Holding

The Central Government must fix the levy‑sugar price having regard to the additional price under clause 5A and the State Advisory Price, as these fall within factors (b) and (d) of Section 3(3C) of the Essential Commodities Act, and the earlier High Court order excluding them is set aside.

Summary

The appellants, Mahalakshmi Sugar Mills and Govind Nagar Sugar Ltd., challenged the Central Government's fixation of levy‑sugar prices for the 1983‑84 and 1984‑85 sugar years, arguing that the government ignored the additional price payable to cane growers under clause 5A of the Sugarcane (Control) Order, 1966 and the State Advisory Price (SAP). The Supreme Court examined earlier judgments, especially Malaprabha‑1 and Malaprabha‑11, and held that these factors are relevant under clauses (b) and (d) of Section 3(3C) of the Essential Commodities Act, 1955. It ruled that the price‑fixation is a legislative function but must comply with the statutory factors, and the Central Government had erred by omitting the additional price and SAP. Consequently, the Court directed the Central Government to refix the levy‑sugar price, limiting the direction to the parties before it. The appeals of the sugar mills were allowed and the Union of India’s appeals were dismissed.

Issues considered

The Central Government’s price‑fixation of levy sugar must consider the additional price payable to cane growers under clause 5A of the Sugarcane (Control) Order, 1966.
Whether the State Advisory Price (SAP) fixed by Uttar Pradesh is a factor to be taken into account under Section 3(3C) of the Essential Commodities Act.
Whether the High Court’s decision in Mahalakshmi Sugar Mills (which excluded the above factors) should be reversed.
Whether the Central Government’s exercise of power under Section 3(2)(f) of the Essential Commodities Act is subject to judicial review for non‑compliance with statutory factors.

Legislation cited

Essential Commodities Act, 1955s. 3(2)(f), s. 3(3C)
Sugarcane (Control) Order, 1966

Subjects

Essential Commodities Actlevy sugar price fixationclause 5AState Advisory Pricepurposive constructionjudicial review of subordinate legislationsugar industry regulationmopping up

Judgment

[2008] 5 S.C.R. 793

-+ MAHALAKSHMI SUGAR MILLS CO. LTD. & ANR. A
v.
UNION OF INDIA & ORS.
(Civil Appeal No. 2258 of 2008)

MARCH 31, 2008
,. B
(S.B. SINHA AND V.S. SIRPURKAR, JJ.)
~

Essential Commodities Act, 1955:
s.3(3C)-Price fixation of levy sugar-Factors to be taken
into consideration - HELD: Fixation of price of levy sugar is c
within realm of Central Government - Determination of price
of levy sugar is required to be carried out keeping in view the
factors specified in s.3(3c).:.. Additional price paid to sugarcane
growers by sugar producers under clause 5-A of Sugarcane
(Control) Order, 1966 and State Advisory Price as mandated D
by State Government would be taken into account in
x determining the price of levy sugar - Central Government
directed to refix price of levy sugar - Direction confined to
parties before the Court including interveners - Sugarcane
(Control) Order, 1966 .:.. Clause 5-A. E
Administrative Law:
Subordinate Legislation - Price fixation of levy sugar -
HELD: Determination of price in terms of statutory provisions
is legislative function validity whereof may be questioned on F
the grounds enumerated in the judgment - Judicial review
Interpretation of Statutes:
Purposive construction and executive construction -
HELD: when legislative policy is reflected in a statutory G
provision, Court while being called upon to determine as to
whether the same has been complied with or not must apply
• -..,!. rule of purposive construction - Rules of executive
construction may a/so be applied in an appropriate situation.
793 H
794 SUPREME COURT REPORTS [2008] 5 S.C.R.

A The sugar producers, namely, appellants, in CA No.
2258 of 2008 and respondents in CA Nos. 2260 and 2261-
2272 of 2008, filed writ petitions before the High Court of
Delhi challenging determination of price of levy sugar for
the sugar years 1983-84 and 1984-85. It was the stand of
B the sugar producers that in pursuance of the Bhargava
Commission Report, the Central Government inserted
clause 5-A in the Sugarcane (Control) Order, 1966 as a
result whereof additional price came to be paid by the
sugar producers to the sugarcane growers over and
c above the Statutory Minimum Price and equivalent
amount from free market sale realization came to be
retained by the sugar producers, but the Government
while determining the price of levy sugar under s.3(3C) of
the Essential Commodities Act, 1955 did not consider the
factors resulting from insertion of clause 5-A in the
0
Sugarcane (Control) Order 1966, and continued 100%
mopping up of the extra sale realization. It was, therefore,
contended that 100% mopping up was illegal and the
liability of the sugar producers towards the cane growers
arising out of clause 5-A of the Order was to be considered
E before arriving at the price of levy sugar.
Meanwhile, in Malaprabha-1 1 , the Supreme Court held
that the liability of sugar producers under clause 5-A of
the Sugarcane (Control) Order would be taken into
F account while determining the price of levy sugar, and
directed the Union of India to amend the relevant
notifications. In Modi Industries Ltd. 2 pertaining to sugar
year 1982-83 the stand of the Central Government was
that the additional cane price payable under clause 5-A of
G the Sugarcane Control Order had not been taken into
consideration and furthermore, no mopping up of excess

1
Shri Malaprabha Cooperative Sugar Factor v. Union of India (Malaprabha-
1) 1993(2) Supp. SCR 415= (1994) 1sec648
...
H 2 Modi Industries Ltd. & Anr. v.. Union of India & Ors. (1999) 9 SCC 245
MAHALAKSHMI SUGAR MILLS CO. LTD. & ANR. v. 795
UNION OF INDIA & ORS.
--t- realization of free sugar sale was resorted to while fixing A
price of the levy sugar for the said year. Therefore, the
Court opined that in the facts of the case, Ma/aprabha-1
was not applicable. Similar orders were passed in Bharat
Sugar Mills 3 and Triveni Engineering Works 4 cases. Again
in Malaprabh-115 , distinguishing Modi Industry Ltd. case, B
I the Court reiterated its view in Malaprabha-1 that the new
~ liability under clause 5-A of Sugarcane (Control) Order
cast upon the sugar producers was to be taken into
consideration while fixing the price of levy sugar.
Two different Benches of the Court of Delhi High took c
different views of the decisions of the Supreme Court. In
the writ petition filed by Maha/akshmi Sugar Company
(giving rise to CA No. 2258 of 2008) the High Court opined
that the decision in Modi Industries Ltd. covered the field
in regard to the application of the factor of payment of D
additional price to the cane growers. In regard to the factor
.I\', of State Advice Price (SAP), the High Court held that the
same was not a relevant factor for the purpose of
determination of the price of levy sugar; and that the State
of Uttar Pradesh was not liable to pay the difference of E
price between the Statutory Minimum Price and the State
Advisory Price. In other writ petitions filed by Hari Nagar
Sugar Mills and others (giving rise to CA Nos. 2260 and
2261-2272 of 2008) the High Court took a contrary view.
In CA N0.2258 of 2008, it was contended for the F
~
appellants that the benefit given to sugar producers by
the Supreme Court in Ma/aprabha I and Malaprabha II,
should also be extended to the appellants.

G
3
Bharat Sugar Mills Ltd. & Anr. v. Union of India & Ors. (1999) 7 SCC 246

. -~
4
Union of India & Ors. v. Triveni Engg. Works.Ltd. & Ors. and (1999) 7
SCC244
5 Shri Malaprabha Co-op. Sugar Factory Ltd. v. Union of India & Anr.
(Malaprabha-11) 1997(1) SCR 641= (1997) 10 SCC 216 H
796 SUPREME COURT REPORTS [2008] 5 S.C.R.

