Allowed

Andhra Pradesh Fertilizer Mixtures Manufactures Association v. The Government of Andhra Pradesh,rep.by its

Telangana HC1 Mar 2013WP/24537/2010

Case brief

AI extract

What is this about?

In appeals against single judge orders granting licenses to fertilizer units, the High Court upheld the State Government's policy of halting new licenses due to urea shortages. The court held the policy was reasonable, served public interest, and cannot be challenged via judicial review, dismissing both writ appeals and petitions.

What did the court decide?

Writ appeals allowed; writ petitions dismissed. Licenses refused to be issued remain valid; single judges' orders are quashed.

Andhra Pradesh Fertilizer Mixtures… — Labour and Industrial Disputes | Telangana HC (2013)

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*THE HON’BLE SRI CHIEF JUSTICE PINAKI CHANDRA GHOSE AND

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THE HON’BLE SRI JUSTICE VILAS V.AFZULPURKAR

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+WRIT APPEAL Nos.1049 and 1624 of 2012 and WRIT PETITION Nos.30856 of 2012; 6284 of 2011 and 24537 of 2010

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% 01.03.2013

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WRIT APPEAL Nos.1049 and 1624 of 2012

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# The Commissioner and Director of Agriculture, Hyderabad and another

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… Appellants

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Vs.

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$ M/s.Omkar Fertilizers Pvt. Ltd., Hyderabad and others

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… Respondents

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! Counsel for the Appellants: ADDITIONAL ADVOCATE GENERAL GP FOR AGRICULTURE

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Counsel for the Respondents: MR.C.V.MOHAN REDDY

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FOR MR. S. SRINIVAS REDDY

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WP.Nos.30856 of 2012; 6284 of 2011and 24537 of 2010

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# M/s. Gangothri Nutrients and Fertilizers Pvt. Ltd and others

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…PETTITIONERS

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Vs.

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$ The Principal Secretary Agriculture Department, Secretariat, Hyderabad and others.

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…RESPONDENTS

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! Counsel for the Petitioners: MR. D. PRAKASH REDDY

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for MR. M. GOVIND REDDY MR. V.R. REDDY KOVVURI

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Counsel for Respondents: ADDITIONAL ADVOCATE GENERAL GP FOR AGRICULTURE

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< Gist:

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> Head Note:

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? Cases referred:

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1. (2003) 5 SCC 437

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2. (1981) 2 SCC 600

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3. AIR 2006 SC 651

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4. (2011) 5 SCC 341

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5. (2001) 3 SCC 635

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THE HIGH COURT OF JUDICATURE, ANDHRA PRADESH AT HYDERABAD

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FRIDAY, THE FIRST DAY OF MARCH TWO THOUSAND AND THIRTEEN PRESENT

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THE HON'BLE CHIEF JUSTICE PINAKI CHANDRA GHOSE AND

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THE HON'BLE MR JUSTICE VILAS V. AFZULPURKAR

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WRIT APPEAL Nos.1049 and 1624 of 2012 and WRIT PETITION Nos.30856 of 2012; 6284 of 2011 and 24537 of 2010

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WA.Nos.1049 and 1624 of 2012:

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BETWEEN

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The Commissioner and Director of Agriculture, Hyderabad and another.

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…APPELLANTS

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AND

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M/s. Omkar Fertilizers Pvt. Ltd., Hyderabad and others.

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…RESPONDENTS

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Counsel for the Appellants: ADDITIONAL ADVOCATE GENERAL GP FOR AGRICULTURE

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Counsel for the Respondents: MR. C.V. MOHAN REDDY

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FOR MR. S. SRINIVAS REDDY

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WP.Nos.30856 of 2012; 6284 of 2011and 24537 of 2010

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BETWEEN

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M/s. Gangothri Nutrients and Fertilizers Pvt. Ltd and others

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…PETTITIONERS

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AND

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The Principal Secretary Agriculture Department, Secretariat, Hyderabad and others.

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…RESPONDENTS

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Counsel for the Petitioner: MR. D. PRAKASH REDDY for MR. M. GOVIND REDDY MR. V.R. REDDY KOVVURI

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Counsel for Respondents: ADDITIONAL ADVOCATE GENERAL GP FOR AGRICULTURE

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The Court made the following:

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COMMON JUDGMENT: (Per Hon’ble Sri Justice Vilas V. Afzulpurkar)

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WA.Nos.1049 and 1624 of 2012 are preferred by the Commissioner and Director of Agriculture and Government of Andhra Pradesh, who are arrayed as respondents 1 and 2 in WP.Nos.27927 and 9896 of 2011 respectively. Writ petitioner 1 and 2, in both the writ petitioner, have now figured as respondents in these appeals.

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2. Relief prayed for in WP.No.9896 of 2011 is questioning the policy decision of the State of AP, under memo dated 09.11.2010 and consequential rejection of petitioner’s application by order dated 26.03.2011. Further, the relief prayed for in later WP.No.27927 of 2011 filed by the same petitioner is questioning the subsequent order dated 23.09.2011 rejecting the application of the petitioner for grant of certificate for manufacture of NPK Mixture Fertilizer.

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3. Learned Additional Advocate General, who appeared in support of these appeals, has advanced various contentions also supported by synopsis of submission and relied upon various decision in support of his contentions. Similarly, Mr. C.V. Mohan Reddy, learned senior counsel, who opposed both the appeals and appeared in support of the writ petitions, has also raised elaborate contentions supplemented by a synopsis.

