Dr. Indramani Pyarelal Gupta Vs. W. R.
Nathu & Ors [1962] INSC 136 (11 April 1962)
11/04/1962 AYYANGAR, N.
RAJAGOPALA AYYANGAR, N. RAJAGOPALA AIYYAR, T.L. VENKATARAMA SINHA, BHUVNESHWAR
P.(CJ) SUBBARAO, K.
MUDHOLKAR, J.R.
CITATION: 1963 AIR 274 1963 SCR (1) 721
CITATOR INFO:
R 1970 SC 385 (5) RF 1970 SC1597 (20) RF 1971
SC1828 (12) R 1975 SC1218 (10) C 1984 SC 87 (21) R 1987 SC2239 (8) D 1988
SC1263 (13)
ACT:
Forward Contracts-Regulation of-Bye-laws
empowering closing out of hedge contracts--Validity of-If can operate
retrospectively-East India Cotton Association Bye-laws cl. 52A-Forward
Contracts (Regulation) Act, 1952 (LXXIV of 1952), ss. 4, 11 and 12.
HEADNOTE:
The appellants were members of the East India
Cotton Association which was an association recognised by the Central
Government under the Forward Markets Regulation Act, 1952. Prioi to December
1955, they had entered into "hedge contracts" in respect of cotton
for settlements in February and May 1956 in accordance with the bye-laws of the
Association. Towards the end of 1955 it was apprehended that the forward market
in cotton was heading for a crisis and the Central Government issued
notifications directing the Association to suspend business in hedge contracts
for February and May 1955 deliveries for short periods this did not improve the
situation. On January 21, 1956, the Central Government, acting under s. 12 of
the Act, made a new byelaw in substitution of bye-law 52AA of the Association
which empowered the Forward Markets Commission, constituted under, the Act, to
issue a notification closing out all hedge contracts at rates fixed by the
Commission. On January 24, 1956, the Commission issued a notification closing
out all hedge contracts including those subsisting on that date, and fixed the
rates for the settlement of such contracts. The appellants contended that the
amended bye. law 52AA was invalid as the power to close out hedge contracts
could not be conferred upon the Commission and as the Association was in law
incapable of conferring such a power on the Commission or on any other body and
that in any cases the bye-law could not operate retrospectively so as to affect
existing contracts.
Held, (per Sinha, C. J., Ayyangar, Mudholkar
and Aiyar, JJ.
Subba Rao, J. contra), that the amended
bye-law 52AA was not ultra vires the Central Government and validly empowered
the Commission to close all hedge contracts in cotton including existing
contracts. Clause (f) of s. 4 of the Act provided that one of the functions of
the Commission 722 shall be to perform such other duties and exercise such
other powers as may be assigned to the Commission "by or under the Act, as
may be prescribed". There was no limitation upon the nature of the power
that may be conferred under cl. (f) except that it must be in relation to the
regulation of forward trading in goods. It was not possible to place any
limitation on this power by invoking the rule of ejusdem genesis as there was
no common positive thread running through cls. (a) to (e) of s. 4. To judge
whether legally a power could be rested in a statutory body the proper rule of
interpretation was that unless the nature of the power was such as to be
inconsistent with the purpose for which the body was created or unless the
particular power was contra-indicated by any specific provisions of the Act,
any power which furthered the provisions of the Act could be legally conferred.
judge by this test the power conferred by the bye-law could be validly vested
in the Commission. The power was one conferred "under the Act".
The words "under the Act" signified
a power conferred by laws made by a subordinate law-making authority which was
empowered to do so by the Act. The impugned bye-law was clearly well within the
bye-law making power under ss. II and 12. The bye-law did not contravene
articles 64 of the Articles of Association of the Association as articles 64
applied only to the Board and placed no restrictions on the power of the
Association, Western India Theaters Ltd. v. Municipal Corporation of Poona,
[1959] Supp. 2 S.C.R. 71, Hubli Electricity Co. Ltd.
v. Province of Bombay, 76 I.A. 57 and
Narayanaswamy Naidu v. Krishnamurthi, I.L.R. 1958 Mad. 513, referred to,
Further, upon a proper construction of the amended bye-law it applied not only
to contracts to be entered into in future but also to subsisting contracts. A
statute which could validly enact a law with retrospective effect could in
express terms validly confer upon a rule making authority a power to make a
rule or frame a bye-law having retrospective operation. In the present case the
power to make bye-laws so as to operate on subsisting contracts followed as a
necessary implication from the terms of s. 11. There was no contra indication
in the other provisions of the Act.
