Patna High Court
Rohtas Industries Ltd. And Ors. vs The Union Of India (Uoi) And Ors. on 23 October, 1970
Equivalent citations: AIR1971PAT414, AIR 1971 PATNA 414
JUDGMENT S.N.P. Singh, J.
1. In these two applications under Articles 226 and 227 of the Constitution of India the constitutional validity of the Cement Control Order 1967 has been challenged.
2. In C. W. J. C. No. 319 of 1968 petitioner No. 1 is "Rohtas Industries Ltd.," which carries on, inter alia, the business of manufacture and sale of cement, having its registered office at Dalmianagar in the State of Bihar, where its cement factory is situated. In C. W. J. C. No. 320 of 1968 petitioner No. 1 is "Ashoka Cement Ltd.," which also carries on, inter alia, the business of manufacture and sale of cement, having its registered office at Dalmianagar in the State of Bihar, where its cement factory is situated. In both the applications petitioner No. 2 is Sri C. D. Mehra, a share-holder of petitioner No. 1.
3. As stated in the applications, the factory of Rohtas Industries Ltd., has a production capacity of about 1100 tonnes of cement per day and the factory of Ashoka Cement Ltd., has a production capacity of about 700 tonnes of cement per day. For the purpose of storing cement, the factory of Rohtas Industries Ltd., has constructed a godown known as "silo", which has a storage capacity of about 7000 tonnes, and the factory of Ashoka Cement Ltd., has constructed a "Silo", which has a storage capacity of about 3000 tonnes.
4. Cement had been a controlled commodity for a number of years till 1965. It was decontrolled with effect from the 1st of January, 1966. On the 23rd of December, 1967, the Central Government, in exercise of the powers conferred by Section 18-G and Section 25 of The Industries (Development and Regulation) Act, 1951 (hereinafter to be called "the Act"), and all other powers enabling it in that behalf, made the Cement Control Order 1967 (hereinafter to be called "the Order") and it came into force from the 1st of January, 1968. A copy of the order has been made Annexure '1' to the applications. By the Cement Control (Amendment) Order 1968, which was made on the 12th of January, 1968, certain amendments in the Cement Control Order 1967 were effected. A copy of the Cement Control (Amendment) Order, 1968 has been made Annexure '2' to the applications. It appears that the Cement Control (Second Amendment) Order 1968 was made on the 21st of March, 1968, and certain amendments in the Schedule to the Cement Control Order 1967 were made. A copy of the Cement Control (Second Amendment) Order 1968 has been made Annexure "3' to the applications.
5. In order to appreciate the contentions which have been raised on behalf of the petitioners in the two writ applications, it is necessary to quote the relevant provisions of the Act and the order.
6. As stated in the preamble of the Act, it was passed by the Parliament to provide for the development and regulation of certain industries. Section 2 of the Act declares that it is expedient in the public interest that the Union should take under its control the industries specified in the First Schedule. "Cement" and "Gypsum" products have been mentioned under Item No. 35 of the First Schedule. Section 18-G of the Act, which empowers the Central Government to control supply, distribution, price etc., of certain articles, reads as follows:
"18-G. (1) The Central Government, so far as it appears to it to be necessary or expedient for securing the equitable distribution and availability at fair prices of any article or class of articles relatable to any scheduled industry, may, notwithstanding anything contained in any other provision or this Act, by notified order, provide for regulating the supply and distribution thereof and trade and commerce therein.
(2) Without prejudice to the generality of the powers conferred by Sub-section (1), a notified order made thereunder may provide-
(a) for controlling the prices at which any such article or class thereof may be bought or sold;
(b) for regulating by licences, permits or otherwise the distribution, transport, disposal, acquisition, possession, use or consumption of any such article or class thereof;
(c) for prohibiting the withholding from sale of any such article or class thereof ordinarily kept for sale;
(d) for requiring any person manufacturing, producing or holding in stock any such article or class thereof to sell the whole or part of the articles so manufactured or produced during a specified period or to sell the whole or a part of the articles so held in stock to such person or specified in the order;
(e) for regulating or prohibiting any class of commercial or financial transactions relating to such article or class thereof which in the opinion of the authority making the order are, or if unregulated are likely to be, detrimental to public interest;
(f) for requiring persons engaged in the distribution and trade and commerce in any such article or class thereof to mark the articles exposed or intended for sale with the sale price or to exhibit at some easily accessible place on the premises the price-lists of articles held for sale and also to similarly exhibit on the first day of every month, or at such other time as may be prescribed, a statement of the total quantities of any such articles in stock;
(g) for collecting any information or statistics with a view to regulating or prohibiting any of the aforesaid matters; and
(h) for any incidental or supplementary matters, including, in particular, the grant or issue of licences, permits or other documents and the charging of fees therefor.
(3) Where, in pursuance of any order made with reference to Clause (d) of subsection (2), any person sells any article, there shall be paid to him the price therefor-
(a) where the price can consistently with the controlled price, if any be fixed by agreement, the price so agreed upon;
(b) where no such agreement can be reached, the price calculated with reference to the controlled price, if any, fixed under this section;
(c) where neither Clause (a) nor Clause (b) applies, the price calculated at the marked rate prevailing in the locality at the date of sale.
(4) No order made in exercise of any power conferred by this section shall be called in question in any court.
(5) Where an order purports to have been made and signed by an authority in exercise of any power conferred by this section, a Court shall, within the meaning of the Indian Evidence Act, 1872, presume that such order was so made by that authority.
