LexSARASWATI INDUSTRIAL SYNDICATE LTD. ETC. versus UNION OF INDIA
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9.56 SARASWATI INDUSTRIAL SYNDICATE LTD. ETC. v. UNION OF INDIA August 30, 1974. [P. JAGANMOHAN REDDY, M. H. BEG AND A. ALAGIRISWAMI, JJ.] Sugar (Control) Order, 1966, Clause ?-Central Go1·t. fixing th• price "hav- ing_ regard to the estimated cost of production of sugar on the basis of the rele- vant 3chedule''-Fixation of price twice 1vithin o,ne .reaJon--Govt. if obliged to tnak_e adjustments for losses due to any previous erroneous fixations. Essential Comtnodi'ties Act, 1955 1 Section I'S-Fixation of the price of sugar i11 good faith-Suit for dan1ages if could be initiated. Clause 7(1) of the Sugar (Control) Order, 1966, gives the Central Govt. JJO~r to fu:. the Jnaximum sugar price by notification in the official Gazette "from time to time." Clause 7(2) requires the Govt. to· fix the price "having regard to the estimated cost of production of sugar on the basis of the relevant schedule". The appellants who have preferred these appeals on the certificate J!(anted by the High Court under Art. 133(l)(c) of the Constitution have chal- lenged the notification dated 28th June 1967 issued by the Central Govt. under Cl. ·7 of the Sugar Control order fixing ex-factory prices for sugar factories specified in the notification on the ground that the method adopted in fixing price:!S of sugar manufactured in various States was not correct. They also alJe.ged failure of the C-entral Govt. to take into account the fact that there was an ini- tial fixation of prices of sugar by a notification dated 1st February 1967 followed ,hy a final fixation on 28th June 1967. It was contended that appropriate ad- justments or allowances should have been made in the final fixation by a noti- fication of 28-6-1967. Rejecting the contentions and dismissing the appeals. , HELD : ( 1) Price fixation is more in the nature of a legislative mea!ure even though it may be based upon objective criteria found in a report or other material. It could not, therefore, give rise to a complaint that a rule of natural justice has not been followed in fixing the price. Nevertheless, the criterion adopted must be reasonable. Reasonableness, for purposes of judging whether there was an "excess of power" or an ••arbitrary'' exercise of it, is really the demonstration of a reasonable nexus between mauers which are taken into ac- count in exercising a power and the purpose of exercise of that power. (961 H; '962 A-BJ Shru Meenakshi Mills Ltd. v. Union of India (1974) 1 S.C.R. 468 and The Panipai Cooperative Sugar Mills v. Tiu Union of India [1973) 2 S.C.R. ~60 re1ied 0n. '.nJN Prl!tnier Automobiles Ltd. v. Union of Jndia, referred to. .A B c D E F The appellants have not asserted that they incurred loms or did not make reasonable profits. The practice of fixing the prices, once during the initial ·months of tb_e crushing season on the data then available and the other at the G end of the season, has been invariably followed. From the very nature of things, fixation or refixation of ex-factory price could not take plac.e on any other basis. Tt could not be delayed until the who-le season came to an end leaving the price fixed for the previous sea,,on, which was the only other alternative, to govern 'ales. The passage in page 116 of the report of the Sugar Enquiry Commi5Sion and the expressions "year to year in the same zone" and "determined annually" occurring therein clearly show that the Coriunission meant to lay down only @Hie-lines in determining relevant criteria for maximum price fixation. What H -is most important to note, however, is the reference to the margin of pro.fit, which the two sets of schedules, containing different heads filled in for deter- mining cost of manufacture, do not mention. It is evident that the schedules ·~re not all embracing. Again the passage at p. 115 shows that the concept of a A B c D E F ~ G SARSWATl INDUSTRIAL SYNDICATE V. UNION 957 '·fair-price", in1plied in a reasonable fixation, and not some mechanical formula. ignoring profits or losses altogether. w~ contemplated by the Commission. It cannot, bo said that tho Government, in fixing the price of sugar in 1967, took into consideration any extraneous matters or that it acted arbitrarily or un- reasonably in doing so. [967 B-C; 965 D-H] (ii) Clause 7(2) m1uires the Govt. to fix the price •having regard to the· estimated cost of production of sugar on the basis of tho relevant schedules."· The exp
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