Calcutta High Court
Star Paper Mills Ltd. And Ors. vs Union Of India (Uoi) And Ors. on 5 April, 2006
Equivalent citations: AIR2006CAL141
Author: Ashok Kumar Ganguly
Bench: Ashok Kumar Ganguly, Aniruddha Bose
JUDGMENT Ashok Kumar Ganguly, J.
1. This Letters Patent appeal has been filed by the Star Paper Mills Ltd., a company within the meaning of the Companies Act (hereinafter referred to as said Company) and one Sri Shyamal Kumar Chowdhury, impugning a judgment and order dated 30th September, 2005 passed by a learned Judge of the Writ Court whereby the learned Judge was pleased to dismiss the writ petition with costs of 200 GMs.
2. That Writ Petition [C.R. No. 9817 (W) of 1982] was filed by the said company in 1982 challenging, inter alia, the Paper (Control) Order, 1979, as amended. All the three main prayers in the writ petition were directed against the said Control Order. Prayer for injunction was also made for restraining the respondents from giving effect to the said Control Order and there was also a prayer for injunction permitting the petitioner to sell white printing paper at the minimum retention price of Rs. 5633A per tonne plus excise duty and other levies applicable to the release order holders and consignees.
3. Interim order issued by a learned Judge of the Writ Court on 12th July, 1982 was to the following effect:
In so far as the interim order is concerned, Mr. Dey appearing for the petitioner states on instruction that unless the petitioner is allowed to have retention price of Rs. 5633A as against Rs. 4200/- which the impugned retention price, the petitioner will have to close down its business. The petitioners are prepared to give an undertaking not to deal with or dispose of its immovable assets pending disposal of the rule. There will be an interim order of injunction in terms of prayer (f) of the petition. The petitioners would have entitled to sell their white printing papers at the price of Rs. 5633/- per metric tonne pending disposal of the rule on the undertaking of the petitioner to Court through its Advocate-on-record Mr. A.K. Dey not to deal with or dispose of the immovable assets except on the usual course of business pending disposal of the rule. In so far as the excise duty payable on the higher price is concerned, the petitioner is directed to furnish a bank guarantee in favour of the Collector having jurisdiction over the subject-matter of the excise proceeding for the difference between the excise duty which is payable and the excise duty at the rate of 26.25%.
Let a plain copy of this order signed by the Assistant Registrar (Court) be given to the learned Advocate for the parties.
4. It is not in dispute that in view of the aforesaid interim order the writ petitioner sold papers at a rate higher than what was prescribed by the Control Order. The petitioner also furnished a bank guarantee and the same has been kept renewed even on date. The said interim order was subsequently extended on 10.2.1983 by a learned Judge of this Court and by the said order an interim order was granted in terms of prayer (a) which is set out below:
(a) The interim order dated July 12, 1982 be varied, modified and it be clarified that in respect of the said white printing papers supplied to DGSD or various education purposes, as such for text books, exercise books and University examinations, the bank guarantee as directed in the said order dated July 12, 1982 of this Hon'ble Court is not required to be given by your petitioner No. 1.
5. While granting the interim order in terms of prayer (a) the learned Judge observed that the said order will not prejudice the right of the Central Excise authority to charge higher rate of duty if leviable according to law and it was also made clear that the interim order will not be applicable to the clearance made prior to the date of notification.
6. After obtaining such interim order no other steps appear to have been taken by the parties to get the matter heard at an early date till the matter was taken up by the learned Judge of the Writ Court and dismissed by a judgment and order dated 30th September, 2005 which was more than after two decades after the passing of the interim order.
7. When the matter was taken up for hearing by the learned Judge of the Writ Court the following contentions were raised on behalf of the petitioner :
(i) The fixation of price is a quasi-judicial function and such prices could not be fixed without reasons being assigned;
(ii) Since no reasons were assigned for the price fixed in the amended Control Order the same is bad and should be struck down on that ground; and
(iii) The price fixed by the Control Order does not take care of the cost price for manufacturing white paper and as such fixation of such a price is bad.
8. The learned Judge noted that the authorities who fixed the price did not appear before His Lordship at the time of hearing of the writ petition. It may be noted that no one appeared for those authorities even before this Court when the appeal was heard. The Judge, however, refused to accept the contentions raised before him on behalf of the writ petitioners and dismissed both the contentions holding that there is no merit in the writ petition.
9. When the matter was heard before us the learned Counsel for the appellant gave up the contention that fixation of price is a quasi-judicial function and that such fixation of price must be done for reasons to be assigned.
10. Before this Court it was made clear that for the last 10 years there is no Paper Control Order. The learned Counsel for the appellant also did not dispute the said position.
11. The only submission which was made before this Court by the learned Counsel for the appellant is whether a fair price has been fixed by the authorities having regard to the facts and circumstances of this case and if the price is not fair in that case the respondents cannot compel the writ petitioners to sell white paper at such a fixed price.