Explanation :-- In this section, the expression 'article or class of articles' relatable to any scheduled industry includes any article or class of articles imported into India which is of the same nature or description as the article or class of articles manufactured or produced in the scheduled industry. Section 25 of the Act provides for the delegation of powers by the Central Government and it reads thus:
"25. (1) The Central Government may, by notified order, direct that any power exercisable by it under this Act (other than the power given to it by Sections 16 and 18-A) shall, in relation to such matters and subject to such, conditions, if any, as may be specified in the direction be exercisable also by such officer or authority (including in the said expressions any development Council, State Government or officer or authority subordinate to the Central Government) as may be specified in the direction, (2) Any power exercisable by a State Government by virtue of a direction under Sub-section (1) may, unless otherwise provided in such direction, be exercised also by such officer or authority subordinate to that State Government as it may, by notified order, specify in this behalf."
7. The preamble of the Order runs thus:
"Whereas it appears to the Central Government that for the purpose of securing the equitable distribution and availability at fair prices of cement, the supply and distribution of, and trade and commerce in, cement should be regulated."
As defined in Clause 2 (b) of the Order, "Controller" means "the Cement Corporation of India Limited". Clause 3 of the Order puts certain restrictions on the removal of cement from the precincts of the factory and it runs as follows:
"No producer shall remove or permit the removal of any cement, whether sold or unsold, from the precincts of his factory or from any other part of his premises to any place outside the precincts of such factory or premises except with the previous permission in writing of the Central Government."
Clause 4 of the Order empowers the Central Government to direct sale or transport of cement and it runs thus:
"The Central Government may, by order, require any producer to sell cement to such person or class of persons or to transport cement to such destinations by such modes of transport, and on such terms and conditions, as may be specified in the Order."
Clause 5 of the Order empowers the Central Government to direct disposal of stock and it reads as follows:
"The Central Government may, with a view to securing proper distribution of cement, issue' such orders, general or special, as may be necessary, to any producer as to the disposal of his stock."
Clause 7 of the Order is headed as "Retention prices" and it reads as follows:
"The ex-factory prices admissible to the producer for the different varieties of cement shall be as specified in the Schedule."
Clause 8 of the Order is headed as "Price at which producer may sell" and it runs as follows:
"No producer shall, himself or by any person on his behalf, sell-
(a) rapid hardening cement and low heat cement at a price exceeding Rupees 148.53 per metric tonne,
(b) any other variety of cement at a price exceeding Rs. 125.53 per metric tonne, free on rail destination railway station plus the excise duty paid thereon.
Provided that in the case of packed cement, there shall be added to the price referred to in this clause such charges as may be fixed by the Central Government in respect of packing or the containers and the Central Government may fix different charges for different kinds of packing or containers, as the case may be.
Provided further that the Central Government may allow rebate, discount or commission in the price of cement sold to the Government through the Directorate-General of Supplies and Disposals or intended for export out of India.
Explanation :-- For the purposes of this Order, the expression 'free on rail destination railway station' means the price "including the cost of transport by the chennest mode except where any other mode of transport has been specified by the Central Government under Clause (4) at the destination point."
Clause 9 of the Order makes provisions for payments to Cement Regulation Account by the producers and it runs thus:
(1) Every producer shall, in respect of each transaction by way of sale of cement effected by him, pay within one month of the date on which he realises the price of such cement, to the Controller, an amount equivalent to the amount, if any, by which the free on rail destination price of such cement realised by him exceeds the aggregate of the following amounts, namely :--
(i) the ex-factory price of such cement calculated in accordance with the rates specified in the Schedule;
(ii) a selling agency commission calculated at the rate of Rs. 1.25 per metric tonne;
(iii) the excise duty paid thereon; and
(iv) in the case of packed cement, the charges fixed by the Central Government in respect of the packing or the containers under the first proviso to Clause 8.
Provided that the expenditure incurred by the producer on freight by the cheapest mode of transport or where any other mode of transport has been specified by the Central Government under Clause 4, by such mode of transport in respect of such transaction shall be reimbursed to the producer by the Controller from out of the Cement Regulation Account referred to in Clause 11."
Clause 11 of the Order is headed as "Cement Regulation Account" and it runs thus:
(1) The Controller shall maintain an account to be known as the Cement Regulation Account to which shall be credited the amounts paid by the producer under Clause 9 and such other sums of money as the Central Government may grant from time to time (as amended).
(2) The amount credited under Sub-Clause (1) shall be spent only for the following purposes, namely :--
(i) paying or equalising the expenditure incurred by the producer on freight in accordance with the provisions of this Order;
(ii) equalising concession, if any, granted in the matter of price for supplies to Government or for purposes of export under the second proviso to Clause 8;
(iii) expenses incurred by the Controller in discharging the functions under this Order subject to such limits, if any, as may be laid down by the Central Government in this behalf.
(3) The Controller shall cause accounts to be kept of all moneys received and expended by him from out of the Cement Regulation Account and he shall prepare and submit such report and returns relating to the said account as may be required by the Central Government from time to time.
(4) The balance, if any, remaining unspent in the Cement Regulation Account shall be disbursed in accordance with such directions as may be given by the Central Government in this behalf."
Clause 12 12 of the Order cmpoers the Central Government to vary the prices and to alter the Schedule and it runs thus:
"The Central Government may, having regard to any change in any of the factors relevant for the determination of prices of cement, such as an increase or decrease in the cost of production or distribution, by notification in the official gazette, vary the price fixed in tin's order or alter the Schedule to this Order as appeals to it to be necessary."
Clause 13 of the Order states that all powers exercisable by the Central Government under this Order except under Clauses 8, 11 (2) and 12 shall also be exercisable by the Controller. Clause 14 lays down the procedure regarding claims by producers and it runs thus:
"Every producer shall make an application regarding his claim for any reimbursement towards equalising freight or equalising concession in the matter of export price to the Controller who may, in settling the claim, require the producer to furnish all details relating thereto, including the cost of freight incurred, excise duty, if any paid etc."
The Schedule of the Order, as mentioned in Clause 7 thereof, reads as follows:
"THE SCHEDULE (See Clause 7) Ex Works Name of Producer Price for Metric tonnes Price :
(Rs.)
