M/S Oil Palm Developers And ... vs State Of Andhra Pradesh,
2021 Latest Caselaw 1863 AP

        HON'BLE SRI JUSTICE D.V.S.S.SOMAYAJULU


                     W.P.No. 2043 of 2021
ORDER :

This writ petition is filed for the following reliefs :

"to issue a writ or order or direction more particularly one in the nature of Writ of Mandamus or any other appropriate Writ declaring the G.O.RT.No.22 dated 19.01.2021 issued by the 1st Respondent fixing the formula for the pricing of Oil Palm Fresh Fruit Bunches (FFBs) as arbitrary, illegal, void and contrary to the Judgment passed in W.P.No.9376 of 2015 by the Hon'ble High Court dated 15.12.2015 and the provisions of Andhra Pradesh Oil Palm Regulation of Production and Processing Act, 1993 (hereinafter referred to 'the Act') and rules there under besides violating the petitioners rights guaranteed under Articles 14 and 19(1)(g) of the Constitution of India and consequently direct the 1st Respondent to re- fix the FFBs pricing formula for the period November, 2020 to October 2021 (oil year) by taking OER of 16.08% (Pedavegi) in terms of CACP Report and pass...."

This Court has heard Sri B.Adinarayana Rao, learned

senior counsel for Sri Challa Guna Ranjan, the Government

Pleader for Agriculture appearing for respondent Nos.1 and 2,

Additional Solicitor General for respondent No.4 and Sri

M.S.Prasad, senior counsel for the unofficial respondents.

The issue in this case relates to the fixation of price by the

State for the Oil Palm Fresh Fruit Bunches (FFB) from which

palm oil is extracted. The following facts are not in dispute:

(1) The relevant statue applicable to the facts of the case is the

Andhra Pradesh Oil Palm (Regulation of Production and

Processing) Act, 1993 (for short 'the Act'). In this Act, section 13

is the important for this case. The two clauses of section 13 of

the Act are reproduced hereunder:

Section 13. Power to fix prices (1) The Government may on their own fix the minimum price of Oil Palm FFBs or may authorize the Oil Palm Commissioner to do so, subject to such guidelines as they may give in that regard from time to time. (2) Where the Oil Palm Commissioner is authorized to fix the prices of Oil Palm FFBs to be purchased by the factory, he shall declare at such intervals as may be directed by the Government the minimum price at which the Oil Palm FFBs be purchased by the factories.

In addition, section 11 of the Act states that the State

Government shall have the power to declare a particular area as

the factory zone for the purpose of supply of fresh oil palm fruit

bunches to the factories. Under section 11(2) of the Act, once a

factory zone is established, all the farmers (oil palm growers) of

that area shall supply their fruit bunches from their plantations

to the factory. The factory is also under an obligation to buy the

oil palm fresh fruit bunches. There is no dispute about this

position vis a vis the Act.

(2) It is also important to note that there are two State

owned units: one in Pedavegi in the State of Andhra Pradesh

and the other at Aswaraopet in Telangana.

(3) The Government of India has also clarified by letter

dated 07.12.2014 that the State Government is free to determine

the price and take its own independent decisions basing on their

own formula also. Even after the present writ petition is filed,

the Government of India clarified that its formula is purely

recommendatory in nature and that the State/Government of

Andhra Pradesh must take its own decision whether to follow

the recommendations or to evolve their own formula.

Apart from this, the law on the subject with regard to price

fixation is also very clear. The Hon'ble Supreme Court of India

in the case of Shri Sitaram Sugar Co. Ltd., v. Union of

India1 held as follows in para 45:

45. Price fixation is in the nature of a legislative action even when it is based on objective criteria founded on relevant material. No rule of natural justice is applicable to any such order. It is nevertheless imperative that the action of the authority should 'be inspired by reason.

Saraswati Industrial Syndicate Ltd., MANU/SC/0075/1974: [1975]1SCR956 . The Government cannot fix any arbitrary price. It cannot fix prices on extraneous considerations: Renusagar, (supra)."