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4. In addition to these appeals, we had also heard WP.Nos.24537 and 30856 of 2012 and WP.No.6284 of 2011 where similar question, as is involved in the appeals, arise for consideration. Mr. D. Prakash Reddy, learned senior counsel, has also been heard in support of the writ petitions along with the learned Additional Advocate General,

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who resisted the writ petitions. The brief details of these connected writ petitions are as follows:

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(a) WP.No.24537 of 2010 is filed by AP Fertilizer Mixtures Manufacturers Association questioning the fax message of the Commissioner and Director of Agriculture to all the District Joint Director of Agriculture in the State instructing them to monitor movement and availability of fertilizers to meet the demand of the farmers and to see that NPK granulate mixture units shall procure the raw material only with the permission of Commissioner of Agriculture.

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(b) WP.No.6284 of 2011 is filed seeking a declaration that the Fertilizer (Control) Order, 1985 (for short ‘FCO’) cannot be applied o the petitioner and for consequential direction to official respondents forbearing the petitioner from applying the provisions of the FCO.

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(c) WP.No.30856 of 2012 is filed by a fertilizer manufacturing unit, which is aggrieved by the order of the Commissioner of Agriculture rejecting the request for grant of manufacturing certificate as per of the policy that no mixture unit will be allowed license in view of shortage of raw material. Petitioner preferred appeal against the said order before the appellate

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authority i.e. Principal Secretary to Government, Agriculture and Cooperation Department. The said appeal was dismissed under G.O.Rt.No.945 dated 23.08.2012 upholding the order of the Commissioner in view of shortage of raw material as well as on other ground. Though the other grounds are not germane for consideration, as pointed by the learned Senior Counsel for the petitioner, the primary ground of rejection based on

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the policy, is the question involved in this batch of cases. Since the common questions arise for consideration, the writ petitions are also being disposed of by this common judgment.

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5. For the sake of convenience, the facts in WP.No.27927 of 2011 are noted and the parties are referred to as they are referred in the writ petitions. Facts, in brief, are as follows:

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(a) The writ petitioner established mixture fertilizer plant and had applied for issuance of certificate for manufacturing NPK Mixture Fertilizer under Clause 15 of the FCO, which would involve allotment of urea to the mixture fertilizer plant for the purpose of manufacture of mixture fertilizer. As the allotment of urea by the Government of India (GOI) to the State of Andhra Pradesh was not adequate to meet the needs of farmers, who are prime users, the Government of AP took a policy decision and issued a Memo No.14251/Agrl/V/A1/2010-2 dated 09.11.2010 to the Commissioner and Director of Agriculture not to issue fresh licenses to new mixture fertilizer units in view of the shortage of raw materials. The application of the petitioner was, accordingly, returned on 26.03.2011 in view of the said memo. Challenging the said memo dated 09.11.2010 and the consequential rejection order dated 26.03.2011, petitioner filed WP.No.9896 of 2011. Simultaneous application, being WPMP.No.12222 of 2011 was also moved seeking interim directions for fresh consideration of petitioner’ application. After considering the averments of the State, as per their counter affidavit, a learned single Judge issued interim direction dated 07.06.2011 directing the Commissioner to reconsider petitioner’ application for grant of license without reference to

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the memo dated 09.11.2010.

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(b) The Commissioner and Director of Agriculture has, accordingly, reconsidered petitioner’s application and by a detailed order dated 23.09.2011 rejected petitioner’s application primarily on the ground that the quantity of urea allotted to the State Government is hardly sufficient to meet the requirements of agriculturists and as such, no fresh manufacturing license can be issued to the petitioner, as the basic raw material is not adequate. Challenging the said order, petitioner filed WP.No.27927 of 2011. Petitioner has also filed WPMP.No.3249 of 2012 and as per the order of a learned single Judge, the GOI was impleaded in WP.No.9896 of 2011. Later, the GOI as well as the State of AP filed separate counter affidavits and the State also filed an additional counter affidavit as well in the later writ petition. Learned single Judge heard both the writ petitions. WP.No.27927 of 2011 was allowed under order dated 23.07.2012, which was challenged by the State in WA.No.1049 of 2012. Learned single Judge delivered separate order allowing WP.No.9896 of 2011 on 03.12.2012, questioning the same, the State has preferred WA.No.1624 of 2012.

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6. Primary questions, which arise for consideration in the appeals as well as the writ petitions, are:

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(a) Whether the State Government has power and can refuse grant of license to the newly established manufacturing plants of mixture fertilizer, on the ground that allotment of urea made by GOI to the State is just adequate to cater to the needs of agriculturists in the State and no additional quantities of urea are available for allotment to the new mixture plants?

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(b) Whether the policy decision of the State, as contained in impugned memo dated 09.11.2010 is valid in law?

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(c) Under the jurisdiction of judicial review, whether this Court was justified in declaring the State policy as arbitrary, unconstitutional and whether it can direct the State Government to grant license with respect to the petitioner ignoring the said memo, in view of huge investment made by the petitioner in establishing the mixture plants?