A Disposing of the appeals, the High Court
HELD: 1.1 Indisputably, determination of price in
terms of statutory provisions is a legislative function. The
superior Courts ordinarily would not interfere therewith.
But, when such a function is carried out in contravention
B of the statutory requirements, the Courts are not ,
powerless. In a case of this nature, it becomes the duty of r
the Court to interpret its earlier judgments and refer to
the one which is applicable. [para 45] [820-G & H; 821-A]
C 1.2 Validity of subordinate legislation may be
questioned on the grounds that: (a) it is ultra vires the
Constitution; (b) it is ultra vires the parent Act; (c) it is
contrary to the statutory provisions other than those
contained in the parent Act; (d) law-making power has
been exercised in bad faith; (e) it is not reasonable; and
D (f) it goes against legislative policy, and does not fulfill
the object and purpose of the enabling Act. [para 53] ..,
[823-8, C & DJ
Indian Express Newspapers (Bombay) Private Ltd. and
E Ors. v. Union of India and Ors. (1985) 1 SCC 641; Bombay
Dyeing & Manufacturing Co. Ltd. v Bombay Environmental
Action Group [(2006) 3 SCC 434; Vasu Dev Singh v Union of
India [2006 (11) SCALE 108, Life Insurance Corporation of
India & Ors. v Retired L.I. C. Officers Association & Ors. 2008
(2) SCALE 484 - relied on.
F
1.3 When validity of a notification issued by the
Central Government in exercise of its power under a Y
statute is questioned, even if the provision is directory in
nature, substantial compliance thereof must be shown to
have been made. The statutory authority must apply its
G mind. The directions issued in the decisions of this Court
must be demonstrated to have been complied with.
[para 47-48] [821-C & D]
Shri Sita Ram Sugar Company Ltd. v. Union of India
~- .
H (1990) 3 SCC 223; Commissioner of Income-Tax, West
MAHALAKSHMI SUGAR MILLS CO. LTD. & ANR. v. 797
UNION OF INDIA & ORS.

-+ Bengal, Calcutta v. Gungadhar Banerjee & Co. (P) Ltd. (1965) A
3 SCR 439; The Panipat Co-operative Sugar Mills v. The
Union of India (1973) 1 SCC 129; The State of Karnataka &
Anr. v. Shri Ranganatha Reddy & Anr. (1977) 4 SCC 471; State
of UP & Ors. v. Renusagar Power Co. & Ors. (1988) 4 SCC;
Shri Sitaram Sugar Company Ltd. & Anr. v. Union of India & B
Ors. (1990) 3 SCC 223, Ku/dip Chand & Anr. v. Advocate-
' -1 General to Government of HP & Ors. (1990) 4 SCC 356; Delhi
Farming & Construction (P) Ltd. v. Commissioner of Income
. Tax, Delhi (2003) 5 SCC 36 - relied on.
1.4 A direction by the Central Government to the c
owners of the sugar mills that a part of their products
would be sold at a price determined by it was within its
realm. Such a quota could be fixed by the Central
Govrnment in exercise of its power under Section 3(2) (f)
of the Essential Commodities Act, 1955. [para 44] D
[820-F & G]
)( 1.5 Determination of price of levy sugar is required
to be carried out keeping in view the factors specified in
s.3 (3C) of the Essential Commodities Act, 1955. The term
"having regard to" occurring in s.3 (3C) of the Act plays E
an important role in the matter of construction of the
relevant provisions of the Act. If a price is determined
without applying the principles underlying the factors
enunciated in Section 3(3C) of the Act, the superior Courts
can issue requisite direction. [para 46] [821-B] F
1.6 Section 3(3C) of the Act specifies four factors: (a)
-_.,. the minimum price, if any fixed for Sugarcane by the
Central Government; (b) the manufacturing cost of sugar;
(c) the duty or tax, if any, paid or payable thereon; and (d)
securing a reasonable return on the Capital employed in G
the business of manufacturing, The Statutory Protected
· Price, as specified by the Sugarcane (Control) Order, 1966,
would be a factor which would be covered by clause (a).
> -~.
The Central Government, however, cannot ignore the
other factors. [para 5, 49) [802-A,_B; 821-G] H
798 SUPREME COURT REPORTS (2008] 5 S.C.R.

A 2.1 Additional price paid to the cane growers, as
envisaged under clause SA of the Order, or the State
Advisory Price as mandated by the States in exercise of
their regulatory power, would be considered in
determining the price of levy sugar. [para SO] [822-A & B]
B Shri Malaprabha Cooperative Sugar Factory v. Union of ·
India (Malaprabha-1) 1993(2) Supp. SCR 41S=(1994) 1 SCC
648; Sita Ram Sugar Company Ltd. v. Union of India (1990)
3 sec 223 - relied on.

c 2.2 The Essential Commodities Act does not
contemplate that manufacturers of sugar must continue
their activities at a loss. Purported object for which Clause
SA was introduced was to see t'hat the sugar industry
became entitled to excess realization of free sugar which
would give them a reasonable margin for meeting their
0
requirements including modernization and expansion of
the Plant. [para SS] [824-A & B]
2.3 Sub-clause (iv) of Clause SA of the Sugarcane
(Control) Order, 1966 mandates that the additional price
E determined under sub-clause (ii) shall be paid by the
producer of sugar to the sugarcane grower. It is, therefore,
mandatory in character and adds to the price of
sugarcane. It was clearly held that SO% of the mopping
up amount could not be taken into consideration for ;.
F determination of the price of levy sugar. Admittedly,
mopping up of 100% was held to be illegal. [para S6]
[824-C & D] y-
2.4 Malaprabha-11 not only explained the ratio laid down
in Malaprabha-1 but also took into consideration Modi
G Industries as also fresh arguments advanced on behalf of
the Central Government. All contentions of the Central
Government were specifically rejected. The decision in
Malaprabha-11 that while taking into consideration the _.,. . ._
unfavourable factor, the Central Government cannot
H refuse to consider the factor which is favourable to the
MAHALAKSHMI SUGAR MILLS CO. LTD. & ANR. v. 799
UNION OF INDIA & ORS.
__ _,, mill owner, assumes significance for two reasons: (1) it is A
possible that while confining mopping up to the extent of
SO%, the fact of additional price paid in terms of Clause
SA of the Order would be neutralized or adjusted but the
same would not mean that the exercise shall not be carried
into effect; and (2) the effect of payment of an extra amount B
jn terms of State Advisory Price cannot be refused to be
' -1 taken into consideration. [para S9-60) [82S-C, D & E]
Shri Malaprabha Cooperative Sugar Factor v. Union of
India (Malaprabha-1) 1993(2) Supp. SCR 41S=[(1994) 1 SCC
648; Shri Malaprabha Co-op. Sugar Factory Ltd. v. Union of c
India & Anr. (Malaprabha-11) 1997(1) SCR 641= (1997) 10
sec 216 - relied on.
Modi Industries Ltd. & Anr. v. Union of India & Ors. [1999)
9 sec 24S - held inapplicable.
D
3.1 When the legislative policy is reflected in a
statutory provision, the Court, while being called upon to
x: determine as to whether the same has been complied with
or not, must apply the rule of purposive construction. It is
idle, in a case of this nature, to contend that as the element
E
of additional price paid under Clause SA of the Order and
SAP had not been specifically provided for in Section
3(3C), they should be kept out of consideration for the
purpose of determina~ipn of the price of levy sugar. If the
actual price payable to the cane growers is absolutely
relevant for determining the price of levy sugar, F
consideration of the said elements would come either
--y under clause (b) or clause (d) of Section 3 (3C) of the Act.
It was so held in Malaprabha-1. In such a situation, Clauses
(b) and (d) of Section 3(3C) were clearly held to be attracted
by the Constitution Bench* also. [par!! 62-63] [82S-G, H; G
826-A, B & C]
*U.P Coop. Cane Unions Federation vs. West U.P Sugar
~4
Mills Assn. 2004 Supp. SCR 238 - relied on.
Shri Malaprabha Cooperative Sugar Factory v. Union of H
800 SUPREME COURT REPORTS [2008] 5 S.C.R.

A India (Malaprabha-1) 1993(2) Supp. SCR 415= (1994) 1 SCC t-
648 - relied on.
3.2 In the instant case, the rule of purposive
construction applies. The Central Government itself
correctly understood the decision of this Court in
B Malaprabha-1 as has been explicitly said in the counter
affidavit filed in Bharat Sugar Mills. Indisputably, for the •
purpose of determination of the price of levy sugar, it
r
called for the relevant materials from each of the owner of
the sugar mills. It is, therefore, too late in the day for the
c Central Government to contend contra. Rules of executive
construction in a situation of this nature may also be
applied where a representation is made by the maker of
legislation at the time of introduction of the Bill or
construction thereupon is put by the executive upon its
D coming into force, the same carries a great weight.
[para 65, 66-67] [829-A, B, C & DJ
New India Assurance Co. Ltd. v. Nusli Neville Wadia 2007
(14) SCALE 556 - relied on.
E R. V. National Asylum Support Service (2002) 1
W.L.R.2956; Pepper v. Hart (1993) A.C. 593; Wilson v. First
County Trust Ltd., [2004] 1 A.C. 816 - referred to.