1990 (3) SCC 223

Paras 45 to 51 of this judgment deal with the entire issue

and it is clearly laid down by the Hon'ble Supreme Court that

price fixation is in the nature of a legislative action. However, on

the issue of judicial review of this action, the Hon'ble Supreme

Court held as follows:

"45. Judicial review is not concerned with matters of economic policy. The Court does not substitute its judgment for that of the legislature or its agents as to matters within the province of either. The Court does not supplant the "feel of the expert" by its own views.

When the legislature acts within the sphere of its authority and delegates power to an agent, it may empower the agent to make findings of fact which are conclusive provided such findings satisfy the test of reasonableness. In all such cases, judicial inquiry is confined to the question whether the findings of fact are reasonably based on evidence and whether such findings are consistent with the laws of the land. As stated by Jagannatha Shetty, J. in M\s. Gupta Sugar Works, (supra):

The Court does not act like a chartered accountant nor acts like an income tax officer. The court is not concerned with any individual case or any particular problem.

The court only examines whether the price determined was with due regard to considerations provided by the statute. And whether extraneous matters have been excluded from determination."

To a similar effect is the judgment of the Hon'ble Supreme

Court of India in Pallavi Refractories v. Singareni Collieries

Company Limited2. They cited with approval the earlier

judgments and held as follows in para 14:

"14. A Constitution Bench of this Court in Shri Sita Ram Sugar Co. Ltd. v. Union of India MANU/SC/0249/1990 : : [1990]1 SCR 909 has held that in judicial review the Court is not concerned with the matters of economic policy. The Court does not substitute its judgment for that of the Legislature or its agent as to the matters within the province of either. The Legislature while delegating the powers to its agent may empower the agent to make findings of fact which are conclusive provided, such findings satisfy the test of reasonableness. In all such cases, the judicial enquiry is confined to the question whether the findings of facts are reasonably based on evidence and whether such findings are consistent with the laws of the land. The Court only examines whether the prices determined was with due regard to the provisions of the Statute and whether extraneous matters have been excluded while making such determination. It was further observed that price fixation is not within the province of the Courts. Judicial function in respect of such matters stands exhausted once it is found that the authority empowered to fix the price has reached the conclusion on rational basis."

2005 (2) SCC 227

These facts and the law are set out at the very out set to

highlight the fact that price fixation is essentially a legislative

function of the Government and that this Court has a very

limited role in the matter, due to its inherent lack of technical,

economic and other expertise. Further as per the settled law on

the subject, this Court can look into the decision making

process and can only see if the decision was arrived at on the

basis of some material or is based on extraneous considerations

or on the basis of material which is not relevant.

The impugned order in this case was issued on 19.01.2021

vide G.O.Ms.No.22 dated 19.01.2021. Paras 2 to 4 of this order

are reproduced here under :

"In the references 1st and 3rd read above, the Commissioner of Horticulture, A.P., Guntur, has informed the pricing formula for the Fresh Fruit Bunches for the Oil Year 2020-21 i.e., from November 2020 to October 2021, based on the OER% and Nuts% for the Oil year 2019-20, furnished by the AP Oilfed, as under:-

"12.10 percent of net Crude Palm Oil (CPO) weighted average price realized by the APOILFED, Pedavegi Unit (Based on the actual OER of 16.08% recovered for the Oil Year 2019-20 by the APOILFED Pedavegi Unit) Plus 75.25 percent on 10.26% recovery of Palm Nuts weighted average price realized by APOILFED".

3. The Commissioner of Horticulture, A.P., Guntur has requested to take necessary action for finalization of Price formula for the

Oil year 2020-21 i.e., from November 2020 to October 2021.

4. Government after careful examination of the matter, hereby fix the Oil Extraction Ratio percentage (OER%) as 18.682% for the oil year 2020-21 i.e., from November 2020 to October 2021, so as to avoid loss to the farmer as well as to stop cross purchase of FFB by oil processing units in the state.

