R.M. SAHAI, J.

1. These are two sets of appeals filed by various Sahkari Sakkar Karkhanas that is, Cooperative Societies of Sugarcane Growers, Private Undertakings, Joint Stock Companies producing sugar in the State of Maharashtra and the State itself being one, directed against direction by a Full Bench of the Bombay High Court in Satara Sahakari Sakhar Karkhana Ltd. v. State of Maharashtra 1989 AIR(Bom) 53 (FB) : 1988 MLJ 1050] that the cane-growers who were not members of any Cooperative Society but who were required to supply their cane under reservation order or Control Orders to sugar factories with which they were attached were entitled to market price instead of price fixed by the Government, and other directed against fixation of market price for 1993-94 by the High Court at Rs 740 as against Rs 340 to Rs 400 fixed by the Government

2. The directions issued by the Full Bench are as under

"We are therefore of the view, that unless provisions for the following are made in it, the State Order will not be valid -

(i) The sugarcane-growers who are not members of the factory or factories to which they are required to supply their sugarcane shall be paid for the sugarcane supplied by them the price calculated at the market rate prevailing in the locality at the date of the sale;

(ii) The market rate may be as agreed between the parties, namely, the sugarcane-grower and the factory or factories concerned. If there is any dispute over it, the same should be resolved by an independent authority which may be created under the Order such as the one under clause 12 of the present Order. The authority concerned should decide the dispute expeditiously after hearing the parties and by a speaking order;

(iii) No unauthorised deductions on any account should be made by the factory from the price to be paid to the sugarcane-grower without his consent. The State Order should provide for a machinery similar to the above to hear and grant to the sugarcane-grower, expeditious relief if he had any complaint in that behalf." *

The reasons for these directions were twofold, one, the non-members were not bound by the price fixed under bye-laws framed under the Cooperative Sugar Act and other that there was no machinery in the Zoning Order issued by the State Government to hear the non-members before the price was fixed. Before examining whether these reasons are well founded in law leading to the impugned directions it is necessary to narrate in brief the necessity which impelled the Central Government to grant protection to sugar industry and consequently to control the supply and distribution of the sugarcane without sacrificing the interest of the cane-grower

3. Sugar is an item of daily use in every household, rich or poor. Use of white sugar has increased with rolling of years, growth of population, rise in income etc. Today it is somewhere about 134 lakh tonnes. Even in 1931 the requirement was more than 9 lakh metric tonnes. But the production was nearly 1.8 lakh metric tonnes only. And there was an import of more than 8 lakh metric tonnes. The Government, therefore, decided to grant protection to the sugar industry. The Bhargava Commission appointed by the Central Government in 1970 in Chapter I of Part I of its report has traced the growth and development of the sugar industry and observed that till 1930-31 there were only 29 sugar factories producing 1.22 lakh tonnes of sugar in the country. That was, however, not adequate to meet the internal requirement and nearly 8 lakh tonnes of sugar was imported in that year. In 1932 protection was granted to the sugar industry. Following this there was a phenomenal expansion of the industry and the number of sugar factories increased to 111 in 1933-34 and to 137 in 1936-37. The sugar import which was about 8 lakh tonnes in 1930-31 was almost stopped from 1936-37. Thereafter there was little development of the industry up to 1951-52. The development and regulation of the sugar industry came under the control of Government of India for the first time from May 1952 when the Industries (Development and Regulation) Act, 1951 came into force. All the 138 sugar factories which were working before 1952 were registered under the provisions of Industries (Development and Regulation) Act, 1951. New sugar factories were established thereafter under licences granted by the Central Government. Another important feature of post-1951 development noticed by the Commission was setting up of sugar factories largely in the cooperative sector due to Government policy of giving preference to cooperative societies in the matter of licensing. In respect of State of Maharashtra the Commission observed that sugar industry in Maharashtra was progressing very fast and the sugar production in Maharashtra was expected to reach 16.37 lakh metric tonnes and the State was to become the largest producer of sugar in the country. Today the State accounts for nearly 30% of the sugar output. The national output of sugar for 1991-92, 1992-93 and 1993-94 was 134, 106 and 96 lakh metric tonnes respectively. The output of Maharashtra was 42, 36 and 27 lakh tonnes for the corresponding years

4. While granting protection to the sugar factories the Government did not ignore the interest of sugarcane-growers. It is the basic rather the only raw material for sugar. It is grown by cultivators who were usually exploited or at least were in danger of being exploited. Therefore, the Government agreed for fixing the price of cane. At a conference called by the Government of India in 1933 representatives of cane-growers asked for a minimum price. The Government accepted the demand and in 1934 passed the Sugarcane Act, 1934 which conferred powers on the then Provincial Governments to fix minimum price for the cane. Since 1950 it is being done under Control Orders issued from time to time. The last Order known as Sugarcane (Control) Order was issued by the Central Government in 1966. The main features of the Order are twofold - one, that it broadened the base for price fixation by providing that the minimum price of cane shall be fixed having regard to the cost of production of sugarcane, the return to the grower from alternative crops, the availability of sugar to consumer at fair price, the price at which sugar produced from sugarcane is sold by producer of sugar and the recovery of sugar from sugarcane. The other is that it regulates distribution and movement of sugarcane by empowering the Government to notify in the Gazette and reserve any area where sugarcane is grown for a factory having regard to the crushing capacity of the factory, the availability of sugarcane in the reserved area and the need for production of sugar with a view to enable the factory to purchase the quantity of sugarcane required by it. The Order thus attempts to assure supply of cane to sugar factories and ensure minimum price to cane-growers