Per Subba Rao, J.-Under s. 12 (1) of the Act
the Central Government had no power to make a bye-law with retrospective
effect. The provision conferring rule making power must be strictly construed
and unless it expressly conferred a power to make a bye-law with retrospective
effect, it must be held that it was not conferred any such power. Evey if it
was permissible to inter such a power by necessary 723 implication, it could
not be inferred in the present case.
It could not be said that unless
retrospective operation was given to the provisions of s. 12, the object of the
legislature would be defeated or the purposes for which the power was conferred
could not be fulfilled.
Further, the powers conferred on the
Commission under the impugned bye-law could not be performed by the Commission
under c1. (f) of s. 4. Clauses (a) to (e) of s. 4 showed that the functions of
the Commission were wholly supervisory and advisory in nature; the functions
described in cl. (f) were analogous to these and could only be supervisory or
advisory. The Commission had no administrative functions or powers of
management or powers of interference in the internal management of registered
association which were vested in the Association. The power conferred upon the
Commission was not conferred "under the Act". The words did not
include a rule or a bye-law, and applied only to an assignment made in the
exercise of an express power conferred under the Act. The Central Government
had no power tinder s. 12 to make a bye,law assigning any function to the Commission.
Union of India v. Madan Gopal Kabra (1954)
S.C.R. 541, Modi Food Products Ltd. v. Commissioner of Sale's Tax, U.P., A.I.R.
1956 All. 35, Strawboard Manufacturing Co. Ltd. v. Gupta Hill Workers' Union,
(1953) S.C.R. 439, India Sugar & Belineries Ltd. v. State of Mysore, A.I.R.
1960 Mys. 326, C.W. Motor Service (P) Ltd. v. State of Kerala, A.I.R. 1959
Kerala 347, Howell v. Falmouth Boat Construction Co. Ltd.
(1951) A. C. 837; The Western India Theatres
Ltd. v. Municipal Crporation of the City of Poona, (1959) Supp. 2 S.C.R. 71 and
Hubli Electricity Co. Ltd. v. Province of Bombay ( 1948) 76 I.A. 57, referred
to.
CIVIL APPELLATE JURISDICTION: Civil Appeal
No. 109 of 1957.
Appeal by special leave from the judgment and
order dated March 1, 1956, of the Bombay High Court in Appeal No. 20 of 1956.
G. S. Pathak, K. H. Bhabha, H. M. Vakeel and
I. N. Shroff, for the appellants.
C. K. Daphtary, Solicitor General of India,
B. K. Khanna and P. D. Menon, for the respondents.
724 C. K. Daphtary Solicitor General of India
S. N. Andley, Rameshwar Nath and P. L. Vohra, for the Interveners.
1962. April 11. The Judgment of Sinha C. J.,
Ayyangar, Madholkar and Aiyar, JJ., was delivered by Ayyangar, J., Subha Rao,
J. delivered a separate judgment.
AYYANGAR, J.-This is an appeal by special
leave from the judgment of a Division Bench of the Bombay High Court affirming
the judgment of a learned Single Judge whereby a petition filed under Article
226 of the constitution by the appellants was dismissed. By their petition, the
appellants challenged the validity of a notification issued by Forward Markets
Commission a statutory body created by the Forward Markets Regulation Act 1952
(LXXIV of 1952) (hereinafter referred to as the Act) to the authorities of the
East India Cotton Association, Bombay (which will be referred to as the
Association) intimating to them that the continuation of trading in certain
types of forward contracts in cotton including that known as "hedge
contracts" was "detrimental to the interest of the trade and the
public interest and to the larger interests of the economy of India" and
directed these contracts to be closed out, to be settled at prices fixed in the
notification.
It is necessary to set out briefly certain
facts in order to appreciate the points raised by the appeal. The fast India
Cotton Association is an "association" which has been recognised by
the Central Government under a. 6 of the Act.
