Case Note & Summary
The Supreme Court adjudicated appeals arising from a Patna High Court judgment that upheld a revenue recovery certificate issued against a sugar factory for unpaid sugarcane price differential. The appellant, S.K.G. Sugar Ltd., operated a sugar factory within a reserved area notified under Section 31 of the Bihar Sugarcane (Regulation of Supply and Purchase) Act, 1981. The Central Government, under Clause 3 of the Sugarcane (Control) Order, 1986, fixed a minimum price of Rs 13.92 per quintal for sugarcane. The State Government, after a meeting between the sugar factory owners association and cane growers, announced a price of Rs 20.50 per quintal on March 31, 1983. The appellant paid only the Central minimum price and refused to pay the differential, leading the Collector to issue a certificate of dues under the Revenue Recovery Act for the difference. The appellant challenged the certificate in a writ petition before the Patna High Court, which dismissed the petition and review, prompting the appeals to the Supreme Court. The core legal issue was whether the State Government had the power to fix a price higher than the minimum price determined by the Central Government and whether the differential could be recovered as arrears of land revenue. The appellant argued that the Sugarcane (Control) Order, 1986 only permitted the Central Government to fix a minimum price and that the State Government had no authority to exceed it, especially under Section 42 of the Bihar Act, which allegedly applied only to khandsari and open pan units. It also contended that any remaining dues could only be recovered through a civil suit by the growers, not by certificate proceedings. The Supreme Court rejected these contentions. It held that Clause 3 of the Sugarcane (Control) Order fixes only a minimum price to protect cane growers from being compelled to sell below that price; it does not prohibit agreements to pay a higher price. The Court relied on its earlier decision in State of Madhya Pradesh v. Jaora Sugar Mills Ltd., which held that despite the minimum price fixation, parties were at liberty to agree to a higher price by contract, and only purchase or sale below the minimum was prohibited. In the present case, there was an agreement between the sugar factory owners association and the cane growers at a meeting convened by the State Government, and the appellant was a consenting party that acted upon the agreement until March 31, 1983. The Court found consensus ad idem and held that the factory could not resile from the collective agreement merely because it was a separate legal entity. The Court further held that because the reserved area scheme under Section 31 of the Bihar Act obliged the factory to purchase cane from growers in the zone, the State Government's role in convening the agreement gave the agreed price a statutory character with a first charge on the factory's assets. The price differential was a statutory due recoverable as arrears of land revenue under the Revenue Recovery Act. The Collector's certificate for the differential between Rs 13.92 and Rs 20.50 per quintal was therefore valid, and no separate suit by the growers was necessary. The appeals were dismissed.
Headnote
A) Sugarcane Price Regulation - Minimum Price vs Higher Price - Sugarcane (Control) Order, 1986, Clause 3 - The Order fixes only minimum price to protect cane growers from being compelled to sell below that price; it does not prohibit agreement for higher price. Court held that there was no statutory prohibition at the relevant time to agree to pay higher price than fixed under the Order. Held that State Government could fix higher price pursuant to agreement. B) Revenue Recovery - Certificate Proceedings - Bihar Sugarcane (Regulation of Supply and Purchase) Act, 1981, Sections 31, 42; Revenue Recovery Act - Reserved area under Section 31 obligates factory to purchase cane from growers in the zone; State Government's role in convening agreement gives price statutory character. Collector's certificate for differential dues between Central minimum price and agreed higher price is valid and recoverable as arrears of land revenue. Held no separate suit by growers required. C) Contract Formation - Oral Agreement Through State Intervention - Sugarcane (Control) Order, 1986, Clause 3 - Agreement between sugar factory owners association and cane growers at meeting convened by State Government, even if oral, is binding if there was consensus ad idem. The factory's separate legal entity status does not permit resiling from collective agreement. Held that appellant was consenting party and acted upon it. D) Statutory Price and First Charge - Statutory First Charge - Sugarcane (Control) Order, 1986, Clause 5A - Agreed price bears stamp of statutory first charge on sugar and assets of factory over other contracted liabilities. Recovery of sugarcane price dues as arrears of land revenue under Revenue Recovery Act is appropriate course of action. Held demand valid.
Issue of Consideration
Whether the State Government had the power to fix a sugarcane price higher than the minimum price fixed by the Central Government under the Sugarcane (Control) Order, 1986, and whether the differential amount could be recovered as arrears of land revenue through certificate proceedings under the Revenue Recovery Act.
Final Decision
The appeals were dismissed. The Collector's certificate for recovery of the differential sugarcane price was held valid. The State Government's fixation of Rs 20.50 per quintal pursuant to the agreement was statutory and enforceable. The appellant factory was liable to pay the difference between the Central minimum price and the agreed price, and the recovery proceedings under the Revenue Recovery Act were appropriate; no separate suit was required.
Law Points
- Minimum price under Sugarcane (Control) Order does not bar higher price by agreement
- State Government can enforce agreed price as statutory price with first charge
- revenue recovery for sugarcane price differential is valid
- agreement between millers and growers through State is binding on factory in reserved area.