1. M/S Dalmia Cament (Bharat) Ltd., Dalminagar 90.50
2. M/S Andhra Cement Co. Ltd., Vijayawada 90.50
3. M/S Orissa Cement Ltd., Rajgangpur 90.50
4. M/S K.C.P. Ltd., Macharla 90.50 up to an annual production of 115,000 tonnes.
96.00 for every tonne beyond 115,000 tonnes per annum.
5. M/S Rohtas Industries Ltd., Delmianagar 90.50
6. M/s Mysore Iron & Steel Works Ltd, Bhadravati 90.50
7.
M S Associated Cement Companies Ltd. :
New Porbandur Works 96.00 Jamul Works 96.00 Dwarka Works 90.50 up to an annual production of 245,000 tonnes 96.00 for every tonne beyond 245,000 tonnes per annum.
Other Works 90.50
8. U P. Government Cement Factory Churk 90.50 up to an annual production of 220,000 tonnes.
96.00 for every tonne beyond 220,000 tonnes per annum.
9. M/S Dalmia Dadri Cement Ltd., Dalma Dadri 90 50
10. M/s Bagalkot Cement Co. Ltd., Bagalkot 90.50
11. M/S Aeboka Cement Ltd., Dalmianagar 90.50
12. M/s Jaipur Udyog Ltd., Sawaimadhopur 90.50
13. M/s India Cement Ltd., Talaiyuthu Works 93.50 Sankaridrng; Works 46.00
14. M/s Birla Jute Mfg. Co. Ltd., Satna 93.00 up to an annnal production of 225,000 tonnes.
96.00 for every tonne beyond 225,000 tonnes per annum.
15. M/s Birla Jute Mfg. Co. Ltd., Chiuorgarb 96.00
16. M/S Shree Digvijay Cement Co. Ltd., Sikka Works 93.50 up to an annual production of 260,000 tonnes.
96.00 for every tonne beyond 260,000 tonnes per annum provided that the combined production of the Sikka & Bawree works is not less than 410.000 tonnes in that year.
Sawree Works
129.75
* * exclusive of actual wharfage charges paid at
Sikka on Clinker.
17.
Kalyanpur Lime & Cement Works Ltd., Banjari
93. 50
up to an annual production of 150.000 tonnes.
96.03
for every tonne beyond 150,000 tonnes per annum.
18.
Sone Vallay Portland Cement Co, Ltd , Japla
93.50
19.
M/S Panyam Cement & Mineral Industries Ltd , Cement Nagar
96.00
20.
M/S Saurashtra Cement & Cbemical Industries Ltd., Rosevav
96.00
21.
M/S Madras Cement Ltd., Rajapalayam
96.00
22.
M/S Mysore Cement Ltd., Ammesendra
96.00
23.
M/S Assam Cements Ltd., Cherrapunji
96.00
24.
M/S Industrial Development Corporation of Orissa Ltd , Bargarh
96.00
25.
M/S Travancore Cement Ltd., Kottayam
113.25
In the case of rapid hardening cement and low heat cement, an additional price of Rs. 7/- and Rs. 10/- per metric tonne may be added to the price specified above.
(1-32/67-Cem) Sd/- K. I. Vidyasagar, Joint Secretary to the Governmemnt of India."
I may state here that by the Cement Control (Amendment) Order, 1968, which was made on the 12th of January, 1968, for the original Sub-clause (1) of Clause 9, the following sub-clause was substituted:
"(1) Every producer shall, in respect of each transaction by way of sale of cement effected by him, pay within one month of the date on which he realises the price of such cement, to the Controller, an amount equivalent to the amount, if any, by which the free on rail destination price of such cement exceeds the aggregate of the following amounts, namely :--"
In the case of Jaipur Udhyog Ltd. v. Union of India, AIR 1969 Raj 281 a Division Bench of the Rajasthan High Court struck down Sub-clause (1) of Clause 9 as amended by Clause 2 (ii) of Cement Control (Amendment) Order, 1968 and restored Sub-clause (1). of Clause 9 as it originally stood. It was also held that the definition of "Controller" contained in Clause 2 (b) of the Order is void. It has been stated in the affidavit in opposition filed on behalf of the Union of India that in view of the decision of the Rajasthan High Court declaring Clause 2 (b) of the Order authorising the Cement Corporation of India to act as Controller for purposes of the said Order as invalid, an officer of the Department of Industrial Development has been notified as Cement Controller for purposes of the said Order with effect from the 12th of October, 1968, and a copy of the relevant notification No. 1-28/68-Cem., dated the 24th of September, 1968, was published in the Official Gazette on the 12th of October, 1968.
8. The petitioners of both the writ applications have alleged that there was no justification for the Central Government to promulgate the impugned order when in the years 1966 and 1967 the production capacity of cement had increased and it was freely available to the consumers at fair price in all parts of India and no complaint had been received about mal-distri-bution and there was no likelihood of any shortage of cement in the year 1968 and onwards. The circumstances under which cement was decontrolled from the 1st of January, 1966, and the Order was made on the 23rd of December, 1967, by the Central Government have been explained in the affidavit in opposition filed on their behalf. It has been stated that before the partial decontrol of cement with effect from the 1st January, 1966, the industry was often complaining that the strict price control had contributed partly to the tardy growth of the industry and that there was lack of internal financial resources and the companies were unable to pay their shareholders reasonable dividends. A copy of the letter dated the 28th of April, 1965, of the Cement Manufacturers' Association has been made Annexurc "A" to the affidavit in opposition. Though the Government had their own doubts about the Co-operative ability of the different producers to maintain the pattern of distribution to areas having no cement factories, in 1965 the Government ultimately decided to try partial decontrol of cement and came to a "Gentleman's Agreement" with tho industry that not less than 50 per cent, of the total production would be reserved for Government purchases through the Director-General of Supplies and Disposals at the same f.o.r. (Free on rail) price, subject to a rebate of Rs. 6/- per tonne and any escalations that may be called for consequent on Government actions. The statutory control on price and distribution gave place to a form of self-regulating control by the industry itself as a result of the "Gentleman's Agreement". Thus, according to the Central Government, there was no complete decontrol from the 1st of January, 1966, but only a partial and experimental decontrol as the industry had agreed to a form of self-regulating control of continuing the same system of uniform f.o.r. price all over India to sell cement within the price limits approved by Government and to the same price differential in regard to the retention prices of the producers. A uniform increase of Us. 13/- per tonne was given to all the producers in consultation with the Chief Cost Accounts Officer mainly for purposes of expansion of the industry.