5. The Bhargava Commission in Chapters I and II of Part II dealing with price fixation and stabilisation of supply of cane after examining pros and cons of the various competing interests was of the opinion that the need for steady and adequate supply of cane to the sugar industry from year to year could not be overemphasised. It felt that an assured and adequate supply of cane was essential for the working of the sugar industry on an efficient and economic level. The Commission observed that sharp increase and decrease in cane supply from year to year were the bane of the Indian sugar industry. Therefore, it felt that it was imperative that some kind of stability in the matter of supply of raw material to the industries should be brought about. It, therefore, recommended that provisions should be made for agreement between cane-growers and factories. The Commission suggested that where Cane-Growers Societies Union operated it would be desirable to have tripartite agreements involving factories, the societies and the growers. It suggested that minimum price be fixed for sugarcane related to a basic recovery of 8.5% with a premium for every 0.1% increase in recovery on proportionate basis. It also recommended that the sales realisation from sugar after expenses should be shared with the cane-growers who execute agreement for supply of cane and fulfil their contract. Both these recommendations were accepted. The latter has been incorporated as para 5-A in the Sugarcane (Control) Order, 1966 ("1966 Order" for short). The minimum price for cane is fixed for growers throughout the country and recommendations of Bhargava Commission are being followed both in fixing minimum price of cane, and payment of additional price in accordance with formula framed by it appended as Schedule II to 1966 Order

6. In the State of Maharashtra it was the experience of the Government that there were cyclic ups and downs in sugarcane production in the State which adversely affected some of the sugar factories, particularly those which were identified as sick and financially weak. The Government found that in times of shortage of sugarcane crop, in the absence of statutory provisions earmarking areas for drawal of cane it became difficult for certain factories to get adequate quantity of cane thereby affecting their obligation towards the cane-growers for payment of cane price, employees and workers for payment of their salaries and wages etc. In such situations the State Government was required to assist the factories with huge amounts for enabling them to discharge their obligations by diverting funds with considerable stress and strain on the State Exchequer. The Government found that at times some of the factories starved of sugarcane whereas others exceeded their crushing capacity. In order to find out some solution to these problems the State Government appointed a Committee as an Experts Committee under Government Resolution dated 28-4-1980 in exercise of the powers delegated to it by notification issued by the Central Government in 1966. The said Committee was requested to take review of the work done in the past in regard to the formation of zones for sugar factories; to identify the limitations due to which the object of formation of zones could not be achieved; and to suggest remedial measures in various matters. The Committee submitted its Report in October 1983. After considering the Report the State Government on 12-9-1984 issued the Maharashtra Sugar Factories (Reservation of Areas and Regulation of Crushing and Sugarcane Supply) Order, 1984. In the preamble to the Order it is mentioned that the notification was issued to implement the recommendations of the Experts Committee appointed by it and also to ensure economic viability of large number of sugar factories. The order mentions that since the Government of India had granted letters of intent for establishment of new sugar factories and has stipulated therein that the conversion of the letters of intent into industrial licences shall, inter alia, depend on the State Government notifying the zones for drawal of sugarcane by new sugar factories. The Order defines "cane-grower" either as owner or as a "tenant including a body corporate such as a company registered under the Companies Act, 1955 (1 of 1956), a society registered under the Maharashtra Cooperative Societies Act, 1960 (Maharashtra Act XXIV of 1961), any body corporate set up under any law for the time being in force, including an organisation owned or controlled by the Government of any State or Government of India". It defines the "reserved area" to mean the area reserved for a factory as specified in the Schedule pertaining to that factory. Clause 3 of the Order provides that having regard to the crushing capacity of sugar factories and the yield of sugarcane in the reserved area, and the need for production of sugar, the area as specified in the Schedule shall be reserved for the sugar factory with a view to enabling it to purchase quantity of sugarcane required by it. Sub-clause (2) of clause 3 prohibits any sugar factory to purchase cane or accept supplies of cane from cane-growers except from the area reserved for that factory. The only exception to it is contained in clauses 4 and 5 of the Order. Clause 4 deals with grant of licence and clause 5 regulates supply of sugarcane empowering a permit officer to allow a sugar factory to purchase cane from areas other than that reserved for it under clause 3 provided he is satisfied that the circumstances mentioned in the clause existed. The Order was amended in 1987, 1988 and 1989. Sub-clause (1-A) was added after sub-clause (1) in clause 3 of the Order issued in 1984 by the Maharashtra Sugar Factories (Reservation of Areas and Regulation of Crushing and Sugarcane Supply) (Second Amendment) Order, 1987 and it is provided that the area specified in each of the Schedules and reserved for the factory mentioned in that Schedule in accordance with sub-clause (1) of the clause shall be reviewed by the State Government after every three years and in clause 4, sub-clause (6-A) was added after sub-clause (6) which empowered the licensing authority to allow a sugar factory to manufacture sugar from the sugarcane to be purchased by it from non-members which is grown in the area reserved for it which is overlapping or common with other factories if such factory has entered into contracts for purchase of cane from such growers and if the sugarcane does not exceed the requirements of the factory based on its licensed crushing capacity during any crushing season