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7. Learned single Judge while allowing WP.No.9896 of 2011 held that ‘A

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policy choice is the one selected by the State, taking into account and consideration all prevailing factors and circumstances. But, however, no policy can be taken by the State contrary to the requirements of law or in transgression of the obligations cast on the State by a statutory provision’. It was further held that ‘the policy decision taken by the State Government in the instant case is contrary to Clause 14 read with clause 15 and 16 of FCO, 1985 on the ground that the GOI has not exercised its powers under Clause 6 of the FCO read with clauses 3-A, 3-B and 3-C of the Fertilizer (Movement Control) Order, 1973 (for short ‘FMCO’) to the extent of 100% of urea indigenously produced. It was further held that the control of the GOI is only to the extent of 50% of indigenously manufactured urea and 20% of Phosphatic and Potassic fertilizers thereby leaving 50% of the urea and 80% of Phosphatic and Potassic fertilizers to be made available freely by such manufacturers. Consequently, it was held that the manufacturers of mixed fertilizers can source their raw material i.e. urea from the balance 50% of urea and 80% of Phosphatic and Potassic fertilizers directly from the manufacturers from open market. The State, therefore, cannot take a policy decision contrary to the said legal position. Consequently, WP.No.9896 of 2011 was allowed.

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8. As stated earlier, on similar reasoning and analogy, the learned single had earlier allowed WP.No.27927 of 2011 holding that the Commissioner and Director of Agriculture need not entertain any apprehension that the urea since made available under the Central Fertilizers Pool by the Central Government will be poached by the petitioner inasmuch as the requirement of petitioner’ mixture units would be made out of the remaining decontrolled 50% of the urea. Consequently, it was held that the Commissioner had taken into consideration irrelevant material resulting in improper application of mind. Hence, the order of rejection passed by the Commissioner was set aside and Mandamus was issued requiring the Commissioner to accord necessary permission, as applied for by the petitioner within

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15 days.

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9. Learned Additional Advocate General, in support of the appeals, has raised various contentions opposing the conclusions reached by the learned single Judge, as briefly noted above, inter alia, contending that urea is the only fertilizer, which is under production, distribution and movement control of GOI and is completely subsidized fertilizer.

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It is contented that every year GOI, Department of Fertilizers conducts Zonal conferences before Kharif and Rabi seasons involving Manufacturers and Agricultural Department of respective States with a view to assess the requirement of each State/District wise and allocations are made by GOI for each State and the said supply plan is uploaded as Fertilizer Monitoring System. According to the said supply plan, fertilizers are supplied to the State/District concerned; whereafter the Department of Agriculture in each State monitors the supply. Learned Additional Advocate General states that urea whether manufactured indigenously or imported is entirely drawn in the supply plan and allotted to different states as per their requirement. It is stated that every year’s requirement is submitted by the respective States including the State of AP. But, however, there is a shortfall in the allotment with reference to the State projections and the request for adequate allotment is not being considered by GOI in view of its obligation to ensure equitable distribution among all the States and Union Territories. It is stated that in view of this scenario that the policy decision dated 09.11.2010 was taken not to issue fresh license to mixture units. Reliance is placed upon the communication of GOI in its letter dated 16.09.2010 wherein the State Government was informed that the distribution within the State and inter-se allocation for direct agricultural use and mixture manufacturing units is the prerogative of the State Government based on the ground realities.

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10. Learned Additional Advocate General further submits that Government of Andhra Pradesh, being of the view that the allotted quantities are sufficient to meet the needs of farmers and there is shortage of raw material (urea),

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took a decision not to issue fresh license. Hence, the said policy decision is taken in larger public interest and cannot be assailed or set aside under the power of judicial review. In support of the said contention, reliance is placed upon a decision of the Supreme in UNION OF INDIA v. INTERNATIONAL

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[1] TRADING CO . for the proposition that doctrine of promissory estoppel and legitimate expectation cannot come in the way of public interest, as the public interest has to prevail over private interest and the said policy decision cannot be interfered by the Court. Reliance is also placed upon the decision of the Supreme Court in BISHAMBHAR DAYAL CHANDRA

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[2] MOHAN v. STATE OF UTTAR PRADESH wherein it is held that within the executive power of the State Government, action taken for common good cannot be interfered by the Court,

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as it has to draw balance between individual rights, freedom of trade and national interest. Another decision of the Supreme Court in

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[3] M/S. LAXMI KHANDSARI v. STATE OF U.P . is also relied upon for the

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proposition that reasonable restrictions in the nature of social control and interest of general public are affirmative actions, which cannot be interfered with under judicial review. Another decision of the

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[4] Supreme Court in STATE OF ORISSA v. GOPINATH DASH is relied for the proposition that Courts would not interfere with the matter of policy even if second view is possible, as the practicality of the issue can be better judged by the State rather than by the Courts. STATE OF UTTAR PRADESH v. [5] RAKESH KUMAR KESHAR I is relied upon for the proposition that the Court while exercising judicial review would not sit in appeal over decision of the administrative bodies and the policy decisions of the State. UGAR

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[6] SUGAR WORKS LTD. v. DELHI ADMINISTRATION is relied upon for the proposition that imposing restrictions or conditions by way of policy are permissible when public interest is involved.

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11. Learned Additional Advocate General also submitted that the assumption of the learned single Judge that 50% of the urea is free of control is not sustainable inasmuch as entire quantity manufactured by the companies indigenously is made available for GOI for distribution through supply plan and no urea is left over. Hence, the Mandamus issued on the assumption that 50% of the free urea can be sourced by petitioner directly through the manufacturers is misconceived. It is reiterated that GOI has full control over the urea to the extent of 100% and GOI has reserved its power to move 50% of the same to meet exigencies under the FCO and the Essential Commodities Act, 1955. Strong reliance is placed on Clauses 3-A, 3-B and 3-C of the FMCO.

