A Scholarly Analysis of the U.P. Sugarcane (Regulation of Supply and Purchase) Rules, 1954

Introduction

The State of Uttar Pradesh, being a significant contributor to India's sugar production, has a long history of regulating its sugarcane industry. The U.P. Sugarcane (Regulation of Supply and Purchase) Act, 1953 (hereinafter "the 1953 Act") was enacted to provide for a rational distribution of sugarcane to factories, its development on organized scientific lines, to protect the interests of cane growers and of the industry (*Ch. Tika Ramji And Others, Etc. v. State Of Uttar Pradesh And Others*, 1956, citing Statement of Objects and Reasons). In furtherance of the objectives of the 1953 Act, and in exercise of the powers conferred by Section 28 thereof, the Uttar Pradesh Government promulgated the U.P. Sugarcane (Regulation of Supply and Purchase) Rules, 1954 (hereinafter "the 1954 Rules"). These Rules, along with the U.P. Sugarcane Supply and Purchase Order, 1954 (issued under Section 16 of the 1953 Act), form the bedrock of the regulatory framework governing the intricate relationship between sugarcane growers, cooperative societies, and sugar factories in the state. This article seeks to provide a comprehensive analysis of the 1954 Rules, drawing upon relevant statutory provisions and judicial pronouncements, particularly those provided as reference materials.

Historical and Legislative Context

The regulation of the sugarcane industry in Uttar Pradesh predates the 1953 Act and the 1954 Rules. The Supreme Court in *Ch. Tika Ramji And Others, Etc. v. State Of Uttar Pradesh And Others* (1956) traced this legislative history, noting earlier enactments and the influence of various committee reports, such as the Indian Tariff Board Report (1938) and the U.P. Sugar Industry Enquiry Committee (Swaminathan Committee) Report (1951), which recommended measures like a zonal system and the involvement of cooperative societies in cane supply.

A critical aspect of this legislative framework is its interplay with Central legislation. The Industries (Development and Regulation) Act, 1951 (IDR Act) declared the sugar industry as a scheduled industry, bringing its regulation under Central purview for certain aspects (*Triveni Engineering Works Ltd. And Another Etc. v. Union Of India And Others*, 1996). The Essential Commodities Act, 1955, and the Sugarcane (Control) Order, 1966, issued thereunder, empower the Central Government to fix the minimum price of sugarcane (*U.P Cooperative Cane Unions Federations v. West U.P Sugar Mills Association And Others*, 2004; *M/S. Shervani Sugar Syndicate Ltd., Allahabad v. Union Of India And Another*, 1979).

The constitutional validity of the 1953 Act was upheld in *Ch. Tika Ramji And Others, Etc. v. State Of Uttar Pradesh And Others* (1956), where the Supreme Court held that the Act fell within the State's legislative competence under Entry 33 of List III (Concurrent List) of the Seventh Schedule to the Constitution of India, as amended by the Constitution (Third Amendment) Act, 1954. The Court found no repugnancy between the State Act and Central laws, reasoning that they operated in different fields, with the State focusing on the regulation of supply and purchase of sugarcane without encroaching upon aspects exclusively managed by the Central government, such as price fixation (*Ch. Tika Ramji*, 1956; *Forum For People'S Collective Efforts (Fpce) And Another v. State Of West Bengal And Another*, 2021, citing *Tika Ramji*). This delineation of powers is crucial for understanding the scope and operation of the 1954 Rules.

Key Provisions and Mechanisms under the 1954 Rules

The 1954 Rules lay down detailed procedures and mechanisms for regulating the supply and purchase of sugarcane. These are designed to ensure a steady supply of cane to factories while safeguarding the interests of growers and cooperative societies.

Reservation and Assignment of Areas

A cornerstone of the regulatory mechanism is the concept of reserving or assigning geographical areas for sugarcane supply to specific factories. This is governed by Chapter VI of the 1954 Rules (*Triveni Engineering Works Ltd. And Another Etc. v. Union Of India And Others*, 1996; *Basti Sugar Mills. Co. Ltd. v. State Of Uttar Pradesh And Others*, 1994).

