Essential Commodities (Amendment and Validation) Act, 20091
| [Act 36 of 2009] | [22nd December, 2009] |
An Act further to amend the Essential Commodities Act, 1955 and to make provisions for validation of certain orders issued by the Central Government determining the price of levy sugar and actions taken under those orders and for matters connected therewith
Whereas a Bench of three Judges of the Hon'ble Supreme Court in the case of Modi Industries Ltd. v. Union of India on the 20th February, 1996 reported in (1994) 1 SCC 648
;And whereas subsequently the decision of a Bench of three Judges of the Supreme Court, dated 28-1-1997 in the case of Shri Malaprabha Coop. Sugar Factory Ltd. v. Union of India (Malaprabha 2), (1999) 9 SCC 245
, did not have any bearing on the fixation of price of levy sugar for the year 1975-1976 to 1979-1980;And whereas the decision of the Bench of three Judges in Modi Industries Ltd. v. Union of India, (1997) 10 SCC 216
;And whereas in the case of Union of India v. Triveni Engg. Works Ltd., (1999) 9 SCC 246
;And whereas in Malaprabha Coop. Sugar Factory Ltd. v. Union of India (Malaphabha 3), (1997) 10 SCC 216
, were dismissed by order dated 16-11-2000 and the working statement given before the Hon'ble Court showed that the retention of fifty per cent being a factor which can be taken into consideration in determining element (d) in Section 3(3-C) of the Essential Commodities Act was taken into account, not to the extent as desired by the petitioners, but the result of this was that the levy price fixed at Rs 163.780 in respect of West U.P. had gone up to Rs 172.430, the Hon'ble Supreme Court held that "the said fixation is in accordance with law and the directions given by this Court have been complied with. Neither a case for contempt has been made out nor is there any justification, in our opinion, for giving any direction to the Government to refix the levy price under Section 3(3-C) of the Essential Commodities Act.";And whereas notwithstanding the judgment in Modi Industries case, (2009) 16 SCC 569
, in a judgment dated 31st March, 2008, in relation to Sugar Seasons 1983-1984 and 1984-1985, held that the actual price payable to cane growers was absolutely relevant for determining the price of levy sugar;And whereas there are thus conflicting decisions as to the factors to be taken into consideration in determining the price of levy sugar;
And whereas it has become necessary to make suitable amendments to the Essential Commodities Act, 1955 (10 of 1955) to clarify and reiterate the underlying principles and the factors that needed to be taken into consideration in determining the price of levy sugar and to give effect accordingly;
And whereas in order to remove doubts and ambiguities it has become necessary to make such provisions with retrospective effect to validate the determination of the price of levy sugar by the Central Government from time to time pursuant to the provisions of the Essential Commodities Act, 1955.
Be it enacted by Parliament in the Sixtieth Year of the Republic of India as follows:-
1 Received the assent of the President on 22-12-2009 and published in the Gazette of India, Extraordinary, Part II, Section 1, dated 22-12-2009, pp. 1-4, No. 44.
Prefatory Note-Statement of Objects and Reasons.-Sugar and sugarcane are essential commodities under the Essential Commodities Act, 1955. Under the system of partial control on sugar, a part of the sugar produced by sugar mills is requisitioned as levy sugar and the balance is allowed to be sold as non-levy (free sale) sugar in the open market. While price of non-levy sugar is determined by the market forces, the price of levy sugar is determined by the Central Government under the provisions of sub-section (3-C) of Section 3 of the Essential Commodities Act, 1955, having regard to-
(a) the minimum price, if any, fixed for sugarcane by the Central Government;
(b) the manufacturing cost of sugar;
(c) the duty or tax, if any, paid or payable thereon; and
(d) the securing of a reasonable return on the capital employed in the business of manufacturing of sugar.
2. A new Clause 5-A was inserted in the Sugarcane (Control) Order, 1966, with effect from the 1st day of October, 1974, providing for additional cane price to the cane growers as fifty per cent share of the excess realisation from sale of sugar after the working results of the sugar factory become known.