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12. Per contra, Mr. C.V. Mohan Reddy, learned senior counsel, would submit that 50% of the urea manufactured in India and 80% of the Phosphatic and Potassic fertilizers are outside the purview of the FCO. The proceedings of Ministry of Chemicals and Fertilizers, GOI, dated 19.06.2012 and 17.04.2012 are relied upon in support of the said contention. It is also contended that the State Government has no authority or jurisdiction to impose restrictions of movement of sale of fertilizers, which is exclusively under the power of GOI under FCO and that being only to the extent of 50% of the urea manufactured in India, there is no justification for rejecting the petitioner’s application or such a policy, as is recorded in the memo dated 09.11.2010. Learned senior counsel would, therefore, submit that the control of GOI is only to the extent of 50% of urea fertilizer and 20% of Phosphatic and Potassic fertilizer. It is also asserted that fertilizer manufacture units are free to sell the balance of their produce i.e. urea and Phosphatic and Potassic fertilizer to whomsoever they like without any restrictions whatsoever including to the mixture fertilizer units. It is also contended that the right to get a certificate of manufacture under Clause 15 of FCO cannot be curtailed by an administrative fiat or under the guise of policy decision, which infringes Article 19(g) of the Constitution of

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India. It is, therefore, contended that the petitioner cannot be denied supply of urea when they can procure the same from manufacturers from out of 50% of decontrolled urea and it is reiterated that the writ petitioner will not seek allotment of fertilizer from the State Government and would meet their needs from the open market.

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13. As briefly noted above, the learned single Judge accepted the contentions of the writ petitioner while allowing the writ petitions. Questions, therefore, as framed above, are answered in the light of the rival contentions, as noted above.

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14. The FCO, issued in exercise of power under Section 3 of the Essential Commodities Act, 1955, was issued with a view to regulating equitable distribution of fertilizers and making fertilizers available at fair price by notification in the official gazette, fixed minimum price or rates at which fertilizers may be sold by dealer/manufacturers/importer/pool handling agency. Clauses 12, 13, 14 and 15 of the FCO, relevant for our purpose, are extracted hereunder:

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12. Restriction on preparation of mixtures of fertilizer.-No person shall carry on the business of preparing any mixture of fertilizers [special mixture of fertilizers, Bio-fertilizers or Organic fertilizers] except under and in accordance with the terms and conditions of a certificate of manufacture granted to him under clauses 15 or 16. 13. Standards of mixtures of Fertilizers.- (1) Subject to the other provisions of the order,-

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**(a) no person shall manufacture any mixture of fertilizers whether of solid or liquid fertilizers specified in Part a of schedule I unless such mixture conforms to the standards set out in the notification to be issued by the Central Government in the Official Gazette;*

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(b) no person shall manufacture any Bio-fertilizer unless such Bio-fertilizer conforms to the standards set out in the part A of Schedule – III.

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(c) no person shall manufacture any Organic fertilizer unless such organic fertilizer conforms to the standards set out in the part A of Schedule IV.

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(2) Subject to the other provisions of this order, no person shall manufacture any “mixture of fertilizers unless such mixture conforms

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to the standards set out in the notification to be issued by the State Government in the Official Gazette;

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Explanation- For the purposes of this sub-clause, mixture of fertilizers shall not include liquid fertilizers and 100% water soluble fertilizers, containing N.P.K.

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(3) [omitted]

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(4) No Certificate of manufacture shall be granted in respect of any fertilizer which does not conform to the standards set out in the notification referred in sub- clause (1) or (2);

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(5) Nothing in this clause shall apply to special mixtures of fertilizers

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14. Application for certificate of manufacture of mixtures of fertilizers:-

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(1) Every person desiring to obtain a certificate of manufacture for preparation of any mixture of fertilizer or special mixture of fertilizer shall possess such qualification as may be prescribed for this purpose by the State Government or shall employ a person possessing such qualification for the preparation of such mixture [and possess the minimum laboratory facility as specified in clause 21A of this Order.]

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(2) An applicant for a certificate of manufacture for preparation of mixture of fertilizers or special mixture of fertilizers shall make an application to the registering authority

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(a) if he is an applicant for a certificate of manufacture for any mixture of fertilizers in Form-D, in duplicate, together with the fee prescribed therefor under clause 36; or,

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(b) if he is an applicant for a certificate of manufacture, for any special mixture, in Form-E, in duplicate, together with the fee prescribed there for under the said clause 36 and an attested copy of the requisition of the purchaser.

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(3) Every person desiring to obtain a Certificate of Manufacture for preparation or organic fertilizer or Bio-fertilizer shall make an application in Form D, in duplicate, together with a fee prescribed therefore under clause 36, to Registering authority.

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Provided that where the manufacturer of organic fertilizer is a State Government or a municipality, it shall not be necessary for it obtain the Certificate of Manufacture:

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Provided further that where the manufacturer of vermin-compost, other than a State Government or municipality, has annual production capacity less than fifty metric tones, it shall not necessary for him to obtain the Certificate of Manufacture for preparation of vermin-

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compost.

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15. Grant or refusal of certificate of manufacture for preparation of mixtures of fertilizers, Bio-fertilizers or Organic fertilizers:-

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(1) On receipt of an application under Clause 14, the registering authority shall, by order in writing, either grant or refuse to grant the certificate of manufacture in respect of any mixture of fertilizer, Bio-fertilizer, Organic fertilizer or special mixture of fertilizer and shall, within forty-five days from the date of receipt of the application, furnish to the applicant a copy of the order so passed;

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(2) Where an application for a certificate of manufacture for mixture of fertilizers, Bio-fertilizer, Organic fertilizer is not refused under subclause (1), the registering authority shall grant a certificate of manufacture, in Form-F and where an application for a certificate of manufacture for a special mixture is not refused under that subclause, [such authority shall within forty five dates from the date of receipt of the application, grant] a certificate of manufacture to the applicant in Form-G.

