District Collector of Hyderabad &
Ors Vs. M/S. Ibrahim & Co  INSC 15 (5 February 1970)
05/02/1970 SHAH, J.C.
HIDAYATULLAH, M. (CJ) HEGDE, K.S.
CITATION: 1970 AIR 1275 1970 SCR (3) 493 1970
SCC (1) 386
E 1973 SC 106 (25) F 1975 SC1443 (6) RF 1976
SC1207 (80,89,91,176,177,445,513,541) RF 1977 SC1825 (12)
Constitution of India, Arts. 301, 304, 305,
358 and 359Freedom of trade under Art. 301 if guaranteed to individuals-If
could be taken away by executive action.
Protection under Arts. 358 and 359 to orders
passed by Government Scope of.
The Central Government promulgated the Sugar
Control Order, 1963, under r. 125(2) of the Defence of India Rules, 1962.
The respondents, who were holders of licences
under the Andhra Pradesh Sugar Dealers Licensing Order, 1963, (issued under the
Essential Commodities Act, 1955) and who were dealers in sugar in the cities of
Hyderabad and ' Secunderabad, were 'recognised dealers' under the Sugar Control
Order. They were allocated quotas of sugar, but, in 1964, the State Government)
ordered that the sugar allocated to the two cities be given in its entirety to
a Cooperative Stores. The respondents were thus prevented by an executive order
from carrying on their business. They challenged the order successfully in the
In appeal to this Court on the questions :
(1) whether the order was protected under Arts. 358 and 359, because the
President had declared a state of emergency; and (2) whether the order was
violative of Art. 301,
HELD : (1) (a) Under Art. 358 the respondents
could not challenge any executive action which, but for provisions contained in
Art. 19, the State was competent to take. But in the present case, the
executive order was not one which the State was competent to make. Since the
order of the State Government has the effect of cancelling the licences of the
respondent, which could be done only after an enquiry according to the
procedure prescribed in the Andhra Pradesh Sugar Dealers Licensing Order, the
executive order was contrary to the statutory provisions contained in the
Andhra Pradesh Sugar Dealers Licensing Order and the Sugar Control Order. Such
executive action of the State, which is otherwise invalid, is not immune from
attack under Art. 358, merely because a proclamation of emergency was in
[502 A-D] (a) In the present case, there was
discrimination against the respondents in that the impugned order conferred a
monopoly on the Cooperative Stores in disregard of the subsisting right of the
respondents. The order is not protected under Art. 359, because only if it was
shown to have been made under the authority reserved by the Defence of India
Ordinance or the Rules made there under, that the jurisdiction of the court to
entertain a petition for infringement of the guarantee under Art. 14 is
[502 E-G] (2) The impugned order trenches Won
the freedom of trade and commerce guaranteed by Art. 301.
499 By this Article the freedom of trade,
commerce and intercourse throughout the territory of India is declared free.
Under it, a restriction upon the legislative power of Parliament and State
Legislature is imposed by the Constitution. The guarantee of the freedom is not
in the abstract but to individuals. Within the limits of Arts. 304 and 305
there could be legislative restrictions upon the individuals' right to freedom
of trade, but not, by executive action. [503 D-F; 504 D-E] Commonwealth of
Australia v. Bank of New South Wales, L.R.  A.C. 235, referred to.
CIVIL APPELLATE JURISDICTION : Civil Appeals
Nos. 1285 to 1309 of 1966.
Appeals by special leave from the judgment
and order dated June 23, 1965 of the Andhra Pradesh High Court in Writ Appeals
Nos. 34 to 58 of 1965.
P. Ram Reddy and A. Y. Rangam, for the
appellants (in all the appeals).
K. Rajendra Chaudhuri and K. R. Chaudhuri,
for the respondent (in C.A. No. 1304 of 1966).
The Judgment of the Court was delivered by
Shah, J. These appeals are filed with special leave against the order of the
High Court of Andhra Pradesh declaring G.O.M. No. 2976 dated December 30, 1964
"null, void and ultra vires".