This partial decontrol was made valid for a period of one year in the first instance up to the 31st December, 1966, and was subsequently extended for another year up-to the end of the year 1967. During the above period of informal control by the industry there were complaints and representations to the Government that the cement produced by the various units was not being properly distributed and cement became scarce in certain parts of the country and was not available for use. During the period the Government off-take fell much below the stipulated level of 50 per cent, and came to about 35 per cent, due to the reduction in Government's activities as a result of enforcement of economy measures in the field of Governmental expenditure. The demand of the organised industry also fell because of the recessionary trends. These factors resulted in a larger quantity of cement becoming available to the public which contributed to the slight improvement in the supply position. That improvement was, thereiore, not attributable to decontrol or to a more efficient distribution by the industry. There were complaints from the Governments of Punjab and Haryana about the shortage of cement in those States.
There was deterioration in the supply position during April-June, 1966 and the rainy season. States like the Punjab, Har-yana, Himachal Pradesh, West Bengal, Assam, North-eastern Territories and Ma-harashtra continued to be largely deficit areas and the supplies to some of these States had to be made from the adjoining States and in some cases even from distant places. With the improved conditions of agriculture the demand for cement in the rural sector was expected to increase further. In their recommendations relating to the cement industry in 1961, the Tariff Commission had anticipated a cumulative increase in the demand for cement of 12 1/2 per cent, per annum. With the revival of the Fourth Five-Year Plan with effect from the 1st April, 1969, the demand both in the Government and non-Government sectors was expected to increase. There was no basis for the assumption that there was no likelihood of any shortage from the year 1968 onwards. Thus the averments madej in the affidavit in opposition filed on behalf of the Central Government show that the control of cement was reintroduced for securing equitable distribution and availability at a fair price of the commodity throughout the country. There docs not appear to be any valid reason for disbelieving any of the statements made in the affidavit in opposition. It is, therefore, not possible to hold that there was no justification for the promulgation of the impugned order. As the impugned order wag made for securing equitable distribution and availability at a fair price of cement throughout the country, it must be held that it was well within the competence of the Central Government to pass the order in exercise of the powers conferred on them by Section 1SG of the Act.
9. Mr. Lal Narayan Sinha, learned counsel, appearing for the petitioners, did not challenge the vires of Section 18G of the Act, though in both the writ applications one of the grounds of attack is that Section 18G of the Act is ultra vires of the Constitution as it delegates essential legislative functions to the Central Government without due control and proper guidelines and does not prescribe any procedure or standard for exercise of various powers. It is, therefore, not necessary to consider the constitutional validity of Section 18G of the Act.
10. Mr. Sinha in support of the two writ applications raised the following contentions:
(i) That the fixation of different retention prices for different producers are based on irrelevant principles inasmuch as the prices are not fixed on the basis of the value of the commodities sold but on personal factors relating to the producers.
(ii) That the fixation of different retention prices is violative of Article 14 of the Constitution.
(iii) That the provisions for the compulsory deposit to the Cement Regulation Account and for its utilisation amount to forfeiture of price earned by the producers and as "such it is beyond the scope of Section 18G of the Act.
(iv) That the provision made in proviso 2 to Clause 8 of the Order regarding the Government purchases is in direct contravention of Article 31 (2) of the Constitution of India because (a) it provides for payment of a concessional rate of price by the Government for the goods purchased by it; and (b) the price fixed is not consist-tent with the principles of price fixation as laid down and explained in the case of R. C. Cooper v. Union of India, AIR 1970 SC 564.
(v) That the price fixation under the terms of the order is ultra vires of Section 18G of the Act because the concept of price in terms of Section 18G must mean a price according to the concept as laid down and explained in the Bank Nationalisation case, referred to above.
(vi) That the restrictions imposed by the Order on the producers are unreasonable and they violate Article 19 (1) (f) and (g) of the Constitution.
11. I will deal with the first and second contentions raised by learned counsel appearing for the petitioners together. It is clear from the Schedule to the Order that retention prices or ex-factory prices of all the twenty-five cement producers in India have been fixed ranging between Rs. 90-50 and Rs. 136-30 per tonne. The retention price of petitioner No. 1 of both the writ applications has been fixed at Rs. 90-50 per tonne. In both the writ applications it has been alleged that in the year 1967 petitioner No. 1 of both the writ applications had been charging Rs. P3-50 per tonne but the retention price was fixed at Rs. 90-50 per tonne by the Order although the cost of production had increased. Thus, the fixation of ex-factory price by the Government under the Order had been made without any basis. The petitioners have also alleged in the two writ applications that though in their case there has been reduction of price, there was no such reduction in the cases of Madras Cement Ltd., Mysore Cement Ltd., Panyam Cement Ltd., Panyam Cement and Mineral Industries Ltd., India Cement Ltd., Associated Cement Co. Ltd., Jamul Works, Associated Cement Co. Ltd., New Porbandar Works, Saurashtra Cement and Chemical Industries Ltd., and Birla Jute Manufacturing Co. Ltd., and they were allowed to retain the ex-factory price at the rate of Rs. 96/- per tonne. It has also been alleged that India Cements and Kalyanpur Lime and Cement Works Ltd., who were receiving Rs. 93-50 per tonne during the decontrol period, have been allowed the same ex-factory price of Rs. 93-50. A comparative statement showing the cost of production of cement of petitioner No. 1's factory of both the applications and that of three others, namely, Saurashtra Cement and Chemical Industries Ltd., Madras Cement Ltd., and Mysore Cement Ltd., has been made annexure '4' to both the applications and it is alleged that though the cost of production per tonne of cement of the other three producers of cement, referred to above, is admittedly lower than that of the petitioners, still as a result of preferential treatment the ex-factory price for these producers was fixed at Rs. 96/- per tonne. There is further the allegation that the ex-factory price for Industrial Development Corporation of Orissa Ltd., has been fixed at Rs. 96/- per tonne though the said Corporation of Orissa has not yet started manufacture of cement on commercial basis.