Against this back drop of the law and the facts, the

submission of the learned counsel are being summarized

hereunder:

For the petitioner, Sri B.Adinarayana Rao, learned senior

counsel appeared and argued the matter at length. It is his

contention that the fixation of the price is contrary to the order

of the combined high Court in WP.No.9376 of 2015 and also

contrary to the procedure which was decided in a meeting held

in December, 2015. He argues that the first respondent had

arbitrarily fixed the Oil Extraction Ratio (OER) at 18.682%. He

contends that in the earlier years, this OER was based upon the

Pedavegi unit of Andhra Pradesh Oilfed. It is argued that the

fixation of price should be in accordance with the CACEO and

the OER 16.08% of Pedavegi. He also relies upon the

Government of India memo dated 13.08.2013 to argue that the

OER should be determined as per the actual oil content

extracted in the past by the processing industry. Relying upon

the expert committee report called the CACP report of January,

2012, the learned senior counsel argues that it is clearly laid

down in this report that till the testing centers or other scientific

mechanism to determine the OER is in place, the experts are

inclined to continue with OER 18%. He also draws the attention

of this Court to the minutes of the meeting dated 21.12.2015

and points out that the oil palm price fixation committee met on

21.03.2018 under the Chairmanship of the Minister and

recorded their deliberations in the minutes which are filed by

the learned Government Pleader. Learned senior counsel points

out that in para 2 of the recorded minutes, it was decided to get

the fresh fruit bunches from Andhra Pradesh processed at the

Telangana State Oil Food Unit at Aswaraopeta and vice versa to

determine the correct OER. Learned senior counsel points out

that in order to eliminate any differences between the

conclusions of oil extraction from fresh fruit bunches, it was

decided to test the same at the Pedavegi unit which is in Andhra

Pradesh and the same crop/bunch was also to be processed at

Telangana State Unit at Aswaraopeta. Learned senior counsel

submitted that this was decided upon in order to arrive at a

scientific basis for the price fixation. However, by relying upon

the subsequent letters which are filed by the learned

Government Pleader and in particular the letter dated

17.06.2018 addressed by the Collector of West Godavari, the

learned senior counsel submits that although fresh fruit

bunches were collected from Andhra area and were sent for

processing into Telangana (Aswaraopeta) the vice versa was not

done. Therefore, he submits that the respondents cannot rely

upon the data said to have been obtained from this processing

at Aswaraopeta to fix the price.

He also draws the attention of this Court to the minutes

dated 21.12.2015 of the meeting chaired by the Hon'ble Minister

for Agriculture in which it was decided that with effect from

2016-17, the OER obtained at Pedavegi alone will be

considered. Relying on this minutes, learned counsel submits

that it was decided with effect from 2016-17, the OER

percentage of the Pedavegi alone is to be considered. He points

out that is the reason why the prayer is made in these lines. He

also disagrees with the States' reliance on the testing conducted

in Aswaraopeta and submits unless the minutes are followed in

their entirety, it cannot be said that the percentages are correct.

Relying upon the judgment of the learned single Judge reported

in Oil Palm Developers and Processors Association v. State

of Andhra Pradesh 3, the learned senior counsel argues that the

learned single Judge noticed that the OER ratio/percentage

varies from one garden to another, the efficiency of the

processing mill, climatic parameters, care of the machinery,

control of spillage etc. (para 48). He also relies upon para 49 of

this judgment to argue that the OER prevalent in one State

alone should be taken into consideration while fixing the oil

palm FFB and not the OER of a unit in a different State.

Learned senior counsel submits that these factors which have a

very heavy bearing on the OER were ignored by this State.

MANU/AP/0752/2015

In reply to this, learned Government Pleader for

Agriculture argues that the present decision is a correct decision

taken after considering all the facts. According to him, in the

year 2012 itself basing on the CACP report etc., the Government

of India issued directions dated 13.08.2013 fixing OER at 18%.

He also relies upon the CACP report to argue that the OER is

established at 18% as per this report. He draws the attention of

this Court to the minutes of the meeting dated 21.03.2018. He

points out that even after the 2015 meeting, subsequent

committee meetings were held to determine the price. In

particular he relies upon the deliberations of a meeting held on

21.03.2018. It is his contention that this was a wide ranging

meeting including the farmers, Government and also the

representatives of the oil palm extraction industry. In order to

arrive at a conclusion about the OER, which is varying between

the A.P. Unit (Pedavegi and the Aswaraopeta unit in Telangana

a via media is sought to be achieved. Basing on his counter and

the other documents, he argues that the unit at Pedavegi is an

old unit and is not giving proper results. Therefore, it was

decided to collect fresh fruit bunches from the Andhra area and

get them processed both at Pedavegi and also in Aswaraopeta in

Telangana. However, as the State of Telangana refused to agree

with the vice versa proposal, he submits that the State had no

option to go ahead with the processing of the fruit bunches from

Andhra in Telangana. He points out that even in the minutes

dated 05.07.2018 that the farmers were demanding for 18.5%

OER and that it was also agreed that the unit at Pedavegi had to

be modernized.

