w w w . L a w y e r S e r v i c e s . i n

Vishnu Sugar Mills Ltd. v/s Union of India

Company & Directors' Information:- VISHNU CORPORATION PRIVATE LIMITED [Active] CIN = U29253WB2011PTC170713

Company & Directors' Information:- S M SUGAR PRIVATE LIMITED [Active] CIN = U51299DL1999PTC098109

Company & Directors' Information:- VISHNU SUGAR MILLS LTD [Active] CIN = U15421WB1961PLC024941

Company & Directors' Information:- S M INDIA LTD [Strike Off] CIN = U26942ML1998PLC005541

Company & Directors' Information:- THE INDIA COMPANY PRIVATE LIMITED [Active] CIN = U74999TN1919PTC000911

Company & Directors' Information:- VISHNU AND COMPANY PRIVATE LIMITED [Active] CIN = U16008DL1998PTC093436

Company & Directors' Information:- UNION COMPANY LTD. [Active] CIN = U36900WB1927PLC005621

Company & Directors' Information:- INDIA CORPORATION PRIVATE LIMITED [Active] CIN = U65990MH1941PTC003461

Company & Directors' Information:- VISHNU COMPANY LIMITED [Strike Off] CIN = U17222UP1946PLC001500

Company & Directors' Information:- SUGAR CORPORATION PVT LTD [Strike Off] CIN = U15424WB1954PTC000884

Company & Directors' Information:- VISHNU PRIVATE LIMITED [Active] CIN = U45200PN2012PTC142690

Company & Directors' Information:- UNION COMPANY PRIVATE LIMITED [Dissolved] CIN = U99999KA1942PTC000292

    C.W.J.C. 6964,7960 Of 2006

    Decided On, 04 September 2006

    At, High Court of Bihar


    For the Appearing Parties: Y.V. Giri, Jyoti Saran, Sudhir Singh, Advocates.

Judgment Text

(1.) The two writ petitions raise common questions of law and as such, with consent of parties, have been taken up together for adjudication and disposal. The main contesting respondents, the Union of India has appeared and filed counter-affidavits on both the cases. Heard Shri Y. V. Giri, learned Senior Counsel in support of the writ petitions and Shri Sudhir Singh, learned counsel for the Central Government.

(2.) That the issue raised in the present writ applications are, inter alia, for issuance of an appropriate direction to the respondents to immediately lift and/or get lifted the levy sugar as per allocation on payment of levy sugar price thereof. In the alternative, it is prayed that in case of failure to lift the same within the period of allocation, as made by the Central Government through the Directorate of Sugar, Government of India, New Delhi, to hold that the petitioner was free to sell them as free sugar treating the allotment lapsed in terms of direction of Government of India in the Directorate of Sugar, New Delhi dated 16th March, 2001 (Annexure-13 to CWJC No. 6974 of 2006) which is Annexure-12 in CWJC No. 7960 of 2006. It is further submitted that the carry forward rule, as enunciated in the directions of Government in Directorate of Sugar dated 18-6-2002 (Annexure-D to the counter-affidavit in CWJC No. 6964 of 2006) is unreasonable and arbitrary and, as such, ultra vires the Constitution. Once levy allotment/ allocation lapses and the producer is free to sell it as free sale sugar, the liability to deliver sugar at a same quantity at a future date should stand extinguished.

(3.) The Parliament enacted Essential Commodities Act, 1955 to be an Act to provide, in the interest of general public, the control of production, supply and distribution of, and trade and commerce in certain commodities. One of the commodities, which is an essential commodity for the purposes of said Act, is sugar. Section 8 of the said Act confers powers on the Central Government to control production, supply, distribution etc. of essential commodities. Section 3(l)(f), inter alia, provides that without prejudice to the generality of the powers conferred by sub-section (1) of Section 3, an order made thereunder, may provide for requiring any person holding in stock or engaged in production or in business of buying or selling any essential commodities to sell, hold or specified quantity held in stock or produce or received by him to the Central Government or a State Government or an officer or agent of such Government or to a Corporation wholly controlled by such Government or to such other persons or class of persons and in such circumstances as may be specified in the said order. Section 3(3-C) inter alia, provides that where a producer is required by an order made with reference to Section 3(2)(f) to sell any kind of sugar, he shall be paid an amount which shall be calculated with reference to such price of sugar as the Central Government may, by order, determine having regard to the principles enunciated in that section which includes the minimum price of sugarcane, cost of manufacturing sugar, taxes and duties payable thereon and securing of reasonable returned on the capital employed in the business of manufacturing sugar.

