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In 1961 the Central Government promulgated the Molasses Control Order under Section 18G of the Industries (Development and Regulation) Act, 1951 imposing restrictions on the sale of molasses and fixing the maximum price of molasses. A similar Ethy1 Alcohol price control order was issued in 1971 relating to Ethy1 Alcohol which is a product of molasses. Sub-clause (2) of Clause 1 of the Molasses Control Order, 1961 provided that it shall come into force in a State on such date as the Central Govt. may by notification in the official Gazette, appoint in this behalf for such State, and different dates may be appointed for different States. It is an accepted position that the Molasses Control Order, 1961 was never extended to the States of U.P. and Bihar.

In 1984, the U.P. Legislature enacted the U.P.Sheera Niyantaran Adhiniyam, (Molasses Control Act) 1964 which is impugned in the present appeals. It is the case of the respondents that although the Central Molasses Control Order of 1961 was never extended to the State of U.P. the State Government would notify the maximum price of molasses under Section 10 of the U.P. Act of 1964 in consonance with the maximum price prescribed by the Central Government under the Molasses Control Order of 1961. Identical notifications were issued by the Central Government and the State Government relating to the price of molasses every year. On 10.6.1993 the Molasses Control Order, 1961 and the Ethy1 Alcohol Price Control Order were rescinded by the Central Government by two separate notifications of the same date. In the State of U.P. however, the U.P. Sheera Niyantaran Adhiniyam, 1963 continued to operate despite the repeal of the Central Molasses Control Order, 1961. The State Government thereafter issued three notifications of 13.8.1993, 22.10.1993 and 1.1.1994 under the U.P.Sheera Niyantaran Adhiniyam, 1964. This gave rise to the present litigation.

In order to keep a proper balance over distribution of molasses to the industries which had come up over a period of time when decontrol was announced by the Government of India, it was not possible for the State of U.P.to announce a total decontrol. Nevertheless by the first notification of 13.10.1993, 70% of molasses were freed from control. However, it had an immediate adverse effect on the chemical and down stream industries in U.P. As a result, the subsequent State notifications were issued in October, 1993 and January, 1994 reducing substantially the percentage of molasses which were made free of control and increasing the percentage of controlled molasses. Simultaneously, the price of controlled molasses was also enhanced by the State Government. The State has followed a fair economic policy. In fixing from time to time, the percentage of free and controlled molasses and the prices for controlled molasses, the overall market position had also been borne in mind and the extent of availability, and the price of imported petro feed stock and chemical products had also to be borne in mind. In other words, the State has submitted that price fixation of molasses and the percentage of free and controlled molasses is essentially a matter of economic policy and the same should not be the subject matter of challenge under Article 19(1)(g) of the Constitution when the policy is fair and has been in force for a long time. This submission has much force. This Court has held that in examining the reasonableness of an economic measure, the State should have more latitude in formulating economic policy as well as appropriate legislation in comparison to legislating relating to fundamental rights. (See in this connection Delhi Science Forum & Ors. etc. V. Union of India & 'Anr. etc. (JT 1996 (2) SC 295) and Dalmia Cement (Bharat) Ltd. & Anr. etc. V. Union of India & Ors. etc. (JT 1996 (4) SC 555).

The Bihar State Legislature thereafter enacted the Bihar Amending Act 1 of 1964 which was passed with the assent of the President, under which the Bihar Molasses (Control) Act, 1947 was made permanent instead of temporary. After the repeal of the Molasses Control Order, 1961 by the Central Government in June, 1993 the State Government of the State of Bihar issued an order in the exercise of powers under Section 7 of the Bihar Molasses (Control) Act, 1947 on 9.6.1993 directing sugar industry to sell molasses at a specified controlled rate to different distilleries. The Controller of molasses in the State of Bihar also gave a further clarification that the central Government had not rescinded the Bihar Molases (Control) Act, 1947 and the State authorities were free to regulate and control molasses in exercise of power vested in the State under the State Act. In the State of Bihar also, in September 1993, a system of partial decontrol of molasses was introduced allowing sugar factories to sell the remaining molasses at free market prices after fixing a certain percentage for molasses to be supplied at fixed controlled rates to the distilleries. The challenge to these orders and the Bihar Molasses (Control) Act, 1947 are similar to the challenges in the appeals pertaining to the State of U.P. For reasons which we have set out in our judgment in the appeals pertaining to the State of U.P., these appeals are also dismissed with costs.