State of West Bengal and
Ors Vs. M/S Veejay International (India) & Ors  Insc 178 (20 February 2007)
Dr. ARIJIT PASAYAT & S.H. KAPADIA
Dr. ARIJIT PASAYAT, J.
Challenge in this appeal is to the judgment rendered by a Division Bench of
the Calcutta High Court holding that clauses 9 and 10 of the Notification
No.4784- F.S./FS/Sectt/Food/148-1/97, dated 19.12.1997 issued in exercise of
the powers conferred by Section 3 of the Essential Commodities Act, 1955 (in
short the 'Act') read with Government of India, Ministry of Agriculture and
Irrigation (Department of Food) Order No. G.S.R. 800 dated 8th June, 1978 was
contrary to the policy declared under the Foreign Trade Development and
Regulation Act, 1992 (in short 'Foreign Trade Act'). Accordingly, it was held
"In view of our findings aforementioned it must be held that the order
does not conform to the policy laid down by the Central Government in exercise
of its power conferred upon it under Section 5 of the 1992 Act inasmuch as in
terms thereof, the Central Government could not even itself interfere with the
proclaimed policy relating to import and export adopted by it in terms of
Section 5 of the 1992 Act."
By the abovesaid notification order in question was made which was called
West Bengal Rice and Paddy Control Order, 1997 (for short 'the Control Order').
Background facts in a nutshell are as follows:
The notification in question was issued purportedly with a view to regulate
the price and availability of rice in the State of West Bengal. The State
Government in exercise of delegated power given under the Act, by the
notification No.G.S.R. 800 dated 8th June, 1978 promulgated West Bengal Rice
and Paddy (Restriction on Movement) Order, 1981 (in short 'Movement Order').
Clause 5 of the said order authorizes Officers to enter into any premises
and make search and seizure of essential commodities or vehicle etc. Vires of
the said orders were considered by a Division Bench of Calcutta High Court.
Thereafter, the Control Order was issued. Clauses 9 and 10 of the said
Control Order are relevant for the purpose of the present dispute. They read as
follows:- "9. Regulation of storage of rice and paddy for export (1) No
person shall store or attempt to store or transport any quantity of rice or
paddy procured for export without a valid permit in Form 'D' granted by the
Director or by the Controller, if so authorized by the Government.
(2) In the case of transshipment of stocks from one vehicle to another in
exigencies, by an exporter without a valid permit such transshipment shall be
made only with the prior permission of the nearest Controller, stating in total
the reason for such transshipment.
10. Regulation of export of rice produced in West Bengal - No person shall
export or attempt to export any rice or paddy produced or grown in West Bengal
without a written authority granted by the Government in this behalf, and if
the Government or such authorized officer is satisfied that such export of rice
will not adversely affect the price and availability of rice in the local
market, the Government or such authorized officer may grant authority for
export of specified quantity and variety of rice as may be determined by the
Government or such authorized officer."
Respondent filed a writ petition before the Calcutta High Court questioning
the legality of the aforesaid clauses primarily on the ground that they were
repugnant and inconsistent with the policy declared by the Foreign Trade Act.
The State took the stand that the clauses in question are regulatory in
nature and do not suffer from any infirmity.
The High Court accepted the challenge and, inter alia, concluded as follows:
"Clause 9(1) of the Control Order deals with restriction on transport
whereas; clause 4.21 of the export and import policy framed by the Central
Government under Section 5 of the 1992 Act clearly states that items allowed
for export shall not be withheld/delayed for any reason by any agency of the
Central or State Government. Both the provisions, thus, are in direct conflict
with each other. Clause 9.2, provides for a prior permission of the nearest
controller when transshipment takes place from one vehicle to another. If
clause 9.1 is bad, clause 9.2 cannot survive independently.
Clause 10 of the Control order is in mandatory form. It totally prohibits
export or import. It confers absolute unguided, unbridled and uncontrolled
power upon the authorities named therein to consider as to whether a permit for
export should be granted or not. By reason of an order made under the delegated
notifications no authority of the State Government can authorize to issue
permit for export. Such a contingency is contemplated only in terms of
paragraph 5 of the 1992 Order. Once in terms of EXIM policy non Basmati rice is
considered to be free for export which decision must have been taken into
consideration by the Central Government upon taking into consideration all
aspects of the matter viz. availability thereof in the country, the quantum of
production and the requirement within the courts, the State Government in
exercise of its delegated power cannot be held to have any say in the matter.
If the State Government has any difficulty in relation thereto, it may bring
the same to the notice of the Central Government so that at the time of
registration of such contract entered into by and between the exporter and the
foreign country, the same may borne in mind by the appropriate authority so as
to restrict number of registrations of contract by and between the exporters
from India and the Foreign Countries."
As noted above, an escape route was suggested as would be seen from the
quoted portion of the High Court's order.
In support of the appeal, learned counsel for the appellants submitted that
the High Court completely lost sight of the fact that the two clauses were
regulatory in nature.