(4.) That in exercise of powers under Section 3 of the Act, the Central Government issued the Sugar (Control) Order, 1966, Clause 5 of the said Order empowered the Central Government to issue directions, inter alia, to producers regarding production, maintenance of stock, storage, sale, grading, disposal, delivery and distribution of any kind of sugar as it may deem fit. That under this power (Clause 5), the Central Government, from time to time, has been issuing directions to the producers to sell their monthly quota of free sale sugar within period specified therein. They are required to despatch different proportions of their monthly quota within weeks specified therein.

(5.) This direction ensures a regular supply of free sale sugar in the open market and, thus, prevents hoarding by producers of sugar in order to push up the free market prices. Any disobedience or infraction of the schedule set forth therein directs severe penal consequences of violation of order issued under the Essential Commodities Act.

(6.) That the Central Government in exercise of powers under Section 3 of the said Act has issued the Levy Sugar Supply (Control) Order, 1979. Under the said order, the Central Government is authorised to issue directions, inter alia, to any producer to supply levy sugar to such person in such quantity as may be specified at a price not exceeding price determined under Section 3(3-C) of the Act. That by notification No. GSR 157(E), dated 1st March, 2002, the Central Government notified, in supersession of earlier notifications, that every domestic producer shall sell 10% of sugar produce to the Central Government or as directed by the Central Government as levy sugar under the Levy Sugar Supply (Control) Order, 1979.

(7.) That from time to time, the Central Government issues sugar price determination orders for each production year of the price as determined therein is the price referred to as the levy sugar price which is payable by the allottee of levy sugar to the producer at the time they take delivery thereof.

(8.) Thus, from the aforesaid statutory provisions, it would be seen that for the present sugar produced by producers in India is divided into two. One which is commonly referred to as free sale sugar which is 90% of sugar produced in a sugar producing year where the producer can sell the same at open market prices, free price subject to despatch as specified by the Central Government. The second is the balance 10% of the production for the sugar which is requisitioned by the Central Government under Section 3(2) (f) of the Act and is to be delivered to persons as directed by the Central Government within the period specified and at prices fixed by the Central Government known as levy sugar price. That the reasonableness of the aforesaid provisions have been challenged and has been upheld in general public interest specifically with the reference to the fact that any loss that the producer may suffer as a consequence of levy sugar, price would be made up by open market sale as also in view of the fact that while fixing price of levy sugar, the Government is to take into account the price as enunciated in sub-section (3-C) of Section 3 of the Act which includes securing a reasonable return in the business of manufacturing sugar. That it appears as a corrective coercive method for ensuring regular supply of free sale sugar in the market, apart from the penal provisions of failing to comply with regard to schedule of sale and delivery of free sale sugar, it is provided, by the Government of India in the Directorate of Sugar has, by its direction dated 18th July, 1994 (Annexure-12 to CWJC No. 6964 of 2006), inter alia, directing that if the weekly quotas are not despatched within the time schedule fixed and if no representation is received from the factory within a week thereof then action would be taken to convert the free sale lapsed quota of sugar into levy sugar. It would, thus, be seen that in case producer fails to sell free sale sugar within the time bound schedule then the remaining stock of free sale sugar would be liable to be treated as levy sugar, the consequence whereof would be that the producer would get only the levy sugar price and not the open market free sale price. It is on basis of this and a subsequent circular dated 16-3-2001 (Annexure-13 to CWJC No. 6964 of 2006) which will be discussed later that it is being urged on behalf of the petitioner that on parity of reasoning once the quota of free sale sugar lapses and is to be converted into levy sugar, when the quota/allocation of levy sugar lapses by reason of not lifting within the time prescribed, it should be treated as free sale sugar as doing otherwise would unreasonably deprive the producer of his right to get the price for his produce immediately because it is on basis of the said price realisation that the producer pays the cane growers the price of sugarcane and meets other liabilities, statutory and non-statutory. The question is whether such a stand of the petitioner is tenable.