The other allegations which have been made in the two writ applications arc these: that in fixing the price of Sawree Cement Works the freight for the transport of clin-kar from Sikka must have been included but the same consideration has not been shown to others including the petitioners whose manufacturing process involves similar transport of slag and Pazzolanic materials; that some of the factories are situated near the place from where they can obtain raw material at low expenses but have to incur heavy freight in distributing its production while some others are situated closer to the place of consumption but due to difficult circumstances have to incur a large expenditure for obtaining raw materials; that in fixing the ex-factory price of the latter class of factories, their heavy expenses for obtaining raw material have been ignored while their advantages in the shape of saving of freight in distributing their product to the consumers in the nearby markets have been ordered to be pooled; that in the case of Assam Cements Ltd., a public undertaking under the Government of Assam, whose retention price has been fixed at Rs. 96/-, road freight for a part of the distance for transport of cement has been allowed to be borne by Cement Corporation of India Ltd., (respondent No. 2) but no such consideration on account of freight was shown to other producers; and that the petitioners and other producers of cement were not consulted before the Order was made.
12. Regarding the validity of the different retention prices fixed in the Schedule to the Order, the case of the Union of India as disclosed in the aforesaid affidavit in opposition filed on their behalf, is as follows: In 1961, the Tariff Commission, after an individual cost examination of different producers recommended as many as ten different retention prices to be given to the producers. The Commission did not find it possible to arrive at a common price for a majority of the units because of the then existing wide discrepancy in the costs of different units. While accepting the recommendations of the Commission, the Government, however, took the view that there should be a uniform price for the industry, so that greater pressure was exercised on units having appreciably higher costs to find economies and there was a measure of reward for those units able to achieve economies. Government, however recognised that in the case of those few units having appreciably higher costs on account of special reasons, an extra price may have to be allowed for a period of time as would enable them to continue in production until by reaching economic levels they would also be able to operate within the uniform price. Accordingly Government fixed a uniform ex-works price of Rs. 69-50 per tonne for the industry and allowed Rs. 3/- per tonne over Rs. 69-50 per tonne to India Cements, Digvijay Cements Satna Cements, Kalyanpur Cements and Sone Valley Cements and Rs. 5-50 per tonne as additional price was allowed to the new units, namely, Panyam Cements, Saurashtra Cements and Madras Cements. An increase of Rs. 25-50 per tonne was allowed in the solitary case of Travancore Cements. The three sets of prices, namely, Rs. 69-50, Rs. 72-50 and Rs. 75-00 per tonne (except in the case of Travancore Cements where Rs. 95/- per tonne was allowed) came into existence on the basis of the Tariff Commission's recommendations. The above three sets of prices were further subject to adjustments whenever called for consequent on governmental actions including escalations of price on account of fuel and power. Accordingly, the following further price increases were given to the industry, including the petitioners, from time to time:
Rs. 2.75 per tonne from 1-1-1963, Rs. 1.25 per tonne from 1-7-1964 and Rs. 4.00 per tonne from 1-6-1965.
A further increase of Rs. 33/- per tonne was allowed with effect from the 1st of January, 1966 mainly for expansion purposes and to allow for any possible increase in the cost of production to pay bonus, to pay interest on borrowings and to meet increased taxation. The said amount of Rs. 13/- per tonne consists of an element of Rs. 2.70 per tonne on account of average increase in cost in the future, an element of Rs. 2/- per tonne as bonus on ceiling of 20%, an element of Rs. 1.30 per tonne for interest on Industrial Development Bank loans at 8%, and after deducting an element of Rs. 3.50 per tonne for tax the amount left for expansion purposes was determined at Rs. 4/- per tonne. At the time of the informal control in 1966 the cement industry agreed to continue the same three sets of retention prices built up on the recommendations of the Tariff Commission as accepted by Government. These were the prices that were notified in the Schedule to the Order. The retention price allowed to the petitioners and notified in the Schedule to the Order was, therefore, based on the recommendations of the Tariff Commission and on the same considerations as were applicable to others similarly placed. The grant of a retention price of Rs. 93.50 per tonne to the petitioners during the year 1967 was unauthorised and it had been allowed by the Central Organisation set up by the industry, namely, the Cement Allocation and Co-ordinating Organisation, without the sanction of Government and contrary to the "Gentleman's agreement" entered into by the industry with the Government at the time of the informal control from 1-1-1966. The petitioners have, therefore, no legitimate right for the continued payment of the higher retention price of Rs. 93.50 per tonne which had been received by them during 1967, The retention price of Rs. 90.00 per tonne allowed to the petitioners and notified in the Schedule to the Order was composed of Rs. 69,50 per tonne based on the recome-dnations of the Tariff Commission; an increase of Rs. 8/- per tonne granted from time to time on account of increase in the cost of production as a result of Governmental actions and a general increase of Rs. 13/- per tonne allowed to all the producers from 1-1-1966.