7. Trouble appears to have started after the notification was issued by the State Government in 1984. Writ petitions were filed by cooperative societies and sugarcane-growers challenging the Order as being beyond the scope of the Act and the 1966 Order. It was claimed that the Order was violative of the rights guaranteed under Articles 14 and 19 of the Constitution. The challenge on behalf of the growers was that the Order in preventing the cane-growers from selling their sugarcane at the best price available imposed an unreasonable restriction. It was claimed that in the process of reservation they have been deprived of the highest price in the area, therefore, it was liable to be struck down as arbitrary. The prohibition in the Order on enrolment of the members was also challenged. A Division Bench of the Bombay High Court in Rahuri Sahakari Sakhar Karkhana Ltd. v. State of Maharashtra 1987 AIR(Bom) 248 : ILR 1987 Bom 418] held that the Order was not violative of the provisions of the Constitution or the Central Government Order of 1966 and the Essential Commodities Act (hereinafter referred to as "the Act"). Nor did the Bench find any merit in the claim that the reservation policy was violative of any constitutional guarantee as the Orders having been issued in view of the scarcity or non-availability of sugarcane and for securing equitable distribution the Order was squarely covered in the directive policy unfolded by clause (b) of Article 39 of the Constitution. The Bench did not find any merit in the claim that the distribution of sugarcane on the licensing capacity of the sugar factories was violative of any statutory provision or the Constitution as the licence for crushing the sugarcane was granted by the Central Government under the provision of Industries (Development and Regulation) Act, 1951. The Bench repelled the challenge that the order was arbitrary or violative of Article 14 of the Constitution. Nor it agreed with the claim of non-members of the cooperative societies that the prohibition in the Order from becoming members or obligation to supply cane to the factory in the reserved area was unreasonable or arbitrary. The Bench observed

"With the sole intention of avoiding cut-throat competition between the different sugar factories as well as the sugarcane-growers, the impugned order has been issued. In this context, it cannot be forgotten that the Cooperative Societies Act has been enacted keeping in view the Directive Principles of State Policy as enshrined in the Constitution. The cooperative movement in the ultimate analysis is socio-economic and moral movement. It is a part of the scheme of decentralisation of wealth and power. Cooperative capitalism is neither cooperation nor socialism. On the other hand, cooperation is a substitute for self-interest of an individual or groups of individuals for the benefit of the whole society. Wealth has no meaning if it is concentrated in few hands. In the absence of decentralisation or equitable distribution of wealth or property, it becomes improperty. Therefore equitable distribution is the essence of equality. If for achieving this object the impugned order has been issued under the powers conferred by the Essential Commodities Act and the Sugarcane (Control) Order, 1966, then it cannot be said that this equitable distribution results in inequity or arbitrariness. In our view, the criteria adopted and the guidelines laid down are reasonable. They have a nexus with the object sought to be achieved. Without reserving areas quo each factory and regulating the supply of sugarcane to the members or non-members, the object of distribution of the essential commodity viz. the sugarcane, would not have been achieved. Therefore, we find it difficult to accept the challenge raised by the petitioners which is based on Article 14 of the Constitution of India." *

8. Grievance was also made by the non-members of denial of any hearing by the Permit Officer. It was stated on behalf of the State that it was intended to follow a fair procedure. Notes 1 to 7 incorporating the procedure were produced before the Bench. They were found to be reasonable but the Bench was of the view that they required to be given statutory shape by amending the 1984 Order. Since the necessary amendments were not made another Bench at Aurangabad held that since the State Government did not carry out the amendments in clause 5(1)(d) of the 1984 Order as pointed out by the Bench in the earlier decision the sugarcane-growers had a right to supply sugarcane grown by them to the factory of their choice as they were likely to receive better value in the form of price for the sugarcane grown by them. A contrary view appears to have been taken by another Bench. The controversy was referred to a larger Bench which is para 9 of the judgment has noticed the views taken by different Benches. It then observed that in none of the earlier decisions given by the Division Benches were they called upon to test the validity of the Order on the ground of deprivation of sugarcane-grower of the best price available to them. The Bench observed that its validity was challenged only on the ground of the alleged illegality of the restrictions on the freedom to sell and purchase the sugarcane except to and by the factories in whose favour the Reservation Order was issued. The Bench held that the Order issued by the Central Government in 1966 did not provide for fixation of the maximum price of sugarcane to be supplied by the sugarcane-grower to the sugar factories. The Full Bench observed that the Aurangabad Bench had issued the directions permitting the growers to sell their sugarcane at the best price to different factories only because there was no machinery to hear the sugarcane-growers before fixing the price and redress their grievance. The Bench found that this direction had not been complied with. It thereafter considered the question of fixation of price by dividing the sugarcane-growers into two categories - one, who are members of any cooperative society and the others who are non-members. It held that since those growers who were members of the society had to enter into an agreement under the bye-laws framed which were the same in all cooperative societies they could not make any grievance against fixation of price. It found that even otherwise before the Government which fixed the price, they were represented by their elected Board of Directors who protected their interests. In respect of non-members it was held that since they were not heard nor were they represented by anyone before the Committee they were placed in a double jeopardy and in absence of any machinery to hear them before the price was fixed they were put to grave injustice. The Bench further held that since there was no power in the State Order to fix the maximum price payable to the cane-growers, therefore, those growers who were non-members of any sugarcane cooperative society or they were suppliers to non-debtor factories they were not bound by the prices fixed by the State Government. The price fixation was binding only on the members of the debtor factory. Having reached the conclusion that the price fixation was not binding on the non-members, therefore, "they have a choice either not to supply the sugar to any of the factories or to sell it to the highest bodies", the Bench held that "the latter freedom of the members is however rendered nugatory by the provisions of clause 3 of the State Order", the effect of which was that the non-members would be placed in a situation where either they had the option not to supply the sugarcane to the factory owners or to resign themselves to their fate by allowing their crop to go waste. To get over this difficult, what the Bench described as Hobsons choice it resorted to Section 3(2)(f) of the Act read with Section 3(3)(c) and held that the supply by the growers being in the nature of a compulsory sale, they were entitled to supply the sugarcane at the market rate