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16. Conditions for grant of certificate of manufacture in respect of special mixture of fertilizers and period of validity of such certificate:-

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(1) No certificate of manufacture in respect of any special mixture of fertilizers shall be granted to an applicant unless he holds a valid certificate of manufacture under this Order for any mixture of fertilizers.

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(2) Every certificate of manufacture granted in respect of any special mixture of fertilizers shall be valid for a period of [six months] from the date of its issue:

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Provided that the registering authority may, if it is satisfied that it is necessary so to do, extend the said period to such further period or periods as it may deem fit, so however, that the total period or periods so extended shall not exceed [twelve months]

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15. As stated above, the order impugned in WP.No.27927 of 2011 was passed by the Commissioner and Director of Agriculture under Clause 15 of the FCO, extracted above. The FMCO is further issued for securing equitable distribution of fertilizer among the States in India. While Clause 3 thereof prohibits export of fertilizers, Clauses 3-A, 3-B and 3- C, inserted by amendment with effect from 16.07.2010, which are relevant

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are extracted hereunder:

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“3-A. The distribution and movement of fertilizers along with the imports of finished fertilizers, fertilizer inputs and production of indigenous units shall continue to be monitored through online Web Based “Fertilizers Monitoring System”.

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3-B. The Department shall continue to draw the supply plan of all the fertilizers including Phosphatic and Potassic in consultation with the manufacturers and importers of finished fertilizers and continue to convey the supply plan, agreed upon by manufacturers and importers of fertilizers and Department of Fertilizers, to the respective State Governments on month to month basis.

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3-C. In addition fifty per cent of indigenous production of Urea, twenty per cent of the Phosphatic and Potassic fertilizers produced or imported in India shall be regulated under Clause 6 of the Fertilizer (Control) Order, 1985, the Fertilizer (Movement Control) Order, 1973 and the Essential Commodities Act, 1955.”

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16. Clause 3 along with Clauses 3-A, 3-B and 3-C of the FMCO read together provide that GOI with a view to securing availability of fertilizers, order any fertilizer manufacturer, importer, supplier to move and sell the fertilizer produce and imported by him in such quantities or in such State/States or within such period, as may be specified. However, distribution and movement of such fertilizer along with imported finished fertilizers and the production of indigenous units shall continue to be monitored through online Web Based Fertilizers Monitoring System in accordance with the supply plans drawn by the Department and agreed upon by the manufacturers and importers of fertilizers and Department of Fertilizers, of the respective State Governments on month to month basis regulating the entire supply under Clause 6 of the FCO, FMCO and the Essential Commodities Act.

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17. Counter filed by the Government of India in WP.No.9896 of 2011 may be noticed at this stage. Paras 1 to 3 of the counter, relevant for our purpose, are extracted hereunder:

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1. It is submitted that with the objective of providing Fertilizers to the farmers at affordable prices and also to ensure reasonable rates of return to the entrepreneurs in the fertilizer sector and to ensure balanced use of fertilizers for food security in the Country, Government of India has been implementing Concession Scheme for

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decontrolled Phosphatic & Potassic (P&K) fertilizers. This scheme has been replaced by Nutrient Based Subsidy Policy (NBS) w.e.f. 1.4.2010 for decontrolled P&K fertilizers vide notification dated 4.3.2010 (Annex-R1). The NBS Policy presently covers 25 Grades of P&K fertilizers namely Di Ammonium Phosphate (DAP), Muriate of Potash (MOP), Triple Super Phosphate (TSP), Single Super Phosphate (SSP), Mono Ammonium Phosphate (MAP), Ammonium Sulphate and 19 grades of complex fertilizers. Under the policy, the subsidy is announced annually for each nutrient i.e. nitrogen (N), phosphorous (P), potash (K) and sulphur (S) on per kg basis which is converted into subsidy per tonne depending upon the nutrient content in each grade of the fertilizers. The MRP (Maximum Retail Price) of P&K fertilizers has been allowed to be fixed by manufacturers/importers at reasonable level based on demand-supply dynamics.

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2. It is submitted that under the NBS policy, Distribution and movement of fertilizers along with import of finished fertilizers, fertilizer inputs and production by indigenous units are monitored through the online web based “Fertilizer Monitoring System (FMS)”. 20% of the price decontrolled fertilizers produced/imported in India is in the movement control under the Essential Commodities Act 1955 (ECA) and Department of Fertilizers will regulate the movement of these fertilizers to bridge the supplies in undeserved areas.

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3. It is submitted that under the NBS Policy, Manufacturers of customised and mixture fertilizers are allowed to source subsidized fertilizers from the manufacturers/importers after their receipt in the districts as inputs for manufacturing customized fertilizers and mixture fertilizers for agricultural purpose. However, there would be no separate subsidy on sale of customized fertilizers and mixture fertilizers. The respective State Governments will allot required quantities out of the Supply plan to mixture units, if they desire so based on farmers needs.

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18. It is further stated in the counter affidavit that as per Clause 3-C of FMCO, 50% of the urea is under statutory movement control under GOI and balance 50% is part of supply plan mutually agreed between GOI and manufacturers, thereby implying that GOI has a right to direct the companies in order to serve remote and difficult areas in various States. It is, therefore, reiterated that ‘All fertilizers be it indigenous or imported are drawn into supply plan and hence there is no other subsidized fertilizer available over and above the supply plan. No mixture unit can source fertilizer for manufacture without the consent of the State Government’.