Francis Bennion entitled "Executive Estoppel: Pepper
v. Hart revisited", published in Public Law, Sprin9 2007
F Issue, pg. 1 - referred to.
4. The Central Government is directed to refix the
price of levy sugar. However, this direction is confined
only to the parties before the Court including the
G interveners. The reason therefor is that the other mill
owners were not aggrieved thereby. The judgment of the
High Court in Hari Nagar Sugar Mills is affirmed and that in
Mahalakshmi is reversed. [para 71-73] [830-D, E, F]
.._
k--
CIVIL APPELLATE JURISDICTION : Civil Appeal No.
H 2258 of 2008.
MAHALAKSHMI SUGAR MILLS CO. LTD. & ANR V: 801
UNION OF INDIA &. ORS. [S.S. SINHA, J.]

. From the final Judgment and Order dated 9:11.2006 of A
the High Court of Delhi at New Delhi in W.P. Nos. 2585 and
2586/1986
WITH
Civil Appeal Nos. 2260 and 2261-2272 of 2008. · 8
•
1 Mohan Parasaran, A.S.G., K. K. Venugopal, L. Nageshwar
Rao, Dr. R.G. Padia, Jayant Bhusan, Syed Shahid Husain Rizvi,
SanjeevKumarSingh, Hina Rizvi, Bhargava Desai, Rahul, Udai
Kumar, Manik Karanjawala, H.K. Puri, V.M. Chauhan, Priya Puri,
Chidananda D.L., Gaurav Dhingra, K.K. Senthil, Navin Prakash, c
S. Wasim A. Qadri, Sushi! Kumar, D.S. Mahra, Fuzani Husain,
Manoj Kr. Dwivedi, Gunnam Venkateswara Rao, Lalit Srivastava,
Kamlendra Mishra, Ajay Bhargava, Vanita Bhargava, Susmit
Pusker (for MIS. Khaitan & Co.), Alok K. Agarwal, Vikas Nanda
and T. Mahipal for th,e appearing parties. D
The Judgment of the Court was delivered by
S.B. SINHA, J. 1. Leave granted.
2. What are the factors which are required to be taken into
E
consideration by the Central Government for determining the
price of levy sugar in exercise of its power under Section 3(3C)
of the Essential Commodities Act, 1955 (the Act) is the question
involved herein.
3. Before us, there are various owners of sugar mills who F
purchased sugarcane from the farmers.
4. Section 3(2)(f) of the Act empowers the Central
Government to fix compulsory quota of sugar produced by a
sugar producer in the manner prescribed by the Central
Government including the price thereof at which the same is to G
be sold. It is known as "levy sugar". The rest of the sugar, however,
can be sold by the producers in free market. It is known as "free
~
---;.' sugar''.
5. The factors which are relevant to be taken into
H
802 SUPREME COURT REPORTS [2008] 5 S.C.R.

A consideration by Central Government is contained in Section
3(3C) of the Act which includes:
(a) The minimum price, if any fixed for Sugarcane by the
Central Government.
B (b) The manufacturing cost of sugar.
•
(c) The duty or tax, if any, paid or payable thereon; and
(d) Securing a reasonable return on the Capital employed
in the business of manufacturing, and different price
c may be determined from time to time for different
areas or for different factories or for different kind of
sugar.
6. In these appeals, we are concerned with the
determination of price of sugar for the sugar years 1983-84 and
D 1984-85.
7. The Central Government, in exercise of its power
conferred upon it under Section 3 of the Act, made an order
known as the Sugarcane Control Order. Clause 5A of the said
E order reads, thus :
"Clause 5A. Additional price for sugarcane
purchased on or after 1st October 1974:
(1) Where a producer for sugar or his agent purchases
sugarcane, from a sugarcane grower during each
F sugar year, he shall, in addition to the minimum
sugarcane price fixed under Clause 3, pay to the
sugarcane grower an additional price, if found due,
in accordance with the provisions of the second
Schedule annexed to this Order.
G
xxx xxx xxx
(4) The additional price determined under sub-clause
(2) or sub-clause (3) as the case may be, shall be k · ._
paid by the producer of sugar to the sugarcane
H grower, at such time and in such manner as the
MAHALAKSHMI SUGAR MILLS CO. LTD. & ANR. v. 803
UNION OF INDIA & ORS. [S.B. SINHA, J.]

Central Government or the State Government, as the A
case may be, from time to time, direct.
(5) No ·additional price determined under sub-clause (2)
or sub-clause (3), as the case may be, shall become
payable by a producer of sugar who pays a price
higher than the minimum sugarcane price fixed under 8
clause (3) to the sugarcane grower.
Provided tMat the price so paid shall in no case be
less than the total price comprising the minimum
sugarcane price fixed under clause (3) and the c
additional price fixed determined under sub-clause
(2) or sub-clause (3), as the case may be.
(6) Where any extra price is paid by the producer of
sugar to the sugarcane grower for the supply
sugarcane in addition to the minimum sugarcane D
price fixed under clause (3), the extra price so paid
shall be adjusted against the additional sugarcane
price determined under sub-clause (2) or sub-clause
(3), as the case may be, and the balance, if any, shall
be paid to the sugarcane grower. E
(7)** Subject to the provisions of sub-clause (4), the
additional price shall become payable to a
sugarcane grower, if he, in performance of his
agreement with a producer of sugar, supplies not
less than 85% o the sugarcane so agreed: F
(* Provided that the Central Government or the State
Government as the case may be, may if it is satisfied
that the appellant had sufficient cause for not
preferring the appeal within a further period of thirty G
days, admit if presented within a further period of
fifteen days.
(**Provided that the additional price shall become
payable to a sugar grower even when he supplies
less than 85% of the sugarcane so agreed, if for the H
804 SUPREME COURT REPORTS [2008] 5 S.C.R.

A same supply he has not been subjected to any "t -
penalty by or under any Central or State Act or any
rules or orders made thereunder for his failure to
supply 85% of sugarcane so agreed."
8. Some of the States in India, however, even prior to
8 coming into force of the said Parliamentary Act, had enacted
Legislative Acts, inter alia, providing for to regulation and control )>-

of production of sugar.
9. We may notice that in the State of Uttar Pradesh, the
c Government of Uttar Pradesh enacted Sugar Control Act, 1938.
The Legislature of the State of Uttar Pradesh, furthermore,
enacted UP Sugarcane (Regulation of Supply and Purchase)
Act, 1953.
10. We may divide the mode and manner in which the
D prices for levy sugar were to be fixed by the Central Government
in three different periods.
11. Prior to 1.10.1974, the Central Government, for arriving
at the price of levy sugar, used to mop up the entire excess
realization of amount received by the owners of the sugar mills
E out of sale of free sugar as no restriction thereupon was imposed.

12. Levy sugar price also used to be premised on Statutory
Minimum Price (SMP), a factor specified in clause (a) of Section
3(3C) of the Act which is to be determined in terms of clause (3)
F of the Sugarcane Control Order, 1966 and not on the actual
cane prices paid by the sugar factories to the cane growers.
'f°-
13. The Central Government, however, appointed a
Committee commonly known as Bhargava Commission. It gave
its recommendations, inter alia, opining that mopping up of the
G extra sale realization should be confined to 50%.
14. The Central Government, relying on or on the basis of
the recommendations of the said Commission, introduced
clause SA in the said Order as a result whereof additional price k•
.
came to be paid to the growers of sugarcane (1) over and above
H
MAHALAKSHMI SUGAR MILLS CO. LTD. &ANR. v. 805
UNION OF INDIA & ORS. [S.B. SINHA, J.]

---r the SMP by the sugar producers; (2) equivalent amount from A
free market sales realization came to be retained by the sugar
producer.
15. In terms of the said amendment carried out in
Sugarcane Control Order in the year 1974, while determining
the levy sugar price, 50% of the mopping up was permitted B
~
__,,. provided the liability of sugar producers towards cane growers
to the extent of 50% of excess realization was also taken to be
a factor as a part of cost of production. To put it differently, in the
earlier scenario whereas entire extra sales realization was
- applied to reduce the price of levy sugar, upon amendment of c
the said Order, only 50% of the entire sales realization was
considered to be permissible to reduce the price of levy sugar
provided the liability of excess realization was also considered
as a part of cost of production.
D
16. Post October 1974, therefore, apart from the levy sugar
being based on the SMP only, the same was based on the actual
:x cane price payable by the sugar producer. However, according
to the sugar mill owners, the Central Government continued with
the exercise of determination of the price of levy sugar on the
basis of 100% mopping up and had not been considering the E
said changed scenario.
17. We may also notice that the State of Uttar Pradesh in
purported of its power conferred upon it under Section 16 of the
1953 Act enforced a price to be paid by the owners of the sugar F
mill to the producers known as State Advisory Price (ASP).
1' Indisputably, the SMP as also the ASP for sugarcane varied
from year to year.
18. Questioning the mode of calculation resorted to by the
Central Government in determining the price of levy sugar, G
particularly, the effect of clause 5A of the Sugarcane Control
Order, as also the price levied by the State known as ASP,
, --" Mahalakshmi Sugar Mills and Hari Nagar Sugar Mills filed writ
. applications before the Delhi High Court in the year 1985.
H
806 SUPREME COURT REPORTS [2008) 5 S.C.R.

