, may not be in  interest
\nof  the cane growers.  Once when there was glut of  cane  in
\n1990- 91 it was the State which came to rescue and paid\t Rs.
\n10,000\/-  per hectare even to non-members.  The\t Full  Bench
\ntoo did not find any flaw in price fixation, nor it held  it
\nto be unremunErative yet it imported the concept of free and
\ncompetitive market price for those cane growers who were not
\nmembers of any society mainly because they were not bound by
\nthe  bye  laws.\t The submission\t of  compulsive\t cooperative
\nsystem founded on bye laws does not have much substance.  No
\nmaterial  was placed before the High Court or this Court  to
\nsubstantiate
\nthat  the  Government resorted to under pricing of  cane  to
\nenable\tthe  sugar factories to\t discharge  their  financial
\nobligation.  In absence of any material it cannot be assumed
\nthat the Director of Sugar Factories who are none else\tthan
\ncane  growers  themselves would opt for a lesser  price\t for
\ntheir  cane  because the sugar factories of which  they\t are
\nmembers were under an obligation to pay their debts.\n<\/p>\n
21.  Coming  to the other rationale of the Full\t Bench\tthat
\nthe price of cane having been fixed under the bye- laws\t for
\nthe cooperative societies it was binding on the members\t and
\nnot  others it may be appropriate to reproduce the  gist  of
\nrelevant bye-laws noticed by the Full Bench
\n\t      “Bye-laws\t Nos.63, 64, 64A, 65A and  65B\tdeal
\n\t      with  the fixation of price of  sugarcane\t and
\n\t      deduction\t of certain amounts from the  prices
\n\t      paid to the members.\n<\/p>\n
\t      Bye-law 63 states that the Board of  Directors
\n\t      of  the  factory\twill give  advances  to\t the
\n\t      members  against\tthe price of  the  sugarcane
\n\t      supplied\tby them, by prior permission of\t the
\n\t      Director of Sugar and the Deputy Registrar  of
\n\t      the Co- operative Societies and in  accordance
\n\t      with   their  directions\tand   after   making
\n\t      deductions for certain purposes.\n<\/p>\n
\t      Bye-law  64  states  that\t the  price  of\t the
\n\t      sugarcane supplied by the members, shall be as
\n\t      fixed  by the Board of Directors\tevery  year.
\n\t      The  Board  of Directors will  fix  the  price
\n\t      according to the constitution, the object\t and
\n\t      the bye- laws of the society and after  taking
\n\t      into consideration the financial\ttransactions
\n\t      and conditions of the year.  The bye-law\tthen
\n\t      makes  an exception to this general  rule\t and
\n\t      states  that  so\tlong as\t the  share  capital
\n\t      invested\tby  the Government is  not  refunded
\n\t      com-\n<\/p>\n
\t      603<\/span><\/p>\n
\t       pletely\tand\/or the loan taken from  the\t In-\n<\/p>\n
\t      dustrial\tFinance\t Corporation  or  from\t any
\n\t      Central Financial Institution supplying  funds
\n\t      for fixed capital assets is not fully  repaid,
\n\t      the  price to be paid to the members shall  be
\n\t      that  as fixed by the State  Government.\t For
\n\t\t\t    the\t purposes of our discussion, we will  refe
\nr
\n\t      to this period briefly as the debt-period.
\n\t      Bye-law  64A states that whenever\t it  becomes
\n\t      necessary\t  for\tthe  factory   to   purchase
\n\t      sugarcane\t  from\t non-members   outside\t its
\n\t      jurisdiction,    the   factory   shall\ttake
\n\t      permission  of the State Government  for\tsuch
\n\t      purchase.\t However, during the debt period the
\n\t      price  to be paid to the nonmembers  shall  be
\n\t      that as will be fixed by the State  Government
\n\t      before the beginning of the crushing season.
\n\t      Bye-law 65A mentions the deductions to be made
\n\t      from  the\t price payable to  the\tmembers\t for
\n\t      raising non-refundable deposit from them,\t the
\n\t      rate  of such deductions and the rate  of\t and
\n\t      the  manner of its disbursal and the  interest
\n\t      to be paid on such deposit.\n<\/p>\n
\t      Bye-law  65B  gives  power  to  the  Board  of
\n\t      Directors\t  to  collect  deposits\t by   making
\n\t      deductions  from the price to be paid  to\t all
\n\t      sugarcane\t suppliers  and\t states\t that\tsuch
\n\t      deposits shall be used only for the  expansion
\n\t      of the factory and other capital\texpenditure.
\n\t      The  bye-law  also  lays\tdown  the  rate\t  of
\n\t      interest to be paid on such deposits.”\n<\/p>\n
Bye-law 64 empowers the Board of Directors to fix the  price
\nof sugarcane to be supplied by members of cooperative  soci-
\nety  to the factory.  It further provides that the price  so
\nfixed shall be according to the Constitution the object\t and
\nthe  bye-law of the society and after taking into  consider-
\nation the financial transaction and conditions of the  year.
\nIn this bye-law there is a further exception empowering\t the
\nState Government to fix the price so long the share  capital
\ninvested by the Government is not refunded completely or the
\nloan  taken  from the financial institution is\tnot  repaid.
\nThe  Board of Directors which are referred in  the  bye-laws
\nare  none else than the agriculturist or the  cane,  growers
\nthemselves.   It is difficult to visualise that\t they  would
\nopt  or\t fix  a\t price for  the\t sugarcane  which  would  be
\nunremunerative.\t As explained earlier the price fixed by the
\nCabinet Committee in exercise of power under the bye-law  is
\nthe  State Advised Price.  It applies uniformly to all\tcane
\ngrowers\t irrespective  of whether they are members  or\tnon-
\nmembers and whether they are in reserved area or outside it.
\nTo  confine  it to the members as they having  entered\tinto
\nagreement and being members of the cooperative societies are
\nbound by it is ignoring the entire price mechanism.  Nowhere
\nin  the\t country the State Advised Price is  fixed  for\t one
\nclass  of growers only.\t In absence of any material to\tshow
\nthat the fixation by the Government was one sided or with  a
\nview to exploit the cane growers the submission that it\t did
\nnot apply to non-members cannot be accepted.  The order does
\nnot  make any distinction between members  and\tnon-members.