9. How far this conclusion of the Full Bench is legally sustainable and whether the reasons in support of it are properly founded is the crux of the matter that requires consideration. Varied submissions on wide spectrum were advanced touching upon not only the provisions of the Act, the Central and the State Orders but also the Cooperative Societies Act, the limited scope of interference by the courts in policy decision and the principles of price fixation in controlled economy. If Shri F.S. Nariman, learned Senior Counsel appearing for the Sahkari Karkhanas apprehended the effect of decision to be a collapse of zoning system and gradual erosion of cooperative movement in the State, then Shri G. Ramaswamy, learned Senior Counsel appearing for the State could not see any justification for the court to interfere in matters of economic policy and the direction of the Full Bench according to him was violative of the scheme of the Act. Shri Dholakia, yet another Senior Counsel appearing for the State did not find any rationale to distinguish between controlled price and the market price as once the price of any commodity was statutorily fixed under the orders issued by the Government then that alone became the market price. Shri Venugopal, learned Senior Counsel appearing for private undertakings urged that the Act visualised watertight compartmentalisation of the Order issued under it to balance the interests of consumers and when the Government did not fix any maximum price but provided for payment of minimum price only there was no scope to import the concept of higher price or market price. According to him the rationale for price fixation did not suffer from any infirmity nor it caused any prejudice to the cane-growers. Shri R. Nariman, learned Senior Counsel appearing for joint stock companies, urged that payment of market price would result in closing down of smaller units as price structure was correlated with yield and not the market. Elaborating their submissions, the learned counsel submitted that the Government of Maharashtra has been encouraging the cooperative movement in the State over the last several decades. As a result of its effort, more than a hundred sugar factories have come to be established in the cooperative sector. These cooperative societies span the entire spectrum of the States agricultural sector. All the sugarcane-growing areas are covered by one or the other cooperative society which has established its own sugar factory. This development has not only enhanced the sugar production but has changed the very face of rural Maharashtra. It has brought prosperity and awareness to villagers besides providing several amenities. The cooperative societies supply seeds, fertilizers, agricultural implements and many other goods at comparatively cheaper rates to their members. Many of them run schools and other educational institutions providing education to the children of the sugarcane-growers. The interest of the State and the interest of the public demands that this cooperative movement is kept alive and is not allowed to be weakened or stultified. On the contrary, every effort should be made to encourage and promote it since the fate of these factories is indivisibly connected with the well-being and survival of millions of farmers who are their members. After the amendment of the Maharashtra Cooperative Societies Act (reference is to the 1985 Amendment which came into force on and from 12-5-1985) any and every person who seeks to become a members of the society will be enrolled as such. What is called the concept of "universal membership" has been introduced by the said amendment. Every grower is welcome to join the cooperative society of his area. Nobody who applies will be refused, but if somebody wants to stay out he cannot complain at the same time that he is being paid the same price as the members of the society. It is open to him either not to raise sugarcane or to raise and sell the same to the cooperative factory concerned at the same price as the members. He cannot claim a preferential status. He too can become a member of the society if he likes and avail of all the benefits provided by the society but nobody can help him if he chooses to stay out voluntarily. While the members are under an obligation to raise sugarcane in the specified area year after year, the non-members are under no such obligation; they are free to raise such crops as they choose. The argument further was that the economy of each sugar factory was different; for various reasons it was also not possible to ensure a uniform price by all the factories. And if every sugar factory is compelled to pay price at Rs 700 a tonne, as some factories are paying, most of them would go out of market which would cause incalculable damage to the rural economy of the State. If these societies are to be kept alive, it is necessary that a separate price is fixed for each factory having regard to its own economy and other relevant factors. Neither can the members complain of it nor can the non-members. So far as the questions of law are concerned, the learned counsel submitted that neither the Central Government nor the State Government made any order under Section 3(2)(f) of the Act; hence, there was no obligation upon them to ensure the price as contemplated by Section 3(3)(c). It was urged that even if it was assumed for the sake of argument that an order under Section 3(2)(f) must be deemed to have been made by necessary implication, even then Section 3(3)(c) must be held to have been satisfied for the reason that the expression locality in clause (c) means, in the context, the reserved area (zone) in which the grower is situated. The price paid by the sugar factory to its members in that zone must be deemed to be and is the market price - there is no other price in the said locality - and since that is paid to the non-members as well, Section 3(3)(c) is satisfied