(9.) It appears that by direction dated 18-7-1994 (Annexure-12 of CWJC No. 6964 of 2006), as noted above the Central Government had directed that if producer failed to deliver free sale sugar within the time schedule the same will be liable to be converted into levy sugar. This was subsequently followed by another circular dated 16-3-2001 (Annexure-13 of CWJC No. 6964 of 2006) issued by the Central Government wherein it had been specifically laid down that States and Union Territories to whom levy sugar was allotted and did not lift it within the validity of the period of release order, the unlifted levy sugar quota for the month would be treated as lapsed. From this, the petitioner wants the Court to draw an inference that the unlifted quota of levy sugar would lapse for all intent and purpose making and/or converting levy sugar into free sale sugar. At the very outset, the answer to this is straightway and simple. What lapses is the release order and the quota in favour of the designated allottee and not the levy liability of the producer. The position stands clarified by a subsequent direction of the Central Government dated 8-0-2002 (Annex-ure-D to the counter-affidavit of Union of India in CWJC No. 6964 of 2006) wherein it has been specifically stated that after the levy sugar is not lifted for a period of three months from the date of initial allocation then the producer could not be made to suffer longer and could sell the lapsed quantity of allotment in free sale but the liability to deliver levy sugar of the same quantity at a future date at levy price would continue. This has also been explained by the Central Government to the petitioner by their letter dated 27-7-2006 (Annexure-C to the counter-affidavit of the Central in CWJC No. 6964 of 2006). To my mind, the effect of these two circulars dated 16-3-2001 and 18-6-2002 is that the unlifted allocation of levy sugar after three months of initial allocation could be sold at free sale prices, thus, ensuring better price recovery for the purchasers to meet their immediate liabilities, statutory and non-statutory with liability to supply the levy sugar at controlled price at a future date. This protects the interest of the producer as he gets more than what he normally gets in present and would have to deliver levy sugar for the Public Distribution Systems at a later date maintaining supplies for the weaker section at controlled prices. It is in my view, thus, neither unreasonable nor arbitrary and brings about a just balance between the financial viability of the producer and the needs of the general public through Public Distribution Systems.

(10.) It is then urged with reference to various orders passed by this Court in July/ August. 2002 which are appended as Annexures-8, 9 and 10 to CWJC No. 6964 of 2006 that on earlier occasions when the allotment lapsed because of States not lifting the levy sugar, the producers including the petitioner was permitted by the Court to sell the unlifted levy sugar allotments in open market as free sale sugar and there was no further carry forward of levy sugar liability. I have perused the said orders. The facts were different. There, the Central Government made allocations which were not complied with. Allocations were then changed. Within time, levy sugar was not lifted by the allottees. No further allocations were made and in that view of the matter, the Court directed for sale as free sale sugar. It also appears that the directions of the Central Government, as contained in their circular dated 18-6-2002 (Annexure-D to the counter-affidavit to CWJC No. 6964 of 2006) with regard to right to sell levy sugar as free sale sugar after expiry of three months of allocation not being complied with and the carry forward of levy liability was not brought on record or to the notice of this Court. In view of the said peculiar facts of no fresh allotment and the said circular not having been brought to the notice of this Court, this Court rightly passed an order permitting sale of levy sugar as free sale sugar with no carry forward levy liability. Under such circumstances, those orders cannot be used as precedents for any purpose specially in the facts in relation to the allotments in dispute.

(11.) What brought the petitioners to this Court was that allotments having been made, they were not lifted as per the two months' period given in the allotment, thus blocking the money of the petitioner and, therefore, they prayed that a direction may be issued for immediate lifting and payment of levy price and in alternative permit petitioner to sell the same as free sale sugar.