\nNor does it visualise separate mechanism for price  fixation
\nfor  the two.  The price is fixed, may be, by the  Board  of
\nDirectors or by the State Government under bye-laws but\t the
\nprices\tare for the reserved area.  The\t Central  Government
\ndid  not  fix  any  maximum  price  obviously  because\t the
\nconditions in the agricultural sector differed from State to
\nState.\t Therefore, it having fixed a minimum price  expects
\nthe  State to offer remunerative price to  its\tcultivators.
\nIn  a controlled economy the price fixation machinery is  to
\nbe determined by
\n604<\/span>
\nthe  State Government or under the 1966 Order in the  manner
\nprovided  therein.   Since in Maharashtra 95% of  the  sugar
\nfactories  are in the cooperative sector the price is  fixed
\nby  the\t Government as it has substantial  financial  stock.
\nBut  so\t long the price fixation does not  suffer  from\t any
\ninfirmity or it is held to be prejudicial to cane grower  so
\nas  to\tbenefit the State or the  financial  institution  it
\ncannot be held to be bad.  Therefore once the price fixation
\nhas  been undertaken and performed by such an  authority  it
\ncannot be held to be inapplicable to one particular class of
\ncane  growers as the fixation having been done by the  State
\nGovernment  under the bye-laws it was not binding  on  those
\ncane  growers  who were not members of\tany  society.\tThat
\nwould be defeating the entire purpose of enforcing controls.\n<\/p>\n
22.  Reverting to the various issues which   arise\t for
\nconsideration  it may be stated that zoning  or\t reservation
\nand  fixation  of  price for  each  zone  are  inter-linked.
\nTherefore,  it may be seen whether zoning suffers  from\t any
\ninfirmity.   It has already been explained that\t even  under
\nthe  1966  Order the fixation of minimum price\tIs  factory-
\nwise.  Thus each factory has been considered to be one zone.
\nReservation  or zoning and fixation of price for  each\tzone
\nhas  been  upheld  by this Court in  Shri  Malaprabha  Coop.
\nSugar Factory Lid v. Union of India & Anr.<\/a> (1994) 1 SCC\t 648
\nand  Anakapalle Co-op.\tAgrl. and Industrial  Society  Lid.,
\netc.etc.  v.  Union of India and others (1973) 3 SCC  43  5.
\nThat was not challenged as well.  Yet it was urged that such
\nzoning\tcould not be used to enforce a\tcooperative  pricing
\nsystem\tcontrary  to the statutes and rules.   The  approach
\ndoes  not  appear  to be correct as it\tassumes\t that  price
\nfixation is undertaken for cooperative societies as they are
\nindebted  to State Government, Manner of price fixation\t has
\nbeen  indicated\t earlier.   The exercise  is  taken  by\t the
\nCommittee  in accordance with guidelines in the 1966  Order.
\nIn  absence  of any challenge to it on ground  of  it  being
\narbitrary or being in violation of the principles of pricing
\nthe  assumption\t that  pricing in zone\tis  like  a  private
\narrangement between the State as a creditor and\t cooperative
\nsociety\t as a debtor cannot be countenanced.  The mere\tfact
\nthat  the bye-laws empower the State Government to  fix\t the
\nprice  for cooperative society does not render it  bad.\t  If
\nthe  price  fixed by the Government is good for\t members  of
\ncooperative  society  who  are\tas  much  cane\tgrowers\t  as
\nnonmembers  then there is no reason to hold that such  price
\nwas  bad  or  it operated  unreasonably\t for  non-  members.
\nZoning\thas  been resorted to in the State to  regulate\t the
\nsupply of cane to various factories on equitable basis.\t  It
\nis  a well established feature in the country.\tOnce a\tzone
\nis reserved for a factory the cane grower has an  obligation
\nto  supply  cane  to  the factory  and\tthe  factory  has  a
\ncorresponding  obligation to lift the cane from\t the  field,
\ncrush  it produce sugar and pay to the grower not  only\t the
\nminimum price but also share the profit with him.\n<\/p>\n
23.  In\t the  affidavit filed by the Dy.  Secretary  of\t the
\nState it has been explained that while forming the zones for
\nthe  sugar  factories besides capacity\tand  requirement  of
\nsugarcane  to the sugar factory the physiological nature  of
\nsugarcane  is also taken into consideration.  It  is  stated
\nthat crop of sugarcane is a perishable commodity and it\t has
\nto be crushed at the earliest after its harvesting for which
\nthe  optimum  distance of 40 kms has been laid down  by\t the
\nUnion
\n605<\/span>
\nof  India,  therefore, zones of the factories  are  normally
\nbetween\t 35  to\t 40  kms radius\t around\t the  factory.\t The
\naffidavit  points  out that in the process  of\tzoning\tmany
\nTalukas\t in  the  State pockets where  there  are  no  sugar
\nfactories have been left out because those areas do not fall
\nwithin\tthe  radius  of 35 to 40 kms.\tHowever,  from\tsuch
\npockets\t where the sugarcane is produced such  sugarcane  is
\nallotted  to the neighbouring needy factories in  accordance
\nwith the Maharashtra Sugar Zoning Order and the\t cultivators
\nsupplying  sugarcane from such free areas, even though\tthey
\nare non-members they, get the same benefits as are available
\nto the members of the said factory to whom the sugarcane  is
\nallotted.   It is also stated that in any areas where  there
\nis  no\tsugarcane production or it is very meager  like\t the
\nparts  of Thane District, they have been kept  free  because
\nsuch  sugarcane involves huge transport costs and it is\t not
\npossible to transport the sugarcane in adequate quantity  to
\nany  of\t such factories.  The affidavit further\t points\t out
\nthat in those areas where there is adequate sugarcane supply
\nor they have good potential for growing sugarcane but  there
\nis  no\tsugar factory they have been kept free so  that\t the
\nrights\tof sugarcane growers in such areas to  organise\t and
\nestablish sugar factories can be protected.  Till such\ttime
\nthe  sugarcane\tgrown  in  such areas  is  allotted  to\t the
\nneighbouring needy zone and the price paid is the same as is
\npaid  to  the members of the cooperative  societies  of\t the
