THE STATE OF MADHYA PRADESH versus THE GWALIOR SUGAR CO., LTD., AND OTHERS

Citation: [1962] 2 S.C.R. 619 · Decided: 30-11-1960 · Supreme Court of India · Bench: BHUVNESHWAR PRASAD SINHA · Disposal: Case Partly allowed
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Judgment (excerpt)

2 S.C.R 
SUPREME COURT REPORTS 
619 
THE STATE 0]' MADHYA PRADESH 
v. 
THE GWALIOR SUGAR CO., LTD., 
AND OTHERS 
(AND CONNECTED APPEAL) 
(B. P. SINHA, c. J., s. K. DAS, A. K. SARKAR, 
N. RAJAGOPALA AYYANGAR and 
J. R. MUDHOLKAR, JJ.) 
Gess-Levy 011 sugar cane ordered by erstwhile Rulcr-Consti-
tutio1ial validity-Constitution of fadia, Arts. 14, 265, 373. 
In order to put the sugar industry on a stable footing, for 
which it was necessary to develop the cane area, the Ruler of 
the erstwhile Gwalior State by an order dated 27-7-1946 sanc-
tioned the levy of cess of one anna per maund on all sugar cane 
purchased by the respondent company. When the Government 
of Madhya Bharat, which was the successor state of the former 
Gwalior State, made a demand for payment of the cess, the 
respondent filed a petition before the High Conrt of Madhya 
Bharat challenging the legality of the levy on the grounds (r) 
that the order dated 27-7-1946 was only an executive order and 
not a law under Art. 265 of the Constitution of India and that, 
therefore, there was no authority for the imposition of the cess 
after January 26, 1950, and (2) that the levy was discriminatory 
and violated Art. r4 inasmuch as while the respondent was made 
liable to pay the cess the other sugar factories in the State were 
exempt. It was found that at the time when cess was first 
levied there was no sugar factory in existence in the Gwalior 
State other than that of the respondent. 
Held, that (r) the Ruler of an Indian State was an absolute 
monarch in which there was no constitutional limitation to act 
in any manner he liked, he being the supreme legislature, the 
supreme judiciary and the supreme head of the executive. Con-
sequently, the order dated 27-7-1946 issued by the Ruler of 
Gwalior State amounted to a law enacted by him and became 
an existing law under Art. 372 of the Constitution of India. 
The levy of cess was therefore by authority of law within the 
meaning of Art. 265; 
Madhaorao Phalke v. The State of Madhya Bharat, [r961] r 
S.C.R. 957, followed. 
(2) the levy of cess did not contravene Art. r4 because (a) 
the object was cane development in the particular area and a 
geographical classification based upon historical factors was 
a permissible mode of classification, and (b) a tax could not be 
struck down as discriminatory unless it was foµnd that it was 
imposed with a deliberate intention of differentiating between 
November 30. 
1961 
State of 
Madhya Pradesh 
v. 
Gwalior 
Sugar Co , Ltd. 
620 
SUPREME COURT REPORTS 
[1962] 
an individual and individual; and particularly, in the instant 
case, where when cess was first sought to be levied, there was 
no other sugar factory existing in the State. 
CIVIL APPELLATE JURISDICTION: Civil Appeals Nos. 
98 and 99 of 1957. 
Appeals from the judgment and order dated August 
31, 1954, of the Madhya Pradesh High Court in Civil 
Misc. Case No. 9 of 1953. 
R. Ganapathi Iyer and D. Gupta, for the appellant 
in C. A. No. 98 of 1957 a.nd respondents in C. A. No. 
99 of 1957. 
S. K. Kapur and Naunit Lal, for the respondents in 
C. A. No. 98 of 1957 and appellant in C. A. No. 99 of 
1957. 
1960. 
November 30. 
The Judgment of the Court 
was delivered by. 
MunHOLKAR, J.-These are cross appeals from two 
judgments of the erstwhile High Court of Madhya 
Bharat. Both of them arise out of a writ petition 
presented by the Gwalior Sugar Company Ltd., who 
are respondents in C. A. 98 of 1957, in which they 
challenged the validity of the levy of a cess on sugar. 
cane purchased by the respondents. The grounds un 
which the validity of the cess is challenged are two. 
The first ground is that it was not levied under any 
law and the second ground is that it is discriminatory 
against the respondents. 
In order to appreciate these contentions it is neces. 
sary to set out certain facts. In the year 1940 in pur. 
suance of an agreement entered into between the 
Govemrnent of Gwalior State and Sir Homi Mehta 
and others a sugar factory was 3Stablished at Dabra. 
The name of tlrnt factory is Tho Gwalior Sugar Co., 
Ltd. On Jmrn 20, 1946, the Maharaja Scindia, the 
ruler of Gwalior State constituted a Committee to con. 
sider the desirability of imposing a "cane cess on the 
lines of the United Provinces or Bihar and to recom. 
mend a procedure for fixation of sugar prices within 
the terms of the agreement subsisting between the 
Government and the factory". The Report of the 
2 S.C.R. SUPREME COURT REPORTS
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