UNION OF INDIA AND ORS. versus SURYA PHOSPHATE LIMITED AND ANR.

Citation: [1992] 3 S.C.R. 817 · Decided: 12-08-1992 · Supreme Court of India · Bench: KULDIP SINGH · Disposal: Appeal(s) allowed
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Judgment (excerpt)

UNION OF INDIA AND ORS. 
A 
v. 
SURYA PHOSPHATE LIMITED AND ANR. 
AUGUST 12, 1992 
[KULDIP SINGH AND P.B. SAWANT, JJ.] 
B 
Administrative Law : 
Price controf-Ferti/ize,-Single Super Phosphat~ovemmenl's cif'-:-
cular dated 19.6.1982--lnterpretation of-New scheme for J>!IYment of difr . C 
ferential rate of subsidy in place of unifonn subsidy-Whether to be on IM 
basis of actual cost shown by manufacturers-Nonnative method adopted by 
Government for working out the cost of different components-Validity of. ' 
Single Super Phosphate (SSP) a fertilizer, was brought under! D 
Retention Price Control with effect from 23.5.1982. 'Jbe Fertili7.er Industry 
Coordination Committee (FICC) issued a scheme of subsidy in order to ' 
boost up the consumption or phospatic fertill7.er. The bendlt of the saij : 
subsidy was passed on to the farmers by IORring the prke. However, · 
prior to 23.5.1982 there was no uniformity in the price of SSP and it varied , E 
from manufacturer to manufacturer and from zone to zone. The Govar-· 
MeDt therefore changed the formula on the recommendation or a Workiq 
Group which examined and reviewed the subsidy on SSP. According to the 
revised formula variable costs would be determined and fixed costs sag-
gested by the Group would be added to arrive at the ex.factory price. 
Consequently, Government sent a Circular letter dat.ed 19.6.1982, to all '.F 
manufacturers or SSP. 
The Respondent-company has been manufactlllias SSP slace 
28.11.84 long after the new formula for subsidy came into fene. It ud no 
aptive plant and had to procure the raw material viz. Suphuric Adi frCl!M 
die market at a higher price. Though the Respondt!nt-company's llllit did G 
Ht incur any capital cost on setting up a matching Sulphuric Add Plaat, 
aotlonal cost on setting up such a plant to match the requirement of 
Installed capacity of SSP was provided for, while working out the coawa-
don cost. Subsidy was accordingly worked out and paid to the Res,_. 
dent· company. 
. 
H 
817 
) 
818 
SUPREME COURT REPORTS 
(1992) 3 S.C.R. 
A 
Not satisfied with the method of calculating subsidy, and insisting 
that the Government was obliged to take into consideration the landed 
costs of Sulphuric Acid at its factory, the Respondent-company filed a 
Writ Petition before the High Court. It was held by the High Court that 
the Government was bound to calculate subsidy payable to the company 
B 
taking into consideration its ex-factory price. Being aggrieved against the 
said order, Government preferred the-present appeal. 
Allowing the appeal, this Court 
>---
HELD : 1. The Circular letter issued by Government on 19th June, 
c 
1982 made no representation other than conveying to each of the manufac-
turing units that a scheme .for payment of differential rate of subsidy in 
._
place of the earlier uniform Oat subsidy was being introduced. What that 
differential rate of subsidy would be, would depend upon the ex- factory 
price worked out by the FICC separately for each manufacturing unit. The 
~---
method by which the ex-factory price was to be worked out for each of the 
D manufacturing units was not indicated in the Circular letter. That was to 
be on the basis of the recommendation of the Working Group as accepted 
by the Government. In fact, the new method of payment of subsidy was 
based on the said recommendation which also included the formula to 
work out the ex-factory price. (824 D,E] 
E 
2. It was implicit in the said Circular letter that the ex-factory price 
...... ~ 
would be worked out by the FICC on certain basis. It is incorrect to say 
that in the absence of a method for working out the ex-factory price 
indicated in the said Circular letter, it should be presumed that what was 
represented to the manufacturing units was that they would be paid 
F 
subsid~ on the basis of the actual costs shown by them. [824-H, 825-A,B] 
3. Understandably, the method adopted by the FICC for working out 
~ 
the ex-factory price was on a norma.tive basis as recoininended by the 
Working Group and accepted by the Government. That was as it should 
be. In the absence of such norms for working out the costs of different 
G components, there would virtually be chaos an_d arbitrariness, as also 
misfeasance at both ends. (825-C] 
CIVIL APPELLATE JURISDICTION: CivilAppeal No. 585of1992. 
r-
From the Judgment and Order dated 25.6.1991 of the Patna High 
H Court in Civil Writ Juri~diction Case No. 92 of 1990 (R). 
I 
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U.0.1. v. SURYA PHOS
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