It is alleged that the petitioners have not so far expanded their capacity and the amount of Rs. 13/- has not been used for the purpose it is intended but presumbly for other unauthorised purposes. It is, therefore, incorrect to say that the petitioners' retention price has been fixed arbitrarily or that the increase in cost has not been taken into consideration. Regarding the allegation that in the cases of Madras Cements Ltd. and seven others the retention price was not reduced at all and it was kept at Rs. 96/- per tonne, it is said that certain units were granted higher retention price on account of their higher capital cost and other special considerations and those units fall under that category and so in their cases the retention price notified in the .schedule to the said Order was higher but it was the same as admissible to them at the time of the informal control with effect from the 1st January, 1966. Regarding India Cements and Kalyanpur Lime and Cement Works Ltd., it is said that the price of Rs. 93.50 was allowed to them as they were entitled to the same prior to the introduction of the informal control from the 1st January, 1966. Regarding the comparative cost of production of the petitioners' factories and the factories of other three concerns, as shown in Annexure 4 to the applications, it has been stated that the petitioners not being entitled to the price of Rs. 96/- per tonne, it will not be correct to determine the profit and loss with reference to this price. Lesser or higher gross profit of a company depends upon various factors and circumstances within the control of the Management of the Board of Directors. The profitability cannot therefore, serve as a guide to the fixation of retention price which is fixed with reference to all factors including the capital costs of the company. Regarding the retention price of the Industrial Development Corporation of Orissa Ltd., it has been said that the Corporation being a new unit a retention price of Rs. 96/-per tonne, which had been allowed to other new units, had been notified in pursuance of the Government's resolution dated the 31st October, 1961. Thus, according to the case of the Government, there was no case of discrimination in the matter of fixation of retention price and it was not based on irrelevant principles.
13. In the case of (AIR 1969 Raj-281), it had also been contended that different retention prices had been fixed on arbitrary basis and all the relevant factors determining the price were not taken into consideration. It was also urged in that case that the Order was discriminatory because it fixed different prices of various producers of cement. Both the contentions were rejected and it was held that the argument about discrimination cannot hold good merely because there is differentiation in the matter of fixation of ex-factory prices, especially when the differentitation is based on rational and logical grounds disclosed by the Government. It was further held that "it is open to the producers to move the Government for altering the ex-factory prices whenever an occasion arises for the same regard being had to the factors mentioned in Clause 12 of the Order". Thus the retention prices fixed in the Order are not arbitrary ones there is safeguard against abuse of powers. In the case of Dalmia Cement (Bharat) Ltd. v. Union of India (Civil Writ Petition No. 319 of 1968, decided on 5-12-1969) (Delhi), the Delhi High Court has also held that the ex-factory price of producers was fixed after taking into consideration all the relevant factors and on the basis of the information in the possession of the Government. I an inclined to agree with the view expressed in the above two mentioned cases. Before the Tariff Commission submitted its report, it gave full hearing to the representatives of the industry. Appendix III to the Report of the Tariff Commission shows that the Commission visited the various factories including the factories of the petitioners. Appendix IV shows that the Public inquiry which was held on 11th and 12th of July, 1961, was attended by the representatives of petitioner No. 1 of both the applications.
There is nothing in the Report to show that the Tariff Commission took irrelevant factors into consideration while recommending the different retention prices in the case of different producers of cement. It appears that the Tariff Commission allows twelve per cent, return on the capital in the cases of both Rohtas Industries Ltd., and Ashoka Cement Ltd., over and above the actual cost of production depreciation etc. The other eight units, which were similarly situate, were also allowed twelve per cent, return on the capital employed by them. In the cases of only five units, which were in he lower cost group, fourteen per cent, return on capital employed by them was allowed. In the cases of certain units which formed a class by themselves lower return on capital was allowed. The different rates of return, on capital employed by the different units were allowed on the principles that high cost units or new units which enjoy some tax concession should not except returns on the same scale as low cost units. Thus, it cannot be said that there was unjustifiable discrimination between petitioner No. 1 of the two applications and those units which were allowed high retention prices. There was rational basis for the differentiation and it was made on relevant grounds. In the matter of fixation of ex-factory prices for the cement, personal factors relating to the producers were bound to be taken into consideration by the Central Government. It is, therefore, not possible to accept the contention of Mr. Lal Narayan Sinha that fixation of different (retention prices for different?) producers are based on irrelevant principles. For the reasons stated above, I do not find any substance in the first and second contentions raised on behalf of Mr. Sinha.
14. I now proceed to consider the thrid contention of Mr. Lal Narayan Sinha relating to the provision made in the Order for the compulsory deposit to the Cement Regulation Account. Under Clause 8 of the Order a uniform price for cement throughout the country has been fixed. As explained in the affidavit in opposition filed on behalf of the respondents, cement has to move long distances before it reaches the consumer. Freight is, therefore, an important element for determining the consumer's price. A uniform f.o.r. price had to be fixed so that the deficit areas might not suffer from a shortage and those areas might not have to pay higher price than those which were nearer to the producing centres. A uniform f.o.r. destination price had been fixed so that the producers may not be tempted to sell their cement only in areas adjacent to their factory in order to avoid incurring expenses of transport in reaching cement to distant places. The f.o.r. destination price really means the price that the purchaser has to pay to the producer including freight, transport charges and other charges. The burden of payment of those charges falls on the buyer. A break up of the f.o.r. destination price for the quarter January-March 1968, which was fixed at Rs. 172/25 per tonne, has been given as below:
"(i) Weighted average of retention price .... .... Rs. 95.20 per metric tonne.
