Indian Sugar Mills Association – Tamil NaduRep. By its Secretary"Karumuthu Centre"2nd floor v. The Secreatary (FPD)

IN THE HIGH COURT OF JUDICATURE AT MADRASDATED: 30.11.2009CORAMTHE HONOURABLE MR.JUSTICE S.J.MUKHOPADHAYAandTHE HONOURABLE MR. JUSTICE M. DURAISWAMYW.P.No.1569 of 2004 &W.M.P.No.1688 of 2004The South Indian Sugar Mills Association – Tamil NaduRep. By its Secretary"Karumuthu Centre"2nd floor, 498 Anna Salai,Chennai – 600 035. .. Petitioner vs 1.The Secreatary (FPD), Ministry of Consumer Affairs, Food & Public Distribution, Government of India, Krishi Bhavan, New Delhi 110 001.2.The Joint Secretary (Sugar), Ministry of Consumer Affairs, Food & Public Distribution, Government of India, Krishi Bhavan,New Delhi 110 001.3.The Chief Director, Directorate of Sugar Department of Food & Public Distribution, Government of India, Krishi Bhavan, New Delhi 110 001.3.The Chairman, Commission for Agricultural Costs and Prices, Government of India, Krishi Bhavan, New Delhi 110 001. ... RespondentsWrit petition filed for the issuance of a writ ofCertiorarifed Mandamus, calling for the records of the secondrespondent relating to the Notification No.GSR No.44(E)/Ess.Com/Sugarcane dated 14.1.2004 by fixing statutory Minimum Priceof Sugarcane for 2003-2004 at Rs.73/- per quintal linked to thebasic recovery of 8.5% and quash the same as unconstitutional, https://hcservices.ecourts.gov.in/hcservices/ ultra vires and provisions of the Essential Commodities Act andSugarcane (Control) Order, 1966; and direct the respondents torefix the Statutory Minimum price for sugarcane for the sugar year2003-2004 for the Tamil Nadu Zone taking into consideration thefactors listed in Sub Clause (a) to (e) of Clause 3 of theSugarcane (Control) Order,1966, the lower sugar prices, higherincidence of taxes on sugarcane and lower cost of cane cultivationprevalent in the state of Tamil Nadu, as contemplated under theexplanation to Sub Clause (1) of Clause 3 of he Sugarcane (control)Order 1966.For Appellant : Mr. Radhakrishnan Sr.Counsel For Mr.S.Kadarkarai For Respondents : Mr.Velayutham Pichaiya – for R1 No appearance – for R-2 to R-4 ORDERM. DURAISWAMY,J The petitioner association filed the above writ petitionpraying for a writ of Certiorarifed Mandamus, calling for therecords of the second respondent relating to the impugnedNotification GSR No.44(E)/Ess.Com/Sugarcane, dated 14.1.2004, byfixing statutory Minimum Price of Sugarcane for 2003-2004 atRs.73/- per quintal linked to the basic recovery of 8.5% and quashthe same as unconstitutional, ultra vires the provisions of theEssential Commodities Act and Sugarcane (Control) Order, 1966 anddirect the respondents to refix the Statutory Minimum price forsugarcane for the sugar year 2003-2004 for the Tamil Nadu Zonetaking into consideration the factors listed in Sub Clause (a) to(e) of Clause 3 of the Sugarcane (Control) Order,1966, the lowersugar prices, higher incidence of Taxes on sugarcane and lower costof cane cultivation prevalent in the State of Tamil Nadu, ascontemplated under the explanation to Sub Clause (1) of Clause 3 ofthe Sugarcane (Control) Order, 1966.2. The brief facts which lead to the filing of the writpetition is as follows: (i) According to the petitioner's association, the decisionto fix Statutory Minimum Price for sugarcane (hereinafter referredto as "SMP") for 2003-2004 at Rs.73/- per quintal is based onsuo moto revision recommended in its report by he Commission forAgricultural Cost and Prices (hereinafter referred to as "CACP")without any consultation with Indian Sugar Mills Association(hereinafter referred to as "ISMA") or South Indian Sugar MillsAssociation(hereinafter referred to as "SISMA") or any associationof sugar industry, contravenes the express mandate of theSugarcane (Control) Order, 1966 stipulating such consultation. https://hcservices.ecourts.gov.in/hcservices/ (ii) That the decision to substantially hike SMP for 2003-04has been taken without having regard to the steep fall in sugarprice currently ruling at a six year low figure and the fixation ofSMP without having regard to the price at which sugar produced fromsugarcane