19. Indisputably, similar writ applications for different sugar "f -
A
mills were filed by different owners of the sugar mills.

20. One of the contentions raised in the said writ
applications was that 100% mopping up was illegal and the
liability of the sugar producers towards the cane growers was
B to be considered before arriving at the price of levy sugar.
.
~
21. One of the matters which came up before this Court is
Shri Ma/aprabha Cooperative Sugar Factor v. Union of India
(Malaprabha-1) since reported in [(1994) 1 SCC 648] wherein
·c this Court, inter alia, held : ';

"102. In paragraph 2.15 the details of the scheme were
given as follows:

"SUGARCANE SUPPLIES STABILISATION SCHEME
D 2.15 The details of the scheme are as follows:
(1) A statutory minimum price for sugar-cane related to a ")<
basic recovery of 8.6 per cent with a premium for every
0.1 per cent increase in recovery on proportionality basis
will be fixed by the Government of India.
E
(2) The minimum price payable by individual factories will
be fixed on the basis of the recovery of the factory for the
normal crushing period of the previous season.

(3) The statutory minimum price as fixed above shall be
F paid to all the cane growers subject to clauses (18) and
(19) of this scheme.
(4) The factories shall share their extra sales realisation
from sugar with the cane growers who execute agreements
G for supply of cane and fulfil contracts.
(5) The extra sales realisations shall be calculated

H
according to the following formula:

S=R-L

Where S stands for the amount.-Shareable; R stands for
....... -
MAHALAKSHMI SUGAR MILLS CO. LTD. & ANR. v. 807
UNION OF INDIA & ORS. [S.B. SINHA, J.]
>~
the sales realisations ex-factory excluding excise duty paid A
or payable to the factory by the purpose; and L stands for
sugar price as calculated on the basis of the statutory
minimum cane price and according to the Tariff
Commission schedules in force at the time. (In periods of
control and partial control, L stands for the final levy price B
~
of sugar fixed by Government.)
(6) The sales realisations will be in respect of the sugar
produced during the season.
(7) The sales realisations will comprise- c
(i) the actual amount realised up to and inclusive of
' September 30; and
(ii) the estimated value of the unsold stocks held at the
end of September 30.
D
)(
In case (i1) the value of the stocks will be calculated at the
average rate of the sales made during the last fortnight of
September.
(8) The excess or shortfall in realisation from the actual
E
sale of the unsold stock of the season after September 30
shall be carried forward to and adjusted in the extra sales
realisations of the following season.
(9) The extra realisation shall be divided equally between
the factory and the cane growers .. :." F
1' 104. It is true that Clause 5-A deals with additional
price payable to the sugar-cane grower. However, if
the recommendations made by the Bhargava
Commission and the method of computation are
taken into consideration, it will be clear that the G
producer of sugar will be entitled to retain an amount
equivalent to the amount paid to the cane grower
. -~ under Clause 5-A. That amount cannot be taken into
consideration for determination of the price of levy
sugar. This will be evident from paragraphs 2.17, H
808 SUPREME: COURT REPORTS (2008] 5 S.C.R.

-t
A 2.20, 2.21 and 2.39 of Chapter II of Bhargava
Commission Report."
It was furthermore observed :

"108. We are unable to agree with the submissions
B advanced on behalf of the Government that Clause 5-A
deals only with the amount payable to the cane grower >-
and that it cannot have any relevance for determination of
levy sugar. If the determination of minimum price of sugar
and fixation of the price of levy sugar under quantity of
c sugar to be supplied by the producer are inter connected,
then they must be read as a whole and not se~rately as
though each is distinct. While fixing the price of levy sugar
regard is had only to the minimum cane price as spoken
to under Section 3(3-C)( a ). This minimum cane price is
referable to clause (3) of Sugar-cane (Control) Order. The
D
additional price payable to the cane grower under Clause
5-A will arise after the expiry of the sugar year. Sugar )(

price will have to be met only from the extra realisation
made by the producer by the sale of sugar in free market
which will naturally be more than the levy price.
E
109. In view of the above discussion, the impugned
notifications except the one dated November 28, 1974
cannot be upheld. The reason why we leave out the
notification dated November 28, 1974 is that the same
F came to be issued before the new pricing policy was
introduced. We hereby direct the Union of India to amend
the notific:ations taking into account the liability of the
manufacturers under Clause 5-A of the Sugar-cane
(Control) Order as regards cane price and refix the price
of levy sugar having regard to the factors mentioned in
G
Section 3(3-C) of the Act. The Government will have time
to issue the amended notifications as directed above till
December 31, 1993."
+- ~

22. Indisputably, a review application filed thereagainst was
H dismissed by this Court by an order dated 23.2.1994. The
MAHALAKSHMI SUGAR MILLS CO. LTD. & ANR. v. 809
UNION OF INDIA & ORS. [S.B. SINHA, J.]

·--t · Central Government filed an application praying for clarification A
as also for extension of time so as to enable it to re-determine
the price of levy sugar which by an order dated 22.2.1995 was
dismissed but the time for re-fixation of the price was extended
as prayed for. It appears that during the pendency of the said
writ petitions, in the said appeals before this Court in B
... Malaprabha-1, a transfer application came to be filed by Modi
""-1 Industries Ltd. The sugar year involved therein was 1982-83. In
that case, the Central Government stated that additional cane
price payable under clause SA of the Sugarcane Control Order,
1966 had not been taken into consideration and furthermore no c
mopping up of excess realization on levy free sale sugar having
been resorted to while fixing the levy price for the year 1982-83
by a judgment and order dated 30.1.1996. opined that
Malaprabha-1 was not applicable. The said decision is since
reported in Modi Industries Ltd. &Anr. v. Union of India & Ors.
D
[1999) 9 SCC 245]. This Court therein opined :
. "In compliance with our order dated 30.1.1996, an
additional affidavit on behalf of the Union of India has
been filed by Shri Deepak Khandekar, Deputy Secretary
to the Government of India. In the additional affidavit, it· E
has been expressly stated that while determining the
minimum cane price of levy sugar in regard has been had
only to the minimum cane price as spoken to in Section
3(3-C)(a) of the Essential Commodities Act, 1955 and
the additional cane price payable under clause 5-A of the F
Sugar (Control) Order, 1966, has not been taken into
''y
account, and that also there has been no mopping up of
I
. excess realization on levy-free sale sugar while fixing the
price of levy sugar for the season 1982-83.
In view of the above further statement made in the additional G
affidavit filed on behalf of the Union of India, we are satisfied
that this matter is not covered·by the decision of this Court
in Shri Malaprabha Coop. Sugar Factory Ltd. v. Union of
-~
--+ India [(1994) 1 sec 648]."
H
810 SUPREME COURT REPORTS [2008) 5 S.C.R.

A 23. We may notice that similar orders were passed by ·t •
this Court on 19.8.1998 in the case of Bharat Sugar Mills Ltd.
& Anr v. Union of India & Ors. and Union of India & Ors. v.
Triveni Engg. Works Ltd. & Ors. by a judgment and order dated
2.2.1999 which are since reported in (1999) 7 sec 246 and
B (1999) 7 SCC 244 respectively. In Bharat Sugar Mills (supra)
as also in Triveni (supra), this Court followed the decision in
Modi on the premise that the sugar year involved therein was )>-

also 1982-83.

24. It is, however, of some significance to notice that in the
c case of Bharat Sugar Mills, the Central Government in its
counter affidavit filed on 16.4.1998, in response to the Court's
order in regard to the sugar year 1983-84 and 1984-85 to re-fix
the price, stated :

"It is submitted that in regard to the Levy Sugar (Price
D
Determination 1982-83 Production) Order, the Supreme
Court has already upheld the notification issued under
Essential Commodities Act in Mis Modi Industries Ltd. v.
Union of India &Anr [TC (C) No.9 of 1990 (Annexure-1)].

