UP Sugar Mills Case: SC Constitution Bench Reserves Order On Reference To Seven Judge Bench

The Supreme Court 5-judge bench headed by Justice Arun Mishra considered on Thursday whether the state of Uttar Pradesh has the authority to fix the State Advised Price ('SAP'), which is required to be paid over and above the minimum price fixed by the Central Government.

In making the reference on the question of law to a bench of at-least 7 judges in 2012, a 3-judge bench had directed the sugar factories to pay the balance outstanding principal amount, according to the SAP of the relevant crushing seasons, to the cane growers or to the cooperative societies. It had even imposed an interest of 18% per annum if the payment is delayed beyond 3 months from the date of the judgment.

Senior Advocate Jayant Bhushan on Thursday urged for a reference to a 7-judge bench, citing the conflict on the issue between two 5-judge benches in Tika Ramji (1956) and U.P. Cooperative Cane Unions Federations (2004) cases.

"The U.P. Sugarcane (Regulation of Supply and Purchase) Act, 1953 has no specific power to fix price...there is only a power to regulate purchase, which may include price...this was noticed in Tika Ramji that while the earlier Act (of 1938) gave a specific power to the state government to fix price, this Act does not...section 16 of the Act confers on the state government the power to regulate distribution, sale or purchase of cane. The 2004 judgment found that there is a power under this section", he advanced.

He indicated Entry 33 of List III of the 7th Schedule to the Constitution- Trade and commerce in, and the production, supply and distribution of the products of any industry over which the Union has, in public interest, control by law (as in Entry 52 of List I), foodstuffs, cattle fodder, raw cotton, and raw jute.

"Did this Entry come because of this judgment (in Tika Ramji)?", inquired Justice Aniruddha Bose.

He was informed that while the Entry was expanded to include 'foodstuffs' etc by the Constitutional Amendment of 1954, the judgment was rendered only in 1956.

"...Before sugar industry became a controlled industry, both sugar and sugarcane fell within Entry 27 of List II but, after a declaration was made by Parliament in 1951, sugar industry became a controlled industry and the product of that industry, viz., sugar was comprised in Entry 33 of List III taking it out of Entry 27 of List II. Even so, the Centre as well as the Provincial Legislatures had concurrent jurisdiction in regard to the same. In no event could the legislation in regard to sugar and sugarcane be thus included within Entry 52 of List 1. The pith and substance argument also cannot be imported here for the simple reason that, when both the Centre as well as the State Legislatures were operating in the concurrent field, there was no question of any trespass upon the exclusive jurisdiction vested in the Centre under Entry 52 of List 1...", quoted Mr. Bhushan from the Tika Ramji.

"Even the power reserved to the State Government to fix minimum prices of sugarcane under (the earlier UP Act of 1938) was deleted from the impugned Act (of 1953), the same being exercised by the Centre under clause 3 of Sugar and Gur Control Order, 1950...", he stressed, reciting from Tika Ramji.

"'Omitted' would be a better term...", ventured both Justices Mishra and Vineet Saran, since there are two different enactments, one of 1938 and the other of 1953, and the use of the word "deleted" giving the impression that the same Act was amended.

"Is there any pari materia provision to section 16 in the 1938 Act? 16 will have to be interpreted in the best possible manner. A mere omission will not help", asked Justice Mishra.

In response, Mr. Bhushan drew the bench's attention back to Tika Ramji, in as much as it observed that "The only provision which was retained by the State Government in the impugned Act for the protection of the sugarcane growers was that contained in section 17 which provided for the payment of price of sugarcane by the occupier of a factory to the sugarcane growers...the impugned Act merely confined itself to the regulation of the supply and purchase of sugarcane required for use in sugar factories and did not concern itself at all with the controlling or licensing of the sugar factories, with the production or manufacture. of sugar or with the trade and commerce in, and the production, supply and distribution of, sugar. If that was so, there was no question whatever of its trenching upon the jurisdiction of the Centre in regard to sugar industry which was a controlled industry within Entry 52 of List I"

"We can't agree outrightly with you...They (the constitution bench in Tika Ramji) have not considered 16...what is the meaning of 16?", pressed Justice Mishra.

"But they upheld the vires of the 1953 Act! The question squarely arose if the state government has the power to fix prices under the Act, making the 1953 Act repugnant to the Essential Commodities Act and the Sugarcane Control Order, because under the latter the Central government has the power to fix prices! And they held 'No. There is no power to the state government under the impugned Act to fix prices at all!'", insisted Mr. Bhushan.

