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West Uttar Pradesh Sugar Mills Association And Others v. State Of Uttar Pradesh And Others
Factual and Procedural Background
The group of civil appeals and petitions concerns whether the State of Uttar Pradesh possesses the authority to fix a “State Advised Price” (SAP) for sugarcane that is higher than the minimum price determined by the Central Government under the Sugarcane (Control) Order, 1966. Sugar factories had withheld a portion of the purchase price payable to cane growers/co-operative societies on the strength of interim stay orders obtained from the High Court and the Supreme Court. Conflicting Constitution Bench decisions—Tika Ramji v. State of U.P. (1956) and U.P. Coop. Cane Unions Federations v. West U.P. Sugar Mills Assn. (2004)—have generated recurring litigation each crushing season. The present Bench (three Judges) heard extensive arguments, reviewed both earlier Constitution Bench rulings, noted a clear conflict, and considered precedents on when a matter should be referred to a larger Bench. Pending final resolution, the Court issued interim monetary directions to sugar factories and referred the substantive questions to a larger Bench.
Legal Issues Presented
- Whether, by virtue of Article 246 read with List III Entry 33 of the Seventh Schedule, the Central Government has exclusive power to fix sugarcane prices, thereby occupying the entire field.
- Whether Section 16 or any other provision of the U.P. Sugarcane (Regulation of Supply and Purchase) Act, 1953 confers power on the State Government to fix the price of sugarcane.
- If such State power exists, whether it is repugnant to Section 3(2)(c) of the Essential Commodities Act, 1955 and Clause 3 of the Sugarcane (Control) Order, 1966, and therefore void under Article 254 of the Constitution.
- Whether SAP fixed by the State Government is arbitrary, irrational or without application of mind, rendering it invalid.
- Whether SAP constitutes statutory price fixation and, if so, whether it is within the legislative competence of the State.
- Whether the alleged price-fixing power lacks guiding principles and amounts to an arbitrary, uncanalised delegation violative of Articles 14 and 19(1)(g) of the Constitution.
Arguments of the Parties
Appellants' Arguments
- Section 16 of the U.P. Sugarcane Act regulates only distribution, sale, or purchase of cane and does not authorise price fixation; this was conclusively stated in Tika Ramji.
- Even if Section 16 were construed to allow price fixation, such power would be repugnant to the Central Government’s power under Clause 3 of the 1966 Control Order.
- The 2004 Constitution Bench ruling (U.P. Coop. Cane Unions Federations) incorrectly held that a higher SAP can coexist with the Central price and is contrary to Tika Ramji.
- Because of the conflicting Constitution Bench authorities, reference to a larger Bench is necessary for authoritative clarification.
Respondents' Arguments
The opinion does not contain a detailed account of the respondents' legal arguments.
Table of Precedents Cited
| Precedent | Rule or Principle Cited For | Application by the Court |
|---|---|---|
| Tika Ramji v. State of U.P. (AIR 1956 SC 676; 1956 SCR 393) | State legislation did not confer power to fix cane price; price fixation lay with the Centre. | Relied upon to show that the U.P. Sugarcane Act lacks a price-fixing power and to highlight conflict with the 2004 Constitution Bench view. |
| U.P. Coop. Cane Unions Federations v. West U.P. Sugar Mills Assn. (2004) 5 SCC 430 | State can fix a higher price than the Central minimum without causing repugnancy. | Cited as the judgment in conflict with Tika Ramji, necessitating resolution by a larger Bench. |
| Mineral Area Development Authority v. Steel Authority of India (2011) 4 SCC 450 | Procedure when conflicting decisions of equal strength exist; need to refer to larger Bench. | Used as contemporary authority endorsing reference to a larger Bench where there is prima facie conflict. |
| Central Board of Dawoodi Bohra Community v. State of Maharashtra (2005) 2 SCC 673 | A Bench must place matter before a larger Bench if it doubts correctness of a coordinate Bench decision. | Quoted to justify reference beyond a five-Judge Bench when conflicting five-Judge precedents exist. |
| State of W.B. v. Kesoram Industries Ltd. (2004) 10 SCC 201 | Example of a five-Judge decision potentially conflicting with a seven-Judge ruling. | Referenced illustratively in Mineral Area Development Authority to show how conflicts arise. |
| India Cement Ltd. v. State of T.N. (1990) 1 SCC 12 | Seven-Judge authority on legislative competence and taxes on minerals. | Invoked indirectly via Mineral Area Development Authority to demonstrate the hierarchy of Bench strength. |
Court's Reasoning and Analysis
The Court first examined the two Constitution Bench judgments (Tika Ramji and U.P. Coop. Cane Unions Federations) and concluded that they reach irreconcilably different conclusions on the State’s power to fix sugarcane prices. Because both precedents emanate from Benches of equal strength (five Judges), the present three-Judge Bench considered itself duty-bound to have the conflict resolved by a larger Bench, citing the doctrine laid down in Central Board of Dawoodi Bohra Community and the practice followed in Mineral Area Development Authority.
