Judgement Summary

West UP Sugar Mills Association v. State of Uttar Pradesh, 2020 – Decided on 22.04.2020

Coram – Arun Mishra, Indira Banerjee, Vineet Saran, M.R. Shah And Aniruddha Bose JJ.

This is a Reference.

Background of the Reference

The Court was hearing a reference seeking resolution of conflict between the rulings in Tika Ramji v. State of Uttar Pradesh, AIR 1956 SC 676 and State of U.P. Cooperative Cane Unions Federations v. West U.P. Sugar Mills Association, (2004) 5 SCC 430.

In Tika Ramji Case, the 5-judge bench held that,

  • Section 16 of the U.P. Sugarcane (Regulation of Supply and Purchase) Act, 1953 does not include the power to fix a price;
  • The price of cane fixed by the U.P. Government only mean the price fixed by the appropriate Government which would be the Central Government, under Clause 3 of the Sugarcane (Control) Order, 1955.
  • even the provisions in behalf of the agreement contained in Clauses 3 and 4 of the U.P. Sugarcane (Regulation of Supply and Purchase) Order, 1954 provided that the price was to be the minimum price to be notified by the Government subject to such deduction, if any, as may be notified by the Government from time to time, meaning thereby the Central Government, the State Government not having made any provision in that behalf at any time whatsoever;
  • there is no power to fix a price for sugarcane under the U.P. Sugarcane Act or Rules and the Orders made thereunder.

In Tika Ramji case (supra), this Court did not comment on whether a power which the State Government exercised under Section 16 of the 1953 U.P. Act would be repugnant to the Central legislation, since this Court found no such power exercised by the State Government.

In UP Cooperative Cane unions Federations Case, the 5-judge bench held that –

“the inconsistency or repugnancy will rise if the State Government fixes 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.”

It explained that a higher price fixed by the State Government would automatically comply with the provisions of clause 3(2) of 1966 Order. 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.

This Court on conflict between Tika Ramji Case and UP Cooperative Cane unions Federations Case:

It held that the view taken by the Constitution Bench of this Court in the case of U.P. Cooperative Cane Unions Federations case is the correct law.

In the case of Tika Ramji, the Court held that in the field of sugar and sugarcane, both, the Parliament and the State legislature would have the concurrent Jurisdiction as the same will fall under Entry 33 in the Concurrent List of seventh Schedule. Considering the fact that the State Government did not exercise the power of fixing the price, though the powers were available and the Central Government fixed the price/minimum price which came to be adopted by the State Government, this Court in Tika Ramji’s case held that in such a situation there is no conflict and the question of repugnancy does not arise.

Held – “there is no apparent conflict between the decisions in Tika Ramji’s case and U.P. Coop. Cane Unions Federations, which require to be referred to a larger Bench of seven Judges.”

The core issue is whether the State of U.P. has the authority to fix the State Advised Price (SAP) [hereinafter referred to as “SAP”], which is required to be paid over and above the minimum price fixed by the Central Government?

Issues

  • Whether by virtue of Article 246 read with Schedule VII List III Entry 33 of the Constitution the field is occupied by the Central legislation and hence the Central Government has the exclusive power to fix the price of sugarcane?

By virtue of Entries 33 and 34 List III of seventh Schedule, both the Central Government as well as the State Government have the power to fix the price of sugarcane. The Central Government having exercised the power and fixed the “minimum price”, the State Government cannot fix the “minimum price” of sugarcane. However, at the same time, it is always open for the State Government to fix the “advised price” which is always higher than the “minimum price”, in view of the relevant provisions of the Sugarcane (Control) Order, 1966, which has been issued in exercise of powers under Section 16 of the U.P. Sugarcane (Regulation of Supply and Purchase) Act, 1953;

(2) Whether Section 16 or any other provision of the U.P. Sugarcane (Regulation of Supply and Purchase) Act, 1953 confers any power upon the State Government to fix the price at which sugarcane can be bought or sold?

The Sugarcane (Control) Order, 1966 which has been issued under Section 16 of the U.P. Sugarcane (Regulation of Supply and Purchase) Act, 1953 confers power upon the State Government to fix the remunerative/advised price at which sugarcane can be bought or sold which shall always be higher than the minimum price fixed by the Central Government;

In the case of U.P. Cooperative Cane Unions Federations, the Constitution Bench has upheld the power and authority of the State Government to fix the SAP after precisely observing that the Act of 1953 has been enacted to regulate the SAP and purchase of sugarcane required by the sugar factories and that the word ‘regulate’ would also include the right to fix the price. It has also declared that the SAP fixed by the State Government has to be higher than the minimum price fixed by the Central Government. In a given case, the SAP price may be an agreed price.

