Holding

The Uttar Pradesh Khandsari Sugar (Levy) Order, 1981 and the price fixation of Rs 320 per quintal are valid, do not infringe Articles 19(1)(g) and 14, and are not a colourable exercise of power.

Summary

Gupta Sugar Works, a Khandsari sugar manufacturer, challenged the Uttar Pradesh Khandsari Sugar (Levy) Order, 1981 which required surrender of 50% of first‑process output at a fixed price of Rs 320 per quintal. The petition alleged that the price fixation ignored the guidelines of sub‑section 3C of the Essential Commodities Act, amounted to an unreasonable restriction on Articles 19(1)(g) and 14, and that the State’s public‑auction sale of the levy sugar was a colourable exercise of power. The Court held that price fixation is not the Court’s function; it only checks that statutory considerations were observed and extraneous factors excluded. It reiterated that the primary objective of the Act is consumer interest, though the industry’s reasonable return is also a factor, and found the levy price reasonable. The State’s auction was justified to prevent deterioration of inferior quality sugar and was not a colourable exercise. Consequently, the levy order and price were upheld and the writ petition dismissed.

Issues considered

Whether the price fixation of levy Khandsari sugar complied with the guidelines of sub‑section 3C of Section 3 of the Essential Commodities Act, 1955.
Whether the levy order constitutes an unreasonable or excessive restriction on the fundamental rights guaranteed under Articles 19(1)(g) and 14 of the Constitution.
Whether the State’s sale of levy sugar by public auction amounts to a colourable exercise of power.
Whether the levy order is valid under the powers conferred by Section 3 of the Essential Commodities Act.

Legislation cited

Essential Commodities Act, 1955s. 3, s. 3C, s. 5

Subjects

Essential Commodities Actprice fixationlevy orderconsumer interestfundamental rightsArticle 19(1)(g)Article 14colourable exercise of powerpublic auctionUttar Pradeshsugar industry

Judgment

•

GUPTA SUGAR WORKS
1. v.
A
STATE OF U.P. & ORS.

OCTOBER 26, 1987

[B.C. RAY AND K. JAGANNATHA SHETTY, JJ.] B
,._
U.P. Khandsari Sugar (Levy) Order 1981: Levy Order-Validity
of-Khandsari manufacturers required to surrender 50% of produc-
lion-Fixation of price for levy khandsari sugar-Whether valid-
Wheth~r colourable exercise ofpower.

c
~
The U.P. Khandsari Sugar (Levy) Order, 1981 issued in exercise
of powers under section 3 of the Essential Commodities Act, 1955,
required Khandsarl manufacturing units to surrender levy or 50% of
the production by solphitation units in the first process. The balance
50% with the total production by subsequent process was left free to be
sold In the open market by the manufacturing units. The price fixed for D
the levy Khandsari sugar was Rs. 320 per qolntal.

In a writ petition, the petitioner challenged the price fixation on
the ground; that the State Government had not taken into consideration
the guidelines in-built in sob-section 3C or section 3 of the Essential
4 Commodities Act, 1955, that the levy order was unreasonable or exces- E
sive restriction on the fundamental rights guaranteed under Articles

- 19(l)(g) and 14 of the Constitution, and that the levy was a colourable
exercise of the power as the State Government sold the levy sugar by
public auction realising large profit.

Dismissing the Writ Petition, F
,..~
HELD: I.I The Court does not act like a Chartered Accountant
nor acts like an Income-Tax Officer. The Court is not concerned with
any individual case of any particular problem. The Court only
examines whether the price determined was with doe regard to consi-
derations provided by the statute, and whether extraneous matters have G
been excluded from determination. (5801>-E]
~
Union of India v. Cynamide India Ltd., AIR 1987 Sept, SC 1801
at 1805, followed.

t.2 The primary consideration in the fixation of price would be H
577
.
578 SUPREME COURT REPORTS [1988) 1 S.C.R.

the interest of consumers rather than that of producers. l581Fl
A

Since the petitioners in the instant case, are allowed to sell freely
at any rate they like, the remaining 50% of the Sugar (after excluding
the 50% which they have to give for levy) as also the produce by the
second and third process, the loss if any caused to the petitioners would
B be minimal. l581Gl

New India Sugar Works v. State of Uttar Pradesh & Ors., [1981) 3
SCR 29, relied ..