The Bench recognised the practical implications of prolonged litigation—annual petitions on SAP—and deemed an authoritative pronouncement essential “in the interests of justice.” While awaiting that pronouncement, it issued interim directions requiring sugar factories to pay the balance of the principal amount due to cane growers or cooperative societies at the SAP already fixed by the State for the relevant crushing seasons. All existing stay orders were vacated or modified accordingly. The Court provided a three-month window for payment and imposed 18% per annum interest for any delay. It clarified that compliance is “without prejudice” to the factories’ principal contention that the State lacks competence to impose SAP. Finally, recognising that the conflicting judgments are by five-Judge Benches, it requested the Chief Justice of India to constitute a Bench of at least seven Judges to settle the matter.
Holding and Implications
ORDER OF REFERENCE AND INTERIM DIRECTIONS: The Court referred the appeals and petitions to a larger Bench (preferably seven Judges) to resolve the conflict on the State’s power to fix SAP. It simultaneously directed sugar factories to pay the outstanding principal amounts based on SAP within three months, failing which 18% interest would accrue, and vacated all contrary stay orders.
Implications: The ruling does not finally decide the substantive constitutional questions; instead, it preserves the status quo on payments to cane growers while ensuring that a larger Bench will deliver an authoritative resolution. No new precedent on legislative competence is established at this stage, but the interim order provides immediate financial relief to growers and streamlines pending litigation.
Dr. Dalveer Bhandari, J.— The crucial issue involved in this group of matters is whether the State of Uttar Pradesh has the authority to fix the State advised price (for short “SAP”), which is required to be paid over and above the minimum price fixed by the Central Government?
2. It is submitted by the appellants that the power to regulate distribution, sale or purchase of cane under Section 16 of the U.P Sugarcane (Regulation of Supply and Purchase) Act, 1953 (hereinafter referred to as “the U.P Sugarcane Act”) does not include the power to fix a price. According to the appellants, this aspect has been comprehensively dealt with by the Constitution Bench judgment of this Court in Tika Ramji v. State of U.P AIR 1956 SC 676, 1956 SCR 393 In this case this Court enumerated the legislative history of laws relating to sugar and sugarcane of both the Centre and the States. This Court came to the specific conclusion that the power reserved to the State Government to fix the minimum price of sugarcane which existed in U.P Act 1 of 1938 was deleted from the U.P Sugarcane Act since that power was being exercised by the Centre under Clause 3 of the Sugar and Gur Control Order, 1950.
3. The relevant paragraphs from SCR pp. 422 and 433-34 of Tika Ramji case AIR 1956 SC 676, 1956 SCR 393 are reproduced as under: (AIR pp. 697 & 704, paras 25 & 36)
“25. … Even the power reserved to the State Government to fix minimum prices of sugarcane under Chapter V of U.P Act 1 of 1938 was deleted from the impugned Act the same being exercised by the Centre under Clause 3 of the Sugar and Gur Control Order, 1950, issued by it in exercise of the powers conferred under Section 3 of Act 24 of 1946.
The prices fixed by the Centre were adopted by the State Government and the only thing which the State Government required under Rule 94 was that the occupier of a factory or the purchasing agent should cause to be put up at each purchasing centre a notice showing the minimum price of cane fixed by the Government meaning thereby the Centre. The State Government also incorporated these prices which were notified by the Centre from time to time in the forms of the agreements which were to be entered between the cane growers, the cane growers cooperative societies….
36. … As we have noted above, the U.P State Government did not at all provide for the fixation of minimum prices for sugarcane nor did it provide for the regulation of movement of sugarcane as was done by the Central Government in Clauses 3 and 4 of the Sugarcane (Control) Order, 1955.
The impugned Act did not make any provision for the same and the only provision in regard to the price of sugarcane which was to be found in the U.P Sugarcane Rules, 1954, was contained in Rule 94 which provided that a notice of suitable size in clear bold lines showing the minimum price of cane fixed by the Government and the rates at which the cane is being purchased by the Centre was to be put up by an occupier of a factory or the purchasing agent as the case may be at each purchasing centre.
The price of cane fixed by the Government here only meant the price fixed by the appropriate Government which would be the Central Government, under Clause 3 of the Sugarcane (Control) Order, 1955, because in fact the U.P State Government never fixed the price of sugarcane to be purchased by the factories. Even the provisions in behalf of the agreements 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 deductions, 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 whatever.”
4. It has been specifically held in Tika Ramji case AIR 1956 SC 676, 1956 SCR 393 that there was no power to fix a price for sugarcane under the U.P Sugarcane Act or Rules and Orders made thereunder.
