SHRI MALAPRABHA CO-OP. SUGAR FACTORY LTD. versus UNION OF INDIA AND ANR.

Citation: [1993] SUPP. 2 S.C.R. 415 · Decided: 22-09-1993 · Supreme Court of India · Bench: M.N. VENKATACHALIAH · Disposal: Disposed off
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Judgment (excerpt)

SHRI MALAPRABHA CO-OP. SUGAR FACTORY LTD. 
A 
v. 
UNION OF INDIA AND ANR. 
SEPTEMBER 22, 1993 
[MN. VENKATACHALIAH, CJ. DR. T.K. THOMMEN 
AND S. MOHAN, JJ.) 
Constitution of India, 19SO: Anicle J9(l)(f), 19(l)(g) and 31-Levy 
sugar-Fixation of price-Held, Government cannot fzx an arbitrary price nor 
B 
can a price be fzxed on extraneous consideration--lf the price fzxed does not C 
secure a reasonable return on capital employed, it is liable to be challenged 
both on the ground of its being inconsistent with Section 3(3-C) of the Essen-
tial Commodities Act, 19S5, as also violative of Anicles 19(1) (f), 19) (1) (g) 
and 31 of the Constitution. 
The Essential Commodities Act, 19SS/1he sugarcane (Control) Order, D 
1966: Section 3(2) (f), 3(3-C)!Clause SA-Levy Sugar Supply (Control) 
Order, 1972-Levy sugar-Determination of price-Principles regard-
ing-Held, in fzxing levy sugar price nonns laid down in Section 3(3-C) and 
other relevant factors were taken into consideration: 
Clause SA-Additional price payable to sugarcane grower-Computa-
tiqn of-Held, manufacturer of sugar will be entitled to retain an amount 
equivalent to that paid to cane grower-Government could not proceed to 
detennination of levy price by mopping up JOO per cent of excess realisation 
of free sale sugar-Manufacturer of sugar had become entitled to 50 per cent 
of such realisation from 1.10.1972:-Directions given to amend Notifications 
accordingly. 
Administrative Law: 
E 
F 
Judicial review-Levy sugar-Fixation of price-Held, price fixation is G 
a legislative function--lt is permissible to coun to examine whether regard has 
been had to factors mentioned in Section 3(3-C) of the Essential Com-
modities Act, 19S5. 
The Union of India, in exercise of its powers under Section 3 of the 
Essential Commodities Act; 1955 promulgated Levy Sugar Supply (Con- H 
415 
416 
SUPREME COURT REPORTS [1993] SUPP. 2 S.C.R. 
A trol) Order, 1972 providing for compulsory supply or sale of sugar from 
a manufacturer or a recognised dealer of a specified quantity to a person 
or organisation to such State Governments as it may direct from time to 
time. Accordingly, the Central Government issued five notifications, dated 
29.11.1975, 9.2.1976, 3.8.1976, 22.12.1977 and 1.3.1978 requiring the 
B 
c 
D 
producers to supply sugar at the price determined in the Notifications. 
The manufacturers of sugar challenged the Notifications in writ 
petitions before various High Courts on the ground that in price fixation 
the Central Government did not take into consideration the relevant 
criteria laid down under Section 3 (3· C) of the Act. 
The High Court rendered their decision which led to the filing of the 
appeals on certificate, and special leave petitions before this Court by both 
the manufacturers and the Union of India-insofar as they were aggrieved 
by the decisions of the respective High Courts. A number of writ petitions 
• 
and transfer petitions were also filed before this Court. 
· It was contended on behalf of the sugar manufacturers that price 
fixation for the levy sugar was done on notional basis without regard to 
:he actualities as envisaged by Section 3(3C) of the Act, that Clause (d) of 
Section 3 (3C) of the Act, which ensures a reasonable return on the capital 
E employed in the business of manufacturing sugar, cannot be involved to 
limit or restrict the return or to mop off the profits, which the sugar 
producer may get by sale of free sugar by fixing a low price for levy sugar, 
and that the Notifications issued for the years 1974-75 to 1979-80 wherein 
the Government had admitted mopping up 100 per cent excess realisation 
on sale of free sugar were in conflict with Sugarcane (Control) Order 
F 
particularly Oause SA, since the Government after incorporation of the 
said clause could not, in law, determine the levy price by mopping up 100 
per cent excess realisation on sale of free sugar as the sugar manufacturer 
was entitled to 50 per cent of such excess realisation from 1.10.1974. 
G 
Disposing of the case, this court 
HELD : 1. The principles in respect of price fixation of levy sugar 
are: 
(i) The amount payable for levy sugar shall be calculated with refer· 
H ence to price of sugar as the Central Government may determine having 
SUGAR FACTORY LTD. v. V.0.1. 
417 
regard to four factors set out in Section 3(3C) of the Essential Commodities A 
Act, 1955, namely, (a) minimum price of sugarcane, (b) manufacturing 
cost, (c) taxes and duties,
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