12. The Paper Control Order dated 30th July, 1979 under which price has been fixed was titled as the Paper (Control) Order, 1979 and was made in exercise of the power conferred on the Central Government under Section 3 of the Essential Commodities Act, 1955. Under the said Control Order, Clause 4 is to the following effect:
4. Power to direct sale.--The Central Government may, by order, require any manufacturer to sell white printing paper and cream laid or wove paper or any of such varieties of paper to such person or class of persons, and on such terms and conditions, as may be specified in the order.
13. The other relevant clause is Clause 6 which is to the following effect:
6. Retention prices.--The ex-factory prices admissible to the manufacturer for white printing paper and cream laid or wove paper shall be Rs. 3000/- and Rs. 3785/- per metric tonne respectively, and no manufacturer shall sell any of such varieties of paper at a price exceeding such price.
14. In accordance with such provisions retention price of white printing paper was fixed at Rs. 4200/- per metric tonne on 30th March, 1982. Thereafter, it was enhanced to Rs. 5400/- per metric tonne on 11/4/1983. It was further enhanced to Rs. 6400/- per metric tonne on 11/5/1984. This will appear from the notifications dated 30th March, 1982 and the further notification dated 11th May, 1984.
15. In support of the contention that price fixation under the said Control Order is unfair, the learned Counsel for the appellant has relied on several judgments.
16. First reliance was placed on the decision in the case of the Panipat Cooperative Sugar Mills Ltd. v. Union of India . It was a judgment of the Constitution Bench of the Supreme Court. Reliance was placed on paragraphs 25, 29 and 30 of the said judgment and the learned Counsel submitted that the price mechanism which has been approved in the said judgment is that the fair price has to be determined on the basis of the price of the raw material plus the manufacturing cost and the tax or duty applicable in the zone. The learned Counsel also submitted that apart from aforesaid imputes the price fixation should also take into account a reasonable return on the capital employed in the business.
17. In paragraph 29 of the said judgment it has been held that cost of fair price is not an unknown concept and the same was prevalent in the business world as early as 1937. In that paragraph the learned Judges were considering the history of the particular industry and it was sugar industry in the case of Panipat. The Court found that a fair price would not always mean the actual cost and the return of every individual unit. The Court opined if such a concept is accepted that would be rewarding the inefficient and uneconomic units also. In paragraph 30 of the said judgment the Court therefore formulated that the basis of a fair price would have to be built on a reasonably efficient and economic representative cross-section and on the working of such units the cost schedule will have to be worked out. In the said paragraph the Court has also made it clear that the Government cannot fix any arbitrary price nor can it fix a price on extraneous consideration. If the price is fixed on any arbitrary basis, the Court held that it would be in contravention of Articles 19(1)(f) and (g) and Article 31.
18. It may be relevant to keep in mind that after the decision was rendered in Panipat the provision of Article 19(1)(f) and Article 31 have been deleted by the Constitution (44th Amendment) Act, 1978 with effect from 20th June, 1979.
19. The next judgment cited by Mr. Mallick was rendered in the case of Sitaram Sugar Co. Ltd. v. Union of India . It was also a Constitution Bench judgment of the Supreme Court. In this case it was held that the price fixation is a legislative device and in matters of price fixation the principle of natural justice is not applicable. The principles in Panipat however were reiterated by saying that the Government cannot fix any arbitrary price nor such price can be fixed on extraneous consideration. On the other hand it was reiterated that the action of the authority should be on objective basis and must be inspired by reason.
20. The last decision which was cited by the learned Counsel for the appellant on this aspect was delivered in the case of Malaprabha Co-operative Sugar Factory Ltd. v. Union of India and Anr. . In that judgment the learned Counsel relied on paragraphs 59, 60 and 61 of the report and argued that an order under Section 3(2)(f) of the Essential Commodities Act is quasi-judicial in nature. Section 3(2)(f) of the Essential Commodities Act (hereinafter called the said Act) provides as follows:
(f) for requiring any person holding in stock, or engaged in the production, or in the business of buying or selling, of any essential commodity,--
(a) to sell the whole or a specified part of the quantity held in stock or produced or received by him, or
(b) in the case of any such commodity which is likely to be produced or received by him, to sell the whole or a specified part of such commodity when produced or received by him, to the Central Government or a State Government or to an officer or agent of such Government or to Corporation owned or controlled by such Government or to such other person or class of persons and in such circumstances as may be specified in the order.
21. On construing the aforesaid section the learned Judges held that the order which is to be passed under Section 3(2)(f) is quasi-judicial in character since the same will be a specific order directed against a particular individual in order to enable the Central Government to purchase certain quantity of commodity from such person who is holding it. In other words it is an order of compulsory sale. But Section 3(3)(c) of the said Act provides for ascertainment of a price and so far as ascertainment of price is concerned, the consistent view of the Court is that such an exercise is legislative in character.