10. Dr Rajeev Dhavan, learned Senior Counsel appearing for the non-members, however, found compulsion flowing from the zoning order both in supply and price which was arbitrary and the basis for it being the efficiency of factory it was wholly extraneous to price fixation for cane-growers. Dr Abhishek Singhvi, the learned Senior Counsel, did not find any justification for apprehending collapse of zoning or cooperative movement. Dr Rajeev Dhavan submitted that non-members were not bound by the bye-laws of the society. Those bye-laws are between the society and its members. Because the society is indebted to the State, it is obliged to agree to the price advised by the State Government, the creditor. But so far as the non-members are concerned, there was no reason why they should be bound by the price fixed by the creditor for its debtor. The provisions of the Maharashtra Reservation of Areas Order in effect and in truth create a situation contemplated by Section 3(2)(f). Looking from the point of view of the non-members-growers, the situation is no different from the one obtaining had a formal order been made under Section 3(2)(f) requiring the growers to sell their stock to the factory of that zone. The Government cannot simply create such compulsion and leave the growers at the mercy of the factory. In such a situation, the factory would be free to exploit and take advantage of their helplessness. A mere condition in their licence that they shall pay the same price to non-member-growers as is paid to member-growers is not sufficient to secure their legal rights. While the factory can wait, the grower cannot, for the reason that if not harvested and used at the appropriate time, the cane dries up, becomes less yielding and then dies. The Government is bound to ensure, in such a situation, price for sugarcane as contemplated by Section 3(3)(c). The Reservation Order cannot be used to promote or perpetuate the cooperative movement in the State nor can it be used as a lever to compel growers to become members of the cooperative societies. There is no such compulsion under the Cooperative Societies Act and such a compulsion cannot be brought about by the Reservation of Areas Order. The non-members cannot be punished by compelling them to sell their cane to uneconomic and inefficient factories at the price such factories can afford, i.e., at a price far lower than the true value and market price of the cane. The members may be so compelled because they may have a stake in the survival of those societies but the non-members have no such ties to the factory. Article 19(1)(c) of the Constitution of India entitles a citizen of this country not to join a society or an association if he does not wish to. He cannot be compelled by law to join a society or an association. No person can be compelled to walk into these society, which are in truth "debtor colonies". Inasmuch as the State has failed to provide or to ensure the market price as contemplated by Section 3(3)(c) of the Act, the Full Bench was right in declaring that the non-members are entitled to sell their sugarcane to whomsoever they like and at whatever price they can obtain. Even with respect to non-members who have entered into agreements with the factories, Dr Dhavan urged, the situation created by the Government is such that the non-members are also being forced to enter into such agreements. He explains the position thus : even if a non-member does not obtain a loan, he will be paid the very same price for sugarcane as a members of the society. If so, why should a non-member forego the facility of loan which is normally advanced at a lower rate of interest. By foregoing the loan facility, he would be losing at both ends. The vice lies, says Dr Dhavan, in the very system that has been generated by the statutory orders made by the State. Therefore, he says, the non-members cannot be deprived of their liberty to sell their product freely just because they have (sic not) entered into loan agreements. It is another matter that they may be liable for damages for breach of contract with the sugar factories but that is a matter between the factory and that person. So far as the Government is concerned, it cannot take note of that agreement and compel such person to sell his cane at the SAP since that would mean enforcing a private contract between the parties otherwise than through court of law. Dr Dhavan says that in other States (other than Maharashtra and Gujarat) the Governments have not only issued statutory orders creating zones for each of the sugar factories but have also notified the price at which the sugarcane is to be sold by the growers to the factories and this price is common to the entire State though it may vary corresponding to the sugar content in the case

11. Since entire thrust on the price structure operating unfavourably to non-members of cooperative society proceeded on assumption that price fixation by the Government for cooperative society was influenced with creditor and debtor relationship between the two it is necessary to understand the mechanism of pricing for cane prevalent in the State and whether it works harshly and unreasonably against non-members. The entire process of price fixation can be divided into three stages. The first is the fixation of what is known as the minimum ex-factory price by the Central Government under 1966 Order for entire sugar factories in the country linking it with basic recovery of 8.5% with a proportionate increase for every 0.1% extra recovery. Therefore, normally the minimum price of cane paid by two factories cannot be same. For instance, the normal recovery in the State of Maharashtra is stated to be 11.5%. In the year 1987-88 the minimum price fixed was Rs 19.50 per quintal. The highest and lowest price paid for the sugarcane in Ahmednagar District during 1987-88 was Rs 366 and Rs 240 by Sangamner Sahkari Sakkar Karkhana and Jagdamba Sahkari Sakkar Karkhana respectively. The recovery of Sangamner SSK Ltd. was 11.64% whereas the recovery of Jagdamba SSK Ltd. was 10.36%. It was explained that difference of 1.28% between recovery of sugar by the two factories resulted in difference of sugar production per tonne to the extent of 12.8 kgs and the realisation too was Rs 64 per tonne more. This difference got reflected in the price fixation