C J.3 It is clear from the Preamble, that the primary object of the ~
Essential Commodities Act, 1955 was to control production, supply,
and distribution of essential commodities, and to make such commo-
dities available at a reasonable price. The exercise provided under the
Art was intended ultimately to serve the interest of consumers. It is
fundamental in the entire scheme of the Act. But then, the interest of
D the industry as a whole cannot be left out. It is also required to be borne
in mind. The levy price of sugar should ensure reasonable return to the
industry. That is one of the guidelines provided under sub-section 3C of
section 3 of the Act. But that does not mean that the interest of pirodu·
cers should outweigh the interest of consumers. It would be tilting the ;,
balance too.much. [582C-F) ~
E

1.4 There is no colourable exercise of power. There was every
justification for the sale by public auction. The petitioner and some
other producers delivered inferior quality of Khandsari, which was
found to be unacceptable to consumers at Fair Price Shops. The State
-
F Officers accordingly reported to the Government, which issued instruc-
tions to distribute the levy sugar liberally through permits for
marriages and religious functions. The consumers, however, could not
come forward. The Government then directed the disposal of levy sugar
by public auction. It was not with a view to earn profit, although inci-
dentally the Government made some profit. The levy sugar was brought
G to public sale only to prevent deterioration when the consumers refused
to accept it. [583A-C)

The Panipat Co-operative Sugar Mills v. Union of India, [1973] 2
SCR 860 and Anakapalle Coop. Agrl. & Industrial Society Ltd. v.
Union of India & Ors., 1197312 SCR 882, referred to.
H
GUPTA SUGAR WORKS v. STATE OF U.P. [SHETTY, J.] 579

ORIGINAL JURISDICTION: Writ Petition No. 7993 of 1982.
A
(Under Article 32 of the Constitution of India).

R.K. Jain and R.P. Singh for the Petitioner.

Prithiviraj and Mrs. Shobha Dikshit for Respondent Nos. I and
3 to 5. ·
8

Kuldip Singh, Additional Solicitor General, Mr. C.V. Subba
Rao an.dB. Parthasarthy for Respondent No. 2.

The Judgment of the Court was delivered by
c
~ JAGANNAIBA SHETTY, J. This is a petition under Article 32
r of the Constitution. The petitioner is engaged in the manufacture of
Khandsari sugar. The petitioner challenges the validity of the U .P.
Khandsari Sugar (Levy) Order, 1981 ("Levy Order"). It was issued in
exercise of powers under Section 3 of the Essential Commodities Act,
0
1955 by virtue of delegation of power by the Central Government
under Section 5 of the said Act. The levy order requires Khandsari
manufacturing units to surrender levy of 50% of the production by
sulphitation units in the first process. The balance 50% of that process
with the total production by subsequent processes was left free to be
-+ sold in the open market by the manufacturing units. The price fixed for
the levy Khandsari sugar was Rs.320 per quintal. E
The petitioner challenges the price fixation on the ground that
:; the State Government has not taken into consideration the guidelines
in-built in sub-section 3C of Section 3 of the Essential Commodities
Act, 1955. The petitioner alleges that the levy order is unreasonable or

4" excessive restriction on the fundamental rights guaranteed under F
Articles 19( l)(g) and 14 of the Constitution. It is also the case of the
petitioner that the State Government sold the levy sugar by pubhc
auc~ion realising large profit and the levy therefore, was a colourable
exercise of the power.
Before considering these contentions, we may start with recent G
obs~rvation of 0. Chinnappa Reddy, J. in Union of India v. Cynamide
India Ltd., AIR 1987 Sept. SC 1802 at 1805:
J "Price fixation is neither the function nor the forte of the
Court. We concern ourselves neither with the policy nor
with the rates. But we do not totally deny ourselves the
jurisdiction to inquire into the question, in appropriate H
580 SUPREME COURT REPORTS [1988] 1 S.C.R.

proceedings, whether relevant considerations have gone in
A
and irrelevant cpnsiderations kept out of the determination
of the price. For example, if the legislature has decreed the
pricing policy and prescribed the factors which should
guide the determination of the price, we wilt, if necessary,
inquire into the question whether the policy and the factors
B are present to the mind of the authorities specifying the
price. But our examinati9n will stop there. We will go no
further. We will not deluge ourselves with more facts and
figures. The assembling of the raw materials and the
mechanics of the price fixation are the concern of the
executive and we leave it to them. And, we will not revaluate
the considerations even if the prices are demonstrably in-
c jurious to some manufacturers or producers. The Court
will, of course, examine if there is any hostile discrimina-
tion. That is a different 'cup of tea' altogether."

This will be the parametre and the limitati0n of inquiry by
D Courts whenever the price fixation of any essential commodity is
called into question. The Court does not act like a Chartered
accountant nor acts like an Income-Tax Officer. The Court is not con-
cerned with any individual case or any particular problem. The Court
only examines whether the price determined was with due regard to
considerations provided by the statute. And whether extraneous mat- 4-
E ters have been excluded from determination.

In the present case even this limited inquiry appears to be un-
necessary. The validity of the same levy order was the subject matter •
of decision of this Court in New India Sugar Works v. State of Uttar
Pradesh & Ors., [1981] 3 SCR 29.
F
There Fazal Ali, J. who spoke for the Bench observed:

"It was next strongly contended that in fixation of the price
of levy sugar the Government has not taken into considera-
tion the fact that the petitioners would undergo a serious
G loss because the price would not be sufficient even to cover
their manufacturing cost. We are, however, unable to
agree with this argument. The policy of price control has
for its dominant object equitable distribution and availabi-
lity of the commodity at fair price so as to benefit the
consumers. It is manifest that individual interest, however,
H precious they may be must yield to the larger interest of the
GUPTA SUGAR WORKS v. STATE OF U.P. !SHETTY, J.] 581

community viz., in the instant case, the large body of the
consumers of sugar. In fact, even if the petitioners have to A
bear some loss there can be no question of the restrictions
imposed on the petitioners being unreasonable. In Shree
Meenakshi Mills Ltd. v. U.O.I. this Court observed as
follows.
B
"If fair price is to be fixed leaving a reasonable
margin of profit, there is never any question of in-
fringment of fundamental right to carry on business
by imposing reasonable restrictions.

