1990 (3) TMI 358 - SC - Indian Laws

Zonal levy sugar price fixation under Section 3(3-C) upheld, audi alteram partem held inapplicable to legislative pricing

SC upheld the validity of the Central Government notifications dated 28 November 1974 and 11 July 1975 fixing levy sugar prices on a zonal basis under ... Fixation of the levy sugar prices on zonal basis - discriminatory, arbitrary and unreasonable ​​​​​​​- Validity of notifications dated 28th November, 1974 and 11th July, 1975 (Annexures 8 & 9) issued by the Central Government in exercise of its power under sub-section (3-C) of section 3 of the Essential Commodities Act, 1955 challenged - determination of the price of levy sugar as West and East Zones - validity of the subsection by reason of Article 3 lB of the Constitution of India - Held that:- What the learned Judge had in mind was an order by which the 'amount' was calculated in terms of sub-section (3-C) in respect of each individual producer and not an order determining the 'price of sugar'. While the former is non-legislative, the latter, by the very test adopted by the learned Judge, is legislative in character. We, therefore, understand the observation of the learned Judge on this point as applicable only to the individual order fixing the 'amount' in terms of the sub-section and not to orders determining the 'price of sugar' which are what the impugned orders are. Any other construction of the sub-section would conflict with what was adopted by the Constitution Bench in Panipat [1972 (11) TMI 91 - SUPREME COURT]and would, therefore, be unsustainable. The individual orders, calculating the 'amounts' payable to the individual producers, being administrative, orders rounded on the machanics of price fixation, they must be left to the better instructed judgment of the executive, and in regard to them the principle of audi alteram partem is not applicable. All that is required is reasonableness and fair play which are in essence emanations from the doctrine of natural justice. Petitions dismissed. Issues Involved:1. Validity of the notifications fixing levy sugar prices.2. Alleged arbitrariness and discrimination in the zonal price fixation system.3. Compliance with the statutory provisions of Section 3(3-C) of the Essential Commodities Act.4. Judicial review of price fixation orders.Detailed Analysis:1. Validity of the Notifications Fixing Levy Sugar Prices:The petitioners, owners of sugar mills in Uttar Pradesh, challenged the validity of notifications dated 28th November 1974 and 11th July 1975 issued by the Central Government under sub-section (3-C) of Section 3 of the Essential Commodities Act, 1955. These notifications fixed the prices of levy sugar for the 1974-75 production period. The petitioners argued that the prices were determined arbitrarily without considering individual cost characteristics, thus violating their fundamental rights.2. Alleged Arbitrariness and Discrimination in the Zonal Price Fixation System:The petitioners contended that geographical zoning for price fixation was irrational and discriminatory. They claimed that the system averaged wide cost disparities among producers of varying capacities, thereby giving undue advantage to larger factories. They argued that the fixation of prices on a zonal basis without regard to individual factory costs was arbitrary and unreasonable. The respondents countered that the classification into zones was upheld by the Supreme Court in previous cases and was based on recommendations from expert bodies like the Tariff Commission.3. Compliance with the Statutory Provisions of Section 3(3-C) of the Essential Commodities Act:The petitioners argued that the government did not comply with the mandatory requirements of Section 3(3-C), which necessitates considering factors such as the minimum price of sugarcane, manufacturing costs, taxes, and a reasonable return on capital. The Court noted that the expression 'having regard to' in the statute is directory and not mandatory. The government is required to consider these factors but is not limited to them. The Court found that the government had applied its mind to the relevant factors and had reasonably exercised its discretion.4. Judicial Review of Price Fixation Orders:The Court emphasized that price fixation is a legislative function and not subject to the rules of natural justice. It stated that judicial review is limited to examining whether the government acted within its powers and based its decisions on relevant considerations. The Court found that the impugned orders were supported by expert recommendations and relevant material. It concluded that the orders were neither discriminatory nor arbitrary and were consistent with the statutory provisions.Conclusion:The Supreme Court dismissed the petitions, upholding the validity of the notifications fixing levy sugar prices. The Court found no merit in the arguments that the zonal price fixation system was arbitrary or discriminatory. It held that the government had reasonably exercised its discretion under Section 3(3-C) of the Essential Commodities Act and that the price fixation orders were legislative in nature and not subject to detailed judicial scrutiny. The Court reiterated that its role in judicial review is limited to ensuring that the government acts within its powers and based on relevant considerations.