22. The learned Counsel for the Union of India Mr. Saniaddar, on the other hand, relied on the decision of the Supreme Court in the case of Union of India v. Cynamide India Ltd. and Anr. . In Cynamide, the price fixed was in respect of indigenously manufactured bulk drugs. In that judgment it was held that price fixation is a legislative function. It was also held that price fixation mechanism does not concern itself with the interest of any individual manufacturer or producer. Such exercise is in relation to a particular essential commodity as a whole and are directions of a general nature. In Cynamide case it was made clear that in some cases where acquisition or requisition of goods or properties are made from individuals it becomes necessary to fix the price separately in relation to such individuals as in the case of exercise under Section 3(2)(f) of the said Act. In such a situation the determination may acquire a quasi-judicial character hut otherwise price fixation is a legislative activity.
23. Relying on the said principle in Cynamide the learned Counsel argued that in the instant case the price fixation which has been impugned, is a legislative activity.
24. Learned Counsel further submitted that the principal attack in the writ petition is against the paper control order. But the said order being not in existence at least for the last 10 years, this writ petition has become infructuous much before it was taken up for hearing. Apart from that the learned Counsel submitted that from the Paper Control Order it will appear that the same was framed not in exercise of power under Section 3(2)(f) of the said Act. The learned Counsel also submitted Section 3(2)(c) of Essential Commodities Act which confers the legislative authority for price fixation does not contemplate any enquiry in the manner. The learned Counsel also submitted, and in our view rightly, that fixation of a fair price in such cases does not contemplate any hearing. This Court is also of the view that natural justice does not have any play in such a situation.
25. As pointed out above the only submission which has been made by the learned Counsel for the appellant was that the price which was fixed at the relevant point of time, namely Rs. 4200/- per metric tonne as the retention price of white paper was not a fair price. In order to demonstrate that price fixed was not a fair price, reliance was placed by the learned Counsel for the appellant on paragraph 17 of the writ petition. From the said paragraph it appears that fair selling price of white printing paper in June, 1982 was calculated by the petitioner at Rs. 6215/- per metric tonne. Reliance was further placed on paragraph 22 and paragraph 25 of the writ petition. It is difficult for this Court to accept the aforesaid factual assertion as representing the correct fixation of retention price of white printing paper as opposed to the price fixed under the said Control Order. It has been reiterated time and again by Supreme Court even in the decisions which have been cited by the learned Counsel for the appellant that price fixation mechanism cannot be based on the calculation of any individual company or the manufacturing unit who is challenging such fixation of price. Such price fixation has to be made on the basis of a crosssection of various units which will be representative of the industry. And when such prices are fixed by the appropriate authority under the Control Order, if is difficult for a Court to interfere with the same on the basis of assertion of fact by any individual unit.
26. Reference in this connection may be made to the observation of the Supreme Court in the case of Cynamide India (supra). In paragraph 4 of the judgment the learned Judges made it clear as to how a Court will exercise its power and discretion when fixation of a price and that too of an essential commodity is challenged before it. Those pertinent observation at page 743 paragraph 4 of the report are quoted below :
Price fixation is neither the function nor the forte of the Court. We concern ourselves neither with the policy nor with the rates. But we do not totally deny ourselves the jurisdiction to enquire into the question, in appropriate proceedings, whether relevant consideration have gone in and irrelevant considerations kept out of the determination of the price. For example, if the legislature has decreed the pricing policy and prescribed factors which should guide the determination of the price, we will, if necessary, enquire into the question whether the policy and the factors are present to the mind of the authorities specifying the price. But our examination will stop there. We will go no further. We will not deluge ourselves with more facts and figures. The assembling of the raw materials and the mechanics of the price fixation are the concern of the executive and we leave it to them. And, we will not re-evaluate the considerations even if the prices are demonstrably injurious to some manufacturers or producers. The Court will, of course, examine if there is any hostile discrimination. That is a different 'cup of tea' altogether.
27. In matters of price fixation it has been held by the Supreme Court in the case of Welcome Hotel v. State of Andhra Pradesh , that no price fixation order need guarantee profit to the establishment of each unit of articles served or sold. It is overall picture in the trade and commerce that needs to be examined. (See para 9 page 1018 of the report)
28. The learned Judges in Welcome Hotel relied on a previous judgment of the Supreme Court on price fixation in the case of Prag Ice And Oil Mill, . A Constitution Bench in M/s. Prag Ice And OH Mill speaking through Justice Chandrachud (as His Lordship then was) observed at page 1313--
The mechanism of price fixation has necessarily to be left to the judgment of the executive and unless it is patent that there is hostile discrimination against a class of operators, the processual basis of price fixation has to be accepted in the generality of cases as valid.
29. In view of the discussions made hereinabove, it is clear that no case has been made out in the writ petition for this Court to interfere with the price fixation mechanism by the Government. This Court concurs with the finding of the learned Judge of the Writ Court that the writ petition has no merit and is liable to be dismissed.
30. Accordingly, this appeal is dismissed and the writ petition also stands dismissed. All interim orders are vacated.
31. The appeal therefore fails with costs as determined by the Writ Court.
32. Urgent xerox certified copy of this judgment, if applied for, be given to the parties, after completing all the formalities.
Aniruddha Bose, J.
33. I agree.