THE PANIPAT CO-OPERATIVE SUGAR MILLS versus THE UNION OF INDIA

Citation: [1973] 2 S.C.R. 860 · Decided: 06-11-1972 · Supreme Court of India · Bench: J.M. SHELAT · Disposal: Dismissed

Cited by 7 judgment(s) · see the full citation network in Lexace

Judgment (excerpt)

860 
THE PANIPAT CO-OPERATIVE SUGAR MILLS 
A 
v. 
THE UNION OF INDIA 
November 6, 1972 
[J.M. SHELAT, A. N. GROVER, K. K. MATHEW, A. K. 
MUKHERJEA AND Y. V. CHANDRACHUD, JJ.] 
Essential Commodities Act (10 of 1955); s.3 (3C)cls. (a) to (d)--
Scope of. 
From 1958 and even earlier,. ex-factory prices of sugar were worked 
out or. the basis of cost-schedules prepared by expert bodies appointed 
for !hot purpose. 
The prices in the cost schedules were 
prepared in 
respect of the entire production of sugar and not in relation only to that 
part of it which was required to be sold to government (referred to as 
levy sugar), although, partial control in one form or another was in vogue. 
Such cost-schedules were prepared on the basis of average duration and 
recovery i the minimum price of cane, the 
average 
cost of production 
in the various zones. taxes and a fair return on the capital ,emplOyed in 
the industry. 
In 1967, the Central Government was confronted with the 
two problems : (a) the deterioration in the sugar indu•try, and (b) the 
conflicting interests of the manufactureri the consumer and the 
cane 
grower. 
Accordingly Government announced its policy of partial cootrol 
under which 60% of the output of sugar would be acquired 
and the 
balance of 40%would be left for free sale. 
To implement this policy 
sub-s.3 (3C) was enacted in the Essential Commodities Act. 1955. Under 
the sub-section there must be an order under s. 3(2) (f) 
whereby a 
producer is required to sell sugar to the Gov-ernment. 
There shall then 
be paid to the producer an amount there or, that is, for such stock of 
sugar as is required 1'~ be sold; and such amount shall be calculated with 
refrence to such price of sugar as the Central Government may, by order 
determine, having regard to the four factors set out in els. (a), (b), (c) 
and (d) of s. 3(3C). 
Clause (a) provides for the minimum price, if 
a:iv, fixed for sugar cane by the Central Government.under s.. 3; Cl. (b) 
refers to the manufacturing cost of sugar, Cl. (c) to the duty or tax, i'f 
any or payable thereon: and 
Cl. (d) 
to the 
securing 
of 
a 
reasonable 
return 
on 
the 
capital 
employed 
in 
the 
business 
of manufacturing sugar. 
The words 'notwithstanding anything contained 
in sub-s.(3) suggests that the nmount payable to the person required to 
sell the stock of sugar would be with refe:ence t'O the price fixed under 
sub-s (3C). (865 E: 868 F-H; 870 D-G; 874B] 
In pursuance of the power reserved to it under s.3(2).(f) and s.3(3C) 
the Central Government required sugar factories, including the appellant-
ccmpanies to sell to it 60% of their production during 1970-71 at prices 
fixed by it under the Sugar (Price Determination) Order, 1971. 
The 
prices \\'ere fixed on the principles laid down by the Tariff Commission 
and othc: expert bodies. 
The appellants filed writ petitions in the High 
Court for quashing the Order and for refixation of the ex-factory pric,e 
for 1970-71 in respect of the sugar required to be sold to the Government 
under s.3(2) (f). The High Court dismissed the 
writ 
petitions. In 
appeal to this Court it w<is contended by the appellants that sub-section 
(3C), and its cl. (d) must be construed to be de•lin~ with levy sugar 
only, that a reasonable return under cl. (d) should be assured unitwise, 
and that the profit on the free sale of sugar should not be taken into 
B 
c 
D 
E 
F 
G 
H 
... 
.. 
PANJPAT SUGAR MILLS V. UNION 
861 
A 
account in considering whether a reasonable return has been allowed on 
the capital employed. 
B 
c 
D 
E 
F 
G 
H 
Dismissing the appeal, 
HELD : On the constru~tion of sub-s. (3C) and on the evidence pro-
duced there is no case for quashing the Sugar (Price 
Determination) . 
Order, nor, for refixation of the price fixed by the Goy.ernment under the 
suh·section. [881 DJ 
(a I The sub-section pr""' ides two things, (l) the determination by the 
Government of a fair price during the process of which regard shall be 
hJ.d to the fOur matters set out therein, and (2) payment to the manu-
factur.:r. part of \\hose stock is levied, an 'amount therefor', calculated 
\\:ith f'.!f~rcnce to 'such .price· as the Cen,tral Governntent may determine. 
The words ·amount therefor' mean the amount to be paid to the manu-
facturer in respect of such quantity of stock as is required lo be sold 
under an order made with referenco to sub-s. (2)(f). That amou~t is 
th~rcforc referable to the stock of sugar specified in such o

Excerpt shown. Read the full judgment & AI analysis in Lexace.