• Application for Reservation/Assignment: Rule 21 of the 1954 Rules mandates that the occupier of a factory shall, by August 31 each year, apply to the Cane Commissioner in Form-I, Appendix-III, for the reservation or assignment of an area for the ensuing crushing season. This form requires details, including purchases made at more than the minimum cane price during the last season, which is a factor considered in the decision-making process (*U.P.Co-op C.U.Federations v. West U.P.Sugar Mills Assocn*, 2004 (SCCOnline ALL Doc ID 10); *Basti Sugar Mills. Co. Ltd. v. State Of Uttar Pradesh And Others*, 1994).
• Factors for Determination: Rule 22 of the 1954 Rules enumerates the factors that the Cane Commissioner must consider while reserving or assigning an area, or determining the quantity of cane to be purchased. These include the crushing capacity of the factory, the availability of cane in the area, and the interests of cane growers and cooperative societies (*M/s. Triveni Engineering and Industries Ltd., etc v. State of U.P. and others*, 2000). The Supreme Court in *Tika Ramji* (as cited in *T. Venkatasubbiah Setty…* v. Corporation Of The City Of Bangalore And Another…*, 1966, and *Jagmohan Lal Varma v. Textile Commissioner And Ors.*, 1978) noted that the power of the Cane Commissioner under Section 15 of the 1953 Act is guided by these considerations in Rule 22, and is further conditioned by consultation requirements and the provision for appeal, thus not being an uncontrolled or unfettered power.
• Role of Authorities: The Cane Commissioner is empowered under Section 15 of the 1953 Act to declare reserved or assigned areas after consulting the factory and Cane-growers' Cooperative Society (*U.P State Sugar Corporation Ltd. v. State Of U.P And Others*, 1995; *Kumbhi Chini Mill v. State Of U.P. And Ors.*, 2011). Orders of the Cane Commissioner regarding reservation/assignment are appealable to the State Government under Section 15(4) of the 1953 Act (*U.P State Sugar Corporation Ltd. v. State Of U.P And Others*, 1995). Furthermore, Rule 23-A of the 1954 Rules provides for revision by the State Government of the Cane Commissioner's exercise under Section 12 of the Act (estimation of requirement) (*Kumbhi Chini Mill v. State Of U.P. And Ors.*, 2011).
• Purpose: The philosophy behind reservation and assignment is to ensure the maintenance of a reasonable supply of sugarcane to sugar producers and, conversely, to secure the interests of cane growers (*The Simbhaoli Sugar Mills Ltd., Simbhaoli v. Appellate Authority And Others*, 2000). Once an area is reserved or assigned, the factory is obligated to purchase the cane offered from that area as determined by the Cane Commissioner (Sections 15(2) and 15(3) of the 1953 Act) (*Basti Sugar Mills. Co. Ltd. v. State Of Uttar Pradesh And Others*, 1994).

Supply and Purchase Agreements

The U.P. Sugarcane Supply and Purchase Order, 1954, which is intrinsically linked to the 1954 Rules, mandates formal agreements for the supply and purchase of sugarcane.

• Clause 3(2) of the 1954 Order allows a cane grower or a Cane-growers' Co-operative Society to offer to supply cane grown in the reserved area within 14 days of the reservation order. Subsequently, Clauses 3(3) and 4(1) require the occupier of the factory to enter into an agreement in Form-B (with individual growers) or Form-C (with cooperative societies) (*U.P.Co-op C.U.Federations v. West U.P.Sugar Mills Assocn*, 2004 (SCCOnline ALL Doc ID 10); *U.P Cooperative Cane Unions Federations v. West U.P Sugar Mills Association And Others*, 2004 (SCCOnline ALL Doc ID 18)). These agreements detail terms of supply, price (not lower than that paid generally by the factory to other growers), and consequences for non-supply or inability to purchase.
• Clause 5(1) of the 1954 Order stipulates that cane grown in a reserved or assigned area shall not, except with the permission of the Cane Commissioner, be purchased by any person without the previous issue of requisition slips and identification cards to the growers by the factory occupier (*U.P.Co-op C.U.Federations v. West U.P.Sugar Mills Assocn*, 2004 (SCCOnline ALL Doc ID 10)).

Regulation of Price and Payment

While the Central Government fixes the minimum price of sugarcane under the Sugarcane (Control) Order, 1966, the 1953 Act and the 1954 Rules contain provisions regarding the payment of this price and related matters.