5. It is also submitted by the appellants that even if such a power had existed under Section 16 of the U.P Sugarcane Act, even then such power would be totally repugnant to the power of the Central Government to fix the minimum price under Clause 3 of the Sugarcane (Control) Order, 1955. This Court in Tika Ramji case AIR 1956 SC 676, 1956 SCR 393 has not commented on whether such a power with the State Government would be repugnant to the Central legislation, since it found no such power with the State Government, however, the majority judgment in the later Constitution Bench judgment of 2004 in U.P Coop. Cane Unions Federations v. West U.P Sugar Mills Assn. (2004) 5 SCC 430 held as under:
“37. … 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 the 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.”
According to the appellants, the aforementioned conclusion of the U.P Coop. Cane Unions Federations (2004) 5 SCC 430 is contrary to Tika Ramji case AIR 1956 SC 676, 1956 SCR 393.
6. We have heard the learned counsel for the parties at length. We have also carefully perused and analysed both the aforementioned judgments delivered by the two Constitution Benches of this Court in Tika Ramji AIR 1956 SC 676, 1956 SCR 393 and U.P Coop. Cane Unions Federations (2004) 5 SCC 430 cases. In our considered view, there is a clear conflict in the aforementioned judgments of the Constitution Benches. It may be pertinent to mention that almost every year a spate of petitions are filed before the Allahabad High Court and thereafter before this Court on similar issues and questions of law. Therefore, in the interest of justice, it is imperative that the conflict between these judgments be resolved or decided by an authoritative judgment of a larger Bench of this Court.
7. The learned counsel for the appellants in one voice asserted that these cases be referred to a larger Bench so that at least in future the parties would have benefit of a clearer enunciation of law by an authoritative judgment of a larger Bench.
8. The following questions of law may be considered by a larger Bench of this Court:
(1) 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?
(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?
(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? 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.
(4) Whether 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?
(5) Does the State advisory price (for short “SAP”) constitute a statutory fixation of price? If so, is it within the legislative competence of the State?
(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?
9. We are conscious of the fact that ordinarily a Bench of three Judges should refer the matter to a Bench of five Judges, but, in the instant case since both the aforementioned conflicting judgments have been delivered by the Constitution Benches of five Judges of this Court and hence this controversy can be finally resolved only by a larger Bench of at least seven Judges of this Court.
10. Recently, a three-Judge Bench of this Court in Mineral Area Development Authority v. Steel Authority of India (2011) 4 SCC 450 dealt with a somewhat similar situation and this Court in para 2 of the said judgment observed as under:
“2. Before concluding, we may clarify that normally the Bench of five learned Judges in case of doubt has to invite the attention of the Chief Justice and request for the matter being placed for hearing before a Bench of larger coram than the Bench whose decision has come up for consideration (see Central Board of Dawoodi Bohra Community v. State of Maharashtra (2005) 2 SCC 673). However, in the present case, since prima facie there appears to be some conflict between the decision of this Court in State of W.B v. Kesoram Industries Ltd. (2004) 10 SCC 201 which decision has been delivered by a Bench of five Judges of this Court and the decision delivered by a seven-Judge Bench of this Court in India Cement Ltd. v. State of T.N (1990) 1 SCC 12, reference to the Bench of nine Judges is requested. The office is directed to place the matter on the administrative side before the Chief Justice for appropriate orders.”
(emphasis supplied)
11. Reference of these matters to a larger Bench is made so that the controversy which arises almost every year is settled by an authoritative judgment of a larger Bench of this Court.
12. However, in the peculiar facts and circumstances of these cases, we direct the sugar factories to pay the balance outstanding principal amount to the cane growers or to the cooperative societies according to SAP of the relevant crushing seasons. In other words, in all those cases where the sugar factories and other buyers have not paid the balance outstanding principal amount to the cane growers or to the cooperative societies because of the stay orders obtained by them from this Court or from the High Court, they are now directed to pay the balance outstanding principal amount according to SAP as fixed by the State Government from time to time. All the stay orders granted by this Court or by the High Court are modified/vacated in the aforesaid terms.
13. Let the balance outstanding principal amount be paid by the sugar factories within three months from the date of this judgment. In case the balance outstanding principal amount, as directed by this Court, is not paid within three months from the date of this judgment then the sugar factories/buyers would be liable to pay interest at the rate of 18% per annum on the delayed payment to the cane growers or to the cooperative societies, as the case may be.
14. It is made clear that the payment of the balance outstanding principal amount by the sugar factories is of course without prejudice to the main submissions advanced by them (sugar factories) that the State Government lacks legislative competence to impose SAP. It may be pertinent to mention that all these cases are covered by separate individual agreements where the sugar factories had undertaken to pay SAP to the cane growers. We are not examining the veracity of these agreements. It may be relevant to note that SAP has been continuously increasing every year. In all those cases, where for any reason, SAP was not fixed in a particular year, then, the sugar factories/buyers would be liable to pay the balance outstanding principal amount to the cane growers at the rate of SAP of the previous year.
15. On consideration of all the facts and circumstances of these cases, we request the Hon'ble the Chief Justice of India to refer these matters to a larger Bench, preferably to a Bench consisting of seven Judges. All these civil appeals and other petitions are accordingly referred to a larger Bench.
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