\nsugar factories.  In one of the applications filed by one of
\nthe  karkhanas,\t I.A. No. 11 of 1993 in C.A. No. 523  it  is
\nstated\tthat before the crushing season starts the  karkhana
\nenters\tinto  an agreement both with the  members  and\tnon-
\nmembers\t and  gives  them all necessary\t input\tfor  growing
\nsugarcane  such as seeds, fertilisers, technical know-\thow,
\nguarantee, finance for crop loan and also undertakes an\t ac-
\ntivity\tof  harvesting and transporting of  sugarcane.\t The
\napplication points out that the claim of the non-members was
\nnot  justified\tas when there was a glut then  it  were\t the
\nkarkhanas  like the applicant who had at  heavy\t expenditure
\nensured\t that  the cane of the non-members was\tdiverted  to
\nother\tkarkhanas   and\t  they\teven  bore   the   cost\t  of
\ntransportation.\t  But in absence of Zoning Order when  there
\nwas  a\tglut  then the sugar factories\texploited  the\tcane
\ngrowers\t by offering them lower price.\tIt has been  pointed
\nout  that  nearly  80% to 95% sugar  factories\tare  in\t the
\ncooperative sector but some of them have better cane growing
\nareas  coupled with better and efficient functioning of\t the
\nfactory.   They are in a position to offer better  price  as
\ncompared to other factories which are economically weak\t and
\nare  in difficulty.  What is clear from these affidavits  is
\nthat  zoning  is beneficial to the cane growers and  it\t has
\nbeen  resorted\tnot  only to ensure that  the  regular\tcane
\nsupply\tis available to sugar factories but also to  protect
\nthe  cane growers who may otherwise have been seriously\t af-
\nfected.\n<\/p>\n
24.  Having  discussed\tthe pricing of sugarcane,  the\tnear
\nsimilarity  between members and nonmembers of a\t cooperative
\nsociety\t qua supply of cane and payment of price,  the\tnon-
\nfeasibility  of hearing every individual grower by the\tCom-
\nmittee\t before\t  fixation  of\tthe  price   of\t  cane\t and
\napplicability  of uniform rate of cane in the reserved\tarea
\nboth  for  members and non-members it may  now\tbe  examined
\nwhether supply of cane by the cane growers under the  Zoning
\nOrder  issued  by the State of Maharashtra is  a  compulsory
\nsale within meaning of clause (f) of sub-sec-\n<\/p>\n
606<\/span><\/p>\n
tion  (2) of Section 3 of the Act so as to  attract  Section
\n3(3)(c)\t of  the Act.  Both these sub-sections arc  part  of
\nSection\t 3  of\tthe Act which is the  main  Section  and  is
\ndirected  towards  achieving  the objective of\tthe  Act  to
\nprovide, in the interest of general public, for the  control
\nof the production, supply and distribution of, and trade and
\ncommerce in certain commodities.  Sub-section (1) of Section
\n3 spells out the general power of the Government to  control
\nproduction, supply and distribution of essential commodities
\nif it is of opinion that it is necessary or expedient so  to
\ndo  for maintaining or increasing supplies of any  essential
\ncommodity  or for securing their equitable distribution\t and
\nits availability at fair price.\t Sub-section (2) illustrates
\nthis power, further, by empowering the Government to provide
\nfor,   issuing\tlicences  or  permits  for   production\t  or
\nmanufacture  of any essential commodity or for its  storage,
\ntransport  etc.\t and  for  controlling\tprice  at  which  an
\nessential  commodity may be bought or sold.  Its clause\t (f)
\nempowers  the Government to direct any producer to sell\t the
\ngoods produced by it either to itself or to State Government
\nor to any person or class of persons specified in the Order.
\nWhat  price is lo be paid to the producer for such  sale  is
\nprovided by Section 3(3) of the Act.  Relevant part of it is
\nreproduced below:\n<\/p>\n
\t      “S.3.  Powers to control\tproduction,  supply,
\n\t      distribution, etc., of essential commodities
\n\t      (1)……….\n<\/p><\/blockquote>\n
\t      (2)……….\n<\/p><\/blockquote>\n
\t      (3)   Where  any\tperson sells  any  essential
\n\t      commodity\t in  compliance with an\t order\tmade
\n\t      with  reference  to clause (f)  of  subsection
\n\t      (2),  there  shall be paid to  him  the  price
\n\t      therefor as hereinafter provided\n<\/p><\/blockquote>\n
\t      (a)   where  the price can, consistently\twith
\n\t      the controlled price, if any, fixed under this
\n\t      section, be agreed upon, the agreed price;\n<\/p><\/blockquote>\n
\t      (b)   where on such agreement can be  reached,
\n\t      the  price  calculated with reference  to\t the
\n\t      controlled price, if any;\n<\/p><\/blockquote>\n
\t      (c)   where  neither  clause  (a)\t nor  clause\n<\/p><\/blockquote>\n
\t      (b)applies, the price calculated at the market
\n\t      rate prevailing in the locality at the date of
\n\t      sale.”\n<\/p><\/blockquote>\n
A  very perusal of it indicates that its field of  operation
\nextends\t to  where  any\t person\t is  required  to  sell\t any
\nessential  commodity in compliance with an order  made\twith
\nreference to clause (f) of sub-section (2) of Section 3.\n<\/p>\n
25.  Two  conditions, therefore, must exist  one, it  should
\nbe  a  sale of an essential commodity and second  that\tsuch
\nsale  must be in compliance with an order with reference  to
\nsub-section  (2)(f)  of Section 3, the relevant part  of  it
\nreads as under:-\n<\/p>\n
\t      “S.3.  Powers to control\tproduction,  supply,
\n\t      distribution, etc., of essential commodities
\n\t      (1)……..\n<\/p><\/blockquote>\n
\t      (2)   Without  prejudice to the generality  of
\n\t      the  powers conferred by sub-section  (1),  an
\n\t      order made thereunder may provide\n<\/p><\/blockquote>\n
\t      (a)\n<\/p><\/blockquote>\n
\t      (b)
\n\t      (C)\n<\/p><\/blockquote>\n
\t      (d)\n<\/p><\/blockquote>\n
\t      (e)\n<\/p><\/blockquote>\n
\t      (f)  for\trequiring any\t person\t holding  in
\n\t      stock, or engaged in the production, or in the
\n\t      business\t of  buying  or\t selling,   of\t any
\n\t      essential commodity,
\n\t      607<\/span>\n<\/p><\/blockquote>\n
