Supreme Court: State Governments has the power to fix the price of sugarcane if it’s higher than the minimum price

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The Supreme Court held that the conclusion arrived in the case of U.P. Cooperative Cane Unions Federations v. West U.P. Sugar Mills Association and Ors was correct and does not contradict the judgement in the case of Ch. Tika Ramji and Ors. Etc. v. The State of Uttar Pradesh and Ors.

It thus held that the State Government has the power to fix the price which may be higher than the minimum price fixed by the Central Government.

Brief facts of the case

The legislative history, as well as the chronology of lists and events which led to controversy, is as follows:

  1. Under the U.P. Sugarcane (Regulation of Supply and Purchase) Act, 1953, (“1953 U.P. Act”), the State Governments are only concerned with the supply of sugarcane to the sugar factories.
  2. The Central Government repealed and substituted the Sugarcane Control Order, 1955 (“1955 Order”) by Sugarcane (Control) Order, 1966 (“1966 Order”);
  3. That, in the 1966 Order issued Under Section 3 of the Essential Commodities Act, 1955 from the word “price and the minimum price”, word “price” came to be deleted and the power to fix “minimum price” came to be retained;
  4. Clause 3 of the 1955 Order empowered the Central Government to fix “price” or “minimum price” to be paid by the producer of sugar for sugarcane purchased by him. However, 1955 Order came to be repealed by the 1966 Order and Clause 3 of 1966 Order provides that the Central Government may fix the “minimum price” of sugarcane to be paid by the producers of the sugar.
  5. That, 1966 Order came to be further amended in 1976 and 1978 and Clauses 3(3) and 3-A came to be introduced which now contemplates “agreed price”;
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In Tika Ramji case, this Court did not comment on whether a power which the State Government exercised under Section 16 of the 1953 U.P. Act would be repugnant to Central legislation since this Court found no such power exercised by the State Government. While in the case of U.P. Coop. Cane Unions Federations, this court held that any price fixed by the State Government which is higher than that fixed by the Central Government cannot lead to any kind of repugnancy.

Prima facie, there appeared to be a conflict in the said judgements and a three-judge bench of the Supreme Court referred this matter to a larger bench, preferable a bench of seven judges or more, by a judgement dated 22.04.2020. The core issue is whether the State of U.P. has the authority to fix the State Advised Price (SAP) which is required to be paid over and above the minimum price fixed by the Central Government.

Arguments before the court

Shri Jayant Bhushan learned Senior Advocate appearing on behalf of the Appellants has submitted that in the case of U.P. Coop. Cane Unions Federations, this Court did not quote paragraph 34 which 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, 1953 since that power was being exercised by the Centre under Clause 3 of Sugar and Gur Control Order, 1950( repealed by Clause (7) of Sugarcane Control Order, 1955)

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It was argued that in the case of U.P. Coop. Cane Unions Federations, subsequently it is held that any price fixed by the State Government which is higher than that fixed by the Central Government cannot lead to any kind of repugnancy. It is argued that this conclusion and its use for determining repugnancy is incorrect and contrary to the earlier Constitution Bench judgment including in the case of Tika Ramji.

It was further stated that therefore there cannot be two minimum prices, one fixed by the Central Government as minimum price and other fixed by the State Government as SAP, which is also a minimum price. It is submitted that once the Centre has fixed a minimum price, any other price whether minimum price or SAP would be repugnant to the Centre’s decision and the Centre’s power and such power of the State Government would, therefore, have to yield to the Central legislation Under Article 254 of the Constitution, both legislations being under the Concurrent List.

On the other hand, Shri Krishnan Venugopal, learned Senior Advocate appearing on behalf of the State of U.P. vehemently argued that as such there is no apparent conflict between the two decisions.

He submitted that there is a sea change in the law prevailing and considered by this Court in the case of Tika Ramji and thereafter in the case of U.P. Coop. Cane Unions Federations.

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Further, by the time of the challenge to the 1953 U.P. Act and the 1954 U.P. Order made Under Section 16 of the 1953 U.P. Act in the U.P. Coop. Cane Unions Federations, there was a fundamental change in the substratum on which Tika Ramji case was decided to the extent that the Central Government had repealed and substituted the 1955 Order by the 1966 Order. The 1966 Order issued Under Section 3 of the Essential Commodities Act, 1955 expressly left room for the State to advise a price higher than the minimum price fixed by the Central Government under Clause 3(1) of the 1966 Order at which agreements for cane procurement could be reached between farmers or cooperative societies, especially in the context of the reservation of cane-growing areas for exclusive procurement by sugar factories.

In the case of Tika Ramji, though there is a brief mention of Section 16 of the impugned U.P. Sugarcane Act, 1953, neither was the issue raised and the issue was whether Section 16 of the Essential Commodities Act read with Clause 7 of 1955 Order could have purported to repeal Section 16 of the 1953 U.P. Act and the 1954 U.P. Order in light of the proviso to Article 254(2) of the Constitution of India, neither was the issue raised nor was there any argument or discussion on the effect or implications of Section 16 of the 1953 U.P. Act on the fixation of the “minimum price” under the 1955 Order in the context of the discussion of repugnancy of 1953 U.P. Act.