E In the case of Malaprabha Co-operative Sugar Factory
Ltd. v. Union of India the Supreme Court had in their
order dated 22.9.1993 [(1994) 1 sec 648) and order
dated 28.1.1997 directed the refixation of ex-factory price
of levy sugar for the season 1974-75 to 1979-80. The
F Supreme Court had in its order dated 28.1.1997 held that
their order dated 20.2.1996 in TC (C) No.9 of 1990 was
applicable only in respect of sugar year 1982-83 and it
-("
cannot have any bearing for the years 1975-76 to 1979-
80.
G Based on the judgment delivered by the Supreme Court
Order dated 28.1.1997 in the case of Mis Malaprabha
Co-operative Sugar Factor Ltd. & Ors. v. Union of India &
Ors., the Government is considering the question of revision
of levy sugar prices for the years 1974-75 to 1979-80 and +- 4

H other subsequent years with the exception of the sugar
MAHALAKSHMI SUGAR MILLS CO. LTD. & ANR. v. 811
UNION OF INDIA &ORS. [S.B. SINHA, J.]
·-t year 1982-83 in accordance with the directions contained A
in .the aforesaid judgment."
25. Relying on or on the basis of the said assertion made
by the Central Government, this Court, by an order dated
21.4.1998, directed:
B
''T.C. (Civil) Nos. 18-20, 23-28, 30, 32-36 and 38-39/9 are
-I
disposed of in the light of the judgments of this Court in
Malaprabha Coo-operative Sugar Factory Ltd. Vs. Union
of India & Anr. (1994 (1) SCC 648) read with 1997 (1)
sec 216. The respondents 2 and 3 in their counter dated c
16.4.98 have also stated that for these years they are
revising sugar prices in the light of the above two
judgments. It is, therefore, ordered accordingly. The prices
will be fixed within 12 weeks from today. In respect of the
year 1982-83 the respondents shall file· an additional
D
affidavit setting out the basis on which the prices have
been fixed for the zones with which we are concerned in
~
the Transferred Cases. The affidavit will be filed within six
weeks. Rejoinder may be filed within two weeks thereafter.
Rest of the TCs. are adjourned till after the summer
vacation." E

26. The Central, Government, therefore, in no uncertain
terms took the stand that they would follow Malaprabha-1 in the
involving relevant sugar years except for the year 1982-83.
27. The question of implementation of Ma/aprabha-1 vis- F
a-vis Modi again came up for consideration before this Court,
-~
as some interlocutory applications were filed in Shri
Malaprabha Co-op. Sugar Factory Ltd. v. Union of India &Anr.
(Ma/aprabha-11) [(1997) 10 SCC 216]. This Court noticed the
wrong attitude on the part of the Central Government to find G
excuses for not complying with the judgment of this Court as the
same was not palatable to them. It therein moreover noticed
-4
several notifications issued by the Central Government from time
to time. Upon consideration of several contentions raised by
the Central Government in Malaprabha-1, this Court pointed out H
812 SUPREME COURT REPORTS [2008] 5 S.C.R.

i- •
A how the Union of India had been making attempt(s) to
misconstrue and misinterpret the earlier judgments. It, upon
noticing the contentions of the Central Government that Section
3(3C) of the Act and clause 5A were totally independent, in
Malaprabha-1, held : .
B "If the determination of minimum price of sugar and fixation
of the price of levy sugar under quantity of sugar to be ...
supplied by the producer are interconnected, then they
must be read as a whole and not separately as though
each is distinct".
c
28. The factors which were to be taken into consideration,
therefore, were necessary to depress and reduce the levy sugar
price. It was also noticed that clause 5-A was introduced as a
new pricing policy creating a new liability upon the owners of
the sugar mills observing :
D
"In view of this new liability this Court held that the
)(
Government was bound to take that also into account while
fixing the price of levy sugar, without specifying as to
whether the liability became component of Factor A' or
E Factor 'B' or both those factors of Section 3(3-C)."

29. Dealing with a new contention which was raised by
the Union of India visa-vis the decision in Modi, it was observed
that the direction given in paragraph 109 of Malaprabha-1 was
quite clear and did not lend itself to two interpretations and there
F was no confusion in relation thereto as thereby this Court had
directed the Central Government to take into account the liability -( -
of the manufacturer under clause 5A of the 1996 order as
regards cane price for re-fixation of the price of levy sugar. It
was commented :
G
"The doubt or confusion, if any, appears to us to be the
result of unwillingness of the Government to give up its
views and accept and implement the decision of this Court."
+-
30. It was furthermore clarified that the issue as to whether
H the entire or only 50% of the free sugar price could be mopped
MAHALAKSHMI SUGAR MILLS CO. LTD. & ANR v. 813
UNION OF INDIA & ORS. [S.S. SINHA, J.]

up in view of the new price policy contained in clause 5A for A
depressing the levy of the price, stating :
"Since by the new pricing policy a benefit wa.s sought to
be conferred on the producer of sugar by making him
entitled to retain 50% of the extra realization, this Court
held that the said amount cannot be taken into 8
consideration for determination· of the price of levy sugar.
That was entirely a different aspect. The obser./ation which
is made in para 109 and the direction given therein is with
respect to the aspect of sugar producer's liability to pay
additional sugarcane price: ·clause 5-A being C
interconnected with Section 3(3-C), this hew liability would
certainly get projected into Factors 'A' and 'B' of Section
3(3-C). As earlier pointed out mopping up of extra
realization is an element of Factor 'D' of Section 3(3-C).
Thus, the contentions raised on behalf of the respondents D
even otherwise also do not deserve to be accepted." .
31. Distinguishing Modi (supra), the law was stated in the
following terms :
"Even if the Government has omitted to take into E
consideration one unfavourable element, namely, mopping
up of excess realization it cannot justify its omission to
take into consideration another relevant element which is
favourable to the producer of sugar."
32. It was, therefore, emphasized that whereas an F
unfavourable element, namely, mopping up of excess realization
is to be taken into consideration, the favourable element, namely,
liability created towards cane growers for the purpose of
determination of the price could not have been ignored.
G
33. Two different Benches of the Delhi High Court, however,
reacted differently to the aforementioned decisions of this Court
by reason of the judgments which are impugned before us in
the case of Hari Nagar Sugar Mills disposed of on 16.3.2005
and in the case of Mahalakshmi Sugar Company disposed of H
814 SUPREME COURT REPORTS [2008] 5 S.C.R.

A on 9.11.2006. t .
34. Before noticing the respective contentions of the
learned counsel appearing for the parties herein, we may notice
two other decisions of this Court.

B 35. In The Godavari Sugar Mills Ltd. v. Union of India &
Anr. [JT 2001 (10) SC 527] wherein the relevant sugar year
was 1985-86, a question arose as to whether after a long lapse 'I"
of time, the petitioner therein should be permitted to raise new
contentions through a writ petition. This Court refused to exercise
c its discretionary jurisdiction in permitting the petitioner therein
to do so holding that the same will have great financial impact
on the Central Government. The Bench chose to follow Modi
(supra).
36. A contempt petition was also filed by Malaprabha-1 for
D non-implementation of the decisions of this Court wherein a
Bench of this Court opined that no contempt has been committed ,_
by the Central Government. The said decision is reported in ~
Malaprabha Coop. Sugar Factory Ltd. v. Union of India & Anr.
(Malaprabha-3) [(2002) 9 SCC 716]. It was held :
E
"This Court in the aforesaid two decisions has said that .
f

the retention of 50 per cent is a factor which can be taken I
into consideration in determining element (d) in Section
3(3C) of the Essential Commodities Act. The working
statement given before us shows that this has been done,
F not to the extent as desired by the petitioners, but the
result of this is that the levy price fixed at Rs.163. 780 in
respect of West U.P. has gone up to Rs.172.430. In our y·
opinion, the said fixation is in accordance with law and the
directions given by this Court have been complied with.
G Neither a case for contempt has been made out nor is
there any justification, in our opinion, for giving any direction
to the Government to refix the levy price under Section
3(3-C) of the Essential Commodities Act."
+--- -
37. To complete the narration of facts, we may also notice
H
MAHALAKSHMI SUGAR MILLS CO. LTD. & ANR. v. 815
UNION OF INDIA & ORS. [S.S. SINHA, J.]

that validity of the orders passed by the State of U:P. in purported A
4+
exercise of its power under Section 16 of the 1953 Act was
t questioned before a Division Bench of the Allahabad High Court
in West UP Sugar Mills Association & Ors. v. State of UP &
·Ors. [1997 (1) UPLBEC 541]. A DivisionBench of the said Court
noticed that the purported· policy of the State of Uttar Pradesh B
which had been prevailing from 1973 was ultra vires, the
legislative field being covered under the Essential Commodities
""' Act.· The UP Cooperative Cane Union Federations came up
before this Court questioning the correctness of the said
· judgment. The matter was referred to a Constitution Bench. The
majority reversed the decision of the Allahabad High Court
c
holding that the State in exercise of its power of regulation and
control of sugar industries could fix a higher price for the
sugarcane, stating :
"These cases clearly lay down that under the 1966 Order, D
the Central Government only fixes the minimum price and
it is always open to the State Government to fix.a higher
..;.... price. Under the enactments made by the State·
Legislatures, areas are reserved for the sugar factories
and the cane-growers therein are compelled to supply
E
sugarcane to them and therefore, the State Government
has incidental power to fix the price of sugarcane which
will also be the statutory price. They .further lay down that
the Cane Commissioner can direct the cane-growers and
the sugar factories to enter into agreements for purchase
of sugarcane at a price fixed by the State Government F
and such agreements cannot be branded as having been
·y obtained by force or compulsion."
It was furthermore held :
'The second reasoning given by the High Court is that G
even if the State Government had the power to _fix the
minimum cane price under Section 16 of the 1953 Act,
this power came to an end in view of Article 254(1) of the
-4 Constitution on the enactment of the EC Act and the
promulgation of the Sugarcane (Control) Order, 1955 (later H
816 SUPREME COURT REPORTS [2008] 5 S.C.R.