In determining the reasonableness of a restric-
tion imposed by law in the field of industry, trade or c
commerce, it has to be remembered that the mere
fact that some of those who are engaged in these are
alleging loss after the imposition of law will not ren-
der the law unreasonable."
D
(Emphasis supplied)

Similar view was taken by this Court in the case of Prag Ice and
Oil Mills & Anr. v. Union of India, [ 1978] 3 SCR 293 where the Court
speaking through Beg, C.J. observed as follows:
E

- "It has also to be remembered that the object is to secure
equitable distribution and availability at fair price so that it
is the interest of the consumer and not of the producer
which is the determining factor in applying any objective
tests at any particular time."
F
In this view of the matter, the ptimary consideration in the fixa-
tion of price would be the interest of consumers rather than that of the
producers. Moreover, we think that since the petitioners are allowed
to sell freely at any rate they like the remaining 50% of the sugar (after
excluding the 50% which they have to give for levy) as also the pro-
duce by the second and third process, the loss if any caused to the G
petitioners would be minimal.

Mr. R.K. Jain learned counsel for the petitioner however, urged
that the above case did not lay down the correct law. He said that the
primary consideration in the fixation of price would not be the interest
of consumers, but to ensure a reasonable return to producers. That H
582 SUPREME COURT REPORTS [1988] 1 S.C.R.

A according to him the law laid down by this Court in (i) The Panipat
Co-operative Sugar Mills v. Union of India, [1973] 2 SCR 860 and
Anakapalle Coop. Agrl. & Industrial Society Ltd. v. Union of India &
Ors., [1973] 2 SCR 882. Since these two decisions have not been refer-
red to in the New India Sugar Works case we should refer this case to a
larger bench for decision.
B
We do not think that the counsel is justified in his submission.
We do not find any .diversity of views taken in the aforesaid cases. All
those cases concerned with the price fixation of the essential commo-
dity under the Essential Commodities Act. The primary object of the
Act was to control the production supply and distribution of essential
commodities and to make such commodities available at a reasonable
C price. The Preamble of the Act makes it clear. It reads: "An Act to
provide in the interest of the general public, for the control of the
production, supply and distribution of, and trade and commerce in
certain commodities."

D The exercise provided under the Act was intended ultimately to
serve the interest of consumers. It is fundamental in the entire scheme
of the Act. But then, the interest of the industry as a whole cannot be
left out. It is also required to be borne in mind. The levy price of sugar
should ensure reasonable return to the industry. That is one of the
guidelines provided under sub-section JC of Section 3 of the Essential
E Commodities Act. But that does not mean that the interest of produ-
cers should outweigh the interest of consumers. It would be tilting the
balance too much. Such a contention in our opinion, also runs afoul of
our earlier analysis.
.
It is true that there is no express reference to Panipat and
F Anakapalle in the judgment in New India Sugar Works. But the judg-
ment need not be a digest of cases. It need not be written like a thesis.
The decision in New India Sugar Works may be brief, but not less
predictable on the principles of Panipat and Anakapalle. There this
Court found the levy price reasonable even from the point of view of
the industry. This Court took into consideration the liberty reserved to
G manufacturers to sell freely 50% of the Sugar manufactured and also
100% of the produce by 2nd and 3rd processes. This Court was of
opinion that by such a free sale the industry could get reasonable
return. We agree with this conclusion and see no reason for reconsi-
deration.

H As to the grievance of the petitioner that the State has made
GUPTA SUGAR WORKS v. STATE OF U.P. [SHETTY, J.] 583

profit by the sale of Khandsari sugar at public auction, we perused the A
counter affidavit of the State. We do not find any colourable exercise
of the power. There was every justification for the sale by public
auction. It has been stated that the petitioner and some other pro-
ducers delivered inferior quality of Khandsari. That was found to be
unacceptable to consumers at Fair Price Shops. The State officers
B
accordingly reported to the Government. The Government issued in-
structions to distribute the levy sugar liberally through permits for
marriages and religious functions. The consumers, however, could not
come forward. The Government then directed the disposal of levy
sugar by public auction. It was not with a view to earn profit although
incidentally the Government made some profit. The levy sugar was
brought to public sale only to prevent deterioration when the consu- C
mers refused to accept it. We have no reason to doubt the explanation
l given by the State Government.

In the result, the Writ Petition fails and is dismissed with costs.
D
N.P.V. Petition dismissed.