The respondents are dealers in sugar and
other commodities and carry on their business in the cities -of Hyderabad and
Secunderabad. The State of Andhra Pradesh issued the Andhra Pradesh Sugar
Dealers Licensing Order, 1963, in exercise of the power conferred by s. 3 of
the Essential Commodities Act, 1955. Under that order no person may carry on
business as a dealer except under and in accordance with the terms and
conditions of a licence issued by the specified authority. Grant and renewal of
licence could be refused only on grounds reduced to writing and after giving
opportunity to the party to state his case. The respondents were granted
licences under the Andhra Pradesh, Sugar Dealers Licensing Order, 1963. Shortly
thereafter the Central Government, in exercise of the power conferred under
sub-r. (2) of r. 125 of the Defence of India Rules, 1962, promulgated the Sugar
Control Order, 1963. By that order a recognized dealer was defined as a person
carrying on the business; of purchasing, selling 'or distributing sugar and
licensed under the order relating to the licensing of sugar dealers for the
time being in force in a State. The order provided for placing restrictions on
sale, or agreement to sell or delivery by the producers, for controlling the
production, sale, grading, packing, making delivery, distribution etc. of sugar
500 by the producers or recognised dealers, for regulating the movement of
sugar, for fixation of its prices, for allotment of quotas, for delivery of
such quotas and for other incidental matters.
The respondents being holders of licences
under the Andhra Pradesh Sugar Dealers Licensing Order, 1963, were treated as
recognized dealers under the Sugar Control Order, 1963. The State Government
allocated quotas of sugar received from the Central Government for distribution
in different areas and nominated licensees or dealers to take delivery of the
allotted quotas from the factories.
On December 30, 1964 the State Government
ordered that the sugar quota -allocated to "the twin cities of Hyderabad
and Secunderabad" be given in its entirety to the Greater Hyderabad
Consumers Central Co-operative Stores, Ltd., Hyderabad. On that account the
respondents who held licences under the Andhra Pradesh Sugar Licensing Order
for distribution of sugar and were also recognized dealers under the Sugar
Control Order, 1963, were by an executive fiat prevented from carrving on their
business in sugar.
The respondents moved petitions in the High
Court of Andhra Pradesh challenging the validity of the order. The State
resisted the petitions principally on the ground that the order made by the
State Government was in conformity with the provisions of the Sugar Control
Order and was issued in pursuance of the policy laid down by the Central
Government to entrust the work of distribution of sugar exclusively to
cooperative societies and thereby to eliminate in the public interest the
agency of private dealers in lifting and distributing sugar. It was urged that the
respondents could not seek any relief complaining of infraction of their rights
under Arts. 14 and 19 because the emergency declared by the President in
October 1962 had not been withdrawn.
The petitions Were heard by Gopalakrishnan
Nair, J. The learned Judge held that the executive order was not supported
either by the provisions of the Sugar Control Order, 1963, issued by the
Central Government, or by the Andhra Pradesh Sugar Dealers Licensing Order,
1963, that the step taken by the Government was not permitted by law; that 'as
a result of the order of the Government the licences held by the respondents
were cancelled without following the procedure laid down in cl. 7 of the Andhra
Pradesh Sugar Dealers Licensing Order; and that the provisions of the order
could not be circumvented by executive instructions and since the order
discriminated between the respondents -and the Central Consumers Cooperative
Stores in that it conferred a monopoly in disregard of the subsisting rights of
the respondents and amounted to "hostile and invidious"
discrimination in the administration of the Sugar Control Order. He further
held that since the Government had not taken action under the Defence of India
Rules or under any Control Order made under those Rules, the respondents were
not debarred under Arts. 358 & 359 of the Constitution from claiming
protection against impairment of their rights by the order issued by the State.
