Date of the Judgment: 22 April 2020
Judges: Arun Mishra, Indira Banerjee, Vineet Saran, M.R. Shah, Aniruddha Bose
Can a state government fix sugarcane prices that are higher than the minimum price set by the central government? This was the core legal question before the Supreme Court in a case involving sugar mills in Uttar Pradesh. The court examined whether the state had the power to set a “State Advised Price” (SAP) for sugarcane, which is higher than the minimum price set by the central government. The five-judge bench, led by Justice Arun Mishra, delivered the judgment.
Case Background
The case originated from a dispute regarding the State Advised Price (SAP) for sugarcane in Uttar Pradesh. Sugar mills challenged the state government’s authority to fix SAP, arguing that the central government had the sole power to regulate sugarcane prices. The central government sets a minimum price for sugarcane, but the state government of Uttar Pradesh also sets a higher price called the SAP. This dispute led to a series of appeals and cross-appeals, eventually reaching the Supreme Court.
Timeline
| Date | Event |
|---|---|
| 8th April 1932 | Central Legislature passes the Sugar Industry (Protection) Act, 1932. |
| 1st May 1934 | Central Legislature enacts the Sugarcane Act, 1934 to regulate sugarcane prices. |
| 10th February 1938 | U.P. Legislature enacts the U.P. Sugar Factories Control Act, 1938. |
| 1st April 1946 | Proclamation of emergency revoked by the Governor General. |
| 26th March 1946 | British Parliament enacts the India (Central Government and Legislature) Act, 1946. |
| 18th July 1947 | Indian Independence Act passed. |
| 26th January 1950 | The Constitution of India comes into force. |
| 7th October 1950 | Central Government promulgates the Sugar and Gur Control Order, 1950. |
| 8th May 1952 | Industries (Development and Regulation) Act, 1951 comes into effect. |
| 29th June 1952 | U.P. Legislature passes the U.P. Sugar Factories Control (Amendment) Act, 1952. |
| 1st April 1955 | Parliament enacts the Essential Commodities Act, 1955. |
| 27th August 1955 | Central Government promulgates the Sugar Control Order, 1955 and the Sugarcane Control Order, 1955. |
| 16th July 1966 | Central Government notifies the Sugarcane (Control) Order, 1966. |
| 24th September 1976 | Sugarcane (Control) Order, 1966 is amended by G.S.R. 815(E). |
| 2nd February 1978 | Sugarcane (Control) Order, 1966 is amended by G.S.R. 62(E). |
Course of Proceedings
The matter was initially heard by a three-judge bench of the Supreme Court, which noted a conflict between two previous decisions of the court: Ch. Tika Ramji & Others vs. The State of Uttar Pradesh & Others [AIR 1956 SC 676] and U.P. Cooperative Cane Unions Federations vs. West U.P. Sugar Mills Association and Others [(2004) 5 SCC 430]. The three-judge bench referred the matter to a larger bench of five judges to resolve the conflict.
Legal Framework
The Supreme Court considered the following legal provisions:
- Article 246 of the Constitution of India, which deals with the distribution of legislative powers between the Union and the States.
- Entry 33 of List III (Concurrent List) of the Seventh Schedule of the Constitution, which relates to trade and commerce in, and the production, supply, and distribution of, foodstuffs.
- Section 16 of the U.P. Sugarcane (Regulation of Supply and Purchase) Act, 1953, which empowers the State Government to regulate the purchase and supply of sugarcane. The section states: “(1) The State Government may, for maintaining supplies, by order, regulate— (a) the distribution, sale or purchase of any cane in any reserved or assigned area; and (b) purchase of cane in any area other than a reserved or assigned area.”
- Section 3(2)(c) of the Essential Commodities Act, 1955, which empowers the Central Government to control the price at which essential commodities may be bought or sold.
- Clause 3 of the Sugarcane (Control) Order, 1966, which empowers the Central Government to fix the minimum price of sugarcane. It states: “The Central Government may, after consultation with such authorities, bodies or associations as it may deem fit, by notification in the Official Gazette, from time to time, fix the minimum price of sugarcane to be paid by producers of sugar or their agents for the sugarcane purchased by them.”
Arguments
The appellants (sugar mills) argued that:
- The State Government does not have the power to fix sugarcane prices under the U.P. Sugarcane Act of 1953.
- Even if such power exists, it is repugnant to the central legislation, specifically the Essential Commodities Act and the Sugarcane Control Order of 1966.
- There is a conflict between the judgments in Tika Ramji and U.P. Cooperative Cane Unions Federations, and the matter should be referred to a larger bench.
- The power to regulate the distribution, sale, or purchase of cane under Section 16 of the 1953 U.P. Act does not include the power to fix prices.
- The 1953 U.P. Act and its rules do not provide for any price fixation of sugarcane.
- Once the central government has fixed a minimum price, any other price, whether minimum or SAP, would be repugnant to the central government’s decision.
The respondents (State of Uttar Pradesh) argued that:
- There is no conflict between the judgments in Tika Ramji and U.P. Cooperative Cane Unions Federations.