(ii) Excise duty .... .... Rs. 18.32 -do-
(iii) Selling Agency Commission .... .... Rs. 1.25 -do-
(iv) Contingency .... .... Rs. 0.35 -do-
(v) Remuneration for Cement Controller .... .... Rs. 0.25 -do-
(vi) Rebate for Rate Contract through D.G.S. & D. .... Rs. 3.00 -do-
(vii) Average freight .... .... Rs. 25.48 -do-
(viii) Packing charges .... .... Rs. 18.40 -do-
Rs. 172.25 -do-"
As stated in Paragraph 11 of the affidavit in opposition, the Government fixed Rs. 25.48 per tonne as the average freight after having taken into account the freight in different parts of the country payable from the producing centres to the places of consumption and that had been taken as the basis for inclusion of the freight in the f.o.r. destination price. As explained by the Government, those producers who incur a freight less than Rs. 25.48 per tonne are required to contribute into the Cement Regulation Account the difference between the actual freight incurred by them and Rupees 25.48 per tonne. Those producers who incur freight more than Rs. 25.48 in no way causes loss to the producer. Thus the provision for the Cement Regulation Account has been made to rationalise the inequalities in the freight and a producer can have no grievance in that regard. It is thus clear that the provision for the compulsory deposit to the Cement Regulation Account and for the utilisation of the money deposited in the Account docs not amount to forfeiture of price earned by the producers. The burden, if any, falls on consumers and the petitioners, who are producers, cannot make a grievance. The contention of Mr. Lal Narayan Sinha that the provision for the Cement Regulation Account is beyond the scope of Section 18-G of the Act is also not sound. It is clear from the statements made in the affidavit in opposition that the provision for the Cement Regulation Account has been made with a view to ensure that cement may be mude available to the consumers throughout the country at a uniform reasonable price and to ensure movement of cement to the deficit areas. Thus, there is no substance in the third contention raised on behalf of the petitioners.
15. I may state here that the validity of Sub-clause (4) of Clause 11 of the Order was challenged in Jaipur Udhyog's case in the Rajasthan High Court, referred to above. It was held in that case that the clause does not empower the Government to appropriate any part of the Cement Regulation Account for purposes other than those mentioned in the preamble to the Order, nor does it authorise the Government to use any funds of the Cement Regulation Fund (sic) is not part of the producer's property. I am, therefore, fortified in my view by the decision of the Rajasthan High Court in the case of (AIR 1969 Raj 281).
16. As the fourth and the fifth contention of Mr. Lal Narayan Sinha are mainly founded upon the decision of the Supreme Court in the case of (AIR 1970 SC 564), they are hereinafter being dealt with together.
17. According to Mr. Sinha, the Central Government may, in exercise of the powers conferred upon it under Clause 4 read with the second proviso to Clause 8 of the Order, require a producer to sell cement to the Government through the Directorate-General of Supplies and Disposals. The provision in the Order relating to the acquisition of cement at a cheaper rate by the Government by allowing rebate, discount or commission in the price of cement sold to it and not at the market price of the cement contravenes Article 31 (2) of the Constitution.
18. Article 31 (2) of the Constitution reads thus:
"No property shall be compulsorily acquired or requisitioned save for a public purpose and save by authority of a law which provides for compensation for the property so acquired or requisitioned and either fixes the amount of the compensation or specifies the principles on which, and the manner in which the compensation is to be determined and given; and no such law shall be called in question in any court on the ground that the compensation provided by that law is not adequate."
In R. C. Cooper's case, AIR 1970 SC 564 referred to above, the Supreme Court held on a review of a number of decisions (1) that "the principle specified by the law for determination of compensation is beyond the pale of challenge, if it is relevant to the determination of compensation and is a recognized principle applicable in the determination of compensation for property compulsory acquired and the principle is appropriate in determining the value of the class of property sought to be acquired; (2) that "if an appropriate method or principle for determination of compensation is applied, the fact that by the application of another principle which is also appropriate, a different value is reached, the Court will not be justified in entertaining the contention that out of the two appropriate methods, one more generous to the owner should have been applied by the Legislature"; (3) that a principle specified by the Parliament for determining compensation of the property to be acquired is not conclusive (4) that the principle specified must be appropriate to the determination of compensation for the particular class of property sought to be acquired (5) that "if several principles are appropriate and one is selected for determination of the value of the property to be acquired, selection of that principle to the exclusion of other principles is not open to challenge, for the selection must be left to the wisdom of the Parliament."
Further it was observed as follows:
"The broad object underlying the principle of valuation is to award to the owner the equivalent of his property with its existing advantages and its potentialities. Where there is an established market for the property acquired the problem of valuation presents little difficulty. Where there is no established market for the property, the object of the principle of valuation must be to pay to the owner for what he has lost, including the benefit of advantages present as well as future, without taking into account the urgency of acquisition, the disinclination of the owner to part with the property, and the benefit which the acquirer is likely to obtain by the acquisition. Under the Land Acquisition Acts compensation paid is the value to the owner together with all its potentialities and its special adaptability if the land is peculiarly suitable for a particular use, if it gives an enhanced value at the date of acquisition."
Mr. Lal Narayan Sinha submitted that the provision in the Order for the sale of cement to the Government at a concessional rate is inconsistant with the principles of price fixation as laid down and explained in E. C. Cooper's case, AIR 1970 SC 504. The contention of Mr. Sinha though attractive is devoid of substance. Under Clause 11 (2) (ii) of the Order provision for equalising concession, if any, in the matter of price of cement for supplies to Government or for purposes of export under the second proviso to Clause 8 has been made. Thus, a producer is not put to any loss if he is asked to supply cement to Government at a concessional rate. The loss caused by supply of cement to Government at the concessional rate would be ultimately borne by the consumers in India and not by the producer. A producer by the supply of cement to Government at a concessional rate will not get less than what he is entitled to get as the ex-factory or the retention price fixed by Government. It is, therefore, not possible to accept the contention that the second proviso to Clause 8 of the Order contravenes Article 31 (2) of the Constitution.