is sold by the producers of sugar is in clearcontravention of the express stipulation in Clause 3 of theSugarcane (Control) Order. (iii) The supplementary note of CACP dated 29.8.2003, based onwhich the impugned notification is issued, seeks to subvert thewell reasoned main Report of CACP dated 04.10.2002. The principalassumption of CACP on continuance of drought during 2003-04 inarriving at its conclusion for higher SMP is factually incorrect.That the supplementary note in effect is contrary note andseemingly influenced by extraneous factors. The Government withouteven awaiting the deliberation and recommendation of the group ofMinisters, has fixed the SMP at Rs.73/- per quintal, which ispurely to be viewed as political on account of the then forthcomingelections to the lok saba. (iv) Immediately on being aware of the decision of theCentral Government to fix the SMP at Rs.73/- per quintal, ISMA madea representation to the Prime Minister and other Union Ministersconcerned on 01.01.2004. The ISMA also reiterated itssubmission to the Central Government by its letter dated12.01.2004; that the revised SMP fixation has failed to addressthe regional disparities and hence pleaded for different SMP to bedeclared for different regions. (v) The Central Government by its letter dated 1.1.2004,informed the Chief Secretaries of the various State Governmentsthat the Government of India has taken the decision to increase theSMP for 2003-04 season at Rs.73/- per quintal linked to 8.5%recovery. In furtherance of the said letter, the secondrespondent has issued the impugned notification GSR No.44(E)/Ess.Com/ Sugarcane, dated 14.1.2004, fixing the SMP for the year2003-04 at Rs.73/- per quintal linked to 8.5% recovery anddetermining the actual SMP payable by all the sugar factories inthe country. The said impugned notification has been issued onthe basis of Supplementary Note dated 29.08.2003 submitted by CACP.(vi) The impugned notification in fixing the SMP for theindividual sugar mills, has left the price undecided for as many as173 sugar mills out of the total of 452 sugar mills with a footnote that information in respect of these sugar factories has notbeen received by the Central Government as on that date.Therefore, the petitioner's association challenged the impugnednotification in the above writ petition.3. The respondents did not file any counter in the abovewrit petition. https://hcservices.ecourts.gov.in/hcservices/

4. Heard Mr.Radhakrishnan, learned senior counselappearing for the petitioner and Mr.Velayutham Pichaiya, learnedcounsel appearing for the first respondent. 5. The learned senior counsel appearing for thepetitioner submitted that the decision of the Central Government toincrease the SMP for the year 2003-04 from the initiallyrecommended amount of Rs.65.50 to Rs.73/- per quintal linked tobasic recovery of 8.5%, without any consultation with ISMA or SISMAor any of the authorities or bodies of the sugar industry,including the petitioner, as contemplated under Clause 3 of theSugarcane (Control) Order, 1966, is arbitrary and violative of theexpress provisions of the Control Order. The suo moto revision,by CACP, without any consultation with anybody representing theinterest of the industry is patently bad in law; that the SMPfixation has to strictly follow the safeguards built in Clause 3of the control order and promote the combined interest of all stackholders; that having formulated its view and recommended the SMPfor 2003-04 at Rs.65.50 in its initial report dated 04.10.2002, ithas no valid rationale or ostensible reason to revise itsrecommended price to Rs.73/- per quintal; that since the CentralGovernment has exercised the power arbitrarily for extraneousconsiderations, the decision taken on that basis is ultra vires;that the detailed and well reasoned report submitted by CACP on04.10.2002 after consultation with ISMA and other affected bodiescannot stand superseded or subverted by the short supplementaryReport of CACP dated 29.8.2003, which has been prepared without anyconsultation and also without any change in circumstance; that thesupplementary note of CACP dated 29.8.2003 