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19. The primary contention of the learned senior counsel for the petitioner and which was accepted by the learned single Judge is based upon 50% decontrolled urea and 80% Phosphatic and Potassic fertilizer and the claim of the writ petitioner to source their raw material from the said decontrolled 50% urea. The aforesaid averment is specifically belied by the counter affidavit of the GOI and paragraph 8 thereof is relevant, which is extracted hereunder:

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“8. It is submitted that decontrol of fertilizers does not confer total freedom to manufacturer. The power of allocation of fertilizers still rests with Government of India under clause 6 of FCO 1985.”

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Hence, it is clear that the allocation of finished fertilizers within the supply plan on a particular State is common for the direct agricultural use as well as mixture plants or for customized fertilizer plants etc., which is purely within the responsibility and activity of the concerned State Government. It is further clarified that no more extra quota than the allocations made to the State Government by way of supply plan is allotted by GOI for meeting the requirement of Mixture plants. The distribution within the State is decided by the State Government on the allocation of fertilizers for various purposes. It is in that context that the letter of Department of Fertilizers and Chemicals, GOI, had clarified that the power of allocation of fertilizers will rest with GOI under Clause 6 of the FCO and the distribution within the State purely rests with the State Government.

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20. The State Government filed a counter and additional counter affidavit, which refers to revised NBS with effect from 01.04.2011 for the years 20112012 issued by GOI vide communication dated 09.03.2011 stipulates that distribution and movement of fertilizers along with import of finished fertilizers, fertilizers inputs and production by indigenous units will continue to be monitored through online web based Fertilizer Monitoring System. It, further, provides that manufacturers of customized fertilizers and mixture fertilizers will be eligible to source subsidized fertilizers from the

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manufacturers/importers after their receipt in the district. The Counter affidavit also refers to the increase in overall consumption of fertilizers by the agriculturists from 41.25 Lakh Metric Tonnes (LMTs) for the years 20002005 to 56.42 LMTs on account of increase in irrigation potential by 8 Lakh hectares and change in cropping pattern.

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It is stated that though the Department of Fertilizers has been increasing the allotments over the years, they are hardly sufficient to meet the primary requirement of farmers and it is not possible to allocate raw material to the mixture units due to shortage.

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21. Learned Additional Advocate General has also placed the concerned file for the perusal of the Court. The record shows that there are 20 Fertilizer mixing units existing in the State. Through their association, they have made a representation dated 07.10.2010 addressed to the Chief Minister, Government of Andhra Pradesh pointing out that there are 228 mixing units in the country out of which 20 mixing units are in the State of AP, which depend upon subsidized raw materials for manufacture of mixtures. It is stated that control of operation of mixing units is solely under the purview of the State Government, which notifies the grades, the licenses of the mixing units and monitors their production, quality and marketing activities. The aforesaid representation has been made as units had to be closed down due to shortage of supply of raw material and request was made to allow functioning of the mixing units thereby seeking supply of raw material. In another representation, each of the unit’s requirements of urea and other raw material is separately quantified and so far as urea is concerned, the requirement appears to be 50,000 MTs and request for allotment of urea, as above, was made by the association to the Ministry of Chemicals and Fertilizers, New Delhi with a copy to the State Government. On the report, dated 27.10.2010, sent in response thereto, from the Commissioner of Agriculture to the Special Chief Secretary, Government of AP, it was pointed out that the Department of Fertilizers, GOI, allotted 15 LMTs of urea, 5 LMTs

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DAP, 3.35 LMTs MOP for Rabi 2010-2011, which are just sufficient to meet the requirement of cropped area/farmers and thus, the Department has not been in a position to allot raw material to NPK mixture units from out of the allocation made to the State. If the mixture units in the State are to take up producing in full capacity, the raw material requirements is stated to be 59 LMTs of Urea, 25 LMTs of DAP and 20 LMTS of MOP. It was, therefore, reported that in view of the shortage, the existing mixture units are producing only 25% of the total production capacity. The file also discloses that while requests are made to the State and GOI for separate allocation of urea to the fertilizers mixing units, in view of the shortage of raw materials,

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the policy decision contained in the memo dated 09.11.2010 was taken not to issue fresh license to new mixture units. The file also contains communication of the Joint Secretary, Ministry of Chemicals and Fertilizers dated 16.09.2010, which is referred to by the writ petitioner, wherein the State Government was informed that

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‘The Department of Fertilizers gives month wise supply plan of urea and subsidized fertilizers to each State. The distribution within the State and interse allocation for direct agricultural use and mixture manufacturing units is the prerogative of the concerned State Government based on the ground realities’.

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22. From the record, therefore, it is evident that the policy decision is referable to the ground realities, particularly, the fact situation that existing 20 mixture units have been running only to the extent of 25% of their production capacity in view of shortage of raw material (urea). It, therefore, stands to reason as to why the State Government is unable to supply urea to any new manufacturing unit such as writ petitioner. The said policy decision of the State Government, therefore, cannot be said to be either arbitrary or unreasonable but the same is clearly in the large public interest to primarily subserve the interests of agriculturists and farmers in the State. Once it is found, as noted above, that the entire indigenous finished fertilizers along

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with imported fertilizers form part of the supply plan under NBS policy and statutory movement control, the contention of the learned senior counsel for the writ petitioner and the conclusions reached by the learned single Judge that 50% of the decontrolled urea can be sourced by the writ petitioner from open market is clearly erroneous, as it cannot be disputed that no manufacturer can directly supply any manufactured finished fertilizer to anybody except to GOI, as per the power of the GOI under Clause 6 of the FCO read with Clauses 3-A, 3-B and 3-C of FMCO.

