The State of Rajasthan Vs. Nath Mal and
Mitha Mal  INSC 23 (12 March 1954)
HASAN, GHULAM MAHAJAN, MEHAR CHAND (CJ)
DAS, SUDHI RANJAN BOSE, VIVIAN
CITATION: 1954 AIR 307 1954 SCR 982
CITATOR INFO :
E&D 1960 SC 475 (9,12) R 1967 SC 829 (6)
R 1974 SC 366 (58) RF 1981 SC 873 (18,27) R 1987 SC1802 (9)
Constitution of India, arts. 19(1)(f) and
31(2) -Rajasthan Food grains Control Order, 1949, cl. 25-Whether ultra vires
Held, that the first portion of cl. 25 of the
Rajasthan Food grains Control Order, 1949, relating to the freezing of stocks
of food grains is not void under art. 19(1)(f) of the Constitution because such
freezing of stocks of food grains is reasonably related 983 to the object which
the Act was intended to achieve, namely to secure the equitable distribution
and availability at fair prices and to regulate transport, distribution,
disposal and acquisition of an essential commodity such as food grains.
Hold, that the last portion of cl. 25 to the
effect that " such stocks shall also be liable to be requisitioned or
disposed of under orders of the said authority at the rate fixed for purposes
of Government procurement ", is void both under art. 19(1)(f) and art.
31(2) of the Constitution:(i)because the clause places an unreasonable
restriction upon the carrying on of trade or business and is thus an
infringement of the respondents' right under art. 19(1)(f) of the Constitution;
(ii)because the clause by vesting the power
in the authority to acquire the stocks at any price fails to fix the amount of
compensation or specify the principles on which it is to be determined and
leaves it entirely to the discretion of the executive authority to fix any
compensation it likes and is thus hit by art. 31(2) of the Constitution.
CIVIL APPELLATE JURISDICTION: Civil Appeal
No. 136 of 1952.
Appeal under articles 132(1) and 133(1)(c) of
the Constitution of India from the Judgment and Order dated the 19th October,
1951, of the High Court of Judicature for Rajasthan at Jodhpur in D. B.
Miscellaneous Writ Petition No. 3/1951.
K. S. Hajela, Advocate-General of Rajasthan,
for the appellant.
K. N. Aggarwal and P. C. Agarwal for the
M. C. Setalvad, Attorney-General for India (Porus A. Mehta, with him) for the intervener (the Union of India).
1954. March 12. The Judgment of the Court was
delivered by GHULAM HASAN J.-The question involved in this appeal relates to
the constitutional validity of clause 25 of the Rajasthan Food grains Control
Order, 1949, hereinafter called the Control Order, and arises in the following
circumstances :The respondents, who are grain merchants at Raniwara in Jodhpur
Division, Rajasthan State, held 984 licences for dealing in food grains. They
held considerable stocks of bajra in the ordinary course of business but on October 7, 1950, their stocks were frozen by the Deputy Commissioner, Civil Supplies, Jodhpur, through the SubDivisional Officer. It is not disputed that the market price then
prevailing was about Rs. 18 per maund. The State, however, requisitioned the
stocks at the rate. of Rs. 9 per maund and sold them at Rs. 13-5-4 per maund. The respondents claimed that they had purchased the bajra at the prevailing market
rate of Rs. 17 to Rs. 18 per maund. They filed a petition on January 23, 1951,
for the issue of a writ under article 226 of the Constitution before the High
Court of Rajasthan, contending that clause 25 of the Control Order was void
under articles 14, 19 (1) (g) and 31 (2) of the Constitution. The High Court
held that clause 25 was void inasmuch as it is a restriction upon the
fundamental right of the respondents to carry on business under article 19
(1)(g) of the Constitution, that the restriction is not reasonable and is not
saved by clause (6) of article 19.
The High Court further held that clause 25
was also hit by article 31 (2) as fair compensation had not been fixed by the
law for the acquisition of the food grains. As the grains had already been
disposed of by the Government, the High Court holding that Rs. 17 a maund was
fair compensation directed that the State of Rajasthan shall pay compensation
at that rate. The State has preferred. the present appeal on a certificate
granted by the High Court.
The impugned clause 25 is as follows:"
25. Notwithstanding anything contained in this Order, the Commissioner, the
Director, the Deputy Commissioner, the Nazim, the Assistant Commissioner, the
Sub-Divisional Officer, the Senior Officer of a jurisdictional Thikana, the
enforcement officer 'or such other officer as may be authorized by the
Commissioner in this behalf, may freeze any stocks of food grains held by any
person, whether in his own behalf or not, and such person shall not dispose of
any food grains out of the stock so freezed except with the permission of the
said authority. Such stocks shall 985 also be liable to be requisitioned or
disposed of under orders of the said authority at the rate fixed for purposes
of Government procurement. " It is not disputed that bajra is an essential
commodity within the meaning of the Essential Supplies Act (No. XXIV of 1946).
