A) ABSTRACT / HEADNOTE

The case involved a constitutional challenge to the Sugar Export Promotion Act, 1958 by owners of sugar factories producing sugar through the vacuum pan process. The petitioners argued that the Act violated their fundamental rights under Articles 14, 19(1)(f) & 19(1)(g) by compelling them to deliver part of their sugar production to an export agency at a loss, while exempting other sugar producers and other commodities. They further contended that this amounted to compulsory acquisition without compensation under Article 31. The Supreme Court, by majority (Sinha, Imam, Kapur, Subba Rao, Hidayatullah, JJ.), upheld the Act’s constitutionality, reasoning that the restrictions imposed were reasonable in the context of the larger legislative plan to earn foreign exchange and stabilize the sugar industry, especially given that the Government contemporaneously increased internal sugar prices under the Sugar (Control) Order, 1955 to offset export losses. The Court held that such price-raising measures could be considered when assessing the reasonableness of restrictions. It found the classification between vacuum pan sugar and other commodities reasonable under Article 14, as it related to the object of earning foreign exchange. Justice Subba Rao concurred in the result but held that the contemporaneous notification under the Essential Commodities Act could not be considered part of the same legislative scheme. Justice Sarkar dissented, holding the Act unconstitutional as it imposed unreasonable restrictions, forced loss-making transactions, and relied on non-binding Government price policies to mitigate losses. The majority dismissed the petitions, finding no violation of fundamental rights, as arrangements adequately compensated the manufacturers and the public interest outweighed private inconvenience.

Keywords: Sugar Export Promotion Act, Reasonable Restrictions, Fundamental Rights, Article 14, Article 19, Article 31, Price Control, Legislative Scheme, Foreign Exchange, Compulsory Acquisition.

B) CASE DETAILS

i) Judgment Cause Title:
The Lord Krishna Sugar Mills Ltd. & Anr. v. The Union of India & Anr. (with connected petition: Shiva Prasad Banarsidas Sugar Mills v. Union of India)

ii) Case Number:
Writ Petitions Nos. 9 and 14 of 1959

iii) Judgment Date:
6 May 1959

iv) Court:
Supreme Court of India

v) Quorum:
B.P. Sinha, Jafar Imam, J.L. Kapur, A.K. Sarkar, K. Subba Rao, and M. Hidayatullah, JJ.

vi) Author:
Majority opinion by M. Hidayatullah, J.; concurring opinion by Subba Rao, J.; dissenting opinion by A.K. Sarkar, J.

vii) Citation:
[1960] 1 SCR 39

viii) Legal Provisions Involved:

• Constitution of India – Articles 14, 19(1)(f), 19(1)(g), 31, 32

• Sugar Export Promotion Act, 1958 – Sections 3, 4, 5, 6, 7, 8, 9, 14

• Essential Commodities Act, 1955 – Section 3

• Sugar (Control) Order, 1955 – Clause 5

• Industries (Development and Regulation) Act, 1951

ix) Judgments Overruled by the Case:
None

x) Case Related to Law Subjects:
Constitutional Law, Economic Legislation, Industrial Regulation, Trade & Commerce, Public Interest Regulation

C) INTRODUCTION AND BACKGROUND OF JUDGMENT

The Sugar Export Promotion Act, 1958 was enacted to mandate sugar exports in the public interest for earning foreign exchange, authorizing the Government to fix export quotas for certain sugar factories and compel delivery of sugar to a designated export agency. This was coupled with price control measures under the Essential Commodities Act to offset export losses through domestic price increases. The petitioners, prominent sugar mills, challenged the Act’s validity under Articles 14, 19, and 31.

The legislative background stemmed from India’s acute need for foreign exchange during the late 1950s, especially after the Suez crisis, which had previously enabled sugar exports generating ₹12.4 crores. Government identified vacuum pan sugar as a product with export potential and introduced this targeted measure to promote exports.

D) FACTS OF THE CASE

• The Act allowed the Central Government to appoint an export agency (here, the Indian Sugar Mills Association, Export Division) to receive and export sugar from designated factories.

• Government fixed a quota of 50,000 tonnes for export in 1958, apportioned among eligible factories.

• Petitioners received quotas of several hundred tonnes but resisted compliance, citing inability to sell at controlled rates, lack of buyers, pledged stocks with banks, and financial constraints.

• The Government had simultaneously issued a notification under the Sugar (Control) Order, 1955 increasing domestic sugar prices by ₹0.50 per maund to help factories recover export-related losses.

• Petitioners filed writ petitions under Article 32 to restrain enforcement, alleging constitutional invalidity.