\t      (a)   to sell the whole or a specified part of
\n\t      the  quantity  held in stock  or\tproduced  or
\n\t      received by him, or\n<\/p><\/blockquote>\n
\t      (b)   in the case of any such commodity  which
\n\t      is  likely to be produced or received by\thim,
\n\t      to sell the whole or a specified part of\tsuch
\n\t      commodity when produced or received by him,
\n\t      to  the  Central Government or  a\t State\tGov-
\n\t      ernment  or  to an officer or  agent  of\tsuch
\n\t      Government  or  to  a  Corporation  owned\t  or
\n\t      controlled by such Government or to such other
\n\t      person  or  class\t of  persons  and  in\tsuch
\n\t      circumstances  as\t may  be  specified  in\t the
\n\t      order.”\n<\/p><\/blockquote>\n
This sub-Section came up for interpretation by this Court in
\nUnion of India & Anr. v. Cynamide India Ltd. & Anr.<\/a> (1\t987)
\n2 SCC 720.  It was held:\n<\/p>\n
\t      ” an order under Section 3(2)(f) is a specific
\n\t      order directed to a particular individual\t for
\n\t      the purpose of enabling the Central Government
\n\t      to   purchase  a\tcertain\t quantity   of\t the
\n\t      commodity\t from the person holding it.  It  is
\n\t      an order for a compulsory sale.  ”\n<\/p><\/blockquote>\n
It  was\t reiterated in Shri Malaprabha (supra)\tand  it\t was
\nobserved:\n<\/p>\n
\t      “It  is  a specific order directed to  a\tpar-
\n\t      ticular  individual  in order  to\t enable\t the
\n\t      Central  Government  to  purchase\t a   certain
\n\t      quantity of commodity from the person  holding
\n\t      it.  It is an order of compulsory sale.  ”\n<\/p><\/blockquote>\n
26.  Can clause (3) of the State Order issued in 1984 either
\non the language or its effect be construed to be an Order of
\ncompulsory  sale?  It expressly does not purport to  be.  an
\norder under Section 3(2)(f) of the Act.\t It is not an  order
\nof  the nature as was issued by the Central  Government\t for
\nsale of levy sugar.  It does not direct cane grower to\tsell
\nits cane to the Government or to any person specified in the
\nOrder.\tIn absence of any provision the order cannot be held
\nto  be order directing the producers to sell the cane so  as
\nto make it a compulsory sale under clause (f) of sub-section
\n(2) of Section 3.\n<\/p>\n
27.Language  of the Order apart even otherwise\tthe  purpose
\nand  objective for which the Order was issued does  not\t re-
\nmotely\tor  even impliedly warrant any\tinference  that\t the
\nsupply of cane by the growers was sale.\t Mere restriction on
\nsupplying  cane\t to  anyone else than  the  specified  sugar
\nfactory\t cannot\t be construed as an order for sale.   It  is
\ntrue that the effect of such an order as has been issued  by
\nthe  State  of Maharashtra is that a grower who\t is  in\t the
\nreserved  area is precluded from supplying his cane  to\t any
\nother  factory\tthan  the  one\tspecified  but\tthat  is   a
\nrestriction to subserve the main objective of ensuring\tthat
\nthe sugar factory is not starved and the production does not
\nsuffer.\t  That\tdoes not make the Zoning Order one  of\tcom-
\npulsory sale.  Any order under sub-section (1) resulting  in
\nrestricting   the  supply  of  essential  commodity   in   a
\nparticular area or directing it to be sold or purchased on a
\nparticular  price is not an order under Section\t 3(2)(f)  of
\nthe  Act.  If compulsion arising out of restriction is\theld
\nto be compulsory sale then it would render the entire scheme
\nof  Section 3(2) nugatory.  What is contemplated by  Section
\n3(2)(f)\t is  a specific order.\tIt applies  in\tthose  cases
\nwhere  any  essential commodity is directed to\tbe  sold  or
\nparted with in pursuance of an order of the Government.\t  It
\nhas  no application to supply in a reserved  area.   Further
\nunder clause (5) of Zoning Order the cane
\n608<\/span>
\nunder  orders  of  the Director can  be\t supplied  to  other
\nfactories.  The provision completely demolishes the argument
\nof compulsory sale.\n<\/p>\n
28.What\t was  vehemently urged by Dr. Dhawan, was  that\t the
\ninvidious pricing system resorted to by the sugar  factories
\nwhich were indebted to State Government resulted in forcibly
\ndrawing such cane growers who were not members of any  coop-
\nerative society, therefore, it was contrary to the statutory
\nequitable  pricing system consequent to the compulsory\tsale
\nunder the Act.\tIt was urged that the fixation of price\t was
\nirrational  and unfair as it had no bearing or\trelation  to
\nthe  yield of the crop or to the predicament of the  farmer.
\nThe  learned counsel vehemently submitted that\tany  pricing
\nresorted  to either by the cooperative societies or  by\t the
\nState  Government solely and exclusively in relation to\t the
\nmanagement  of cooperative factories was an  extraneous\t and
\nirrelevant  consideration.  The learned counsel\t urged\tthat
\nsince price fixation was not delegated under the 1966  Order
\nany action by the State Government or cooperative  societies
\nto  resort to price fixation which was unfair and unjust  to
\nthe  nonmembers\t was contrary to the  Act.   The  submission
\nproceeded  on assumption that the fixation of price  was  in
\nrespect of a commodity which was directed to be compulsorily
\nsold  under  the orders issued by the  Government.   As\t ex-
\nplained\t earlier the assumption does not appear to  be\twell
\nfounded.  The entire edifice of the submission was built  on
\nthe  compulsive nature of transaction involved in supply  of
\ncane  and  payment of price But what was lost sight  of\t was
\nthat  Section 3(3)(c) could be attracted only if  the  order
\nissued\tby  the\t Government could be held to  be  one  under
\nSection\t 3(2)(f).  The submission ignores that economics  of
\npricing in a controlled economy is entirely different than a
\nfree  market.  The equilibrium in the latter is\t reached  by
\ninteraction of supply and demand.  Its graph keeps on moving
\nup and down governed by the principle of scarcity.  But\t the
\ncontrolled  economy does not operate on demand\tand  supply.