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23. The legal position, as noticed above, may now be seen as under:

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(a) In GOPINATH DASH’s case (4 supra) the policy decision of the State in the mater of allotment of quarters by rotation basis was under challenge. Paras 5 to 8 of the decision are apposite to be extracted hereunder:

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“5. While exercising the power of judicial review of administrative action, the Court is not the appellate authority and the Constitution does not permit the Court to direct or advise the executive in matter of policy or to sermonize any matter which under the Constitution lies Within the sphere of the Legislature or the executive, provided these authorities do not transgress their constitutional limits or statutory power. (See Ashif Hamid v. State of J. & K.(AIR 1989 SC 1899), Shri Sitaram Sugar Co. v. Union of India (AIR 1990 SC 1277). The scope of judicial enquiry is, confined to the question whether the decision taken by the Government is against any statutory provisions or it violates the fundamental rights of the citizens or is opposed to the provisions of the Constitution. Thus, the position is that even if the decision taken by the Government does not appear to be agreeable to the Court it cannot interfere.

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6. The correctness of the reasons which prompted the Government in decision making taking one course of action instead of another is not a matter of concern in judicial review and the Court is not the appropriate forum for such investigation.

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7. The policy decision must be left to the Government as it alone can adopt which policy should be adopted after considering all the points from different angles. In matter of policy decisions or exercise of discretion by the Government so long as the infringement of fundamental right is not shown Courts will have no occasion to interfere and the Court will not and should not substitute its own judgment for the judgment of the executive in such matters. In assessing the propriety of a decision of the Government the Court cannot interfere even if a second view is possible from that of the

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Government.

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8. The Court should constantly remind itself of what the Supreme Court of the United States said in Metropolis Theatre Company v. City of Chicago (1912) 57 L Ed 730. "The problems of Government are practical ones and may justify, if they do not require, rough accommodations, illogical it may be, and unscientific. But even such criticism should not be hastily expressed. What is the best is not always discernible, the wisdom of any choice may be disputed or condemned. Mere errors of government are not subject to our judicial review.”

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(b) In INTERNATIONAL TRADING CO.’ s case (1 supra) the

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Supreme Court was examining the legality of non-renewal of permit of the writ petitioner for lease and operation of Foreign Deep Sea Fishing Vessels on the basis of the policy of the State. Paras 19, 20, 22 and 23 are extracted

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hereunder:

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19. In Union of India v. Hindustan Development Corporation [(1993) 3 SCC 499 = AIR 1994 SC 988] , it was observed that decision taken by the authority must be found to be arbitrary, unreasonable and not taken in public interest where the doctrine of legitimate expectation can be applied. If it is a question of policy, even by ways of change of old policy, the Courts cannot intervene with the decision. In a given case whether there are such facts and circumstance giving rise to legitimate expectation, would primarily be a question of fact.

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20. As was observed in Punjab Communications Ltd. v. Union of India and Ors. [(1999) 4 SCC 727 = AIR 1999 SC 1801], the change in policy can defeat a substantive legitimate expectation if it can be justified on "Wednesbury reasonableness". The decision maker has the choice in the balancing of the pros and cons relevant to the change in policy. It is, therefore, clear that the choice of policy is for the decision maker and not the Court. The legitimate substantive expectation merely permits the Court to find out if the change of policy which is the cause for defeating the legitimate expectation is irrational or perverse or one which no reasonable person could have made. A claim based on merely legitimate extension without anything more cannot ipso facto give a right. Its uniqueness lies in the fact that it covers the entire span of time: present, past and future. How significant is the statement that today is tomorrow’s yesterday. The present is as we experience it, the past is a present memory and future is a present expectation. For legal purposes, expectation is not same anticipation. Legitimacy of an expectation can be inferred only if it is founded on the sanction of law.

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22. If the State acts within the bounds of reasonableness, it would be legitimate to take into consideration the national priorities and adopt

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trade policies. As noted above, the ultimate test is whether on the touchstone of reasonableness the policy decision comes out unscathed.

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23. Reasonableness of restriction is to be determined in an objective manner and from the standpoint of interests of the general public and not from the standpoint of the interest of persons upon whom the restrictions have been imposed or upon abstract consideration. A restriction cannot be said to be unreasonable nearly because in a given case, it operates harshly. In determining whether there is any unfairness involved; the nature of the right alleged to have been infringed the underlying purpose of the restriction imposed, the extent and urgency of the evil sought to be remedied thereby, the disproportion of the imposition, the prevailing condition at the relevant time, enter into judicial verdict. The reasonableness of the legitimate expectation has to be determined with respect to the circumstances relating to the trade or business in question. Canalization of a particular business in favour of even a specified individual is reasonable where the interests of the country are concerned or where the business affects the economy of the country. (See Parbhani Transport Co-operative Society Ltd. v. The Regional Transport Authority, Aurangabad and Ors. (AIR 1960 SC 801), Shree Meenakshi Mills Ltd. v. Union of India [(1974) 1 SCC 468], Hari Chand Sarda v. Mizo District Council (AIR 1967 SC 829) and Krishnan Kakkanth v. Government of Kerala and Ors. (AIR 1997 SC 128).”