There was no complete ban on export or import and, it cannot be said that
there was any absolute, unguided, unbridled and uncontrolled power upon the
authorities to decide whether the permit for export shall be granted or not.
The purpose was to ensure that the export does not affect the price in the
local market and the availability of stock. As a matter of fact, there was no
conflict as was held by the High Court.
In K. Ramanathan v. State of Tamil Nadu and Anr. (1985 (2) SCC 116) it was
held as follows:
"The appellants impugned clause 3(1-A) of the 1982 Order on the grounds
that it was ultra vires the State Government being in excess of the delegated
powers. It was urged (i) that the delegation of a specific power under Section
3(2)(d) of the Essential
Commodities Act by the Central Government notification dated June 9, 1979
issued under Section 5 of the Act to regulate the storage, transport,
distribution, disposal, etc. of an essential commodity, in relation to
foodstuffs, does not carry with it the general power of the Central Government
under sub-section (1) of Section 3 to regulate or prohibit the production,
supply and distribution thereof and trade and commerce therein, and (ii) that
the word 'regulating' in clause (d) of Section 3(2) of the Act does not take in
'prohibiting' and as such there cannot be a total prohibition on transport,
movement or otherwise carrying of paddy out of the areas in question under
clause (d) but only regulation of such activities in the course of trade and
commerce by grant of licences or permits."
Decision in Harishankar Bagla and Anr. v. The State of Madhya Pradesh (AIR
1954 SC 465) throws considerable light on the controversy. Para 7 of the
judgment read as follows:- "7. The first question canvassed by Mr.
Umrigar was that the provisions of Section 3 of the Control Order infringed
the rights of a citizen guaranteed in sub-clauses (f) and (g) of Article 19(1)
of the Constitution. These sub- clauses recognize the right of a citizen to
dispose of property and to carry on trade or business. The requirement of a
permit to transport by rail cotton textiles to a certain extent operates as a
restriction on the rights of a person who is engaged in the business of
purchase and sale of cotton textiles. Clause (5) of Article 19 however permits
such restrictions to be placed provided they are in the public interest. During
the period of emergency it was necessary to impose control on the production,
supply and distribution of commodities essential to the life of the community.
It was for this reason that the Legislature passed the Essential Supplies
(Temporary Powers) Act authorizing the Central Government to make orders from
time to time controlling the production, supply and distribution of essential
Clause 3 of the Control Order does not deprive a citizen of the right to
dispose of or transport cotton textiles purchased by him. It requires him to
take a permit from the Textile Commissioner to enable him to transport them.
The requirement of a permit in this regard cannot be regarded as an
unreasonable restriction on the citizen's right under sub- clauses (f) and (g)
of Article 19(1). If transport of essential commodities by rail or other means
of conveyance was left uncontrolled it might well have seriously hampered the
supply of these commodities to the public. Act XXIV of 1946 was an emergency
measure and as stated in its preamble, was intended to provide for the
continuance during a limited period of powers to control the production, supply
and distribution of, and trade and commerce in, certain commodities. The number
of commodities held essential are mentioned in Section 2 of the Act, and the
requirement of a permit to transport such commodities by road or rail or other
means of transport, cannot, in any sense of the term, be said, in a temporary
Act, to be unreasonable restriction on the citizens' rights mentioned in
clauses (f) and (g) of Article 19(1). The High Court was therefore right in
negativing the contention raised regarding the invalidity of the Control Order
as abridging the rights of the citizens under Article 19 (1) of the
Section 5 of the Foreign Trade Act authorizes the Central Government to
formulate and announce, by notification in the Official Gazette, the export and
import policy as also to amend the same in like manner. If the clauses 9 and 10
of the Control Order and Section 5 of the policy of the Foreign Trade Act are
harmonized, that rules out any conflict. As a matter of fact, Section 6 of the
Act is also of relevance and it reads as follows:
"6. Effect of orders inconsistent with other enactments - Any order
made under section 3 shall have effect notwithstanding anything inconsistent
therewith contained in any enactment other than this Act or any instrument
having effect by virtue of any enactment other than this Act."
The Control Order was passed in exercise of power available under the Act.
"Export" under the Foreign Trades Act involves several activities. It
includes transport, international contract between parties, interstate movement
and delivery to the buyer outside the country. The impugned clauses of the
Control Order relate to certain restrictions on some parts of the activities.
By no stretch of imagination they can be considered to be opposed to the policy
of export. The clauses are regulatory in nature and character without in any
manner affecting the policy flowing from Section 5 of the Foreign Trade Act. It
is not that any unbridled and/or arbitrary power was given to the authorities
as held by the High Court. In fact, the parameters of exercisable of power are
inbuilt in Clause 10. Reasons were required to be recorded.
This was to be done objectively and not subjectively as appears to have been
concluded by the High Court. Looked at from any angle, the High Court's
judgment is indefensible and is set aside.
The appeal is allowed with no order as to costs.