In appeal to a Division Bench of the High
Court the grounds on which the decision was recorded by Gopalakrishnan Nair,
J., were confirmed.
In these appeals counsel for the State of
Andhra Pradesh has not contended that the impugned order could be issued dither
under the Andhra Pradesh Sugar Dealers Licensing Order, 1963, or the Sugar
Control Order, 1963, issued by the Central Government. Indisputably it is an
executive order made by the State Government. The State Government it is
claimed acted in pursuance of the policy of the Central Government to
distribute sugar through cooperative societies. But the order was still
unauthorised. Under the Essential Commodities Act, 1955, the State Government
had issued an order for distribution of sugar through licensed dealers and the
respondents had obtained licences in that behalf. Their licences could only be
cancelled after making the enquiry according to the procedure prescribed by cl.
7 of the Sugar Dealers licensing Order. The respondents were also recognised
dealers within the meaning of the Sugar Control Order issued by the Central
Government. The rights of the respondents could not be taken away by 'an
executive order in a manner plainly contrary to, the provisions of the
It is true that under Art. 352 of the Constitution,
the President declared a state of emergency on October 26, 1962.
By Art358 while a proclamation of emergency
is in operation, nothing' in Art. 19 shall restrict the power of the State (as
defined in Part 111) to make any law or to take any executive action which the
State would but for the provisions contained in that Part 'be competent to make
or to take. By Art. 359 the President is authorised, where a proclamation of
emergency was in operation, to declare that the right to move any court for the
enforcement of such of the rights conferred by Part III as may be mentioned
shall remain suspended for the period during which the proclamation was in
force or for such shorter period as may be specified in the order.
On the issue of the proclamation of emergency
the State is, for the duration of the emergency, competent to enact
legislation, notwithstanding that it impairs the freedoms guaranteed by Art. 19
of the Constitution. The State is also competent to take executive action which
the State would, but for the provisions contained in Art. 19 of the
Constitution be competent to take. The impugned order in this case was issued
while the proclamation of emergency 502 was in operation. The respondents could
not challenge the validity of any law enacted by the State Legislature so long
as the proclamation of emergency was in operation, on the ground that it
impaired the freedoms guaranteed by Art. 19.
They could not also challenge any executive
action which, but for the provisions contained in Art. 19, the State was
competent to take.
In the present case, the State did not enact
any legislation impairing the -fundamental right of the respondents to carry on
business which is guaranteed by Art. 19 (1) (g), they proceeded to make an
executive order. But the executive order immune from attack is only that order
which the State was competent, but for the provisions contained in Art. 19, to
make. Executive action of the State Government which is otherwise invalid is
not immune from attack, merely because a proclamation of emergency is in
operation when it is taken. Since the order of the State Government was plainly
contrary to the statutory provisions contained in the Andhra Pradesh Sugar
Dealers Licensing Order and the Sugar Control Order, it was not protected under
Art. 358 of the Constitution.
Nor had it the protection under Art. 359. On
November 3, 1962 the President issued an order in exercise of the power under
Art. 359, that "the right of any person to move any court for the
enforcement of the rights conferred by -article 14, article 21 and article 22
of the Constitution shall remain suspended for the period during which the
Proclamation of Emergency issued under clause (1) of article 352 thereof on the
26th October, 1962, is in force, if such person has been deprived of any such
rights under the Defence of India Ordinance, 1962 (4 of 1962) or any rule or
order made there under." Only if the impugned order was shown to be made
under the authority reserved by the Defence of India Ordinance or rules made there
under, the jurisdiction of the Court to entertain a petition for impairment of
the guarantee under Art. 14 may be excluded. But the action was not shown to be
taken under the Defence of India Ordinance or under the rule or order made there
Again it may be pointed out that under Art.
301 the freedom of trade, commerce and intercourse throughout the territory of
India is declared free. -That freedom is declared in the widest terms and
applies to all forms of trade, commerce and intercourse. But it is subject to
certain restrictions (if which Arts. 304 and 305 are relevant. It is provided
by Art. 304 :
"Notwithstanding anything in article 301
or article 303, the Legislature of 'a State may by law(a)......................................
