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Judgment
P.D. Dinakaran, J.—Heard.
The petitioners in both the writ petitions viz., W.P.No.31639 and 32973 of 2002, are companies incorporated under the provisions of the
Companies Act and are engaged in manufacture, sale and supply of sugar, having their sugar factory at Palaya Seevaram Village, Kancheepuram
District, and at Kattur, Lalgudi Taluk, Trichy District, respectively.
The petitioner in W.P.No.31639 of 2002 had commenced business with their certificate of eligibility under an incentive scheme 1993, as per
which they have been sanctioned with the free sale sugar quota for ten years, and the petitioner in W.P.No.32973 of 2002 started their sugar
factory from the year 1960.
The raw material for their factories, viz., sugarcane, is supplied by thousands of farmers, who cultivate sugarcane in and around the respective
factories.
Under the Sugarcane (Regulation of Supply and Purchase) Act, 1953, (hereinafter referred to as the ''Act'') the Cane Commissioner reserves
certain cane areas for a particular sugar factory and it is obligatory upon a sugar factory to purchase all the sugarcane that is offered for sale by the
cane growers/cane societies. As per Section 17 of the aforesaid Act, the payment towards the price of cane has to be made within 14 days, failing
which, not only interest is leviable, but also the cane price could be recovered as arrears of land revenue by attachment of the bank accounts,
factory, etc.
The Essential Commodities Act was enacted in the interest of general public, for the control of the production, supply and distribution of, and
trade and commerce, in certain essential commodities, including sugar and sugarcane as defined u/s 2(b) and 2(e) of the Essential Commodities
Act. Section 3(1) of the Essential Commodities Act, empowers the Central Government to issue an order for regulating the supply, distribution and
availability of the essential commodities. Section 3(2) of the Essential Commodities Act, empowers the Central Government to enact orders with
regard to granting license, permits with regard to the manufacture of essential commodities as well as controlling price at which the essential
commodities may be brought or sold, and also to regulate storage, transport, distribution, disposal, acquisition, use or consumption of, any
essential commodity, and thus to notify the quota to be distributed and disposed as levy sugar under the public distribution system.
Exercising the powers thus conferred u/s 3 of the Essential Commodities Act, the Central Government enacted Sugar Control Order, 1966.
Clause 4 of the Sugar Control Order, 1966 empowers the Central Government to restrict any producer from selling or disposing of any kind of
sugar or removing the same from godowns except in accordance with the directions issued in writing. Clause 5 of the Sugar Control Order, 1966
empowers the Central Government to issue directions regarding production, maintenance of stocks, storage, sale, grading, packing, marking and
distribution of any kind of sugar.
Similarly, the Central Government also enacted Sugarcane Control Order, 1966. Clause 3 of the Sugarcane Control Order, 1966 prohibits sale
and purchase of sugarcane by grower to a producer at a price lower than that fixed by the Central Government. Clause 3(1) of the Sugarcane
Control Order, 1966 empowers the Central Government to notify the statutory minimum cane price for various sugar factories. Clause 3(3) of
Sugarcane Control Order, 1966 provides that where a producer of sugar purchases any cane from a grower or a cane society, the producer shall
pay the price of sugarcane within 14 days from the date of delivery of cane. The above scheme of legislation is intended to control the sugar
industry within the administrative machinery of the Central Government as well as the State Government. Thus the sale and supply of sugarcane as
well as the production, sale, supply and distribution of sugar is totally controlled by the Central and State Governments, based on the policy of the
Governments. Accordingly, the Government is empowered to fix the quota of sugar that has to be compulsorily sold by the producer to the
Government or to the nominee of the Government at the price fixed by the Government and the same is called the ''Levy Sugar'', and the balance
of sugar produced by the sugar factories can be sold to anybody, at any price, at any time and therefore, it is called as the ''Free-Sale Sugar''.
The main grievance of the petitioners in these writ petitions is that even though the petitioners are ready and willing to comply with the direction
of the Court to sell the levy sugar to the Government or the nominees of the Government at the price fixed by the Government, the respondents by
exercising the powers conferred under Clause 4 and 5 of the Sugar Control Order, 1966 are arbitrarily and unreasonably imposing restrictions in
the production, sale and supply of the ''free-sale sugar'' by not permitting the petitioners to sell the ''free-sale sugar'' in the free market from the
stock held by the respective petitioner-companies.
Mr. R. Krishnamurthy, learned senior counsel for the petitioner in W.P.No.31639 of 2002 seriously contends that the restriction imposed on
the petitioner on the sale, supply and distribution of the ''free-sale sugar'' is arbitrary and unreasonable; and there cannot be any bar or restriction
on the sale, supply and distribution of the ''free-sale sugar'' without taking into consideration that the petitioner-sugar factories are obliged to
dispose of the ''free-sale sugar'' to generate funds to liquidate the cane price payable to the growers, to meet the current expenses and other
financial commitments to run the factory. Mr. R. Krishnamurthy, learned senior counsel further contends that any restriction by the respondents in
the sale, supply, distribution of the ''free-sale sugar'' is a gross violation to Articles 14 and 19(1)(Government) of the Constitution of India, and
such restrictions are whimsical and capricious. In this regard, Mr. R. Krishnamurthy, learned Senior counsel strongly places reliance on the
decision of the Division Bench of the Allahabad High Court dated 19.3.2002 in C.M.W.P.No.11764 of 2002.