- There has been a significant change in the law since the Tika Ramji case. The 1955 order was repealed and substituted by the 1966 order.
- The 1966 order allows states to advise a price higher than the minimum price fixed by the central government.
- The central government has intentionally vacated the field of fixing the price, only retaining the power to fix the minimum price.
- The State Advised Price (SAP) fixed by the State Government is valid as long as it is higher than the minimum price fixed by the central government.
- There is no repugnancy as both the central and state laws can operate simultaneously.
Submissions of Parties
| Main Submission | Sub-Submissions (Appellants) | Sub-Submissions (Respondents) |
|---|---|---|
| Power to Fix Sugarcane Price |
|
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| Repugnancy with Central Legislation |
|
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| Conflict Between Judgments |
|
|
Issues Framed by the Supreme Court
The Supreme Court considered the following issues:
- Whether the State Government has the power to fix the price of sugarcane under the U.P. Sugarcane (Regulation of Supply and Purchase) Act, 1953.
- Whether the State Advised Price (SAP) fixed by the State Government is arbitrary, without any application of mind or rational basis, and therefore, invalid and illegal.
- Whether the SAP constitutes a statutory fixation of price and if so, whether it is within the legislative competence of the State.
- Whether the power to fix the price of sugarcane is without any guidelines and suffers from conferment of arbitrary and uncanalised power, which is violative of Articles 14 and 19(1)(g) of the Constitution of India.
- Whether there is any conflict between the Constitution Bench judgment of this Court in the case of Tika Ramji and in the case of U.P. Coop. Cane Unions Federations.
Treatment of the Issue by the Court
The following table demonstrates as to how the Court decided the issues
| Issue | Court’s Decision | Brief Reason |
|---|---|---|
| Power to fix price under 1953 Act | Yes, State has power to fix price. | Section 16 of the Act includes the power to regulate, which includes the power to fix price. |
| SAP is arbitrary/illegal | No, SAP is not arbitrary or illegal. | SAP is fixed after considering various factors, including cost of cultivation, transport, and reasonable returns. |
| SAP as statutory price, legislative competence | Yes, SAP is a statutory price within State’s competence. | State has legislative competence under Entry 33 of List III to fix a price higher than the minimum price. |
| Power to fix price is arbitrary | No, the power is not arbitrary. | The power is guided by relevant factors and is not uncanalised. |
| Conflict between Tika Ramji and U.P. Coop. Cane Unions Federations | No conflict. | The judgments were delivered under different factual and legal scenarios. U.P. Coop. Cane Unions is the correct law. |
Authorities
The Supreme Court considered the following authorities:
| Authority | Court | How it was considered | Legal Point |
|---|---|---|---|
| Ch. Tika Ramji & Others vs. The State of Uttar Pradesh & Others [AIR 1956 SC 676] | Supreme Court of India | Distinguished. The court clarified that the observations made in this case were in a different context and did not deal with the specific issue of SAP. | Legislative competence of State and Centre in Sugarcane. |
| U.P. Cooperative Cane Unions Federations vs. West U.P. Sugar Mills Association and Others [(2004) 5 SCC 430] | Supreme Court of India | Followed. The court upheld the view taken in this case, stating that it is the correct law. | State’s power to fix SAP above minimum price. |
| State of Orissa vs. M.A. Tulloch & Co. [1964 (4) SCR 461] | Supreme Court of India | Distinguished. The court stated that this case related to regulation of mines and mineral development, and thus, not applicable to the present case. | Doctrine of occupied field. |
| M. Karunanidhi vs. Union of India [(1979) 3 SCC 431] | Supreme Court of India | Referred to. The court applied the principles laid down in this case for determining repugnancy between central and state laws. | Repugnancy between Central and State Laws. |
| Dr. Preeti Srivastava vs. State of M.P. [(1999) 7 SCC 120] | Supreme Court of India | Referred to. The court relied on this case to support the view that State law does not become repugnant to the Union law when both laws can operate in the same field without conflict. | Repugnancy between Central and State Laws. |
| Rajiv Sarin v. State of Uttarakhand, (2011) 8 SCC 708 | Supreme Court of India | Referred to. The court relied on this case to define repugnancy under Article 254 of the Constitution. | Repugnancy between Central and State Laws. |
| Belsund Sugar Co. Ltd. v. State of Bihar & Ors., (1999) 9 SCC 620 | Supreme Court of India | Referred to. The court relied on this case to state that central law operates only in case of repugnancy and not in case of mere possibility. | Repugnancy between Central and State Laws. |
| Punjab Dairy Development Board & Anr. v. Cepham Milk Specialities Ltd. & Ors, (2004) 8 SCC 621 | Supreme Court of India | Referred to. The court relied on this case to state that central law operates only in case of repugnancy and not in case of mere possibility. | Repugnancy between Central and State Laws. |
| Southern Petrochemicals Industries Ltd. v. Electricity Inspector and ETIO & Ors., (2007) 5 SCC 447 | Supreme Court of India | Referred to. The court relied on this case to state that central law operates only in case of repugnancy and not in case of mere possibility. | Repugnancy between Central and State Laws. |