Learned Government Pleader therefore contends that in

view of the circumstances prevalent, namely, the refusal of the

Telangana Government etc., the only rational way was to get the

fruits from Andhra Pradesh processed at the Aswaraopeta unit

and adopt the results for fixing the price. He points out that

this meeting was held in 2018 and hence, falling back on the

Pedavegi unit is not really called for.

Relying upon the case law that is filed by him, he argues

that price fixation is a purely legislative function and that the

Court with its limited technical expertise should leave the

decision to the experts. He points out that there is a rational

basis for the price fixation and it is neither arbitrary nor

incorrect. As far as the judgment of the learned single Judge is

concerned, the learned Government Pleader points out that it

was for a particular year and the main issue involved in the case

decided in 2015 was about the using the price within the

geographical boundaries of a State alone. Hence, he states that

it cannot be taken as a binding precedent and also argues that

the order of the learned single Judge is under challenge.

Sri M.S.Prasad, learned senior counsel argues on behalf of

the newly added respondents. He also supports the arguments

of the learned Government Pleader in all aspects and brings to

the notice of this Court that the CACP report itself suggested a

OER of 18.55% till a scientific method is involved. This was

highlighted even in the application filed by them to implead

(IA.No.4 ). Learned senior counsel submits that despite the

report of CACP, neither the Government nor the industry has

established a NFFB testing center.

In these circumstances, the learned senior counsel

submits that the method adopted in this case is correct. He also

argues that the petitioners are getting a very high OER that;

they are purchasing their fruits out side the allotted area and

are avoiding to pay the proper price to the farmers. He points

out that geographically there is not much difference between the

Pedavegi factory and the Aswaraopeta area which are just across

the geographical border. Relying upon the copies of Government

Orders issued by the Telangana Government, the learned senior

counsel submits that the proforma of the agreement between the

petitioners and the Telangana Government clearly mentions in

clause 18 that the OER is 18.5% in that oil year or the actual

OER generated whichever is higher. Hence, learned senior

counsel argues that this is not a case in which the Court should

interfere and that the interest of the farmers also should be

protected.

CONSIDERATION BY THE COURT:

This Court after considering all the submissions has to

agree that the issue involved in this case is essentially about

the fixation of price. As per the settled law on the subject, it is a

legislative function. This is not a quasi judicial or other function

which may require a personal hearing etc., before a price is

fixed. In view of the settled law on the subject, the rules of

natural justice are not really applicable in the facts and

circumstances of this case. The decision making process alone

can be examined by this Court and that too within certain

narrow parameters.

The counter filed by the Government Pleader time and

again asserts that the Pedavegi unit is not really efficient

because of its age and other factors. This is reiterated more

than once in the counter. Along with their rejoinder, the

petitioners have filed the minutes of the meeting dated

05.07.2018 held at Pedavegi, West Godavari District. One of the

issues in this meeting was about the variation in the OER. It is

noted that the FFB processed at Aswaraopeta is 18.55.%. It is

also noted in the minutes that the modernization of the Pedavegi

Unit is necessary to meet the OER. Serious concern was also

expressed on the continuous realization of low OER at the

Pedavegi unit. Lastly, the meeting concluded by recording the

need for improving the OER percentage at the Pedavegi unit.

As far as the need for a scientific formula is concerned, as

rightly pointed out by the learned senior counsel for the

respondents, despite the passage of time, steps are not been

taken to establish FFB testing centers in each oil palm

cultivation area. It is also noted till the testing center or any

other scientific mechanism is evolved to determine OER, the

CACP recommended that the current OER should be at 18%.