Mr. V.T. Gopalan, learned Additional Solicitor General appearing on behalf of Mr. K. Kumar, ACGSC for the respondents 1 and 2,
contends that the intention of the Government to impose restriction on the production, sale, supply and distribution of the sugar, produced by the
sugar factories is only to facilitate the sale of sugar in the public distribution system so that even poor people could get sugar at a fair price; and
however it is not disputed that the decision of the Division Bench of the Allahabad High Court dated 19.3.2002 in C.M.W.P.No.11764 of 2002
squarely applies to the facts and circumstances of this case.
Mr. D. Krishna Kumar, learned Special Government Pleader appearing on behalf of the third respondent, adopts the submission of the learned
Additional Solicitor General.
I have given careful consideration to the grievance of the petitioners, arguments of Mr. R. Krishnamurthuy, learned senior counsel and the
contentions of Mr. V.T. Gopalan, learned Additional Solicitor General.
A Division Bench of the Allahabad High Court by order dated 19.3.2002 in C.M.W.P.No.11764 of 2002 as held as follows:
... In this connection we may explain the general scheme regarding sale of sugar. The sugar produced by sugar factories is generally divided into
two categories - levy sugar and free sale sugar. The levy sugar has to be compulsorily sold by the manufacturer to the Government or to the
nominee of the Government at the price fixed by the Government. Such sugar is then distributed to the poor people of the country through the
public distribution system (Fair Price Shops etc). The idea is that the poor people could get sugar at a cheap price. However, this often entails a
loss to the manufacturer because the levy sugar is sold to the Government (or its nominee) at the price fixed by the Government, which is
sometimes lower than the cost price and hence the remaining sugar is permitted to be sold freely in the market Sugar Control Order, 1966 as to
make good the loss entailed by sale of the levy sugar. It must be understood that businessman operate for profit and not for charity. Hence they are
entitled to earn a reasonable amount of profit and cannot be compelled to operate at a loss.
So far as the free sale sugar is concerned, it can be sold to anybody at any price at any time, otherwise, it would not be free sale sugar. We are
prima facie of the opinion that any restrictions imposed on the free sale sugar are prima facie arbitrary and illegal and violative of Articles 14 and
19(1)(g) of the Constitution.
It has been alleged in paragraph 20, 40 to 44 to the writ petition that the Central Government is not permitting release of free sale sugar for sale in
the market beyond a certain amount. We are prima facie of the opinion that this restriction is wholly arbitrary and illegal and violative of Article
19(1)(g) of the Constitution. In our opinion no limitation can be placed by the authorities on the quantum of free sale sugar, which the petitioner
wishes to sell in the open market. If such a limitation is placed, it will militate against the very concept of free sale sugar. We are informed that at
present 85% of the sugar manufactured in sugar factories is regarded as free sale sugar, and 15% as levy sugar. Hence restrictions can only be
placed on the 15% levy sugar, but not on the free sale sugar.
Of course the authorities can verify whether the sugar sought to be sold is only free sale sugar and not the entire sugar (which includes the 15%
levy sugar too). For this purpose the petitioner should inform the District Magistrate details about the sale of free sale sugar, i.e., the quantum sold,
to whom it is sold, etc. But beyond that no restrictions can be placed on sale of free sale sugar, and clauses 4 and 5 of Sugar Control Order, 1966
have to be construed according:-
It may be mentioned that even the State Government recommended the prayer of the petitioner for permitting sale of free sugar (vide Annexure-7),
but surprisingly the Central Government did nothing. The petitioner has stated that it has to pay cane growers dues, factory expenses, etc. which it
cannot do without selling the free sale sugar.
We, therefore, direct that the petitioner can sell the free sale sugar in any quantity to any one at any price, but shall give the intimation to the District
Magistrate about it as stated above.
The above decision of the Division Bench of the Allahabad High Court dated 19.3.2002 in C.M.W.P.No.11764 of 2002 squarely fits in to the
facts and circumstances of the case of the petitioners herein.
I am of further considered opinion that the restrictions alleged to have been imposed by the respondents on the petitioner-sugar factories, are
not only arbitrary, illegal, unreasonable, and a violation to the fundamental rights of the petitioner-sugar factories conferred under Articles 14 and
19(1)(g) of the Constitution of India, but also deprives the legitimate right of thousands of poor sugarcane growers, who could not be paid their
cane price within the statutory period, and as a result they are put into irreparable loss and hardship and also lose interest in cultivating sugarcane;
and consequently the very survival of the sugar industry would become a jeopardy.
For the above reasons, I am obliged to allow the writ petitions as prayed for making it clear that the respondents are entitled to impose
restrictions only on the sale of ''the levy sugar'' that shall be compulsorily sold by the petitioner-sugar factories to the Government or to the
nominees of the Government at the price fixed by the Government for selling the same through public distribution system so that poor people can
get sugar at the fair price; but shall not impose any restriction with regard to the production, sale, supply and distribution of the ''free-sale sugar'' of
the petitioner-factories, subject to their entitlement in that regard.
In the result, these writ petitions are allowed with above observation. No costs. Consequently, W.P.M.P.Nos.46102, 46103, 48988 of 2002 are
closed.