(12.) The facts in this regard are that for the production year 2005-2006 (October, 2005 to September, 2006), the liability of the petitioner was to the extent of 10% of its production that is 5528/50 metric tonnes and after keeping a quantity of 18.10 metric tonnes as gate sale, quota for the employees of the sugar mill, the net levy liability of the petitioner was 5510.40 metric tonnes for the said production year. By order dated 22-3-2006 (Annexure-1 to CWJC No. 6964 of 2006), the Central Government made allocation of 2480 metric tonnes in favour of the Food Corporation of India, in respect of the petitioner. The said order specified that delivery despatches of levy sugar shall commence with immediate effect and the entire quantity shall be delivered, despatched by 20-5-2006. By another similar order dated 26-4-2006 (Annexure I/2 of CWJC No, 6964 of 2006), similar allotment of 2480 metric tonnes was made wherein the deliveries have to be completed by 24-4-2006. It is not disputed that deliveries could not be taken within the stipulated period for various reasons. It would be seen that the period was two months' period as per the said allocations. This having come to the notice of the Central Government, two fresh orders of allocation were issued on 10-7-2006 (Annexure-I/1 to CWJC NO. 6964 of 2006) and that dated 9-8-2006 (Annexure-E to the counter-affidavit filed in CWJC No. 7960 of 2006). The quantities were the same that is 2480 metric tonnes each and the time fixed therein for lifting was thirty days and 60 days respectively that is ending by 8-8-2006 and 7-10-2006 respectively. It is submitted by the petitioner that if the total allocation is added, it would far exceed the total levy liability which were as indicated above, 5510.40 metric tonnes. The total of four allocations comes to 9920 metric tonnes. To my mind, the contention is untenable. The first two allocations dated 22-3-2006 and 26-4-2006 having lapsed by reason of non-lifting, the subsequent two allocations were nothing but replacement thereof or in substitution thereto. Merely because this fact of substitution or replacement is not mentioned, it does not follow that it was in addition to the earlier allocations. Further, merely because the earlier two allocations lapsed, as already held by me earlier, it did not relieve the petitioner of its liability to levy and that continues by virtue of the circular dated 18-6-2002 (Annexure-D to CWJC No. 6964 of 2006) and, accordingly, the subsequent two allocations dated 10-7-2006 and 9-8-2006 were valid and within the levy liability of the petitioner.

(13.) That it is not disputed that so far as the allocation dated 10-7-2006 (Annexure-I/1 of counter-affidavit of CWJC No. 6964 of 2006) is concerned, the same has been lifted within the period spe

Please Login To View The Full Judgment!

cified therein and so far as the last allocation dated 9-8-2006 (Annexure-E of counter-affidavit of CWJC NO. 7960 of 2006) is concerned the price has been paid to the petitioner though the petitioner has neither encashed the price nor permitted the lifting. However, the lifting is valid up to 7-10-2006. It cannot also be urged that the last two allocations having been made after three months of the first two allocations respectively could not have been made as on lapse of the first two allocations, the levy liability lapsed as in my view as held earlier, the levy liability does not lapse. (14.) Coming to the unreasonableness of carry forward rule as I have already indicated that circular dated 16-3-2001 (Annexure-13 to CWJC No. 6964 of 2006) was clarified by circular dated 18-6 2002 (Annexure-D to the counter-affidavit of CWJC No. 6964 of 2006) and the levy liability continues. I have already held that such continuing levy liability is not unreasonable. It is an informed balanced decision valid in law and not unreasonable or arbitrary. Therefore, I do not find any merit in the contentions raised by the petitioner. (15.) However, before parting. I may observe that carry forward rule is reasonable if it is carried forward for a reasonable short period. If it is pointed out that this carry forward rule is being extended for unreasonable long period then the question may arise as to its reasonableness or otherwise but in the facts of the present case, the period does not appear to be unreasonable especially considering the circumstances in which earlier lifting could not be done. (16.) In that view of the matter, I find no merit in these writ applications and they are dismissed accordingly. Application dismissed.

LawyerServices is a Premium Legal Tech solution.

Lawyers, Law Firms, Government Departments and Corporates rely on us for, Workflow Automation, Data Aggregation, Timely Updates, Case Management, Intelligent Research, Latest Legal Data Updates and a LOT more!

If you are a legal professional, CONTACT US, in order to see how our UNIQUE solution can benefit your organization.

Features Intro Close Box