\nThe  production, distribution and the supply  are  regulated
\nand  controlled by the Government in public interest.\tSuch
\norders are issued in social interest for the common  benefit
\nand  fair  price for the needy and poor.  Legality  of\tsuch
\norders cannot be tested on cost structure of free economy or
\nmaximum\t profit theory.\t The concept of cost  structure\t and
\nthe  profit in a controlled economy is\tentirely  different.
\nIn  M\/s.  New India Sugar Works etc. etc. v. State of  Uttar
\nPradesh\t &  Ors.  etc.\tetc. (1981) 2  SCC  293\t this  Court
\nalthough in a different context observed as under:\n<\/p>\n
\t      “The  policy  of\tprice control  has  for\t its
\n\t      dominant\tobject\tequitable  distribution\t and
\n\t      availability of the commodity at fair price so
\n\t      as  to benefit the consumers.  It is  manifest
\n\t      that  individual interests, however’  precious
\n\t      they may be must yield to the larger  interest
\n\t      of the community, namely, in the instant case,
\n\t      the large body of the consumers of sugar.\t  In
\n\t      fact,  even  if the petitioners have  to\tbear
\n\t      some  loss  there can be no  question  of\t the
\n\t      restrictions imposed on the petitioners  being
\n\t      unreasonable.\n<\/p><\/blockquote>\n
29.The\tanother facet of the same submissions by Dr.  Dhawan
\nwas  that  due to operation of the State Order\tdirecting  a
\ncane  grower  to  supply  its cane to  a  factory  in  whose
\nreserved  area\tit falls, the real nature of  supply  was  a
\ncompulsory  sale as visualised in Section 3(2)(f).   It\t was
\nattempted to be supported by clauses (6)(a), (6)(b),  (6)(c)
\nof the 1966 Order and clauses
\n609<\/span>
\n(3)and\t(1)  of\t the State Order.  It was  urged  that\teven
\nthough\tcompulsory  supply has to be made  by  operation  of
\ndifferent provisions of the two orders yet it was in  nature
\nof  contract of sale under compulsion.\tReliance was  placed
\non  Andhra  Sugars  Ltd. & Anr.\t Etc.  v.  State  of  Andhra
\nPradesh & Ors.<\/a> (1 968) 1 SCR 705 and Vishnu Agencies  (Pvt.)
\nLtd.   Etc. v. Commercial Tax Officer & Ors.  Etc.<\/a> (1978)  2
\nSCR 433.  The learned counsel submitted that since the Order
\nwas specific both in letter and intent and it was clear from
\nthe schedules that all growers could supply cane only to  an
\nidentifiable  sugar  factory the  necessary  inference\tthat
\narose was that it was a compulsory sale and, therefore,\t the
\nrespondents  were entitled for a market price under  Section
\n3(3)(c).   Help was also taken from Shri Malaprabha  (supra)
\nand it was urged that where there were general orders  which
\nidentified  the seller and the buyer and both were aware  of
\nthe  nature of transaction that the sale had to be  made  to
\nidentifiable  designated person the sale was nothing  but  a
\ncompulsory  sale.   It was urged that a\t provision  with  in
\nbuilt specific identification could not be used as a  device
\nto  disguise  the real nature of transaction.  None  of\t the
\nsubmissions appear to be well founded.\tAs observed in\tShri
\nMalaprabha (supra) and Anakapalle (supra) the provisions  of
\nSection 3(3)(c) could apply only where there was a  specific
\norder  of sale.\t In absence of any such order the  inference
\nthat  the  learned counsel for respondent has  attempted  to
\ndraw  cannot be said to be justified.  What is\tcontemplated
\nunder  Section 3(3)(c) is an order of a compulsory sale\t and
\nnot a compulsion arising out of enforcement of\trestrictions
\nunder the provisions of controlling distribution and supply.