The three appellants are members of the
Association carrying on business in partnership. The appellants had, prior to
December 1955, entered into "hedges contracts" in respect with other
members of the Association for settlements in February and May 1956. There was
no dispute that these 725 contracts were in accordance with the bye-laws of the
Association as they stood at the date when the contracts were entered into. The
terms and conditions of forward contracts in cotton including "hedge
contracts", and the manner of their implementation, were governed by the
provisions contained in certain bye-laws of the Association and of these that
relevant to the consideration of the matters in this appeal was bye-law 52AA
which on the date when the appellants entered into their contracts ran as
follows:"52-A.A. (1) whether or not the prices at which the cotton may be
bought or sold are at any time controlled under the provisions of the Essential
Commodities Act, 1055, if the Textile Commissioner with the concurrence of the
Forward Markets Commission and after consultation with the Chairman (of the
Board), be of opinion that the continuation of hedge trading is likely to
result in a situation detrimental to the larger interests of the economy of
India and so informs the Board, the Board shall forthwith cause a notice to be
posted on the Notice Board to that effect and on the posting of such notice and
notwithstanding anything to be contrary contained in these bye-laws or in any
hedge or on call contract made subject to these Byelaws, the following
provisions shall take effect.
(2)Every hedge contract and every on call
contract in so far as the cotton is uncalled there under or "in so far as
the price has not been fixed there under entered into between a member and a
member or between a member and a non-member then outstanding shall be deemed
closed out at such rate, appropriate to such contract as shall be fixed by the
Textile Commissioner and the provisions 726 of Clauses (3), (4) and (6) of
Bye-laws 52A in so far as they apply to hedge and on call contracts, shall
apply as if they formed part of this Bye-law. After the affixation of the said
Notice on the Notice Board trading in hedge and on call contracts shall be
prohibited until the Textile Commissioner with the concurrence of the Forward
Markets Commission and after consultation with the Chairman, permits
resumption".
Towards the end of 1955 the Chairman of the
Association appears to have apprehended that the forward Market in cotton was
heading for a crisis which was in part due to the transacting of unbridled
option business, which though prohibited by the Act and also by the bye-laws of
the Association was ever the less indulged in on a large scale.
The hair man brought this situation to the
notice of the members of the Board of the Association at a meeting held on
December 16, 1955, and suggested that they should give serious thought to this
vital problem. It may be mentioned that the government also were anxiously
considering the steps to the taken to solve or avert the crisis. The action
which the government took in this matter is reflected in a notification issued
by them on December 23, 1955, by which in exercise of the powers conferred in
them by s. 14 of the Act they directed the Association to suspend its business
in Indian cotton edge contracts for delivery in February 1956 and May 1956 for
a period of 7 days with effect from the date of the notification. The situation
did not apparently improve as a result of this temporary suspension so that
before the expiry of the work fortnight, action under the same provision was
gain taken under a notification dated December 10, 1955, by which the period of
7 days was extended by a further period of 7 days i. e. till 6, 1. 56A meeting
of the Board of Association was held on 727 January-6, 1956, i. e., the day on
which the suspension of forward business expired when the following-,
resolution was unanimously passed: "'In view of the suspension of forward
trading by government the Board hereby resolves under bye-law 52 that an
emergency has arisen or exists and prohibits until further notice, subject to the
concurrence of the Forward Markets Commission as from Saturday, the 7th
January, 1956, trading in hedge contracts for February and May 1956, deliveries
above a maximum rate of Rs. 700/per candy Thereupon a suit (numbered as suit
2/1956) was filed by a member of the Association as representing himself and
all other members, on the original side of the High Court, Bombay against the
Association and its Board, challenging the validity of the notification of
Government suspending forward trading, as also of the resolution of the 'Board,
just now extracted. An application for the grant of interim stay was made for
restraining the Board from giving effect to its resolution but this was refused
by the learned trial Judge and an appeal was filed against the refusal.
While things were in this state the Central
Government, in exercise of the powers conferred on them by s. 12 of the Act,
made anew bye-law which was published in a Gazette of India Extra. ordinary
dated January 21, 1956, in substitution of bye law 52 AA set out earlier. The
new byelaw ran.