503 (b) impose such reasonable restrictions
on the freedom of trade, commerce or intercourse with or within that State as
may be required in the public interest Provided that no Bill or amendment for
the purposes of clause (b) shall be introduced or moved in the Legislature of a
State without the previous sanction of the President." It is also provided
by Art. 305 that the existing law or laws which may be made by the State
providing for State monopolies, i.e. relating to any matter as is referred to
in sub-cl. (ii) of cl. (6) of Art. 19, are outside the guarantee of Art. 301.
In the present case the State had not assumed a monopoly to deal in sugar. It
had granted monopoly to a Central Consumers Cooperative Stores which was not a
corporation owned or controlled by the State within the meaning of Art. 19 (6)
(ii). The order was challenged on the ground that it trenches upon the freedom
of trade and commerce guaranteed by Art. 301 of the Constitution. By Art. 304
even by legislature restrictions on the freedom of trade, commerce and
intercourse with or within the State may only be imposed, if such restrictions
are reasonable and are required in the public interest and the Bill or
amendment is introduced or moved in the Legislature of a State with the
previous sanction of the President. Obviously the guarantee under Art. 301
cannot be taken away by executive action.
The guarantee under Art. 301 which imposes a
restriction upon legislative power of the Parliament or the State Legislature
and the declaration of freedom is not merely an abstract declaration. There is
no reason to think that while placing a restriction upon legislative power the
Constitution guaranteed freedom in the abstract and not of the individuals.
Article 301 of the Constitution is borrowed almost verbatim from s. 92 of the
Commonwealth of Australia Constitution Act 63 and 64 Vict. c. 12 of 1.900.
In dealing with the contention that no
individual right was guaranteed by s. 92 of the Commonwealth of Australia
Constitution Act the Judicial Committee in Commonwealth of Australia v. Bank of
New South Wales(1) observed at p. 305 "The necessary implications of these
decisions (James v. Cowan-(1932) A.C. 542-and James v. The Commonwealth of
Australia-(1936) A.C. 578) are important. First may be mentioned an argument
strenuously maintained on this appeal that s. 92 of the Constitution does not
guarantee the freedom of individuals. Yet James was an individual and James
vindicated his, 'freedom in hard won fights.
(1) L.R. 1950 A. C. 235504 Clearly there is
here a misconception. It is true as has been said more than once in the High
Court, that s. 92 does not create any new juristic rights but it does give the
citizen of State or Commonwealth, as the case may be, the right to ignore, and,
if necessary, to call on the judicial power to help him to resist, legislative
or executive action which offends against the section. And this is just what
James successfully did." Our Constituent Assembly borrowed the concept of
freedom of trade, commerce and intercourse from the Australian Constitution. It
is true that the limitations upon the amplitude of the guarantee are not
expressed in s. 92 of the Australian Constitution, as are to be found in our
Constitution. Again, there is no guarantee in the Australian Constitution of a
fundamental right to carry on trade. But this departure from the scheme of the
Australian Constitution does not alter the true character of the guarantee and
it cannot be inferred that the Constitution imposed restrictions upon
legislative, power, but denied to the individuals affected by unauthorised
assumption of executive power the right to challenge the exercise of that
power. A vital constitutional provision cannot be so construed as to make a
mockery of the declared guarantee and the constitutional restrictions on the
power of the legislature. If the power of the State Legislature is restricted
in the manner provided by Art. 301, but within limits provided by Arts. 303 to
305, it would be impossible to hold that the State by executive order can do
something which it is incompetent to do by legislation.
In any view of the case, these -appeals must
fail and are dismissed. Only one respondent has appeared in this case, but even
he has not filed a statement of the case. In the circumstances, there will be
no order as to costs.
V.P.S. Appeals dismissed.