\nA  cane grower in a reserved area gets the price for  supply
\nof  his cane to a specified factory.  This price is  payable
\nboth  to members and nonmembers.  The orders  only  restrict
\nthat the supply could not be made to any factory outside the
\narea.\tThe restriction may result in confining\t the  choice
\nbut  it cannot be construed as an order of sale.  The  situ-
\nations\tin which an order can be considered to be  an  order
\nfor  compulsory\t sale may be one where the Government  by  a
\nparticular  order or a general order as in the case of\tlevy
\nsugar  directs the producer to part with his goods.   Number
\nof commodities have been declared to be essential  commodity
\nunder Section 3 of the Act.  Its supply and distribution may
\nbe  regulated either by restricting the area or\t fixing\t the
\nprice.\t If in respect of any such commodity the  Government
\npasses\tan order directing a producer to sell any  essential
\ncommodity to Government or to any class of persons specified
\nin  the order then it shall be a compulsory sale.   None  of
\nthe   decisions\t on  which  reliance  was  placed  has\t any
\nrelevance.   The observation in Andhra Sugars  (supra)\tthat
\nwhere  cane  growers  entered into  agreement  with  factory
\nowners\twho were bound to purchase the cane by operation  of
\nstatutory provisions may amount to compulsion of law and not
\ncoerce\tand  the agreements so entered\tare  enforceable  as
\ncontracts of sale as defined in Section 4 of the Indian Sale
\nof  Goods Act, did not mean that the compulsive\t element  of
\nsupplying  cane resulted in compulsory sale.  The Court\t was
\nbringing  out the distinction between coerce and  compulsion
\nunder  law.   But every compulsion does not  bring  about  a
\ncompulsory  sale.   Similarly the other decision  in  Vishnu
\nAgencies  (supra)  was concerned  with\tdetermining  whether
\nsupply\tmade under statutory order was sale for purposes  of
\nlevy of sales tax.\n<\/p>\n
610<\/span><\/p>\n
30.The\tdual pricing system, one, for members and other\t for
\nnonmembers  or\tthe  option to non-members to  sell  to\t the
\nfactory\t of  their  choice may be  negative  of\t the  zoning
\nconcept\t and  may  effect the cooperative  movement  in\t the
\nState.\t Dr.  Singhvi may be right that even  before  Zoning
\nOrder was issued the cooperative movement was there and\t the
\nbenefits that a member of the society derives may not result
\nin affecting the system largely but any policy which has the
\ntendency of shaking the system rudely must be avoided.\n<\/p>\n
31.Consequently the first two directions issued by the\tFull
\nBench on price fixation cannot be upheld.  As regards  third
\ndirection  it has been explained in the affidavit  filed  in
\npursuance   to\t order\tdated  24th  February\t1995   which
\nsubstantially  remains\tuncontroverted that  the  deductions
\nunder  bye-law 65 are made for the Chief  Minister’s  Relief
\nFund,\tSmall\tSaving\tSchemes,  Cane\t Development   Fund,
\nVasantdada  Sugar Research Institute, Area Development\tFund
\netc..  The  details as to how the deductions are  made\thave
\nalso  been  mentioned.\t It is true that they  are  made  in
\nexercise of power under bye- law 65 which does not apply  to
\nnon-members.   But  these deductions being for\tthe  general
\nwelfare\t of  the  society it cannot be said  that  they\t are
\neither bad or they suffer from any infirmity.  The  deposits
\ndeducted  unlike members arc refundable and they carry\tsame
\ninterest as is paid to members.\t A non-member who is sharing
\nin  profits of the sugar production cannot be heard  to\t say
\nthat he has no obligations towards the society because he is
\nnot a member of any co-operative society.\n<\/p>\n
32.With\t the  conclusion thus arrived the other\t issues\t are
\nrendered  academic.   Suffice  it to say  that\tthe  Court’s
\nresponsibility\tis  to\tconstrue  the  provision  which\t may
\nadvance\t the  co-operative  movement  in  the  State.\t The
\namendments  in\tSections  22 and  23  have  facilitated\t the
\nmembership  Notwithstanding  the right of a cane  grower  to
\nbecome a member of cooperative society the provisions cannot
\nbe construed so as to result in nullifying the whole  system
\nof control devised to improve production of the sugar in the
\ncountry.   For\tsake of more profit to few  individuals\t the
\nsociety cannot be made to suffer.  Ours is a mixed  economy.
\nCompetition and control have been blended to reduce economic
\nimbalance.  If the individual growers who do not  constitute
\nmore  than 20% otherwise get the same profit as a member  of
\ncooperative  society then there appears no justification  to
\nconstrue  the provision to give them a bit more profit\twhen
\nit  is fraught with danger of small units closing  down\t and
\nthe entire zoning system coming to a crash.\n<\/p>\n
33.  Even though as discussed earlier the supply  made\t  by
\nthe non-members could not be  considered  to  be  compulsory
\nsale within    meaning of Section 3(2)(f) and therefore, the
\nprovisions  of\tSection 3(3)(c) are not attracted,  yet\t the
\nmethodology  adopted by the State for fixing price  requires
\nto  be rationalised as various discrepancies  have  surfaced
\nfor  which there is no satisfactory explanation.   The\tFull
\nBench  felt that there was something grievously\t wrong\twith
\npi-icing  system in the State, therefore, it found  a  legal
\nbasis  for striking it down at least for non-members.\tWhat
\nis  baffling  is  that even though  factory  after  factory,
\nrather, nearly the entire lot is shown to be suffering\tloss
\nyet  new  units are coming up every day in  the\t cooperative
\nsector.\t May be because as
\n611<\/span>
\nclaimed\t by the State it is vitally concerned in  production
\nof  sugar  and is, therefore, investing\t substantial  funds,
\nnearly 95% in setting up of the units.\tMay be as  suggested
\nby  the respondents that the public funds  thus\t transferred
\nfor   social  welfare  is  being  siphoned  off\t by   vested
\ninterests.   May  be as argued that the loss is\t more  paper
\nwork than truth as in fact it has resulted in giving rise to
\nwhat has come to be known as powerful political sugar  lobby
\nin  the\t State of Maharashtra.\tBut these are  matters\tmore
\npolitical  than\t legal, the remedy for which may not  be  in
\ncourts.\t  Even otherwise it is not possible to identify\t the
\nevil,  both, for paucity of material and discipline, of\t re-
\nstraint,  of  keeping  away  rather  than  delving  in\tsuch
\nhazardous  zone.   All the same from the chart\tfiled  along
\nwith  the  affidavit in C.A. No.523 of 1989 it\tappears\t the
\nfactories having better recovery have been permitted to\t pay
\nlower  price  as compared to the factories the\trecovery  of
\nwhich is lower.\t For instance at item Nos.14 and 15 the\t two
\nkarkhanas, Ashok and Dayaneshwar, arc shown to have recovery
\nof  10.21% and 10.53% respectively.  Yet the price  paid  in
\n1985-86\t was  Rs.270\/ – per tonne by Ashok  whereas  it\t was
\nRs.250\/- by Dayaneshwar.  Similarly serial nos.21 and 22 the
\nfactories, Sanjiwani and Sangamrer with same recovery,\tthat
\nis,  11. 3 1 % have been made to pay Rs. 3 64\/\t-,  Rs.330\/-
\nand  Rs.240\/-  for years 1985-86, 1986-87  and\t1987-88\t and
\nRs.391\/-, Rs.348\/- and Rs.366\/- respectively.  Then again at
\nserial\tno.37  and 38 Shriram and Ajinkyatara  the  recovery
\npercentage was 10. 84 and 11. 75 respectively and the  price
\npaid  was Rs.311.50, Rs.300\/- and Rs.285\/ –  and  Rs.305.50,
\nRs.330\/- and Rs.415\/respectively.  It has not been explained
\nhow  this difference has arisen.  Such wide disparities\t are
\nbound  to  create distrust.  In price  mechanism  chart\t the
\nexpenditure  which  is deducted from the  receipts  includes
\noverheads  which  are  substantial.   Over  and\t above\t the
\ninterest, loan, bonus etc. is also deducted.\n<\/p>\n
34.  In the written arguments filed on behalf of respondents
\nit is explained that there is considerable disparity in\t the
\nmarket price of sugarcane in Maharashtra in recent years and
\nthe variation in 1990-91 ranged between Rs.545\/- to Rs.275\/-
\nin 1991-92 between Rs.511\/- and Rs.286.80 whereas in 1992-93
\nit  was\t between  Rs.  731\/  -and  Rs.310\/-.  According\t  to
\nrespondents this price variation has nothing to do with\t the
\nproduct,  namely,  the recovery from the  sugarcane  but  is
\nbased  on extraneous consideration as seen by its  principal
\ncreator, namely, the State Government.\n<\/p>\n
35.  The respondents may not be justified in advancing\tthis
\nsubmission as the entire price structure of cane is  founded
\non two basic factors, one, the recovery percentage and other
\nthe  incentive for sharing profit arrived at by working\t out
\nreceipt\t minus expenditures And that is neither contrary  to
\nlaw nor unfair.\t But the wide disparity in the price paid by
\ntwo  factories\tis certainly glaring and is  apt  to  create
\nmisgiving.   How  to remedy it?\t In a  welfare\tsociety\t the
\nconsumer   of  essential  goods\t is  as\t important  as\t the
\nmanufacturer  and producer of it.  The entire  objective  of
\nthe Essential Commodities Act is to promote social  welfare.