12. The next is the State Advised Price. Every State has its own method to determine it. The power is assumed under Acts of the State Legislature or orders issued by the Governments. For instance, in the State of Haryana a Sugarcane Control Board is constituted under Section 3 of the Punjab Sugarcane (Regulation of Purchase and Supply) Act, 1953 headed by the Chief Minister and other high officials of the Agricultural and Cooperative Department, the Director of Sugar Mills etc. to advise the Government and the Cane Commissioner on various matters including the price of cane to be paid to growers. Similarly in U.P. and Andhra Pradesh it is done under orders issued under the U.P. Sugarcane (Regulation of Supply and Purchase) Act, 1953 and the Andhra Pradesh Sugarcane (Regulation of Supply and Purchase) Act, 1961. In Maharashtra 95% of sugar factories are in the cooperative sector. They are governed by the Cooperative Societies Act and the bye-laws framed thereunder. Bye-laws 63, 64, 64-A, 65-A and 65-B deal with fixation of price of cane. Bye-law 64 empowers the State Government to fix the price of cane so long as the amount invested by it in setting up of sugar factory is not repaid. The exercise is undertaken by a committee constituted by the Government known as "Ministerial Cabinet Committee". It comprises of the Chief Minister and other Ministers concerned. It takes into account the ex-gate minimum price declared by the Central Government, the estimated sugar production and its availability for production by the sugar factories, the estimated average of sugar factory, the estimated conversion charges and the present-day levy and free sale sugar price while fixing the price. In the written submission filed by the appellants it is stated that in the year 1993 while the statutory minimum price fixed by the Government of India was Rs 345 per metric tonne the State Advised Price for the State of Maharashtra was Rs 360 to Rs 400 per metric tonne. It is explained that although such price in other States, for instance Andhra Pradesh, Madhya Pradesh and Uttar Pradesh was Rs 400, Rs 530-560 and Rs 580-600 per metric tonne respectively but these prices were ex-gate whereas in the State of Maharashtra it was ex-field. That is a cane-grower apart from the price determined by the State Government is paid harvesting and transportation charges etc. And when all this is totalled then the price paid to the cane-grower in the State is the highest in the country. The advance cane price or the price for harvesting and transportation is paid to the cane-growers irrespective of whether they are members of any cooperative society or not. The advance according to the appellants was paid by sugar factories under agreement entered with growers whereas according to respondents it was paid by the banks and the non-members did not enter into any agreement. Since the parties were at variance on an issue of fact, they were granted time on 24-2-1995 to file further affidavits clarifying their stand. From the affidavits filed it now transpires that the loans are normally advanced by the village societies or rural banks to the farmers on the certificate issued by the sugar factories showing cane plantation, acreage, date of plantation, etc. Although the factum of agreement between the cultivator and the sugar factory is not clearly admitted in the reply filed on behalf of the respondent but apart from those cultivators who do not need any loan for growing the crop whose percentage appears to be negligible, it appears by and large; rather the uniform practice is that a tripartite arrangement is arrived at between the cultivator, the loaning society and the sugar factory. The loan is advanced on the basis of the certificate issued by the sugar factory and it is the sugar factory which ultimately repays the amount due to the loaning society out of the price of cane to be paid to the cultivator. Such agreements were recommended by the Bhargava Commission as well. Even otherwise no bank or society would advance any loan unless it is assured of its repayment. It is, therefore, reasonable to assume that the advance is paid to the cultivators by the rural banks or societies on the certificate issued by the sugar factories

13. The third is the price paid at the end of the season. The Bhargava Commission had recommended payment of additional price at the end of the season on fifty-fifty profit-sharing basis between growers and factories to be worked out in accordance with Schedule II to the 1966 Order. Even though in the affidavit filed earlier by the officials of the Department in the special leave petition it was stated that additional price was paid, but a doubt had arisen as in Ex. 6 filed along with the additional affidavit of Deputy Secretary to the Government of Maharashtra in CA No. 523 of 1989, explaining the mechanism of fixation of cane price it appeared that in the State of Maharashtra either the State Advised Price is paid or additional cane price is paid, whichever is more. Therefore, the appellant was directed to explain whether the additional price was paid in addition to State Advised Price but the affidavit filed in pursuance of the Order dated 24-2-1995 remains vague. It appears that the practice in the State is to pay the advance as stated earlier at the beginning of the season and then the cost of transportation and harvesting in the middle of the season and the price worked out finally at the end of the season, by the Ministerial Cabinet Committee headed by the Chief Minister, Cabinet Ministers of the Department concerned etc. on statements submitted by each factory and recommendations made by the Committee after discussing the matter with members of State Federation of Cooperative Sugar Factories and representatives of the State Cooperative Bank. In the State of Maharashtra, therefore, it appears instead of additional price it is the State Advised Price which is paid

14. It would be appropriate to notice here how the State Advised Price and the additional price is worked out and if it is in any manner prejudicial to the cane-growers specially the non-members. In the additional affidavit filed by Deputy Secretary to the Government of India in Civil Appeal No. 523 of 1989 the mechanism of price fixation is explained as underMechanism of fixation of cane price

Receipts Financial Results

"(1) Sale of Sugar

Add - Value of the closing Levy and free sale at

stocks as on 30/9 of assumed prices

the year

Deduct - Value of the opening

stocks of the year

(2) Add or deduct profit or loss from

ancillary units

(3) Add - other receipts from

(a) Sales of molasses Press mud

Bagasse

(b) Miscellaneous receipts

(c) Rebates

(1) + (2) + (3) (R)

Expenditure

I. Cane cost

(a) Govt. of India minimum price

linked with actual recovery

deducting the average

harvesting/transport charges

II. Expenditure relating to cane

Commission to Harvesting and

Transport contract - Khodaki etc

III. Harvesting and transport charges

IV. Cane Purchase Tax

V. Conversion charges

(a) Store consumption

(b) Electrical charges

(c) Outside repairs

(d) Salaries/wages

(e) Overheads

VI. Interest payable

(1) Capital loans and deposits

(NRD/RD)