The question that arises for consideration is how far and in what respects
clause 25 can be said to be void as violating Part III of the Constitution. The
clause authorises the Commissioner and various other authorities mentioned
therein and such other officers as may be authorised by the Commissioner to
freeze any stock of food grains held by a person. It is true that the authority
of the Commissioner to delegate his powers to any other officer at his
discretion is expressed in somewhat wide terms but we need not decide that per
se would be sufficient to invalidate the clause. Admittedly that :power has not
been exercised in the. present case. Nor do we think that the power to freeze
the stocks of food grains is arbitrary or based on no reasonable basis. It is
not disputed that the clause does not state in express terms the circumstances
in or the grounds on which the stocks may be freezed but it should be read
along with section 3 of the Essential Supplies Act which lays down the policy
for controlling the production,, supply and distribution of essential
commodities. Section 3 in so far as it is material says:" The Central
Government, so far as it appears to it to be necessary or expedient for
maintaining or increasing supplies of any essential commodity, or for securing
their equitable distribution and availability at fair prices, may by order
provide for regulating or prohibiting the production, supply and distribution thereof
Sub-section (2) lays down:" Without prejudice to the generality of the
powers conferred by sub-section (1) an order made there under may
986 (d) for regulating by licences, permits
or otherwise the storage, transport, distribution, disposal, acquisition, use
or consumption of any essential commodity;
(e) for prohibiting the withholding from sale
of any essential commodity ordinarily kept for sale;
We are clear, therefore, that the freezing of
stocks of food grains is reasonably related to the object which the Act was
intended to achieve, namely, to secure the equitable distribution and
availability at fair prices and to regulate transport, distribution, disposal
and acquisition of an essential commodity such as food grains. We do not agree
with the High Court that the first portion of clause 25 is void under article
19 (1) (g).
The last portion of clause 25 to the effect
that such stocks shall also be liable to be requisitioned or disposed of under
orders of the said authority at the rate fixed for purposes of Government
procurement ", however stands on a different footing. The clause, as it is
worded, leaves it entirely to the Government to requisition the stocks at any
rate fixed by it and to dispose of such stocks at any rate in its discretion.
This obviously vests an unrestrained authority to requisition the stocks of food
grains at an arbitrary price. In contrast with this provision we may refer to
clauses 23 and 24 of the Control Order. They are as follows:" 23. The
Commissioner or the Director, and the Deputy Commissioner or the Senior Officer
of a jurisdictional Thikana with the approval of the Director, may fix the
ceiling prices at which food grains in any area to which this order applies
shall be sold, and may from time to time vary such prices." "24. The
Commissioner, the Director, the Deputy Commissioner, the Nazim, the Assistant
Commissioner, the Sub-Divisional Officer, or the Senior Officer of the
jurisdictional Thikana as the case may be, may direct any person or persons in
possession, whether on his own behalf or not of any food grains to sell such food
grains or part thereof to any person or persons at any 987 specified place and
at such price as may be fixed under clause 23." It appears from these
clauses that while the authorities may fix the ceiling price at which food
grains should be sold in the market by the dealers and may direct any person in
possession of food grains to sell them to any other person at the price fixed
under clause 23, there is no such limitation upon the power of the Government
to acquire the stocks. In other words, it will be open to the Government to
requisition the stocks at a price lower than the ceiling price thus causing
loss to the persons whose stocks are freezed while at the same time the
Government is free to sell the same stocks at a higher price and make a profit.
It is obvious that the dealer whose stocks are thus freezed will stand to lose
considerably and will be unable to carry on his trade or business at the
prevailing market price. No dealer will be prepared to buy food grains at the
market price when he knows that he is exposed to the risk of his stocks being
freezed any moment and the same being requisitioned at the procurement rate.
The present is a typical case which illustrates how the business of a grain
dealer can be paralyzed, for it is admitted that while the Government
procurement rate was Rs. 9 a maund, the market rate was Rs. 17 or Rs. 18 per
maund, with the result that the stock holder suffered nearly cent. per cent.
lose, while the Government made a profit of Rs. 4-5-4 per maund on the stock requisitioned. We hold, therefore, that the last portion of clause 25 places an
unreasonable restriction upon the carrying on of trade or business and is thus
an infringement of the respondent's right under article 19(1)(g) of the
Constitution and is, therefore, to that extent void. The same result follows if
the impugned clause is examined in the light of article 31(2). The clause by
vesting the power in the authority to acquire the stocks at any price fails to
fix the amount of the compensation or ,specify the principles on which the
compensation is to be determined.
The clause leaves it entirely to the
discretion of the executive authority to fix any compensation it likes. The
High Court 988 rightly held that the clause offended against article 31(2).
For the foregoing reasons we hold that the
last portion of clause 25 is void and dismiss the appeal with costs.
Agent for the appellant and for the
intervener: R. H. Dhebar.