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(c) In M/S. LAXMI KHANDSARI’s case (3 supra) while dealing with

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Article 19 of the Constitution of India and reasonable restrictions, which fell

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for consideration, the Supreme Court held in paras 16 to 19 as under:

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“16. It is abundantly clear that fundamental rights enshrined in Part III of the Constitution are neither absolute nor unlimited but are subject to reasonable restrictions which may be imposed by the State in public interest under Clauses 2 to 6 of Article 19. As to what are reasonable restrictions would naturally depend on the nature and circumstances of the case, the character of the statute, the object which it seeks to serve, the existing circumstances, the extent of the evil sought to be remedied as also the nature of restraint or restriction placed on the rights of the citizen. It is difficult to lay down any hard or fast rule of universal application but this Court has consistently held that in imposing such restrictions the State must adopt an objective standard amounting to a social control by restricting the rights of the citizens where the necessities of the situation demand. It is manifest that in adopting the social control one of the primary considerations which should weigh with the Court is that as the directive principles contained in the Constitution aim at the establishment of an egalitarian society so as to bring about a welfare state within the frame-work of the Constitution, these principles also

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should be kept in mind in judging the question as to whether or not the restrictions are reasonable. If the restrictions imposed appear to be consistent with the directive principles of State policy they would have to be upheld as the same would be in public interest and manifestly reasonable.

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17. Further, restrictions may by partial, complete, permanent or temporary but they must bear a close nexus with the object in the interest of which they are imposed. Sometimes even a complete prohibition of the fundamental right to trade may be upheld if the commodity in which the trade is carried on is essential to the life of the community and the said restriction has been imposed for a limited period in order to achieve the desired goal.

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18. Another important consideration is that the restrictions must be in public interest and are imposed by striking a just balance between the deprivation of right and the danger or evil sought to be avoided. Thus freezing of stocks of food-grains in order to secure equitable distribution and availability on fair prices have been held to be a reasonable restriction in the cases of Narendra Kumar and Ors. v. The Union of India [(1960) 2 SCR 375 = AIR 1960 SC 430], Diwan Sugar and General Mills (P) Ltd. and Ors. v. The Union of India [(1959) 2 SCR 123 = AIR 1959 SC 626] and The State of Rajasthan v. Nath Mal and Mitha Mal [(1954) 1 SCR 982 = AIR 1954 SC 307].

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19. These are some of the general principles on the basis of which the quality of reasonableness of a particular restriction can be judged and have been lucidly adumbrated in State of Madras v. V.G. Row [(1952) 1 SCR 597 = AIR 1952 SC 196] Another important test that has been laid down by this Court is that restrictions should not be excessive or arbitrary and the Court must examine the direct and immediate impact of the restrictions on the rights of the citizens and determine if the restrictions are in larger public interest while deciding the question that they contain the quality of reasonableness.”

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(d) In UGAR SUGAR WORKS LTD.’s case (6 supra) with regard to justiciability of a policy the Supreme Court held as under:

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“18. The challenge, thus, in effect, is to the executive policy regulating trade in liquor in Delhi. It is well settled that the Courts, in exercise of their power of judicial review, do not ordinarily interfere with the policy decisions of the executive unless the policy can be faulted on grounds of mala fide, unreasonableness, arbitrariness or unfairness etc. Indeed, arbitrariness, irrationality, perversity and mala fide will render the policy unconstitutional. However, if the policy cannot be faulted on any of these grounds, the mere fact that it would hurt business interests of a party, does not justify invalidating the policy. In tax and economic regulation cases, there are good reasons for judicial restraint, if not judicial deference, to judgment of the executive. The Courts are not expected to express their opinion as to whether at a particular point of time or in a particular situation any

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such policy should have been adopted or not. It is best left to the discretion of the State.

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19. In T. N. Education Deptt. Ministerial and General Subordinate Services Assn.. vs State of T. N. [(1980) 3 SCC 97] noticing the jurisdictional limitations to analyse and fault a policy, this Court opined that:

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"The court cannot strike down a G.O., or a policy merely because there is a variation or contradiction. Life is sometimes contradiction and even consistency is not always a virtue. What is important is to know whether mala fides vitiates or irrational and extraneous factor fouls."

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20. It would also be prudent to recall the following observations of Lord Justice Lawton in Laker Airways Ltd. v. Deptt. Of Trade [(1977) 2 WLR 234] while considering the parameters of judicial review in matters involving policy decisions of the executive:

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"In the United Kingdom aviation policy is determined by ministers within the legal framework set out by Parliament. Judges have nothing to do with either policy making or the carrying out of policy. Their function is to decide whether a minister has acted within the powers given him by statute or the common law. If he is declared by a court, after due process of law, to have acted outside his powers, he must stop doing what he has done until such time as Parliament gives him the powers he wants. In a case such as this I regard myself as a referee. I can blow my judicial whistle when the ball goes out of play; but when the game restarts I must neither take part in it nor tell the players how to play."

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In the light of the aforesaid legal environment, having examined the questions posed, we are satisfied that the policy of the State expressed in its memo dated 09.11.2010 cannot be said to be arbitrary or unreasonable and as such, cannot be interfered with by exercising power of judicial review by this Court.

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24. In view of the above, therefore, the questions posed for consideration deserve to be answered in favour of the appellants/State and against the writ petitioner.

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Consequently, the writ appeals are allowed and writ petitions are dismissed. As a sequel, the miscellaneous applications, if any, shall stand disposed of as infructuous. In the circumstances, there shall be no order as

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to costs.

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_______________________ PINAKI CHANDRA GHOSE, CJ

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VILAS V. AFZULPURKAR, J

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March 1^st , 2013 DSK

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