He stated that there have been changes in the law relating to repugnancy between Central law and State law in the context of laws made under the Concurrent List, List III in the VII Schedule to the Constitution of India, where both, the Union and the States have the power to make law.

He submitted that judgment of this Court in the case of Tika Ramji, the Central Government retreated from the field of fixing “the price” of sugarcane and only retain the power to fix “the minimum price” while permitting an agreement for fixing a higher price for sugarcane. It is submitted that therefore, the Central Government left it open for the State to fix the price above the minimum price for purposes of the agreement to be reached between the sugarcane growers and sugarcane cooperative society, on the one hand, and the sugarcane factories, on the other. It is submitted that therefore the Central Government expressly indicated its intent to vacate a particular portion of the field of price fixation concerning sugarcane and left it open to the State, the doctrine of the occupied field has no application whatsoever.

There is a difference between “the price” which is a fixed amount and “the minimum price” which only indicates the lowest-permissible rate. The 1966 Order was further amended in 1976 and 1978 and clauses 3(3) and 3-A were introduced, which now contemplated an “agreed price”. Because of the prohibition in Clause 3(2) on transacting below the minimum price, the “agreed price” necessarily had to be higher than the “minimum price” fixed under Clause 3(1).

Therefore, it is clear that as long as the State Advised Price fixed by the State Government of Uttar Pradesh by exercising powers Under Section 16 of the 1953 U.P. Act remains over and above the minimum price fixed by the Central legislature under the 1966 Order, there is no repugnancy to the extent that both laws can be obeyed without infringing the other.

Supreme Court’s View

The factual matrix and the relevant provisions which fell for consideration before this Court in the case of Tika Ramji and which fell for consideration by this Court in the case of U.P. Coop. Cane Unions Federations were altogether different.

Considering the Clause 3 of the 1955 Order by which the Central Government was empowered to fix “price” or the “minimum price” which fell for consideration by this Court in the case of Tika Ramji and as even the time when the matter was decided by this Court in the case of Tika Ramji, no price was determined and/or fixed by the State and therefore, have felt there is no repugnancy and/or conflict, this Court in the case of Tika Ramji did not as such enter into the question of repugnancy. However, in the case of U.P. Coop. Cane Unions Federations, this Court was considering the subsequent change in law more particularly the 1966 Order and Clause 3 of the 1966 Order and other relevant Clauses of 1966 Order.

Having regard to the factual situation then existing that U.P. Government had not fixed the price of the sugarcane, it was held that the price of the cane fixed by the Government could only mean “Central Government”. It has not been laid down as a principle of law that the words “minimum price notified by Government” must necessarily mean the minimum price fixed by the Central Government or that under no circumstances it can mean the price fixed by the State Government.

The court relied on the case of M. Karunanidhi v. Union of India and Anr, which stated that “That to decide the question of repugnancy it must be shown that the two enactments contain inconsistent and irreconcilable provisions so that they cannot stand together or operate in the same field.”

A higher price fixed by the State Government would automatically comply with the provisions of Sub-clause (2) of Clause 3 of 1966 Order. Therefore, any price fixed by the State Government which is higher than that fixed by the Central Government cannot lead to any kind of repugnancy.

Court’s Decision

The Supreme Court concluded that:

  1. By virtue of Entries 33 and 34 List III of Seventh Schedule, both the Central Government as well as the State Government have the power to fix the price of sugarcane. The Central Government has exercised the power and fixed the “minimum price”, the State Government cannot fix the “minimum price” of sugarcane. However, at the same time, it is always open for the State Government to fix the “advised price” which is always higher than the “minimum price”, given the relevant provisions of the Sugarcane (Control) Order, 1966, which has been issued in exercise of powers under Section 16 of the U.P. Sugarcane (Regulation of Supply and Purchase) Act, 1953;
  2. The Sugarcane (Control) Order, 1966 which has been issued Under Section 16 of the U.P. Sugarcane (Regulation of Supply and Purchase) Act, 1953 confers power upon the State Government to fix the remunerative/advised price at which sugarcane can be bought or sold which shall always be higher than the minimum price fixed by the Central Government.
  3. Section 16 of the U.P. Sugarcane (Regulation of Supply and Purchase) Act, 1953 is not repugnant to Section 3(2)(c) of the Essential Commodities Act, 1955 and Clause 3 of the Sugarcane (Control) Order, 1966 as, as observed hereinabove, the price which is fixed by the Central Government is the “minimum price” and the price which is fixed by the State Government is the “advised price” which is always higher than the “minimum price” fixed by the Central Government and therefore, there is no conflict. It is only in a case where the “advised price” fixed by the State Government is lower than the “minimum price” fixed by the Central Government, the provisions of the Central enactments will prevail and the “minimum price” fixed by the Central Government would prevail. So long as the “advised price” fixed by the State Government is higher than the “minimum price” fixed by the Central Government, the same cannot be said to be void Under Article 254 of the Constitution of India.

Thus, it is held that the view was taken by the Constitution Bench of this Court in the subsequent decision in the case of U.P. Coop. Cane Unions Federations is the correct law. There is no conflict between the two decisions of this Court in the case of Tika Ramji and the case of U.P. Coop. Cane Unions Federations and therefore, there is no necessity to refer the matter to the larger Bench consisting of seven Judges


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