• Section 17 of the 1953 Act imposes a liability on the occupier of a factory to pay the price of sugarcane purchased. Sub-sections (3) and (4) provide for payment of interest in case of delay and recovery of dues as arrears of land revenue (*The Pratap Pur Sugar & Industries Ltd. v. The Collector, Deoria And Others*, 1990; *Co-Operative Cane Development Society Ltd. And Anr. Petitioners v. State Of U.P. And 2 Ors.*, 2017).
• The issue of "State Advised Price" (SAP), often higher than the Central minimum price, has been contentious. The Supreme Court in *U.P Cooperative Cane Unions Federations v. West U.P Sugar Mills Association And Others* (2004) (also reported as *West U.P. Sugar Mill Association & ... v. West U P Sugar Mill Association &*, 2004) held that the State Government lacks statutory authority under the 1953 Act or the 1954 Rules/Order to unilaterally fix an SAP that is binding on sugar factories. While parties can consensually agree to a higher price, the State cannot impose it. This affirmed the Central Government's primary role in price fixation, a distinction highlighted in *Tika Ramji*.
• However, as noted earlier, Rule 21 of the 1954 Rules requires factories to declare in Form-I if they paid more than the minimum price, and this is a factor in area reservation/assignment (*U.P.Co-op C.U.Federations v. West U.P.Sugar Mills Assocn*, 2004 (SCCOnline ALL Doc ID 10)), indirectly acknowledging the practice of paying higher prices.

Society Commission

Section 18 of the 1953 Act provides for the payment of a commission by factories to cooperative cane societies for cane purchased through them. The rate of this commission is prescribed by the State Government under the 1954 Rules (*West U.P Sugar Mills Assn. And Others v. State Of U.P And Others*, 2002 (SCCOnline ALL Doc ID 22)).

• Rule 49 of the 1954 Rules specifies this rate. Amendments to this rule have been subjects of litigation. In *West U.P Sugar Mills Assn. And Others v. State Of U.P And Others* (2002), the Supreme Court addressed a situation where Rule 49 was substituted by a new rule which later ceased to operate. The Court held that the old, repealed rule did not automatically revive upon the termination of the substituted rule. This decision emphasized that a substitution implies a complete replacement, and revival requires explicit legislative intent, citing precedents like *B.N. Tewari v. Union of India* (1965).

Other Regulatory Aspects

• Bonding Policy: Rule 57 of the 1954 Rules deals with the Bonding Policy. In *Raj Kumar & 6 Others v. State Of U.P. & 3 Others* (2015), the Allahabad High Court upheld the requirement for farmers supplying sugarcane to produce original Khataunis (land records) to prove they hold land within the specified area, as per this policy.
• Maintenance of Accounts: Rule 100 of the 1954 Rules requires an occupier of a factory to maintain detailed accounts in respect of each sugarcane grower (except for cane purchased through a cooperative society), including net weight of cane purchased and the rate paid (*U.P.Co-op C.U.Federations v. West U.P.Sugar Mills Assocn*, 2004 (SCCOnline ALL Doc ID 10)).
• Rule-making Power: Section 28 of the 1953 Act confers power upon the State Government to make rules. Section 28(2)(o) allows rules to specify the date from which they shall have effect. The Allahabad High Court in *Co-Operative Cane Development Society Ltd. And Anr. Petitioners v. State Of U.P. And 2 Ors.* (2017) interpreted Section 28(3) and found that it does not confer clear power upon the delegatee State Government to frame rules with retrospective operation, distinguishing it from statutory language that explicitly permits antedating.

Judicial Interpretation and Enforcement

Constitutional Validity and Legislative Competence

As discussed, *Ch. Tika Ramji And Others, Etc. v. State Of Uttar Pradesh And Others* (1956) is the locus classicus upholding the 1953 Act, and by implication, the 1954 Rules made thereunder. The Supreme Court meticulously analyzed the legislative fields and found no fatal repugnancy with Central enactments, establishing that the State legislation validly occupied the field of regulating sugarcane supply and purchase within its territory (*Forum For People'S Collective Efforts (Fpce) And Another v. State Of West Bengal And Another*, 2021). The principles of division of powers discussed in cases like *State Of Uttar Pradesh And Others v. Lalta Prasad Vaish* (2007), although concerning industrial alcohol, echo the broader constitutional framework governing State regulation of industries.

Powers and Discretion of Authorities

The 1954 Rules, read with the 1953 Act, confer significant powers on authorities like the Cane Commissioner. Courts have generally held that such discretion, when guided by statutory factors and subject to procedural safeguards, is valid.