\nIt  is\tbeing achieved by controlling price  of\t sugar\twith
\nequal  emphasis on cultivation of cane and its\tprice.\t Any
\nlegislation  must be viewed with this perspective.   In\t the
\nZoning\tOrder  clause (5) empowers sugar factory  to  accept
\ncane  from other zone as well but no similar right has\tbeen
\ngiven to cultivators.\n<\/p>\n
612<\/span><\/p>\n
For better appreciation the entire clause is set out :\n<\/p>\n
\t      “5.  Regulation of supply of Sugarcane.-
\n\t      (1)   A  permit  officer\tmay  allow  a  sugar
\n\t      factory to purchase cane or to accept supplies
\n\t      of  cane\tfrom cane growers from\tareas  other
\n\t      than  the area reserved for it under clause  3
\n\t      if he is satisfied that any ‘of the  following
\n\t      circumstances exist namely\n<\/p><\/blockquote>\n
\t      (a)In  the event of production of cane in\t the
\n\t      area  reserved  for  the\tfactory\t being\t not
\n\t      adequate\tfor  enabling it  to  reach  optimum
\n\t      level of crushing;\n<\/p><\/blockquote>\n
\t      (b)In  the,  event ‘of surplus  production  of
\n\t      cane in the areas reserved for other factories
\n\t      which  those factories are not able  to  crush
\n\t      during the crushing season.\n<\/p><\/blockquote>\n
\t      (c)In  the event of stoppage of  nearby  sugar
\n\t      factory  due to mechanical break down,  labour
\n\t      unrest, lock-out or any other reason.\n<\/p><\/blockquote>\n
\t      (d)In the event of cane grower or cane growers
\n\t      from  the\t area  reserved\t for  a\t  particular
\n\t      factory  declining to supply cane to the\tsaid
\n\t      factory  on  account of any of  the  following
\n\t      reasons,\tif  found justified  by\t the  Permit
\n\t      Officer\n<\/p><\/blockquote>\n
\t      (i)Non-payment  or late payment of cane  price
\n\t      by the sugar factory; or\n<\/p><\/blockquote>\n
\t      (ii)Non-fulfilment  of any of the\t obligations
\n\t      by the sugar factory arising out of  agreement
\n\t      between  the cane grower or cane\tgrowers\t and
\n\t      the sugar factory; or\n<\/p><\/blockquote>\n
\t      (iii)Discrimination  by the sugar\t factory  in
\n\t      harvesting of cane and thereby causing loss to
\n\t      the cane grower or the cane growers;
\n\t      Provided\tthat before passing any order  under
\n\t      this sub-clause, for any of the above reasons,
\n\t      the  Permit  Officer shall  give\tthe  parties
\n\t      concerned\t a reasonable opportunity  of  being
\n\t      heard  in\t person or  through  the  authorised
\n\t      representative.”\n<\/p><\/blockquote>\n
36.Clause  (5) prescribes the situations in which one  sugar
\nfactory\t will  be permitted by the prescribed  authority  to
\npurchase  sugarcane from the zone of another sugar  factory.