"152 AA (1) Whether or not prices at
which cotton may be bought or sold are at any time controlled under the
provisions of the Essential Commodities Act, 1955, if the Forward Markets
Commission is of the opinion 728 that continuation of trading in hedge contracts
for any delivery or deliveries is detrimental to the. interest of the trading
or the public interest or to the larger interests of the economy of India and
so notifies the Chairman, then notwithstanding anything to the contrary
contained in these bye-laws or in any hedge or on call contract made subject to
these bylaws the following provisions shall take effect.
(2)Every hedge contract and every on call
contract in so far as the cotton is uncalled there under or in so far as the
price has not been fixed there under and relating to the delivery or deliveries
notified under clause (1) entered into between a member and a member or between
a member and a non-member then outstanding shall be deemed closed out at such
rate appropriate to such contract and with effect from such date as shall be
fixed by the Forward Markets Commission and the provisions of clauses (3), (4)
and (0) of Byelaws 52-A in so far as they apply to hedge and on call contracts
shall apply as if they formed part of this Bye-law".
This bye law was communicated to the Board of
the Association on January 23, 1956.
We might here state that the validity of this
new bye-law has been impugned on various grounds and the alleged invalidity of
this We-law serves as the main foundation for challenging the validity of the
notification of the Forward Markets Commission issued under the powers
conferred by it.
On January 24, 1956, the appeal from the
order refusing the interim injunction in Suit No. 2 of 1956 was settled between
the parties on , theme terms :
"(1) The impugned resolution dated
January 6, 1956, declared to be valid, 729 (2)The Board of Directors to meet on
January 25, 1958, and consider under bye-laws 52 (2) whether the rate of Rs.
700 fixed under the said resolution should continue or whether it should be
waived. 'In considering the same the Board will apply its own mind and exercise
its own judgment".
On the same day, i.e. January 24, 1956, the
Forward Markets Commission took action under-the powers vested in them under
the new bye-law 52 AA which had been made by government three days earlier. By
a communication addressed to the Chairman of the Association, the Commission
stated :
"'In pursuance of cl. (1) of the bye-law
52AA of the Bye-laws of the E.I.C.A. Ltd., Bombay I hereby notify to you that
the For. ward Markets Commission is of the opinion that continuation of trading
in the hedge contracts for February and May 1956 delivery is detrimental to the
interests of the trade and the public interest and the larger interest of the
economy of India and fixed under cl. (2) of the said bye-law; that the rates
prevailing at the time at which the trading in the said contracts closed On
January 24, 1956, viz., Rs. 700/for February and Rs. 686/8/for May delivery as
the rates at which and January 25, 1956 as the date with effect from which the
hedge contracts and on call contracts in so far as the cotton is uncalled there
under or in so far as the price has not been fixed there under relating to the
said delivery shal l be deemed to be closed out".
Thereupon the three appellants who are
partners carrying on business in cotton under the name and style of Indramani
Pyarelal Co. moved the High Court of Bombay by a petition under Art. 226 of the
Constitution on January 27, 1956, for a writ of mandamus or a direction in the
nature of 730 mandamus against the members of the Forward Markets Commission
who were individually impleaded as respondents to the petition, ordering them
to cancel or withdraw the notification dated January 24, 1956, whose validity
was impugned on various grounds. The petition was heard by a learned single
Judge who dismissed it by his order dated February 23, 1956. An appeal was
filed therefrom to a, Bench of the High Court and when this was also dismissed
the petitioners moved for a certificate of fitness to appeal to this Court but
the same having been rejected, they applied for. and obtained special leave from
this Court, and that is bow the matter is now before us.
The submissions of Mr. Pathak learned Counsel
for the appellant in support of the appeal may be classified under three main
heads : (1) The notification dated 24th January, 1956, served on the Board of
the Association by the Forward Markets Commission was ultra vires for the
reason that byelaw 52AA, as amended by the Central Government on January 21,
1956, was invalid. (2) Assuming the byelaw to be valid it could not operate
retrospectively or be availed of retrospectively so as to affect rights under
existing contracts subsisting on the day the amended bye-law was notified in
the Gazette but that it could if at all, be validly applied only to Forward
hedge contracts entered into thereafter. (3) The notification by the Forward
Markets Commission was improper and malafide and was therefore invalid.