(2) Working Capital

VII. Bonus - Minimum 8.33%

VIII. Education Fund under Section 68

Maharashtra Cooperative

Societies Act

Audit Fees

Other Provisions

DSI/Sakhar Sangh

Grand Total of I to VIII E

R - E = S Surplus

Deduct : Current Depreciation Investment Allowance

Development Rebate and D

part of accumulated losses

S - D + NS Net Surplus

Per M.T. NS = Additional cane price

Government of Indias Minimum statutory

CP + Addl. CP = x

Govt. of Maharashtra - Minimum Advised

CP - Y

X OR Y whichever is more

The manner of working out additional cane price is provided in Schedule II of the Control Order, 1966 in the following manner"The amount to be paid on account of additional price (per quintal of sugarcane) under clause 5-A by a producer of sugar shall be computed in accordance with the following formula, namely

R - L + 2A + B

X = --------------

2C

Explanation. - In this formula -

1. X is the additional price in rupees per quintal of sugarcane payable by the producer of sugar to the sugarcane-grower

2. R is the amount in rupees of sugar produced during the sugar year excluding the excise duty paid or payable to the factory by the purchaser

3. L is the value in rupees of sugar produced during the sugar year, as calculated on the basis of the unit cost per quintal ex-factory, exclusive of excise duty determined with reference to the minimum sugarcane price fixed under clause 3, the final working results of the year and the Cost Schedule and return recommended by such Authority as the Central Government may specify from time to time

4. A is the amount found payable for the previous year but not actually paid [vide sub-clause (9)]

5. B is the excess or shortfall in realisations from actual sales of the unsold stocks of sugar produced during the sugar year, as on the 30th day of September [vide Item 7(ii) below] which is carried forward and adjusted in the sale realisations of the following year

6. C is the quantity in quintals of sugarcane purchased by the producer of sugar during the sugar year

7. The amount A referred to in Explanation 2 shall be computed as under, namely

(i) the actual amount realised during the sugar year; and

(ii) the estimated value of the unsold stocks of sugar held at the end of 30th September, calculated in regard to free sugar stocks at the average rate of sales named during the fortnight 11th to 30th September and in regard to levy sugar stocks at the notified levy prices as on the 30th SeptemberExplanation. - In this Schedule sugar means any form of sugar containing more than ninety per cent sucrose."

15. A comparison of the two would indicate that there is not much difference in the two. In the latter too the cost incurred in producing sugar has to be deducted from the receipts. In any case since the grower is paid either the State Advised Price or Additional Cane Price whichever is higher no prejudice can be said to be caused to non-members. In the affidavit filed on 10-3-1995 it is stated that the final price determined for the earlier year is the advance price for the next year. For instance if amount A was fixed as final State Advised Price at the end of 1993-94 for a factory then that becomes the advance price for 1994-95. It has been explained that the final State Advised Price is fixed on the basis of a detailed statement submitted by the Sugar Commissioner giving a detailed operational financial picture of the working of the sugar factories such as sugarcane crushing, sugar recovery, sugar bags produced, quantity sold as levy and free, income from other items, cost relating to harvesting and transport of cane, sugar factory wages, power, fuel, chemical and other expenses, depreciation provision etc. etc. According to the affidavit, broadly these principles related to (a) valuation of closing stock of free sale sugar and molasses; (b) fixation of Khodki charges (i.e. labour charges paid for collecting cane pieces remaining in the field after harvesting); (c) provision of depreciation and investment allowance/development rebate; (d) sugarcane price to be paid to the members/non-members outside the area of operation; (e) limit of cash component to be paid to the farmers in the cane payment where cane price is on the high side; (f) interest rate on non-refundable/refundable deposits to be paid to members/non-members; and (g) deductions to be made compulsorily from the sugarcane price payment to the farmers. In effect the price for next year which is paid at the commencement of season comprises not only the price based on recovery of 8.5% but also the profit arrived at after sale of sugar