As held by Court in the case of U.P. Cooperative Cane Unions Federations, the State has the competence to determine and fix the State Advised Price fixed under section 16 and therefore fixation of SAP by the State Government cannot be said to be beyond the purview of legislative competence. Once the fixation of State Advised Price has been done, the Cane Commissioner can direct the parties to follow the same as held in U.P. Cooperative Cane Growers Federation. It cannot be said that fixation of price under the regulatory measure provided in section 16 suffers from arbitrariness, nor can it be termed to be uncanalised power. Thus, we are of the considered opinion that the decision in Tika Ramji (supra) is not in conflict with the decision in U.P. Cooperative Cane Unions Federations (supra) and the decision in the latter case is not required to be revisited by a larger Bench of seven Judges.

(3) If the answer to this question is in the affirmative, then whether Section 16 or the said provision of the U.P. Sugarcane (Regulation of Supply and Purchase) Act, 1953 is repugnant to Section 3(2)(c) of the Essential Commodities Act, 1955 and Clause 3 of the Sugarcane (Control) Order, 1966 [hereinafter referred to as “1966 Order”]? And if so, the provisions of the Central enactments will prevail over the provisions of the State enactment and the State enactment to that extent would be void under Article 254 of the Constitution of India.

Section 16 of the U.P. Sugarcane (Regulation of Supply and Purchase) Act, 1953 is not repugnant to Section 3(2)(c) of the Essential Commodities Act, 1955 and Clause 3 of the Sugarcane (Control) Order, 1966 as, as observed hereinabove, the price which is fixed by the Central Government is the “minimum price” and the price which is fixed by the State Government is the “advised price” which is always higher than the “minimum price” fixed by the Central Government and therefore, there is no conflict. It is only in a case where the “advised price” fixed by the State Government is lower than the “minimum price” fixed by the Central Government, the provisions of the Central enactments will prevail and the “minimum price” fixed by the Central Government would prevail. So long as the “advised price” fixed by the State Government is higher than the “minimum price” fixed by the Central Government, the same cannot be said to be void under Article 254 of the Constitution of India.

Concerning laws in List III of the Seventh Schedule of the Constitution of India, where both the Union and the States have the power to enact a law, the question of repugnancy arises only in a case where there is an actual irreconcilable conflict between the two laws. Inconsistency between the two laws is irreconcilable, then the question of repugnancy arises. It is necessary to find the dominant intention of both the legislatures, partial or incidental coverage of the same area in a different context, and to achieve a different purpose, does not attract the doctrine of repugnancy. In Rajiv Sarin v. State of Uttarakhand, (2011) 8 SCC 708, the Court held – repugnancy between the two statutes would arise if there is a direct conflict between the two provisions and the law made by Parliament and the law made by the State Legislature occupies the same field. Hence, whenever the issue of repugnancy between the law passed by Parliament and of State Legislature are raised, it becomes quite necessary to examine as to whether the two legislations cover or relate to the same subject-matter or different.

For repugnancy under Article 254 of the Constitution, there is a twin requirement, which is to be fulfilled: firstly, there has to be a “repugnancy” between a Central and State Act; and secondly, the Presidential assent has to be held as being non-existent. The test for determining such repugnancy is indeed to find out the dominant intention of both the legislations and whether such dominant intentions of both the legislations are alike or different. To put it simply, a provision in one legislation in order to give effect to its dominant purpose may incidentally be on the same subject as covered by the provision of the other legislation, but such partial or incidental coverage of the same area in a different context and to achieve a different purpose does not attract the doctrine of repugnancy. In a nutshell, in order to attract the doctrine of repugnancy, both the legislations must be substantially on the same subject.

In M. Karunanidhi v. Union of India, (1979) 3 SCC 431, the Court opined that where there is a direct collision between the law made by the State and the law made by the Parliament, State law would be void to the extent of repugnancy. It is only when the provisions are irreconcilable.

Repugnancy may result from the following circumstances:

1. Where the provisions of a Central Act and a State Act in the Concurrent List are fully inconsistent and are absolutely irreconcilable, the Central Act will prevail, and the State Act will become void in view of the repugnancy.

2. Where however a law passed by the State comes into collision with a law passed by Parliament on an Entry in the Concurrent List, the State Act shall prevail to the extent of the repugnancy and the provisions of the Central Act would become void provided the State Act has been passed in accordance with clause (2) of Article 254.

3. Where a law passed by the State Legislature while being substantially within the scope of the entries in the State List entrenches upon any of the Entries in the Central List the constitutionality of the law may be upheld by invoking the doctrine of pith and substance if on an analysis of the provisions of the Act it appears that by and large the law falls within the four corners of the State List and entrenchment, if any, is purely incidental or inconsequential.

4. Where, however, a law made by the State Legislature on a subject covered by the Concurrent List is inconsistent with and repugnant to a previous law made by Parliament, then such a law can be protected by obtaining the assent of the President under Article 254(2) of the Constitution. The result of obtaining the assent of the President would be that so far as the State Act is concerned, it will prevail in the State and overrule the provisions of the Central Act in their applicability to the State only. Such a state of affairs will exist only until Parliament may at any time make a law adding to, or amending, varying or repealing the law made by the State Legislature under the proviso to Article 254.