It would be convenient to deal with these
points in that order : (1) The first of the points raised raises the question
of the validity of bye-law 52 AA as amended by the Central Government on
January 21, 1956. Learned Counsel divided his submission on this matter into
two sub-heads(a) that the Forward Markets Commission could not, on a proper
construction of the Act, be validly vested 731 with the power with which it was
clothed by the amended byelaw, and (b) that it was beyond the power of the
Association to have conferred the power which it purported to do under the
amended bye-law 52AA. Put in other words, the objections were that the Forward
Markets Commission could not, having regard to the terms of the statute under
which it was created, be a proper recipient of the power 'with which it was
vested by the bye-law and secondly that the Association was in law incapable of
conferring that power on the Forward Markets Commission or on any other body.
We shall first take up for consideration the
argument that the Forward Markets Commission was in law incapable of being the
recipient of the power conferred by the bye-law under which it was empowered to
issue the impugned notification.
For this purpose it is necessary to examine
in detail the relevant provisions of the Act. Section 2 (b) defines
'Commission' as meaning "The Forward Markets Commission" established
under s. 3. Section 3 (1) enacts :
"3. The Central Government may, by
notification in the Official Gazette establish a Commission to be called the
Forward Markets Commission for the purpose of exercising such functions and
discharging such duties as may be assigned to the Commission by or under this
Act." The point urged by learned Counsel was that the function or the duty
cast upon it by the amended bye-law 52 AA was not such as could be assigned to
the Commission "by or under this Act." The meaning of the words by or
under' and the extent and nature of the duties assigned to the Commission by
the Act will therefore require careful examination.
Section 4 relates to the functions of the
Commission and it is the proper construction of this 732 section that has
loomed large in the arguments on this point. It is, therefore, necessary to set
this out in full :
"4. The functions of the Commission
shall be(a)to advise the Central Government in respect of the recognition of,
or the withdrawal of recognition from any association or in respect of any other
matter arising out of the administration of this Act ;
(b)to keep forward markets under observation
and to draw the attention of the Central Government or of any other prescribed
authority to any development taking place, in or in relation to, such markets
which, in the opinion of the commission is of sufficient importance to deserve
the attention of the Central Government and to make recommendations thereon ;
(e)to collect and whenever the Commission
thinks it necessary publish information regarding the trading conditions in
respect of goods to which any of the provisions of this Act is made applicable,
including information regarding supply, demand and prices, and to submit to the
Central Government periodical reports on the operation of this Act and on the
working of forward markets relating to such goods ;
(d)to make recommendations generally with a
view to improving the Organisation and working of forward markets ;
(e)to undertake the inspection of the
accounts and other documents of any recognished association whenever it
considers it necessary ; and 733 (f)to perform such other duties and exercise
such other powers as may be assigned to the Commission by or under this Act, or
as may be prescribed".
Pausing here it is necessary to add that the
expression prescribed" found at the end of cl. (f) has been defined by s.
2(h) of the Act to mean "Prescribed by rules made under the Act".
Before considering the points urged as
regards the construction of this section taken in conduction with the terms of
s.3(1) we shall refer to a few other provisions which are of some relevance in
the present context. Section 3(2) which confers power on the Central Government
to call for periodical returns from Recognised Associations and to direct such
enquiries as they consider necessary to be made, empowers the government to
direct the Commission to inspect the accounts and other documents of any
recognised Association or of any of its members and submit its report thereon
to the Central Government [vide s. 3(2) (c)]. Subs. (4) of this section enacts
:
"8(4). Every recognised association and
every member thereof shall maintain such books of account and other documents
as the Commission may specify and the books of account and other documents so
specified shall be preserved for such period not exceeding three years as the
Commission may specify and shall be subject to inspection at all reasonable
times by the Commission".
Section 28 reads :
"28. (1) The Central Government may, by
Notification in the Official Gazette, make rules for the purpose of carrying
into effect the objects of this Act.