E) LEGAL ISSUES RAISED

i. Whether the Sugar Export Promotion Act, 1958 violates Article 14 by discriminating between vacuum pan sugar producers and others.
ii. Whether it imposes unreasonable restrictions on the right to hold property and carry on business under Articles 19(1)(f) & 19(1)(g).
iii. Whether the compulsory delivery amounts to acquisition of property without compensation under Article 31.
iv. Whether a contemporaneous price increase under another statute can be considered when judging “reasonableness” of restrictions.
v. Whether the Act’s provisions, especially Sections 5–9, are ultra vires.

F) PETITIONER/APPELLANT’S ARGUMENTS

i. Violation of Equality Clause (Article 14) – The Act targets only vacuum pan sugar producers, exempting other sugar producers and other commodities, without rational basis.
ii. Unreasonable Restrictions (Articles 19(1)(f) & (g)) – Forcing sale/delivery at a loss is not a reasonable restriction in public interest. Losses should be borne by Government or shared across all industries.
iii. Compulsory Acquisition (Article 31) – The Act compels transfer of property without immediate and full compensation.
iv. No Relevance of Price Control Notification – The price increase under the Sugar (Control) Order is a separate legislative act, temporary and discretionary, and cannot justify restrictions imposed by the impugned Act.
v. Sections 5–9 Ultra Vires – These provisions mandate delivery without simultaneous payment, impose penal consequences, and allow sale in India contrary to the stated export object.

G) RESPONDENT’S ARGUMENTS

i. Legitimate Public Interest – Export of sugar earned foreign exchange, stabilized domestic prices, and supported economic development.
ii. Reasonable Classification – Vacuum pan sugar was selected for its export potential; classification directly related to the legislative objective.
iii. Integrated Legislative Scheme – The Sugar Export Promotion Act and the Sugar (Control) Order were part of a coordinated plan; domestic price increase compensated manufacturers.
iv. Negligible Burden – Quota was only 2.5% of annual production; loss was spread across large sales volumes and offset by price increases.
v. Industry Agreement – Most mills complied voluntarily under industry-Government arrangement; petitioners were outliers seeking to evade obligations.

H) JUDGMENT

a. Ratio Decidendi (Majority: Sinha, Imam, Kapur, Subba Rao, Hidayatullah, JJ.)

• Reasonableness Test – In judging restrictions under Article 19, the Court may consider not only the impugned law but also related contemporaneous legislation forming part of a legislative plan (State of Madras v. V.G. Row, Attorney-General for Alberta v. Attorney-General for Canada, Pillai v. Mudanayake).

• Price Control Notification Considered – The domestic price increase was part of the integrated scheme to mitigate export losses; thus, restrictions were reasonable.

• Article 14 Compliance – Selection of vacuum pan sugar producers was reasonable given the product’s export suitability and foreign market demand.

• Article 31 Not Violated – Deferred payment is not deprivation without compensation; the export agency, being industry-run, acted for collective benefit.

b. Obiter Dicta

• Public interest in earning foreign exchange justifies targeted export controls.

• Government may legitimately select commodities for export promotion based on marketability abroad.

c. Guidelines Laid Down

• When assessing reasonableness under Article 19, courts can consider complementary measures under other laws if part of the same legislative policy.

• Classification under Article 14 is valid if it has a rational nexus to the legislative objective.

• Economic legislation is to be tested with deference to legislative judgment in public interest.

I) CONCLUSION & COMMENTS

The decision underscores judicial willingness to uphold economic regulations if integrated within a broader public interest scheme, even when private businesses face burdens. The majority’s acceptance of external compensatory measures in evaluating Article 19 reasonableness marks an important precedent in Indian constitutional law. However, Justice Sarkar’s dissent warns against validating laws based on executive actions under unrelated statutes, as it risks making legislative validity contingent on mutable policy decisions—a concern for stability in commercial regulation.

J) REFERENCES

a. Important Cases Referred

i. State of Madras v. V.G. Row, [1952] SCR 597
ii. Virendra v. State of Punjab, [1958] SCR 308
iii. Arunachalam Nadar v. State of Madras, 1959 SCJ 297
iv. Attorney-General for Alberta v. Attorney-General for Canada, (1939) AC 117
v. Ladore v. Bennett, (1939) AC 468
vi. Pillai v. Mudanayake, (1953) AC 514

b. Important Statutes Referred

i. Constitution of India – Articles 14, 19, 31, 32
ii. Sugar Export Promotion Act, 1958
iii. Essential Commodities Act, 1955
iv. Sugar (Control) Order, 1955
v. Industries (Development and Regulation) Act, 1951