A replaced by the 1966 Order}, which now gives exclusive -t ~
power to the Central Government to fix the minimum price.
As discussed earlier, we are not in agreement with the )
aforesaid reasoning as the question of repugnancy does
not arise. The High Court has also held that the Central
B Government, while fixing the price of sugar under Section
3(3-C) of the EC Act, takes into consideration the minimum
price of sugarcane fixed under the 1966 Order and if the ).la
sugar mills are compelled to pay a higher price than that
fixed by the Central Government, it will disturb the price of
the levy sugar and such an eventuality could not have been
c contemplated by the legislature. Over a period of time, the
quota of levy sugar has gone down from 40 per cent to 10
per cent of the total production of sugar and the sugar
mills are now free to sell 90 per cent of their production in
open market. Under Section 3(3-C) of the EC Act, the
D Central Government has to determine the price of the levy
sugar having regard to several factors enumerated in the
sub-section and the minimum price fixed under the 1966 k
Order is only one of the factors. The manufacturing cost of
sugar and securing of reasonable return on the capital·
E employed in the business of manufacturing sugar are also
relevant factors under clause (b} and (d) of Section 3(3-C)
of the EC Act and, therefore, the fixation of higher price for
sugarcane by the State Government by itself cannot have
any major or substantial impact on the fixation of the price
F of the levy sugar by the Central Government."
38. We have noticed hereinbefore the divergent views
taken by two Division Benches of the Delhi High Court. -y·
39. In the case of Mahalakshmi Sugar, the Delhi High Court
G framed three issues :
"(a) Whether, in view of the judgments of the Hon'ble
Supreme Court in Malaprabha-1 and Malaprabha-11
the impugned order of the Central Government fixing
the price of levy sugar for 1984-1985 is liable to be .+-. -
H struck down inasmuch as it admittedly does not
MAHALAKSHMI SUGAR MILLS CO. LTD. & ANR. v. 817
UNION OF INDIA & ORS. [S.B. SINHA, J.]
f---t
account for the additional price payable by the sugar A
·manufacturer under Clause SA of the Control Order?
(b) Is the Central Government, while fixing the price of
levy sugar under Section 3(3C) EC Act, liable to
account for the SAP fixed by the State of UP and
mandatorily required to be paid by the sugar B
"" manufacturer to the sugarcane grower?
(c) Is the State of UP liable to bear the liability arising
out of the difference between the SAP and the
combination of the SMP and the additional price?" c
y

40. In regard to
.
the first issue, it was held that the decision
/

in Modi (supra) covers the field in regard to the application of
the factor of payment of additional price to the cane growers. In
regard to the factor of State Advice Price (SAP), the High Court
upon noticing paragraph 44 of the judgment in Cane Growers D
Federation (supra) held that the same was not a relevant
factor for the purpose of determination of the price of levy sugar.
In regard to the issue (c), it was held that the State of Uttar
Pradesh is not liable to pay the difference of price to the writ
petitioners. E
41. Mr. Nageshwar Rao, learned senior counsel appearing
on behalf of the appellant in CA @ SLP (C) No.481/07
(Mahalakshmi) urged :
1. Determination of price of levy sugar being a statutory F
"y legislative function, the Central Government could
not have ignored any of the factors laid down therefor.
2. As in Ma/aprabha-1, levy of additional price in terms
of Clause SA of the order was held to be a relevant
factor within the meaning of clause (b) of Section G
3(3C) of the Act, the Central Government .could not
. ...,.
have ignored the same only on a specious plea that
the mopping up of the excess amount realized by the
sugar mill owners have come down from 100% to
SO%. H
818 SUPREME COURT REPORTS [2008] 5 S.C.R.

+"
A 3. In view of the clear and unambiguous directions of
this Court in Malaprabha-1, as clarified in
Ma/aprabha-11, the Central Government was
obligated to take into consideration the fact that the
liabilities of the owner towards the cane grower in
B terms of Clause 5A of the Order as also the State
Advice Price would follow in purview of clauses (b) x
and (d) of Section 3(3C) of the Act.

4. A Constitution Bench of this Court having opined
that imposition of SAP being statutory in nature and
c as the same enhanced the liability of the sugar mill
owners to be a relevant factor for determination of
the price of levy sugar both under clauses (b) and (d)
thereof, the High Court committed a serious error in
passing the impugned judgment.
D
5. The High Court misread and misinterpreted the
.J.~
observations of this Court in paragraph 44 of the UP
Cane Growers' case wherein it had categorically been
held that SAP for the purpose of determination of the
price of levy sugar would come within the purview of
E clause (b) of Section 3(3C) of the Act.
6. Price of sugarcane for being 70% component of the
price of sugar, the total liability of the owner in relation
thereto was mandatorily required to be considered
F by the Central Government.
7. In view of the stand taken by the Central Government
"( .
itself in the case of Bharat Sugar Mills for the sugar
years 1983-84 and 1984-85 which was not confined
to the case of the petitioners therein, the Central
G Government could not have taken a different stand in
the instant cases.
42. Mr. Mohan P1rasaran, learned Additional Solicitor ~-

General appearing on behalf of the Union of India, on the other
hand, urged:
H
MAHALAKSHMI SUGAR MILLS CO. LTD. & ANR. v. 819
UNION OF ·INDIA & ORS. [S.B. SINHA, J.]
I·-+
1. In view of the decisions of this Coart in Malaprabha- A
I, the Central Government sought to rectify the mistake
by introducing Clause SA in the Sugar Control Order
in terms whereof the additional price required to be
paid to the cane growers was to be adjusted with the
~ 50% mopping up from the excess amount realized B
~
by the owners of the sugar mills.
2. This Court in Malaprabha-3 having found the action
on the part of the Certral Government to be in terms
of the decision of this Court in Malaprabha-1, no case
has been made out for interference with the impugned c
· judgment.
3. There being no difference in determination of the
price for levy sugar for the years 1982-83 and 1985-
86 vis-a-vis sugar year 1983-84 and 1984-85, this
D
Court should affirm the decision of the Delhi High
Court dismissing the writ petition of the owners,
particularly, when a similar view has been taken in
Bharat Sugar Mills (supra) and Triveni (supra).
4. In any event, even on equitable considerations, this E
Court should not interfere with the decision of the
High Court after such a long time.
5. Power of judicial review in the case of the price
fixation being limited, this Court should not interfere
in the matter particularly having regard to the fact F
''y
that fixation of price is a legislative function .
.43. The Parliament enacted the Essential Commodities
Act, 1955 to provide in the interest of general public, the control
of production, supply and distribution of, and trade and G
commerce, in certain commodities. Section 3(3C) of the Act
reads as under :
"3.(3C) Whe.re any producer is required by an order made
with reference to clause (f) of sub section (2) to sell any
H
820 SUPREME COURT REPORTS [2008] 5 S,C.R

+·I
A kind of sugar (whether to the Central Government or a
State Government or to an 'officer or agent of such
Government or to any other person or class of persons)
and either no notification in respect of such sugar has
been issued under sub-section (3A) or any such
B notification, having been issued, has ceased to remain in
force by efflux of time, then, notwithstanding anything
contained in sub-section (3), there shall be paid to that
producer an amount therefor which shall be calculated
with reference to such price of sugar as the Central
c Government may, by order, determine, having regard to-

(a) the minimum price, if any, fixed for sugarcane by Central
Government under this section ;
(b) the manufacturing cost of sugar;
D (c) the duty or tax, if any, paid or payable thereon; and
(d} the securing of a reasonable return on the capital
employed in the business of manufacturing sugar and
different prices may be determined from time to time for
different areas or for different factories or for different kinds
E of sugar.
Explanation.-For the purposes of this sub-section,
"producer" means a person carrying on the business of
manufacturing sugar."
F 44. A direction by the Central Government to the owners
of the sugar mills that a part of their products would be sold at a
price determined by it was within its realm. Such a quota could
be fixed by the Central Govrnment in exercise of its power under
Section 3(2)(f) of the Act.
G
45. Indisputably, determination of price in terms of the
provisions of the Act is a legislative function. The Superior Courts
ordinarily would not interfere therewith. But when such a function
is carried out in contravention of the statutory requirements, the
H courts are not powerless. In a case of this nature, it becomes
MAHALAKSHMI SUGAR MILLS CO. LTD. & ANR. v. 821
UNION OF INDIA & ORS. [S.B. SINHA, J.]

the duty of the Court to interpret its earlier judgments and refer A
the one which is applicable.