3. The methodology regarding determination of price of levy sugar by the Central Government has been under continuous litigation in various courts. The Hon'ble Supreme Court in its two judgments on levy sugar prices delivered on the 22nd September, 1993 in (Malaprabha 1), (1997) 10 SCC 216
, clarified that the liability of additional price of sugarcane under Clause 5-A of Sugarcane (Control) Order, 1966 would get reflected in factors (a) or (b) or both of sub-section (3-C) of the aforesaid Section 3. The Hon'ble Supreme Court further held that mopping up of extra realisation in an element of factor (d) of sub-section (3-C) of Section 3 of the Essential Commodities Act, 1955.4. The Hon'ble Supreme Court, in Modi Industries Ltd. v. Union of India, (1999) 9 SCC 244
, on the 2nd February, 1999, the Hon'ble Supreme Court again held that the price of levy sugar for the year 1982-83 has already been upheld in its earlier three decisions.The Central Government has consistently followed the methodology upheld by these judgments of the Supreme Court for determination of prices of levy sugar from the year 1980-81 onwards.
5. The Hob'ble Supreme Court in Mahalakshmi Sugar Mills Co. Ltd. v. Union of India, (2009) 16 SCC 569
, the Hon'ble Supreme Court in a later order dated the 8th July, 2008 upheld the judgment of the Delhi High Court in the case of Union of India v. Saraswathi Industrial Syndicate Ltd., (LPA No. 1053 of 2007 decided on 26-7-2007) directing the Central Government to re-fix the prices of levy sugar for the Sugar Years 1980-81 to 2000-2001 (Except for the year 1982-83).6. Thus, due to the ambiguities in the existing law pertaining to determination of price of levy sugar, there have been conflicting decisions as to the factors to be taken into consideration in determining the price of levy sugar. It, therefore, became absolutely necessary to amend the Essential Commodities Act, 1955 to remove the defects and ambiguities in the law pertaining to determination of price of levy sugar thereby clarifying the expressions of cost components of levy sugar mentioned in sub-section (3-C) of Section 3 of the Essential Commodities Act, 1955. Further, since the refixation of prices of levy sugar for the years since 1980-81 would have led to controversy and confusion regarding the benefit of such refixation to various sugar mills with potential for huge unbudgeted financial burden on the Central Exchequer, it also became necessary to validate the actions of the Central Government taken since the 1st day of October, 1974 [That is the date of insertion of Clause 5-A in the Sugarcane (Control) Order, 1966] under the orders issued for determination of price of levy sugar under sub-section (3-C) of Section 3 of the Essential Commodities Act, 1955.
7. Having regard to the above, it is considered necessary to replace the concept of ‘Minimum Price’ of sugarcane with ‘Fair and Remunerative Price’ (FRP) of sugarcane by giving a reasonable margin to the farmers of sugarcane on account of ‘risk’ and ‘profit’ and, therefore, Section 3 of the Essential Commodities Act, 1955 had to be amended to provide in clause (a) of sub-section (3-C) thereof, the fair and remunerative price. Fixation of Fair and Remunerative Price not only meant giving higher price to the farmers for their sugarcane than the statutory minimum price fixed previously, but also ensured that a fair and remunerative price for sugarcane is fixed by the Central Government.
8. The Sugar Season 2009-2010 had already commenced on the 1st October, 2009 and, therefore, to achieve the above purposes immediately, the Essential Commodities (Amendment and Validation) Ordinance, 2009 (Ordinance 9 of 2009) was promulgated by the President on the 21st October, 2009.
9. The Bill seeks to replace the aforesaid Ordinance.
1. Short title and commencement.-(1) This Act may be called the Essential Commodities (Amendment and Validation) Act, 2009.
(2) It shall be deemed to have come into force on the 21st day of October, 2009.