In this case also, there was a meeting between the parties

on 21.03.2018. In this meeting which was for fixation of the

price, it was decided to take up a study by processing the FFB

collected from Andhra area in the Telangana unit and also vice

versa. Therefore, the fruit bunches from one area were agreed

to be tested in both the Andhra and Telangana units. However,

this was not completely feasible/possible as the Telangana

Government/unit refused to agree for the same. The Telangana

State Cooperative Oil Seeds Growers Federation agreed to

process the fresh fruit bunches from Andhra area at their unit

but refused for the "vice versa". The fresh fruit bunches were in

fact processed in Telangana. The letter of the District Collector

Eluru dated 17.06.2008 states as follows: "after processing

1014.88 metric tones of FFB at Aswaraopeta, the OER of 18.5%

was realized.

The FFB was collected from companies in Andhra

Pradesh. Three out of the present set of petitioners had sent

their FFBs.After processing all these 1014 metric tones, 18.55%

OER was realized. After this, another meeting was held in

Pedavegi on 05.07.2018 wherein, it was noted once again that

the FFBs processed at Telangana yielded an OER 18.55%.

As per the settled law on the subject, this Court has a very

limited area in which it can interfere. It can only interfere if it

comes to a conclusion that the impugned order is passed

without any rational basis or by taking into consideration

irrelevant material etc. It is also settled law that in areas that

require technical knowledge, this Court should be very

circumspect in its interference. These are best left to the

experts. The two meetings referred to above dated 21.03.2018

and 05.07.2018 were meetings involving all the stakeholders. In

the circumstances that were available, the parties decided to get

the produce from the same area processed at two units. But

processing was only possible at Aswaraopeta and it was not

possible in Pedavegi. This was the best available method in the

circumstances. This procedure cannot be called irrational also.

The contention that the earlier practice cannot be given a go by

is not acceptable by this Court. The parties decided to adopt a

particular method. In this meeting of July, 2018, the farmers

requested 18.55% to be fixed as the OER and in the impugned

order the OER is fixed at 18.682% in order to avoid loss to the

farmers. Admittedly, Pedavegi unit is not giving the correct

OER. The machinery in this unit is out dated and the need for

modernization of this machinery has been reiterated on more

than one occasion . The CACP report indicates that 18% should

be adopted. Therefore, this Court is of the opinion that if the

OER achieved at Pedavegi is adopted, the farmers would sustain

a loss since a lower OER percentage leads to greater losses for

the farmers.

Hence, this Court is of the opinion that in the peculiar

facts and circumstances of the case and as the available

evidence shows that the respondents have adopted a reasonable

method based upon certain tangible reasons, the action of the

State is to be upheld. This Court is also of the opinion that

after the meetings of 2018 falling back upon the OER of

Pedavegi is not called for, as it is everyone's case that the

Pedavegi unit is not giving proper results.

Lastly, the issue that survives for consideration is about

the order of the learned single Judge reported in Oil Palm

Developers and Processors Association (3 supra). The

learned single Judge was considering certain factors which were

before him and the question that was framed in the judgment is

whether the OER should be fixed based upon OER achieved by

the unit at Aswaraopeta in the State of Telangana and whether it

could be used to fix the prices in the residuary State of Andhra

Pradesh. Para 14 of this judgment makes this clear. In para 51,

the learned single Judge held that it is impermissible to ignore

the OER of the oil palm unit at Pedavegi and adopt the OER of

the neighbouring State. This was the conclusion reached by the

learned single Judge. It is also important to note that the issue

before the learned single Judge was about the price fixation for

the years 2014-2015. The present case is on a different footing

altogether. After this judgment was pronounced in 2015, there

were meetings wherein a solution was sought to be arrived at by

getting the same bunches processed at both the units in Andhra

and Telangana. This was the consensus evolved. The

processing was only possible at Telangana and the vice versa

was not possible. These facts make a fundamental difference to

the applicability of the learned Single Judge's decision to the

present case. A difference in one fact can also make a difference

in the applicability of a decision to subsequent cases. Apart

from this, it is also clear that this judgment of the learned single

Judge is under challenge. Therefore, since the judgment

pertains to a particular oil year and since the facts are peculiar

to that case, this Court is of the opinion that the judgment

passed in WP.No.9376 of 2015 cannot be the sole basis for

determination of the price for the present year.

For all these reasons, the writ petition is dismissed. No

order as to costs.

As a sequel, the miscellaneous applications, pending if

any, shall stand dismissed.

                                          ________________________
                                          D.V.S.S.SOMAYAJULU,J

Date :     .04.2021
KLP