Essential Commodities Act Is One Of Primary Reasons For Existence Of Our Democracy: Madras High Court

"It can be said that the Essential Commodities Act is one of the primary reasons of the very existence of our democracy. The legislature had created special rights, obligations and special machinery for enforcing the special rights and obligations under the Essential Commodities Act, 1955 and therefore, when it comes for payment of price of the essential commodities, the Essential Commodities Act is the special legislation and therefore, following the basic and time-tested principle generaliaspecialibus non derogant, that is, even in case of any repugnancy or inconsistency, only the Special Act will prevail over the General Act will apply," said the court.

The division bench of Acting Chief Justice T Raja and Justice Bharatha Chakravarthy also observed that the Fair and Remunerative Price, which is the minimum price that sugar mills must pay farmers and fixed by the Central Government, is in reality not a fair market price.

The court added that the actual expenses involved by the farmer are more than 80% of the FRP. The court also encouraged the State Governments to take into account the actual market value and actual expenses involved while fixing the State Advised Price (SAP).

"Taking into account all these, it is roughly estimated that the cost and expenses involved to an ordinary farmer, is more than 80% of the Fair and Remunerative Price which is fixed by the Central Government which is like the minimum wage and it is not the fair market price. Thereafter, the State Governments are authorised and they take into account the actual market value considering the actual expenses involved, the price of the sugarcane, etc., and they fix the State Advised Price (SAP). If only the State Advised Price is paid, the ordinary small and marginal farmers can survive."

The court was hearing the plea by Ayyakannu, the State President of an agriculturists’ association against the low payments made to the Sugarcane farmers. It was submitted by the petitioners that a total of Rs 157.51 crore was payable to the farmers by Thiru Arooran Sugars Limited to whom the produces in Thirumandangudi and Chitoor were supplied.

The court was informed that though the District Collectors of Thanjavur and Cuddalore initiated proceedings under Order 3 of the Sugarcane (Control) Order and recovered around 17 crores, the SBI initiated insolvency proceedings against Thiru Arooran and the company went into the process of liquidation during which a compromise scheme was brought in by Kals distilleries who took over the two units

It was also informed that as per a compromise scheme, the liquidator had approved the plan to pay an amount of Rs 45.01 crore to the farmers. The petitioners argued that the company has evaded payment to the farmers by way of NCLT proceedings and have done gross injustice to the farmers violating their rights under Article 19 and 21 of the constitution.

The official liquidator argued that the farmers were paid graciously. It was submitted that had the company gone into liquidation, the farmers would not even get the current payment as they would come after the secured creditor and workmen wages. It was also submitted that the provisions of the Order 3 of the Sugarcane (Control) Order cannot override the order of the NCLT in view of Section 238 of the IBC.

The court noted that the Sugarcane (Control) Order, 1966 was brought in by way of Section 3 of the Essential Commodities Act which allows the Central Government to regulate production and supply of certain commodities if necessary. The court added that looking into the waterfall mechanism under the IBC, the creditors, workmen and other persons on trheir won chose to deal with the company while the workman was forced to supply sugarcane to the company. Thus, the court opined that the situation with respect to the farmers has not been dealt with in the Act.

The court also added that no empathetic consideration was made while deciding the amounts payable to the farmers. It said the State had failed to take steps to ensure that the farmers get their minimum due of Rs. 78.48 crore, being the Fair and Remunerative price.

Thus, the court directed the State to pay the balance of the FRP price amounting to Rs. 33.46 crore to the farmers within three months. The court also directed the District collectors to pay the balance of the amount already ordered to be paid to the farmers. The court also left it open for the State to seek remedies before the NCLT or negotiate with Kals Distilleries to realize the amounts.

Case Title: P Ayyakannu v. The Government of Tamil Nadu and others

Citation: 2023 LiveLaw (Mad) 142

Counsel for Petitioner: Mr.S.Muthukrishnan

Counsel for Respondents: Mr.S.Silambanan Addl.Advocate General Assisted by Mr.P.Muthukumar, State Government Pleader, Mr.P.H.Aravind Pandiyan Senior Counsel Assisted by Mr.B.Dhanaraj and Mr.P.S.Raman Senior Counsel Assisted by Mr.T.K.Baskar