Moving on to UP Cooperative Cane Unions, he read,

"The controversy raised in these appeals (...) basically relates to the competence of the State Government to fix the State Advised Price for purchase of sugarcane by an occupier of a sugar factory over and above the minimum price fixed by the Central Government..."

"'Minimum price', not 'price'! Minimum price and SAP are different", noted Justice Mishra.

"The Central government has a scientific procedure for fixing the price. They do so for the entire country, but proceed region-wise...they analyse what kind of cane is grown, how much is the recovery, soil, climate, labour cost, productivity, alternative crops...the state government does no such exercise!", asserted Mr. Bhushan.

"The purpose of the minimum price is the no one can pay less than this. If the state government also fixes a minimum price, then what is the value of the one set by the Centre?", he argued.

"No! It is not the Minimum Price. It is the SAP!", repeated Justice Mishra.

"Can you pay lower than that?", asked Mr. Bhushan in response.

"No, no, don't put such questions!", interjected the judge.

"The 5 judges in UP Cooperative Cane said that the state government has the power to fix prices which had just not been exercised by it, despite another 5-judge bench in Tika Ramji holding that the state government had the power to fix prices under the 1938 Act which was deleted in the 1953 Act and now only the Central government has that power under the Sugarcane Control Order issued under the Essential Commodities Act...", pressed Mr. Bhushan.

"In Tika Ramji, there is only a reference to 16, no discussion or construction", noted Justice Saran.

"If 16 was not discussed in the 1956 decision, then it is no authority on the power of the state government!...how to reconcile the minimum price with the SAP? Can they co-exist? If the state has not fixed a price lower than that of the Central government, then is there repugnancy?", reflected Justice Mishra.

"There is no question of a conflict between Tika Ramji and UP Cooperative Cane if the former doesn't consider 16 at all!  we are not examining the correctness of the decision but whether is a conflict, if yes, then there will have to be a reference to 7-judge bench for a revisit", continued the judge.

When asked if the bench feels Tika Ramji is per incuriam for not considering section 16, Justice Mishra remarked, "They may have not noticed", while Justice Saran said, "they may have understood, may not have understood".

"Was Tika Ramji considered in the subsequent decision?", questioned Justice Mishra. He was informed in the affirmative.

"Then is it open for a two-judge or a three-judge bench to doubt it? Can they say it is bad law? Is it for a three-judge bench to refer UP Cooperative Cane when Tika Ramji was considered there?", asked Justice Mishra. "Yes, any bench can doubt...", Mr. Bhushan sought to submit.

"For that, there should have been a consideration of 16 in Tika Ramji! The interpretation as not considered. What you are saying is only a possible interpretation", commented Justice Mishra.

"Your Lordships can't pick UP Cooperative Cane over Tika Ramji", persisted Mr. Bhushan. "We won't say anything...if we say there is no conflict, then no further reference is needed. The matter ends here...Tika Ramji also says there is no repugnancy because both the Centre and the state are competent. They said since there is no provision (in respect of the state), there is no repugnancy. The idea in both UP Cooperative and Tika Ramji is that both have the power!", expounded Justice Mishra.

"To fix price arbitrarily is different. Whether there is competence is the question. And competence can be exercised by the state government only in accordance wit the law, not arbitrarily...Tika Ramji proceeded on no exercise of power because that was the gamut of things then", he continued.

In his turn, Senior Advocate Krishnan Venugopal, for the respondents, countered, "Anything higher than the minimum price will continue to be the state's field! It is always open for the state government to fix a higher price!"

"Even Tika Ramji upheld the vires of the Act. The Centre made it clear in clause (3) of the 1966 Order", he continued. He explained that the Central government, exercising powers under Section 3 of the Essential Commodities Act, made the Sugarcane Control Order, 1955. Clause 3(a) of this Order laid down that the Central Government may fix in respect of an area "the price or the minimum price" to be paid by producers of sugar for sugarcane purchased by them. This order was repealed by the Sugarcane (Control) Order, 1966, clause (3) of which provided that the Central government may fix "the minimum price" of sugarcane to be paid by producers of sugar.

"Earlier, they could fix 115 as the price, but now they can just say it is the minimum price", observed Justice Saran.

Mr. Venugopal continued that the 1966 Order was amended in 1978, contemplating an "agreed price" between the producer of sugar and the sugarcane grower which is bound to be higher than the "minimum price". "The Central government made it clear that you can go above the minimum price and you won't be violating the Order", he contended.

The bench reserved its judgment on the limited issue on Thursday.