46. Determination of a price is required to be carried out
. keeping in view certain factors specified therein. The term
"having regard to" plays an important role in the matter of
construction of the relevant provisions of the Act. If a price is 8
determined without applying the principles underlying the factors
enunciated in Section 3(3C) of the Act, the superior courts can
issue requisite direction.

4 7. When the validity a notification issued by the Central c
Government in exercise of its power under a statute is
· questioned, eyen if the provision is directory in nature, substantial
compliance thereof must be shown to have been made. The
statutory authority must apply its mind.

48. The directions issued in the deci$ions of this Court D
must be demonstrated to have been complied with. {See Shri
Sita Ram Sugar Company Ltd.· v. Union of India [(1990) 3 SCC
223)}. [See also Commissioner of Income-Tax, West Bengal,
Calcutta v. Gungadhar Banerjee & Co. (P) Ltd. ((1965) 3 SCR
439, Page 444, Placitum E to Page 445, Placitum C]; The E
PfJnipat_ Co-operative Sugar Mills v. The Union of India [(1973)
1 SCC 129, Para 30]; The State of Kamatalsa .& Anr. v. Shri
Ranganatha Reddy & Anr. ((1977) 4. SCC 471], Paras 22 to
24; State of U.P. &-Ors. v. Renusagar Power Co. & Ors. ((1988)
4 SCC 59, Paras 80-84]; Shri Sitaram Sugar Company Ltd. & F
Anr. v. Union of India & Ors. [(1990) 3 SCC 223, Paras 28-30];
Ku/dip Chand & Anr. v. Advocate-General to Government of .
HP & Ors. [(1990) 4 SCC 356, Para 15]; Delhi Farming &
Construction (P) Ltd. v. Commissioner of Income Tax, Delhi
[(2003) 5 SCC 36, Para 26].
G
49. Section ·3(3C) of the Act specifies four factors. The
Statutory Protected Prrce, as specified by the Order, would be
a factor which would be covered by clause (a). The Central
Government, however, cannot ignore the other factors.
H
822 SUPREME COURT REPORTS [2008] 5 S.C.R.

A 50. How the statutory direction to pay additional price to
the cane growers, as envisaged under clause 5A of the Order
or the State Advisory Price as mandated by the States in
exercise of their regulatory power ,would be applied in
determining the price of levy sugar was the subject matter of
B various decisions of this Court.
51. In Malaprabha-1, this Court noticed the statutory change
effected by reason of insertion of Clause SA in the Order w.e.f.
1.10.1974. The question raised before this Court was that in
price fixation, the Central Government had not taken into
C consideration the relevant criteria laid down under Section 3(3C}
of the Act while issuing notifications in regard to the fixation of
price of levy sugar. Noticing the decision of this Court in Indian
Express Newspapers (Bombay) Private Ltd. and Ors. v. Union
of India and Ors. [(1985) 1 SCC 641), it was held that
D subordinate legislation can be questioned on any ground on
which the primary legislation could be questioned. The premise
ofjudicial review may be glanced from the following observations
made by this Court in Bombay Dyeing & Manufacturing Co.
Ltd. v. Bombay Environmental Action Group [(2006) 3 SCC
E 434):
"80. A policy decision, as is well known, should not be
lightly interfered with but it is difficult to accept the
submissions made on behalf of the learned counsel
. appearing on behalf of the Appellants that the courts cannot
F exercise their power of judicial review at all. By reason of
any legislation whether enacted by the legislature or by
way of subordinate legislation, the State gives effect to its
legislative policy. Such legislation, however, must not be
ultra vires the Constitution. A subordinate legislation apart
G from being intra vires the Constitution, should not also be
ultra vires the parent Act under which it has been made.
A subordinate legislation, it is trite, must be reasonable
and in consonance with the legislative policy as also give
effect to the purport and object of the Act and in good
H faith."
MAHALAKSHMI SUGAR MILLS CO.LTD. & ANR. y. 823
UNION OF INDIA & ORS. [S.S. SINHA, J.)
j.-+
52. Judicial review of subordinate legislation has also, been A
dilated upon by the Court recently in Vasu Dev Singh v. Union
of/ndia [2006 (11) SCALE 108, Paras 12 to 23]. {See also Life
Insurance Corporation of India & Ors. v. Retired L.l.C. Officers
Association & Ors. [2008 (2) SCALE 484]}.
" >\ 53. From these decisions, it may be deduced that validity 8
of subordinate legislation may be questioned on the ground
that:

a) it is ultra vires the Constitution;

b) it is ultra vires the parent Act; c
c) it is contrary to the statutory provisions other than
those cont.ained. in the parent Act;
d) law-making power has been exercised in bad faith;
D
e) It is not reasonable; and
·-+:.
f) it goes against legislative policy, and does not fulfill
the object and purpose of the enabling Act.
· 54. In Malaprabha-1, Statutory Minimum Price statutorily
E
required to be paid by the sugar producers to the sugarcane
grower was held to be an element so far as factor (b) of Section
3(3C) of the Act is concerned._ This Court took notice of the
r-ecommendations of Bhargava Commission. This Court;
despite its limited power of judicial review, held that the Central
Government cannot ignore any of the factors specified in Section· F
'y
3(3C) of the Act for the purpose of fixation of price for levy sugar.·
What was relevant was the actual cane price paid and excess
realization from free market sales therefor.
55. In Sitaram Sugar (supra) payment of price of G
sugarcane to the growers has been found to constitute 70% of
the total price. Therefore, it indisputably had a great role to play
• -j. for determining the price of levy sugar. Only with a view to
determine the price, it was also necessary to take into
consideration the manufacturing cost and reasonable return on
H
824 SUPREME COURT REPORTS [2008] S S.C.R.

A the capital employed. The Essential Commodities Act does not
contemplate that manufacturers of sugar must continue their
activities although the units were running at a loss. Purported
object for which Clause SA was introduced was to see that the
sugar industry became entitled to excess realization of free
B sugar which would give them a reasonable margin for meeting
their requirements including modernization and expansion of
the Plant.
S6. Sub-clause (iv) of Clause SA of the Order mandates
that the additional price determination under sub-clause (ii) shall
C be paid by the producer of sugar to the sugarcane grower. It is,
therefore, mandatory in character and added to the price of the
sugarcane. It was clearly held that 50% of the mopping up
amount could not be taken into consideration for determination
of the price of levy sugar. Admittedly, mopping up of 100% was
D held to be illegal.
57. It was in the aforementioned premise, this Court
followed the decision of Justice E.S. Venkataramiah in Writ
Petition No.432 filed in the High Court of Karnataka (quoted in
Ma/aprabha-1 (1994) 1 SCC 648}, wherein it was observed that
E if the additional price under Clause SA is allowed to be done,
the producer of sugar would be compelled to ~arry on production
of sugar without having an idea of the price that is likely to be
determined by the Central Government under Section 3(3C). A
producer must draw an object, having regard to his assets and
F liabilities, income and expenditure, whether he would be able
to have a reasonable amount of profit or not. It was in that
situation, the Central Government was directed to refix the price
of levy sugar. The jurisdiction of this Court to interfere in the
matter had clearly been spelt out.
G
58. Modi, Bharat Mills and Triveni dealt with sugar year
1982-83 only. It proceeded on the basis that in that year, the
mopping up having not been done and levy in terms of Clause
SA had not been applied, the factors laid down under Section
H 3(3C) stood complied with. It is for the aforementioned limited
MAHALAKSHMI SUGAR MILLS CO. LTD. & ANR. v. 825
UNION OF INDIA & ORS. [S.B. SINHA, J.]