2. Amendment of Section 3.-In Section 3 of the Essential Commodities Act, 1955 (10 of 1955) (hereinafter referred to as the principal Act)-
(a) in sub-section (3-C), the existing Explanation shall be numbered as Explanation I, and after Explanation I as so numbered, the following Explanation shall be inserted and shall be deemed to have been inserted, with effect from the 1st day of October, 1974, namely:-
‘Explanation II.-For the removal of doubts, it is hereby declared that the expressions "minimum price" referred to in clause (a), "manufacturing cost of sugar" referred to in clause (b) and "reasonable return on the capital employed" referred to in clause (d) exclude the additional price of sugarcane paid or payable under Clause 5-A of the Sugarcane (Control) Order, 1966 and any price paid or payable under any order or enactment of any State Government and any price agreed to between the producer and the grower of sugarcane or a sugarcane growers’ co-operative society';
(b) for sub-section (3-C) and the Explanations thereunder, the following shall be substituted, and shall be deemed to have been substituted, on and from the 1st day of October, 2009, namely:-
‘(3-C) Where any producer is required by an order made with reference to clause (f) of sub-section (2) to sell any kind of sugar (whether to the Central Government or to a State Government or to an officer or agent of such Government or to any other person or class of persons) whether a notification was issued under sub-section (3-A) or otherwise, then, notwithstanding anything contained in sub-section (3), there shall be paid to that producer only such amount as the Central Government may, by order, determine, having regard to-
(a) the fair and remunerative price, if any, determined by the Central Government as the price of sugarcane to be taken into account under this section;
(b) the manufacturing cost of sugar;
(c) the duty or tax, if any paid or payable thereon; and
(d) a reasonable return on the capital employed in the business of manufacturing of sugar:
Provided that the Central Government may determine different prices, from time to time, for different areas or factories or varieties of sugar:
Provided further that where any provisional determination of price of levy sugar has been done in respect of sugar produced up to the Sugar Season 2008-2009, the final determination of price may be undertaken in accordance with the provisions of this sub-section as it stood immediately before the 1st day of October, 2009.
Explanation.-For the purposes of this sub-section,-
(a) "fair and remunerative price" means the price of sugarcane determined by the Central Government under this section;
(b) "manufacturing cost of sugar" means the net cost incurred on conversion of sugarcane into sugar including net cost of transportation of sugarcane from the purchase centre to the factory gate, to extent it is borne by the producer;
(c) "producer" means a person carrying on the business of manufacturing sugar;
(d) "reasonable return on the capital employed" means the return on net fixed assets plus working capital of a producer in relation to manufacturing of sugar including procurement of sugarcane at a fair and remunerative price determined under this section.’.
3. Validation of action taken etc., under specified orders issued under sub-section (3-C) of Section 3 of the principal Act.-(1) Notwithstanding anything contained in any judgment, decree or order of any court, tribunal or other authority-
(a) all things done or all actions taken by the Central Government under the specified orders shall be deemed to be and deemed to have always been done or taken in accordance with law;
(b) no suit, claim or other proceedings shall be instituted, maintained or continued in any court, tribunal or other authority for the payment or adjustment of any payment in relation to the determination of price of levy sugar under any specified order;
(c) no court shall enforce any decree or order directing any payment in relation to the determination of price of levy sugar under any specified order;
(d) no claim or challenge shall be made in, or entertained by any court, tribunal or other authority on the ground that the Central Government did not take into consideration any of the factors specified in sub-section (3-C) of Section 3 of the principal Act in the determination of price of levy sugar under any specified order.
(2) In this section, "specified order" means any order relating to the determination of price of sugar issued under sub-section (3-C) of Section 3 of the principal Act before the 21st day of October, 2009, in relation to sugar produced in any sugar season up to and including the Sugar Season 2008-2009.
4. Repeal and saving.-(1) The Essential Commodities (Amendment and Validation) Ordinance, 2009 (Ordinance 9 of 2009), is hereby repealed.
(2) Notwithstanding the repeal of the Essential Commodities (Amendment and Validation) Ordinance, 2009 (Ordinance 9 of 2009), anything done or any action taken under the principal Act, as amended by the said Ordinance, shall, subject to the provisions contained in sub-section (3), be deemed to have been done or taken under the principal Act, as amended by this Act.
(3) Nothing contained in sub-section (2) shall apply to Clause 3-B of the Sugarcane (Control) Order, 1966, as inserted by the Government of India in the Ministry of Consumer Affairs, Food and Public Distribution Order Number S.O. 266(E)/Ess Com./Sugarcane, dated the 22nd October, 2009 or any thing done or any action taken thereunder.