makes a radicaldeparture from the initial detailed report of CACP dated04.10.2002. While the initial report contains detailed narrativeand elaborate argument on the need to contain cane price within areasonable limit, without in any manner discussing or addressingthe concerns so raised in its initial report, the CACP in itsSupplementary Report recommended for a higher SMP. 6. Countering the submission made by the learned seniorcounsel appearing for the petitioner, the learned counsel appearingfor the first respondent submitted that the impugned notificationdated 14.01.2004 fixing the SMP for sugarcane for 2003-04 atRs.73/- per quintal linked to the basic recovery of 8.5% is justand proper and the same does not contravene the provisions ofClause 3 of the Control Order.7. Learned senior counsel appearing for the petitioner insupport of his submission, relied on the decision reported in 1974(2) SCC 630 (Saraswathi Industrial Syndicate Limited and others v.Union of India).In the above decision, the Apex court held that "anyattempt to adjust the compensation for losses due toany previous erroneous fixation of sugar price will beunfair to subsequent consumers who may be made to pay https://hcservices.ecourts.gov.in/hcservices/ for the past benefits possibly enjoyed by others."8. On a careful consideration of the materials availableon record and the submissions made by both the learned counsel, itcould be seen that the SMP for sugarcane payable by sugarfactories to cane growers is fixed under clause 3(1) of the SugarCane (Control) Order, 1966, which reads as under:(a) the cost of production of sugarcane;(b) the return to the grower from alternative cropsand the general trend of prices of agriculturalcommodities;(c) the availability of sugar to the consumer at afair price;(d) the price at which sugar produced from sugarcaneis sold by producers of sugar; and(e) the recovery of sugar from sugarcane.9. It will be evident that CACP has submitted its initialreport and made consultation in terms of Clause 3(1) of theSugarcane (Control) Order, 1966, with the stakeholders like IndianSugar Mills Association (ISMA) and National Federation of Co-operative Sugar Factories Limited (NFCSFL), the apex bodies ofSugar Industry, for the sugar session 2003-2004, and by reportdated 4.10.2002, recommended SMP at Rs.65.50 per qunital linked to8.5% recovery, based on certain projections as regards cost ofproduction, cost of transportation, etc. Subsequently, the CACPsubmitted supplementary report for the sugar session 2003-2004 on29.8.2003, recommending a revised SMP of Rs.73/- per quintal, whileobserving that the SMP of Rs.65.50 per quintal originallyrecommended by the Commission was based on some projected costfigures, which turned out to be much less as compared to the actualcosts incurred by farmers, as evident from the rise in input priceindex.10. The main grievance of the petitioner is that thesupplementary report for SMP for the sugar session 2003-2004 givenon 29.8.2003 revising the SMP of Rs.73/- per quintal, was so madewithout consulting the stakeholders like ISMA and NFCSFL, the apexbodies of Sugar Industry, as was given earlier. But such submissioncannot be accepted for the reasons mentioned hereunder.11. Under Clause 3(1) of the Sugarcane (Control) Order,1966, the Central Government, after consultation with suchauthorities, bodies or associations as it may deem fit, bynotification in the Official Gazette, from time to time, fix theminimum price of sugarcane to be paid by producers of sugar ortheir agents for the sugarcane purchased by them. On behalf of theCentral Government, the CACP has consulted the ISMA and others.Having received the opinion of the stakeholders like ISMA andNFCSFL, it was to submit its report. Though the report was preparedon 4.10.2002 for the sugar session 2003-2004, recommending SMP @Rs.65.50 per quintal, the Central Government appears to have not https://hcservices.ecourts.gov.in/hcservices/ acted on the same and never issued any Notification in the OfficialGazette under Clause 3(1) of the Sugarcane (Control) Order, 1966,fixing the minimum price of the sugarcane. In such