19. In the case of Lord Krishna Sugar Mills v. Union of India, (AIR 1969 SC 1124) the validity of some of the sections of Sugar Export Promotion Act, 1958, was challenged by the manufacturers of Sugar. One of the grounds of attack was that the whole export programme in respect of sugar amounted to an infringement of their fundamental rights under Article 19 (1) (f) and (g) of the Constitution and amounted also to a compulsory acquisition of their property without payment of compensation. The Supreme Court by a majority view overruled the contention holding that there was no infringement of the fundamental rights of the petitioners and tbat the restriction was not unreasonable because arrangement was made to save the owners of the factories from loss, and the loss entailed by the export of sugar was to be borne by the consumers in India and not by the producers. I am, therefore, fully supported in my view by the above decision of the Supreme Court. The fourth and fifth contentions of Mr. Lal Narayan Sinha must, therefore, fail on the preliminary ground that the producers of cement are not put to any loss entailed by the concession, if any, granted by the Government in the matter of price for supply of cement to it or for purposes of export.
20. Though Mr. Sinha raised a general contention that the restrictions imposed by the Order on the producers are unreasonable and they violate Article 19 (1) (f) and (g) of the Constitution, he did not elaborate the argument. In State of Madras v. V. G. Row, (AIR 1952 SC 196 at p. 200) the Supreme Court laid down that in judging the reasonableness of a restriction upon fundamental rights, the surrounding circumstances can be looked into. It was observed by Patanjali Sastri, C. J., as follows:
"It is important in this context to bear in mind that the test of reasonableness, wherever prescribed, should be applied to each individual statute impugned, and no abstract standard, or general pattern of reasonableness can be laid down as applicable to all cases. The nature of the right alleged to have been infringed, the underlying purpose of the restrictions imposed, the extent and urgency of the evil sought to be remedied thereby, the disproportion of the imposition, the prevailing conditions at the time, should all enter into the judicial verdict. In evaluating such elusive factors and forming their own conception of what is reasonable, in all the circumstances of a given case, it is inevitable that the social philosophy and the scale of values of the Judges participating in the decision should play an important part, and the limit to their interference with legislative judgment in such cases can only be dictated by their sense of responsibility and self restraint and the sobering reflection that the Constitution is meant not only for people of their way of thinking but for all, and that the majority of the elected representative of the people have, in authorising the imposition of the restrictions, considered them to be reasonable."
Keeping in view the principles enunciated in the observation, referred to above, 1 have examined the various provisions of the order. In my opinion, the restrictions imposed by the various clauses of the Order on the producers of cement cannot be said to be unreasonable.
21. It has been explained by the Government in the affidavit in opposition (1) that a producer is free to sell cement in his marketing zone; (2) that there is no restriction on any producer in selling his cement to the public and the question of seeking permission of the Controller arises only for such quantities as he is not able to sell in the free market; (3) that the permission which is required to be given by the Controller is with a view to keep a record of movements of cement from each factory to the different consumption centres for accounting purposes and for purposes of reimbursement of freight expenditure from the Cement Regulation Account; (4) That the Order was issued primarily to rationalise movement, to reduce the burden of freight and to avoid the development of surplus conditions near the producing centres and scarcity conditions near the consumption points in the deficit areas; and (5) that the claims of the petitioners that they would not be in a position to comply with the instructions of the Controller for movement of cement are without any basis.
In (AIR 1969 Raj 281), the constitutional validity of every clause of the Order was considered, and, as I have already stated, only Clause 2 (b) and Sub-clause (1) of Clause 9 of the Order, as amended by the Cement Control (Amendment) Order, 1968 were declared to be void, and the other provisions in the order were held to be constitutionally valid. In the case of (Civil Writ Petition No. 319 of 1968 disposed of on 5-12-1969 by the Delhi High Court) the validity of Clauses 3 to 6 to the order controlling the distribution of cement was challenged by the producers as placing unreasonable restrictions on their fundamental rights guaranteed under Article 19 (1) (f) and (g) of the Constitution. As already stated, the producers had also challenged the ex-factory price fixed by the Central Government as arbitrary and discriminatory. The consumers had attacked the validity of Clauses 8, 9, 11 and 14 on different grounds. The learned single Judge of the Delhi High Court held that the provisions of Clauses 4, 5 and 6 are reasonable to any system of control or distribution of a basic material like cement throughout such a large country like India and they are not violative of Article 19 (1) (f) and (g) of the Constitution. I entirely agree with the views expressed by a Division Bench of the Rajasthan High Court in the case of (AIR 1969 Raj 281), and the learned single Judge of the Delhi High Court in the case of (Civil Writ Petition No. 319 of 1968) and hold that the restrictions imposed on the producers under the various clauses of the Order are not unreasonable and violative of Article 19 (1) (f) and (g) of the Constitution.
22. In the Delhi case it was further held that the producers, who were com-paines registered under the Companies Act, were not citizens and were not entitled to the enforcement of the fundamental rights guaranteed by Article 19 (1) (f) and (g) of the Constitution. It was further observed that it was doubtful whether the share-holders who joined as petitioners could claim to enforce the fundamental rights when the cement was produced not by the share-holders but by the companies. As no argument was advanced before us whether the share-holders can claim to enforce the fundamental rights, I do not consider it necessary to go into that question. I have examined the various provisions of the Order on the assumption that, at any rate, petitioner No. 2, if not petitioner No. 1, of both the writ applications can claim to enforce the fundamental rights guaranteed under Article 19 (1) (f) and (g) of the Constitution.
23. As all the contentions raised by Mr. Lal Narayan Sinha in the course of the hearing of the two writ applications fail, both the writ applications are dismissed but without any order as to costs, A.N. Mukharji, J.
24. I agree.