1993 (9) TMI 352 - SC - Indian Laws

Supreme Court orders amendment of sugar price notifications under Essential Commodities Act

The Supreme Court directed the Union of India to amend the notifications for fixing levy sugar prices under the Essential Commodities Act, considering the ... - Issues Involved:1. Fixation of levy sugar price u/s 3(3C) of the Essential Commodities Act, 1955.2. Consideration of relevant criteria for price fixation.3. Legal validity of the price fixation orders.4. Impact of Clause 5A of the Sugarcane Control Order, 1966 on price fixation.5. Judicial review of the price fixation process.Summary:1. Fixation of Levy Sugar Price u/s 3(3C) of the Essential Commodities Act, 1955:The cases challenge the fixation of levy sugar prices under orders issued u/s 3(3C) of the Essential Commodities Act, 1955. The Central Government issued multiple orders for the years 1975-76 and 1977-78, mandating the compulsory supply or sale of sugar at determined prices.2. Consideration of Relevant Criteria for Price Fixation:The manufacturers argued that the Central Government did not consider the relevant criteria laid down u/s 3(3C) of the Act, including the fair price of cane, cess of tax, manufacturing cost, and reasonable return on capital employed. The Central Government contended that all relevant considerations were taken into account.3. Legal Validity of the Price Fixation Orders:The Karnataka High Court struck down the price determinations for non-application of mind. The Division Bench upheld some orders while striking down others due to reliance on outdated data and failure to consider distress-level free sale prices. The Supreme Court examined whether the Government had applied its mind to the factors mentioned in Section 3(3C).4. Impact of Clause 5A of the Sugarcane Control Order, 1966 on Price Fixation:Clause 5A mandates sharing of excess realisation from free sale sugar between sugar producers and cane growers. The manufacturers argued that post-1.10.74, the Government could not mop up 100% of the excess realisation from free sale sugar. The Supreme Court agreed, stating that the Government must consider Clause 5A, which entitles producers to 50% of such excess realisation.5. Judicial Review of the Price Fixation Process:The Supreme Court reiterated that price fixation is a legislative function, but judicial review is permissible to ensure the Government considered relevant factors. The Court found that the Government had considered the statutory minimum price, manufacturing cost, duties and taxes, and reasonable return on capital employed. However, the Court noted that the Government's methodology post-11.7.75 contradicted Bhargava Commission's recommendations and Clause 5A.Conclusion:The Supreme Court directed the Union of India to amend the notifications, taking into account the liability under Clause 5A of the Sugarcane Control Order and refix the levy sugar price per Section 3(3C) of the Act. The Government was given until 31st December 1993 to issue the amended notifications. The Court allowed partial encashment of bank guarantees provided by the appellants, with adjustments to be made after the new price determination.