• The power of the Cane Commissioner under Section 15 of the Act and Rule 22 of the Rules is "well defined and guided" and not "uncontrolled or an unfettered power," given the consultative requirements and appeal provisions (*T. Venkatasubbiah Setty…* v. Corporation Of The City Of Bangalore And Another…*, 1966, citing *Tika Ramji*; *Jagmohan Lal Varma v. Textile Commissioner And Ors.*, 1978, distinguishing cases where no guidelines were prescribed).
• Decisions of authorities must adhere to principles of natural justice. In *M/s. Triveni Engineering and Industries Ltd., etc v. State of U.P. and others* (2000), an order by the Cane Commissioner was challenged, inter alia, on the ground that it was passed without an opportunity of hearing. While the specific outcome depended on facts, the principle that administrative orders affecting rights must comply with natural justice is well-established (general principles also seen in *State Of U.P And Others v. Maharaja Dharmander Prasad Singh And Others*, 1989).
• Courts generally exhibit judicial deference to government policy decisions made within the statutory framework, especially in economic regulation, unless such policies are arbitrary, capricious, or mala fide (*Dhampur Sugar (Kashipur) Ltd. v. State Of Uttaranchal And Others*, 2007).

Interpretation of Specific Rules

The judiciary has played a vital role in interpreting specific provisions of the 1954 Rules. The ruling in *West U.P Sugar Mills Assn. And Others v. State Of U.P And Others* (2002) regarding the non-revival of a repealed Rule 49 upon the expiry of a substituting rule is a significant example. This ensures certainty in law, clarifying that a substitution is a definitive act unless revival is expressly provided. The interpretation of the State's rule-making power under Section 28, particularly concerning retrospectivity, by the Allahabad High Court in *Co-Operative Cane Development Society Ltd. And Anr. Petitioners v. State Of U.P. And 2 Ors.* (2017) also provides crucial guidance.

Dispute Resolution

The 1953 Act and the 1954 Rules provide mechanisms for dispute resolution, including appeals to the State Government against orders of the Cane Commissioner (e.g., Section 15(4) of the Act, as seen in *U.P State Sugar Corporation Ltd. v. State Of U.P And Others*, 1995). However, it is also important to distinguish between matters amenable to writ jurisdiction (public law remedies) and those that are essentially private contractual disputes, even if involving state-controlled entities in the sugar sector (*Kisan Sahkari Chini Mills Limited And Others v. Vardan Linkers And Others*, 2008).

Impact and Significance of the 1954 Rules

The U.P. Sugarcane (Regulation of Supply and Purchase) Rules, 1954, have profoundly shaped the sugarcane economy of Uttar Pradesh for decades. Their primary significance lies in:

• Orderly Supply Chain: The mechanisms for area reservation/assignment, coupled with mandatory agreements, aim to ensure a predictable and orderly supply of sugarcane to factories, which is essential for their continuous operation during the crushing season (*U.P Cooperative Cane Unions Federations v. West U.P Sugar Mills Association And Others*, 2004 (SCCOnline ALL Doc ID 18)).
• Protection of Interests: The Rules seek to balance the interests of powerful sugar mills with those of numerous, often small, sugarcane growers and their cooperative societies. Provisions for timely payment, regulation of purchase, and involvement of cooperative societies are directed towards this end.
• Framework for Development: By ensuring a structured market, the Rules indirectly contribute to the planned development of sugarcane cultivation and the sugar industry in the state.
• Legal Certainty: Despite complexities and occasional disputes, the Rules, as interpreted and applied by the judiciary, provide a framework of legal certainty for stakeholders.

However, challenges persist. Issues like the determination and enforcement of sugarcane prices (especially the SAP controversy), fixation of society commission rates, and ensuring fair practices in a complex agro-industrial system continue to generate legal and administrative attention.

Conclusion

The U.P. Sugarcane (Regulation of Supply and Purchase) Rules, 1954, represent a comprehensive attempt by the State of Uttar Pradesh to regulate a vital agricultural sector. Born out of historical necessities and evolving through legislative amendments and judicial interpretation, these Rules provide an intricate framework for managing the supply and purchase of sugarcane. They address crucial aspects such as area reservation, contractual obligations, payment mechanisms, and the role of various stakeholders including the Cane Commissioner, sugar factories, cooperative societies, and individual growers.

The judiciary, particularly the Supreme Court in landmark cases like *Ch. Tika Ramji* and *West U.P. Sugar Mills Association*, has played a pivotal role in affirming the constitutional validity of the parent Act, delineating legislative powers, and providing authoritative interpretations of specific rules. While the overarching control of the sugar industry in certain aspects remains with the Central Government, the 1954 Rules demonstrate the significant role of State legislation in managing the ground-level operations critical to this industry. The enduring relevance of these Rules underscores the complexities of agricultural regulation in India and the continuous need for a balanced approach that serves the interests of all stakeholders while promoting the overall health of the industry.