a situation,before the Central Government acted on the recommendation of theCACP, if it comes to the notice of the CACP that some projectedcost figures turned out to be much less as compared to be theactual cost incurred by farmers, it was well within theirjurisdiction to submit a revised report by way of supplementaryreport as made on 29.8.2003 for the same sugar session 2003-2004and for that, no further consultation was required, theconsultation having been already made for the said session earlier.In fact, the report of the CACP is like an internal Office Note,which cannot be relied upon to claim any right, as it is alwaysopen for the authority or the Committee to submit a revised reportor like a fresh note. 12. In its original report dated 04.10.2002, CACP hadrecommended the SMP of Rs.65.50 per quintal linked to a basicrecovery of 8.5%, with a premium of Rs.0.77 per quintal payablefor every 0.1 percentage point increase in recovery beyond thislevel. By subsequent note dated 29.08.2003, the Commission hasconsidered it necessary to recommend a revised basic SMP ofRs.73/- per quintal alongside an incremental premium of Rs.0.85per quintal. 13. In the supplementary note, it is also mentioned thatthe profitability of sugarcane farming in real terms had declinedin recent years, due to decline or stagnation in yield, rise ininput prices and fall in realised output prices. Therefore, thefarmers in general are in a depressed mood in several places, therewere also newspaper reports of farmers committing suicide due toloss of crop income and growing indebtedness.14. Therefore, in the above mentioned circumstances,fixing of SMP for 2003-2004 at Rs.73/- per quintal linked to thebasic recovery of 8.5% by the second respondent is perfectlyjustified. Further consultation with the said bodies is notrequired. Therefore, both the reports of the CACP are to beconsidered as a single report in which, active consultation hasbeen made with all the concerned by the CACP. 15. In the above circumstances, there is no arbitraryconsideration by the CACP at the time of submitting itssupplementary report dated 29.08.2003, which is only acontinuation of the report dated 04.10.2002, while finalizing theSMP of sugarcane subsequent to the submission of the originalreport for 2003-04. 16. The CACP submitted the supplementary report for SMPfor 2003-04 sugar season in August 2003 recommending revised SMPof Rs.73/- per quintal, observing that the SMP of Rs.65.50 perquintal originally recommended by the CACP was based on someprojected cost figures, which turned out to be much less ascompared to the actual costs incurred by farmers, as evident from https://hcservices.ecourts.gov.in/hcservices/ the rise in input price index. 17. The facts and circumstances of the judgment reported in1974(2) SCC 630 (referred supra) differs from the case on hand.Therefore, the above judgment is not applicable to the presentcase. 18. In these circumstances, we are of the considered viewthat the impugned notification fixing the statutory MinimumPrice of Sugarcane for 2003-2004 at Rs.73/- per quintal linked tothe basic recovery of 8.5% is legal and valid and does not warrantany interference. Therefore, the writ petition is liable to bedismissed. Accordingly, the writ petition is dismissed.Consequently, connected miscellaneous petition is also dismissed.However, there will be no order as to costsSd/Asst.Registrar/true copy/Sub Asst.Registrar rjTo1.The Secretary (FPD), Ministry of Consumer Affairs, Food & Public Distribution, Government of India, Krishi Bhavan, New Delhi 110 001.2.The Joint Secretary (Sugar), Ministry of Consumer Affairs, Food & Public Distribution, Government of India, Krishi Bhavan,New Delhi 110 001.3.The Chief Director, Directorate of Sugar Department of Food & Public Distribution, Government of India, Krishi Bhavan, New Delhi 110 001. https://hcservices.ecourts.gov.in/hcservices/

4.The Chairman, Commission for Agricultural Costs and Prices, Government of India, Krishi Bhavan, New Delhi 110 001.+1cc to Mr.S.Kadarkarai, Advocate Sr 64760+1cc to Mr.Velayauthum Pichaiya, Advocate Sr 63831MBS(CO)km/10.12.W.P.No.1569 of 2004