\nIt does not provide for the cane grower seeking a permit for
\nsale of his cane to another sugar factory (than the  factory
\nwithin whose zone he may be situated) even if any or all the
\nconditions  prescribed in the clause are satisfied.  Take  a
\ncase  where  a\tsugar  factory indulges\t in  all  the  three
\nirregularities\tmentioned  in subclause (d) of\tClause\t(5),
\nviz., it does not pay the price of cane at the proper  time,
\nit does not adhere to the agreement it has entered into with
\nthe grower and it also discriminates in harvesting the\tcane
\nthereby causing loss to the cane growers even then the\tcane
\ngrower\tcannot\tapply  for  permit  to\tsell  his  cane\t  to
\nwhomsoever  he\tlikes.\tAll that probably he can  do  is  to
\ncomplain.   But he will get some relief only when  there  is
\nanother\t factory (which, of course, has its own zone)  which
\nis prepared to purchase cane from this zone and applies\t for
\npermit\tto  the permit officer to purchase  cane  from\tthis
\nzone.  If it does not so apply, the grower within the  first
\nzone  is helpless.  That is not being fair and just  to\t the
\ngrowers.   It  is,  therefore,\tnecessary  that\t the   State
\nGovernment  may\t suitably amend the Zoning Order  so  as  to
\nprovide that in a case where any of the three  circumstances
\nmentioned in Clause 5(d) are present it would be open to the
\n613<\/span>
\ncane   growers\tto  apply  to  the  specified  officer\t for
\npermission to supply his cane outside the zone.\t In such  an
\nevent,\tit  may\t be open to the\t officer  to  designate\t the
\nfactory\t to which the grower should sell his  cane  ensuring
\nthat  the  grower gets a price which is not  less  than\t the
\nprice obtained in his zone.\n<\/p>\n
37.The State Government would be further well advised to get
\nthe  matter  thrashed out, before the next  crushing  season
\ncommences,  by an Expert Committee comprising of  economists
\nand  financial\texperts\t well  versed  in  price   fixation,
\nparticularly  in  agricultural sector.\t This  exercise\t has
\nbecome imperative after the enforcement of Zoning Order.  In
\nfact when Zoning Order was introduced the State at that time
\nshould have got these aspects examined.\t However, the  price
\nequation  since 1984 has undergone tremendous upsurge.\t The
\nescalation  is manifold.  Benefit of higher price  of  sugar
\nmust percolate to growers as well.  Therefore, the Committee
\nmay examine,\n<\/p>\n
\t      (a)   if\tthe fixation of State Advised  Price
\n\t      uniformly for the entire State as it is  being
\n\t      done  in other States, or at least  separately
\n\t      for different zones, as the normal recovery in
\n\t      the zones varies, would be more feasible;\n<\/p>\n
\t      (b)   if\tthe additional price worked  out  in
\n\t      the manner indicated in Schedule 11 of Control
\n\t      Order   of  1966\tis  more  advantageous\t and
\n\t      beneficial to the growers.  If it be so it may
\n\t      opt  for\tthe same as it would  avoid  tedious
\n\t      exercise by the Ministerial Committee and have
\n\t      the benefit of uniformity;\n<\/p>\n
\t      (c) The Committee may further examine  whether
\n\t      Rs. 600\/- which has been paid by the factories
\n\t      to the non-growers under interim order  passed
\n\t      by  this\tCourt  would  not  be  a  reasonable
\n\t      minimum price for 1995-96 and may furnish\t the
\n\t      basis for fixation of price for future years;\n<\/p>\n
\t      (d)   It\tmay also suggest ways and means\t for
\n\t      improving\t yield\tby the sugar  factories\t and
\n\t      reducing\toverhead expenses  and\teliminating,
\n\t      possible, paper loss;\n<\/p>\n
\t      (e)   It\twould further be in interest of\t the
\n\t      Government to ask the Committee to examine  if
\n\t      the shortcomings pointed out by the Full Bench
\n\t      in   other   regard  can\tbe   rectified\t and
\n\t      rationalised; and\n<\/p>\n
\t      (f)   The\t Committee may examine whether\tbye-
\n\t      law 65 should be applied to nonmembers or not.\n<\/p>\n
38.  Although  the  price  fixation has not  been  found  to
\nsuffer from any infirmity yet due to passage of time, nearly
\neight\tor  nine  years,  since\t this  price  fixation\t was
\nchallenged  and\t with rise of price all\t around\t it  appears
\nexpedient  to  dispose\tof  these  appeals  with   following
\ndirections  to ensure smooth functioning both for  the\tpast
\nand future :\n<\/p>\n
\t      (i)The   directions  of  the  Full  Bench\t  in
\n\t      paragraph\t 25 of the Judgment shall stand\t set
\n\t      aside.\n<\/p><\/blockquote>\n
\t      (ii)The State Government may take\t appropriate
\n\t      steps to amend Clause (5) of the Zoning  Order
\n\t      so as to protect the cane growers.\n<\/p><\/blockquote>\n
\t      614<\/span><\/p>\n
\t       (ii)  The Government may appoint a  Committee
\n\t      of  Experts  to study and\t examine  the  price
\n\t      structure in the light of what has been stated
\n\t      earlier.\n<\/p><\/blockquote>\n
\t      (iv)Even though the order issued by the  State
\n\t      Government determining price for each  factory
\n\t      is  upheld  but since in\tconsequence  of\t the
\n\t      order  passed  by the High  Court\t an  interim
\n\t      order  was  granted  by  this  Court  and\t the
\n\t      factories were directed to pay Rs.600\/- to the
\n\t      cane growers and they were directed to furnish
\n\t      bank  guarantee  for Rs.145\/- it\tis  directed
\n\t      that  the amount paid by the  factories  shall
\n\t      not  be  liable  to  recovery  from  the\tcane
\n\t      growers.\tBut the bank guarantee furnished  by
\n\t      the appellants or sugar factories shall  stand
\n\t      discharged.\n<\/p><\/blockquote>\n
\t      (v)   It is made clear that the direction\t not
\n\t      to  recover Rs. 600\/- from  non-growers  would
\n\t      not  entitle  any member\tof  the\t cooperative
\n\t      society  or the cooperative society itself  to
\n\t      claim that it was entitled to be paid Rs.600\/-
\n\t      for its cane during the years in dispute.\n<\/p><\/blockquote>\n
39.  For the reasons stated in the order these\tappeals\t are
\ndisposed of with above directions.  Parties shall bear their
\nown costs.\n<\/p>\n
615<\/span><\/p>\n","protected":false},"excerpt":{"rendered":"
Supreme Court of India Maharashtra Rajya Sahkari Sakkar … vs State Of Maharashtra & Ors. Etc. … on 18 April, 1995 Equivalent citations: 1995 SCC, Supl. (3) 475 JT 1995 (3) 581 Author: R Sahai Bench: Sahai, R.M. (J) PETITIONER: MAHARASHTRA RAJYA SAHKARI SAKKAR KARKHANA SANGH LTD. Vs. RESPONDENT: STATE OF MAHARASHTRA & ORS. ETC. […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_lmt_disableupdate":"","_lmt_disable":"","_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[30],"tags":[],"class_list":["post-119078","post","type-post","status-publish","format-standard","hentry","category-supreme-court-of-india"],"yoast_head":"\nMaharashtra Rajya Sahkari Sakkar ... vs State Of Maharashtra & Ors. 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