extent, Malaprabha~l was distinguished. No reason has been A
~·-t
assigned in support of its decision. Rival contentions had not
been noticed. The effect of payment of additional price as also
SAP effect in determining the price did not fall for consideration
therein. Godavari (supra), as noticed hereinbefore, was decided
on the same line; particularly, having regard to the fact thatthe B
prayers made by the appellant therein are sought to be
" ), amended which was not allowed ..
59. It is in the aforementioned situation, Ma/aprabha-11
assumes significance. It not only explained the ratio laid down
in Malaprabha-1 but also took into consideration Modi Industries c
(supra) as also fresh arguments advanced on behalf of the
Central-Government. All contentions of the Central Government
were specifically rejected.
60. The decision in Malaprabha-11 that while taking into
D
consideration the unfavourable factor, the Central Government
cannot refuse to consider the factor which is favourable to the
"-)., mill owner assumes significance. We say so for two reasons -
(1) it is possible that while confining mopping up to the extent of
50%, the fact of additionatprice paid in terms of Clause 5A of
the Order would be neutralized or adjusted but the same would E
not mean that the exercise shall not be carried into effect; and
(2) the effect of payment of an extra amount in terms of State
Advisory Price cannot be refused to be taken into consideration.
61. We are not unmindful of the fact that the learned counsel F
for the appellant in Mahalakshmi before the High Court confined
its case only to SAP but then in Hari Nagar Sugar Mills, the
Delhi High Court accepted the contentions which have been
'""' raised before us.
62. When the legislative policy is reflected in a statutory G
provision, the Court, while being called upon to determine as to
whether the same has been complied with or not, must apply
the rule of purposive construction. It is idle, in a case of this
)._~
nature, to contend that as the element of additional price paid
under Clause 5A of the Order and SAP had not been specifically H
826 SUPREME COURT REPORTS [2008] 5 S.C.R.

A provided for in Section 3(3C}, they should be kept out of f"
consideration for the purpose of determination of the price of
levy sugar. If the actual price payable to the cane growers is
absolutely relevant for determining the price of levy sugar, we
have no doubt in our mind that consideration of the said elements
B would come either under clause (b) or clause (d) of Section
3(3C) of the Act. It was so held in Malaprabha-1. It is interesting ,,
to note that the Constitution Bench of this Court in UP. Coop. A
Cane Unions Federations rejected a contention raised by the
parties that in the event the State is held to have the legislative
competence to impose the same, it will have an adverse effect
c on the price of levy sugar required to be determined under
Section 3(3C) of the Act as noticed supra.
63. Clauses (b) and (d) of Section 3(3C) were, therefore,
clearly held to be attracted by the Constitution Bench also.
D 64. The importance of applying the Rule of purposive
construction has recently been noticed by this Court in New India
Assurance Co. Ltd. v. Nusli Neville Wadia [2007 (14) SCALE _...,.
556] in the following liness :

E "48. Section 5 of the Act, on a plain reading, would place
the entire onus upon a noticee. It, in no uncertain terms,
states that once a notice under Section 4 is issued by the
Estate Officer on formation of his opinion as envisaged
therein Page 0183 it is for the noticee not only to show
cause in respect thereof but also adduce evidence and
F make oral submissions in support of his case. Literal
meaning in a situation of this nature would lead to a
conclusion that the landlord is not required to adduce any .,
evidence at all nor it is required even to make any oral
submissions. Such a literal construction would lead to an
G anomalous situation because the landlord may not be
heard at all. It may not even be permitted to adduce any
evidence in rebuttal to the one adduced by the noticee nor
it would be permitted to advance any argument. Is this
contemplated in law? The answer must be rendered in the ,._ .
H negative. When a landlord files an application, it in a given
828 SUPREME COURT REPORTS (2008] 5 S.C.R.

A Construction' explains various meanings attributed to the
term 'purpose'. It would be in the fitness of discussion to
refer to Purposive Construction in Barak's words:
'Hart arid Sachs also appear to treat 'purpose' as a
subjective concept. I say 'appear' because, although
B Hart and Sachs claim that the interpreter should
imagine himself or herself in the legislator's shoes, •
they introduce two elements of objectivity: First, the
interpreter should assume that the legislature is
composed of reasonable people seeking to achieve
c reasonable goals in a reasonable manner; and
second, the interpreter should accept the non-
rebuttable presumption that members Page 0184 of
the legislative body sought to fulfill their constitutional
duties in good faith. This formulation allows the
D interpreter to inquire not into the subjective intent of
the author, but rather the intent the author would have
had, had he or she acted reasonably.'
(Aharon Barak, Purposive Interpretation in Law (2007) at
pg. 87)
E
52. In Bharat Petroleum Corporation Ltd. v. Maddula
Ratnavalli and Ors. ((2007) 6 SCC 81], this Court held:
'The Parliament moreover is presumed to have
enacted a reasonable statute (see Breyer, Stephen
F (2005): Active Liberty: Interpreting Our Democratic
Constitution, Knopf (Chapter on Statutory
Interpretation - pg. 99 for Reasonable Legislator
Presumption).'
53. The provisions of the Act and the Rules in this case,
G
are, thus required to be construed in the light of the action
of the State as envisaged under Article 14 of the
Constitution of India. With a view to give effect thereto, the
doctrine of purposive construction may have to be taken
recourse to. [See Oriental Insurance Co. Ltd. v. Brij Mohan
H
MAHALAKSHMI SUGAR MILLS CO. LTD. & ANR. v. 829
UNION OF INDIA & ORS. [S.B. SINHA, J.]
h~
and Ors [2007 (7) SCALE 753] . A
65. We are of the opinion that the same principle should
be applied herein.

66. That is how the Central Government itself understood
the decision of this Court in Malaprabha-1. It explicitly said so in B
~
the counter affidavit filed in Bharat Sugar Mills. Indisputably, for
~
the purpose of determination of the price of levy sugar, it called
for the relevant materials from each of the owner of the sugar
mill. It is, therefore, too late in the day for the Central Government
to contend contra. c
67. Rules of executive construction in a situation of this
nature may also be applied where a representation is made by
the maker of legislation at the time of introduction of the Bill or
construction thereupon is put by the executive upon its coming
into force, the same carries a great weight. D

~
68. In this regard, we may refer to the decision of the House
of Lords in the matter of R. V National Asylum Support Service
[(2002) 1 W.L.R.2956] and its interpretation of the decision in
Pepper v. Hart [(1993) A.C. 593]. on the question of 'executive
estoppel'. In the former decision, Lord Steyn stated:- E

"If exceptionally there is found in the Explanatory Notes a
clear assurance by the executive to Parliament about the
meaning of a clause, or the circumstances in which a
power will or will not be used, that assurance may in F
principle be admitted against the executive in proceedings
' .:.,- in which the executive places a contrary contention before
a court."
69. A similar interpretation was rendered by Lord Hope of
Craighead in Wilson v. First County Trust Ltd., {2004] 1 A.G. G
816, wherein it was stated:-
"As I understand it [Pepper v. Hart], it recognized a limited
L _.,i.
exception to the general rule that resort to 'Hansard' was
inadmissible. Its purpose is to prevent the Executive
H
830 SUPREME COURT REPORTS [2008] 5 S.C.R.

A seeking to place a meaning on words used in legislation
which is different from that which ministers attributed to
whose words when promoting the legislation in
Parliament. .. "

70. See for a detailed analysis of the rule of executive
B estoppel in a writing of Francis Bennion entitled "Executive •
Estoppel: Pepper v. Hart revisited", published in Public Law,
Spring 2007 issue, pg. 1.

71. Reliance placed by the learned Additional Solicitor
c General on Malaprabha-111 is not apposite. This Court therein
found the action of the Central Government to be not an act of
contempt presumably because the directions were held to have
been substantially complied with. We are not exercising any
contempt jurisdiction. Contempt is a matter between the Court
and the contemnor. We are herein called upon to determine as
0
to which view of Delhi High Court in Hari Nagar or Mahalakshmi
is correct. We cannot refuse to lay down the law having been ...,,
called upon to do so. We must lay down a law for the future. We,
therefore, while directing the Central Government to refix the
price of levy sugar, would keep this direction confined only to
E the parties before us including the interveners. The reason
therefor is that the other mill owners were not aggrieved thereby.
The parties before us are fighting their grievance for more than
22 years. They should not be allowed to go empty handed.

F 72. We are, therefore, of the opinion that Maha/akshmi
has wrongly been decided whereas Hari Nagar has correctly
been decided.
73. Appeals arising out of SLP (C) Nos.481/2007 and
14130/2007 filed by Mahalakshmi Sugar Mills Co. Ltd. and
G Govind Nagar Sugar Ltd. respectively are consequently allowed
and Appeals arising out SLP (C) Nos.14967-14978 of 2007
filed by Union of India & Ors. are dismissed. No costs.
R.P. Civil Appeal Nos. 2258 & 2260 of 2008 allowed
and civil Appeal Nos. 2261-2272 of 2008 dismissed.
H