734 (2) In particular, and without prejudice
to the generality of the foregoing power, such rules may provide for(a) the
terms and conditions of service of members of the Commission;
(b) the manner in which applications for
recognition may be made under section 5 and the levy of fees in respect thereof
;
(c) the manner in which any inquiry for the
purpose of recognising any association may be made and the form in which recognition
shall be granted ;
(d) the particulars to be contained in the
annual reports of recognised associations ;
(e) the manner in which the bye-laws to be
made, amended or revised under this Act shall, before being so made, amended or
revised be published for criticism ;
(f) the constitution of the advisory commit.
tees established under section 26, the terms
of office of and the manner of filling vacancies among members of the committee
; the interval within which meetings of the advisory committee may be held and
the procedure to be followed at such meetings ; and the matters which may be
referred by the Central Government to the advisory committee for advice ;
(g) any other matter which is to be or may be
prescribed." The argument on this part of the case was briefly this : The
Forward Markets Commission is a statutory body specially created for the
purposes of the Act. The powers which mat be conferred upon the Commission and
the duties which it may be called on to discharge are therefore subject to the
provisions of the Act. No more power can be conferred upon this body than what
the Act allows 735 and the power under the amended bye-law 52AA is not one
which is contemplated by the Act as conferable on it.
Section 4 defines the functions of the
Commission under five general heads (a) to (e) with a residuary clause
contained in cl. (f). The powers or duties dealt with in cls. (a) to (e) are in
their essence either recommendatory or advisory.
In the context therefore #,,the other"
duties or '-,other" powers which may be assigned to the Commission under
cl. (f) must be either ejuesdem generis with advisory or recommendatory powers
or of a nature similar to those enumerated in the previous sub clauses.
In support of these submissions learned Counsel
invited our attention to several decisions in which ancillary powers which
might be implied from the grant of certain express powers were referred to. In
particular it was submitted that the Court would not imply a power which it was
not absolutely necessary to effectuate on express grant or was need to prevent
the nullification of an express power that was granted. In our opinion, these
decisions afford no assistance for resolving the controversy before us. There
is no question here of deducing an implied power from the grant of an express
one. What we are concerned with is the scope of an express power or rather
whether the grant of the power conferred upon the Commission by the bye. law
could be held to be a power which could be assigned to the Commission under cl.
(f). So far as the terms of el, (f) are concerned, there is no limitation upon
the nature of the power that might be conferred except, of course, that which
might flow from its having to be one in relation to the regulation of
forward-trading in goods which the Act is designed to effectuate. Any
limitation therefore would have to be deduced from outside cl.(f) of s. 4.
Taking each of the clauses (a) to (e), it is not possible to put them
positively under one genus in order 736 that there might be scope for the
application of the ejusdem generis rule of construction. Negatively, no doubt
it might be said that none of these five clauses confer an executive power such
as has been vested in them by the amended bye-law 52AA but this cannot be the
foundation for attracting the rule of construction on which learned Counsel
relies. On the other hand, if there is no common positive thread running
through cls.(a) to (e) such as would bring them under one genus and negatively
they do not expressly include any administrative or executive functions, that
itself might be a reason why the expression "other" occurring in cl.
(f) should receive the construction that it is intended to comprehend such a
function. Learned Counsel further suggested that even if the rule of ejusdem
generis did not apply, the allied rule referred to at page 76 of the report of
Western India Theatres Ltd. v. Municipal Corporation of Poona, that the matters
expressly referred to might afford some indication of the kind and nature of the
power, might be invoked, but we consider that, in the context, there is no
scope for the application of this variant either. What we are here concerned
with is whether it is legally competent to vest a particular power in a
statutory body, and in regard to this the proper rule of interpretation would
be that unless the nature of the power is such as to be incompatible with the
purpose for which the body is created, or unless the particular power is
contra-indicated by any specific provision of the enactment bringing the body
into existence, any power which would further the provisions of the Act could
be legally conferred on it. Judged by this test it would be obvious that the
power conferred by the bye-law is one which could be validly vested in the Commission.
A more serious argument was advanced by
learned Counsel based upon the submission that a 737 power conferred by a
bye-law framed under s. 11 or 12 was not one that was conferred ""by
or under the Act or as may be prescribed". Learned Counsel is undoubtedly
right in his submission that a power conferred by a bye-law is not one
conferred "by the Act", for in the context the expression
"conferrod by the Act" would mean "conferred expressly or by
necessary implication by the Act itself". It is also common ground that a
bye-law framed under s. II or 12 would not fall within the phraseology "as
may be prescribed", for the "expression" 'Prescribed' has been
defined to mean "'by rules under the Act", those framed under s. 28
and a bye-law is certainly not within that description. The question therefore
is whether a power conferred by a byelaw could be held to be a power
",conferred under the Act". The meaning of the word ",under the
Act" is well-known. "By" an Act would mean by a provision
directly enacted in the statute in question and which is gatherable from its
express language or by necessary implication there from. The words under the
Act " would, in that context, signify what is not directly to be found in
the statute itself but is conferred or imposed by virtue of powers enabling
this to be done; in other words, by laws made by a subordinate law-making
authority which is empowered to do so by the parent Act.