16. Few facts are necessary to be stated in respect of price fixed under the bye-law of the society. Firstly, price fixation for the cooperative societies under Bye-law 64 either by the Director of Factories or by the State Government was not challenged to be ultra vires, either before the High Court or this Court. It cannot, therefore, legitimately be urged that it was violative of the control order or the zoning order or it was arbitrary. In fact as explained earlier it is the State Advised Price. If the claim of non-members is taken to its logical conclusion, it would act unreasonably for them. Let it be tested. Suppose the price fixed for two factories A and B is Rs 400 and Rs 500 respectively, X being a non-member in area A the price for factory A is not binding on him. If it be so the price fixed for B is certainly not binding on him. And the factory B is not bound to offer him Rs 500. It may or may not. That may lead to uncertainty and even exploitation. And then the price of Rs 500 fixed for B is as much State Advised Price as Rs 400 for A. Much argument was advanced on how the market price in a locality should be understood. It appears unnecessary to deal with it as any other construction would be destructive of zoning and the concept of pricing in a controlled economy. Second, there is no machinery in the State to determine the State Advised Price for non-members as 95% of the sugar factories being in cooperative sector the fixation of price under the bye-laws was always considered to be legal. And rightly so. Therefore, any determination of price by an authority under the bye-laws is valid for cane-growers attached to a sugar factory in reserved area. Third, entire concept of minimum and maximum price for cane appears to be out of place. As pointed out by the Commission, the minimum price is fixed on quality formula. Further, average recovery of the normal crushing period was preferred according to Commission as against average recovery of the optimum period. All this results in payment of adequately reasonable price which comprises of not only cost of cultivation but profit as well. It does not stop there. The payment of additional price or final State Advised Price on profits obtained by a factory as indicated earlier is also paid. The price thus being paid on recovery of cane and profits made from sale of sugar is not minimum but optimum price which is paid to a cane-grower. The fourth and the most important is that the advance paid to the cultivators at the commencement of the season of final price determined for earlier years appears to be reasonable and fair. The mere fact that such determination is made in exercise of power under Bye-law 63 does not render it bad for non-members. No objection could be taken to payment of transport and harvesting charges. That too is explained to be linked with distance etc. So long the determination of price is fair and just and based on relevant material it cannot be held to be not applicable to one class of growers, namely, non-members in the zone because they are not members of the cooperative societies. If the exercise of power is not bad for members of the society it cannot be held to be bad for non-members, unless it is found to be arbitrary. So far cultivation of cane and payment of price is concerned the two are similarly situated. Further the production of sugar being of primary concern the Government ensured that the growers were not denied the minimum. The Additional Cane Price or final State Advised Price are paid as a matter of incentive. And what is incentive for one year becomes the minimum price for the next year. The concept of market price, better price or higher price thus has no place in the scheme. There is no reason why such fixation should not be held to be binding on non-members as in the scheme of price fixation no distinction is made between members and non-members

17. The difference between members and non-members of cooperative societies in relation to cane price may also be noticed. A cooperative society usually invests 7.5% in setting up of a factory or Sahkari Karkhana whereas the balance is borne by the State and the financial institutions. Its members under bye-laws are under obligation to clear every dues of the society otherwise any amount due from them to the society is first charge on the sugarcane cultivated by them and is recoverable from the price of cane. Every member of the society under Bye-law 18-A is required to undertake cultivation of minimum of half acre. The non-members on the other hand have no such obligation. They are not required to cultivate or grow any minimum cane. But they derive all those benefits and advantages as are available to the members of the society. In the licence for crushing cane issued under clause 4(5) of the State Order it is provided in the Form B clause (xvii) that the factories shall be bound to pay samecane price to non-members as members. A non-member is also entitled to share the profits which are worked out at the end of the season. There is thus practically no difference between a member and non-member so far as supply of cane or its price is concerned. A member is no doubt entitled to some facilities such as running of other business or availing the education facility etc. run by the cooperative societies but that has nothing to do with cane price or its supply. As a matter of fact the sale of by-products etc. is shown as receipt while calculating additional price or final State Advised Price

18. With this background it may now be examined whether provision in the State zoning order suffers from any drawback for not providing any machinery to hear the individual non-members and also whether the fixation of price by the Director of Sugar Factories or the State Government under Bye-law 64 framed under Cooperative Societies Act can be said to be binding on members only thus entitling non-members to sell their cane at market price. The exercise of pricing is undertaken by a committee in accordance with guidelines provided after taking into consideration various factors so that the price of sugar does not escalate and cane-growers are not deprived of good return to dissuade them from going for alternative crop. In the affidavit filed by the Under Secretary of the State it is explained that the price determined by the Committee is notified every year but no objection was ever received. No cane-grower can thus legitimately claim that the price fixed for the cane was not productive. The affidavit also pointed out that the non-members have not organised themselves so as to entitle their representative to be invite. Hearing of every individual grower even otherwise is physically impossible. Presence of representative of cane-growers cooperative society before the committee fixing the price makes it broad-based. Such representative would bargain for better price for cane-growers irrespective of whether such a cane-grower is a member of the cooperative society or not. No representative would agree for lower price for members of the society. Therefore, absence of individuals or non-members of cooperative society before the committee fixing the price cannot reflect adversely on the price fixation. No material has been placed to demonstrate how the fixation of price by the State Committee with assistance of Director of Sugar Factories has prejudiced the non-members. In the affidavit filed on behalf of the State it is pointed out that the price of cane fixed to be paid by the Sahkari Sakkar Karkhana is even paid by other factories. Reason being that the price fixation having been done by the Committee it is taken to be fair and just. Same reasoning applies to non-members. Truly speaking the price fixation should be observed in broad perspective. If every individual has to be heard the entire system may fall for sheer non-practicality. In Maharashtra there are 137 sugar factories. With each factory nearly five to six thousand cane-growers are attached. Twenty per cent of them are non-members. If the Committee starts hearing every individual non-member then it shall prove to be an unending purposeless exercise. One may have right to challenge the price fixation on ground that the Committee or the authority did not act in accordance with the guidelines for fixation of price in accordance with the order but that right can be exercised appropriately only after publication of the price. In these appeals since no one objected, the individual members cannot claim that the price fixed was not fair or just

19. Therefore, absence of any machinery in the State Order for hearing non-members could not destroy effectiveness of pricing. Even otherwise the price fixation in a controlled economy may not be bad so long as it is in accordance with the policy formulated by the Government and the decision by the Committee of Experts is not found to be arbitrary. It cannot be assailed only because cane-gro.