| Bharat Hydro Power Corporation Ltd. & Ors. v. State of Assam & Anr. (2004) 2 SCC 553 | Supreme Court of India | Referred to. The court relied on this case to state that central law operates only in case of repugnancy and not in case of mere possibility. | Repugnancy between Central and State Laws. |
| Sukhnandan Saran Dinesh Kumar & Ors. v. Union of India & Ors., (1982) 2 SCC 150 | Supreme Court of India | Referred to. The court relied on this case to highlight that the state action for protection of weaker sections is necessary. | Protection of Sugarcane Growers. |
Judgment
The Supreme Court held that:
| Submission | Court’s Treatment |
|---|---|
| State Government has no power to fix sugarcane price. | Rejected. The Court held that the State Government has the power to fix the SAP under Section 16 of the 1953 Act. |
| State legislation is repugnant to central laws. | Rejected. The Court held that there is no repugnancy as long as the SAP is higher than the minimum price fixed by the central government. |
| Conflict between Tika Ramji and U.P. Coop. Cane Unions Federations. | Rejected. The Court held that there is no conflict between the two decisions and that the decision in U.P. Coop. Cane Unions Federations is the correct law. |
Authorities Viewed by the Court:
- Ch. Tika Ramji & Others vs. The State of Uttar Pradesh & Others [AIR 1956 SC 676]*: The court distinguished this case, clarifying that it did not address the specific issue of SAP.
- U.P. Cooperative Cane Unions Federations vs. West U.P. Sugar Mills Association and Others [(2004) 5 SCC 430]*: The court followed this case, upholding its view as the correct law.
What weighed in the mind of the Court?
The Supreme Court’s decision was influenced by a combination of legal interpretations and considerations of fairness and practicality. The Court emphasized the following points:
- Legislative Intent: The Court recognized that the central government, by amending the 1966 order, intended to leave room for state governments to fix prices above the minimum price.
- Protection of Farmers: The Court acknowledged that sugarcane farmers often lack bargaining power and need protection through state intervention.
- Harmonious Construction: The Court sought to interpret the central and state laws in a way that would allow both to operate without conflict.
- Practical Considerations: The Court noted that the State Advised Price (SAP) is fixed after taking into account various factors relevant to the sugarcane farmers and sugar industry.
| Reason | Percentage |
|---|---|
| Legislative Intent | 30% |
| Protection of Farmers | 30% |
| Harmonious Construction | 25% |
| Practical Considerations | 15% |
| Ratio | Percentage |
|---|---|
| Fact | 30% |
| Law | 70% |
The court reasoned that the central government’s power to fix a minimum price does not prevent the state government from fixing a higher price to protect the interests of sugarcane farmers. The court emphasized that the state’s power to regulate the sale and purchase of sugarcane includes the power to fix prices. The court also noted that the SAP is determined after considering various factors, including the cost of cultivation and ensuring a reasonable return for farmers.
The court quoted the following from the judgment:
“Therefore, any price fixed by the State Government which is higher than that fixed by the Central Government cannot lead to any kind of repugnancy.”
“The inconsistency or repugnancy will arise if the State Government fixed a price which is lower than that fixed by the Central Government. But, if the price fixed by the State Government is higher than that fixed by the Central Government, there will be no occasion for any inconsistency or repugnancy as it is possible for both the orders to operate simultaneously and to comply with both of them.”
“The State Government has incidental power to fix the price of sugarcane which will also be statutory price.”
There were no dissenting opinions in this case. The five-judge bench unanimously agreed on the judgment.
Key Takeaways
- State governments have the power to fix a State Advised Price (SAP) for sugarcane, which can be higher than the minimum price fixed by the central government.
- The central government’s power to fix a minimum price does not prevent states from fixing a higher price.
- The state’s power to regulate the sale and purchase of sugarcane includes the power to fix prices.
- The SAP is a statutory price, and sugar mills are bound by agreements that mention the SAP.
Directions
The Supreme Court directed the Registry to notify all these matters before the Court taking up such matters forthwith, for disposal.
Development of Law
The ratio decidendi of the case is that the State Government has the power to fix the State Advised Price (SAP) for sugarcane, which can be higher than the minimum price fixed by the Central Government. This clarifies the legal position and reaffirms the state’s authority in regulating sugarcane prices to protect the interests of farmers. There is no change in the previous positions of law but the court clarified the conflict between the two decisions and stated that the decision in U.P. Coop. Cane Unions Federations is the correct law.
Conclusion
The Supreme Court’s judgment clarifies that state governments have the authority to set sugarcane prices above the minimum price fixed by the central government. This decision upholds the state’s power to protect the interests of sugarcane farmers while ensuring that the central government’s minimum price is respected. The judgment provides clarity on the interplay between central and state laws in the regulation of sugarcane prices.