It is well settled that the presumption is always in favour of the constitutionality of a statute and the onus lies on the person assailing the Act to prove that it is unconstitutional. Prima facie, there does not appear to us to be any inconsistency between the State Act and the Central Acts.

Clause (1) of Article 254 of the Constitution gives primacy to central legislations in case of conflict with State laws whether enacted before or after. The central law operates only in case of repugnancy and not in a case of mere possibility when such an order might be issued under state law, as opined in Belsund Sugar Co. Ltd. v. State of Bihar, (1999) 9 SCC 620; Punjab Dairy Development Board v. Cepham Milk Specialities Ltd., (2004) 8 SCC 621; Southern Petrochemicals Industries Ltd. v. Electricity Inspector and ETIO, (2007) 5 SCC 447 and Bharat Hydro Power Corporation Ltd. v. State of Assam, (2004) 2 SCC 553.

It is apparent that in U.P. Cooperative Cane Unions Federations, a Constitution Bench has rightly opined that under section 16 of the Act of 1953, there is the power to fix a price with State, which is State advised price. It cannot be said that the Central legislation occupies the field, the Essential Commodities Act, 1955, and the Order of 1966 issued thereunder deals with minimum price. The Central Government has the power to fix the minimum price in clause 3. The State Government is not denuded of the power under the Act of 1953 to fix the “State Advised Price” under section 16 as held in U.P. Cooperative Cane Unions Federations. The power to regulate includes the power to fix the price. But State advised price has to be higher than the minimum price fixed by Central Government. But the exercise of the power under section 16 of the Act of 1953 to fix State Advised Price, cannot be said to be irreconcilable with the minimum price fixation under section 3(2) (c) of the Essential Commodities Act, 1955 and clause 3 of the Sugarcane (Control) Order, 1966. The power of fixation of State advised price under section 16 of the Act of 1953 cannot be said to be arbitrary or illegal in any manner. 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. A higher price fixed by the State Government would automatically comply with the provisions of Sub-clause (2) of Clause 3 of 1966 Order. 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.

(4) Whether the SAP fixed by the State Government in exercise of powers under Section 16 of the U.P. Sugarcane (Regulation of Supply and Purchase) Act, 1953 is arbitrary, without any application of mind or rational basis and is therefore, invalid and illegal?

The power of fixation of State advised price under section 16 of the Act of 1953 cannot be said to be arbitrary or illegal in any manner.


(5) Does the State Advised Price (for short “SAP”) constitute a statutory fixation of price? If so, is it within the legislative competence of the State?

that under the 1966 Order the Central Government only fixes the minimum price and it is always open to the State Government to fix a higher price. Under the enactments made by the State Legislatures areas are reserved for the sugar factories and the cane-growers therein are compelled to supply sugarcane to them and therefore the State Government has incidental power to fix the price of sugarcane which will also be statutory price. They further lay down that the Cane Commissioner can direct the cane-growers and the sugar factories to enter into agreements for purchase of sugarcane at a price fixed by the State Government and such agreements cannot be branded as having been obtained by force or compulsion. Court has specifically held that the SAP is a price higher than that determined by the Central Government which is known as Statutory Minimum Price (SMP). Thus, in the case of U.P. Cooperative Cane Unions Federations, this Court has specifically upheld the power of the State Government to fix the SAP under Section 16 of the Act.

The provision of State advised price has been made to protect the interests of the sugarcane growers who are not in a position to negotiate. In Sukhnandan Saran Dinesh Kumar v. Union of India, (1982).

(6) 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?

The Court held that the State of Uttar Pradesh had the legislative competence to enact the Act, and there was no repugnancy of the Act of 1953 with the Act of 1951 or the Essential Commodities Act, 1955. This Court upheld the validity of the Act and also held that there was no unreasonable restriction imposed. There was no violation of fundamental right under Article 19(1)(g) and Article 14 of the Constitution. Sukhnandan Saran Dinesh Kumar v. Union of India, (1982) – The farmers having small holdings need protection for selling at fair price their meagre agricultural produce. As far back as 1953, the U.P. Legislature enacted U.P. Sugarcane (Regulation of Supply and Purchase) Act, 1953, for rational distribution of sugarcane to factories, for its development on the organised scientific line, to protect the interest of cane growers and of the industry, etc. Constitutionality of this Act was challenged on various grounds including one under Article 19(1)(g). In Tika Ramji v. State of U.P. Court repelled the challenge under Article 19(1)(g) holding that the restriction which is imposed upon the cane growers in regard to sale of their sugarcane to the occupiers of factories in areas where the membership of the cane growers’ cooperative society is not less than 75 per cent of the total cane growers within the area, is a reasonable restriction in the public interest designed for safeguarding the interest of the large majority of growers of sugarcane in the area and works for the greatest good of the greatest number. The proposition is now beyond the pale of controversy that the State can impose a restriction in the interest of general public on the right of a party to contract where in the opinion of the Government the contracting parties are unable to negotiate on the footing of equality. The State action for the protection of the weaker sections is not only justified but absolutely necessary unless the restriction imposed is execessive.

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