This distinction is thus between what is
directly done by the enactment and what is done indirectly by rule-making
authorities which are vested with powers in that behalf by the Act. (vide Hubli
Electricity Company Ltd. vs. Province of Bombay, and Narayanaswami Naidu vs.
Krishna-Murthi. That in such a sense bye-laws would be subordinate-legislation
"'under the Act" is clear from terms of ss. 11 and 12 themselves.
Section 11 (1) enacts:
"11. (1) Any recognised association may,
subject to the previous approval of the Central (1) 76 I.A. 57, 66.
(2) I.L.R. 1958 Mad 513, 547.
738 Government. make bye-laws for the
regulation and control of forward contracts", and sub-s. (2) enumerates
the matters in respect of which bye-laws might make provision. Sub-s. (3)
refers to the bye-laws as the-se made under this section and the provisions of
sub-s. (4) puts this matter beyond doubt by enacting:
"11 (4) Any bye-laws made under this
section shall be subject to such conditions in regard to previous publication
as may be prescribed, and when approved by the Central Government, shall be
published in the Gazette of India and also in the Official Gazette of State in
which the principal office of the recognised association is situate ;
Section 12 under which the impugned bye-law
was made states in sub-s. (2) :
"12 (2) where, in pursuance of this
section, any bye-laws have been made or amended, the bye-laws so made or
amended shall be published in the Gazette of India and also in the Official
Gazette of the State in which the principal office of the recognized
association is situate, and on the publication thereof in the Gazette of India
the bye-laws so made or amended shall have effect as if they had been made or
amended by the recognised associations, and in sub-s. (4):
"12. (4). The making or the amendment or
revision of any bye-laws under this section shall in all cases be subject to
the condition of previous publication", Having regard to these provisions
it would not be 739 possible to contend that notwithstanding that the bye-laws
are rules made by an Association under s. 11 or compulsorily made by the Central
Government for the Association as its bye-laws under s. 18, they are not in
either case Subordinate legislation under s. 11 or 12 as the case may be, of
the Act and they would therefore squarely fall within the words ,-under the
Act" in s4(f). Indeed, we did not understand Mr. Pathak to dispute this
proposition.
His contention however was that when cl. (f)
specifically made provision for powers conferred by "rules" by the
employment of the pbrase "or as may be prescribed" and, so to speak,
took the "rules" out of the reach of the words "'under the
Act" it must necessarily follow that every power confered by Subordinate
law making body must be deemed to have been excepted from the content of that
expression and that consequently in the Content the word ,,'by the Act"
should be held to mean ,,directly by the Act" i.e., by virtue of positive
enactment, of the words "under the Act" should be held to be a
reference to powers gatherable by necessary implication from the provisions of
the Act. As an instance learned Counsel referred us to the power of the Central
Government to direct the Commission to inspect the accounts and other documents
of any recognised association or of any of its members and submit its report
thereon to the Central Government under s. 8 (2)(c) and suggested that this
would be a case of a power or duty which would be covered by the words
"under the Act". We find ourselves wholly unable co accept this. If
without the reference to the phrase "as may be prescribed" the words
"'under the Act" would comprehend powers which might be conferred
under "byelaws" as well as those under "rules" we are
unable to appreciate the line of reasoning by which powers conferred by
bye-laws have to be excluded, because of the specific reference to powers
conferred by rules".
740 Undoubtedly, there is some little
tautology in the use of the expression "as may be prescribed" after
the comprehensive reference to the powers conferred "under the Act",
but in order merely to avoid redundancy you cannot adopt a rule of construction
which cuts down the amplitude of the words used except, of course to avoid the
redundancy.
Thus the utmost that could be that though
normally and in their ordinary signification the words ,under the Act"
would include both "rules" framed under s.28 as well as
"bye-laws" under s. 11 or 12, the reference to "rules"
might be eliminated as tautlogous since they have been specifically provided by
the words that follow. But beyond that to claim that for the reason that it is redundant
as to a part, the whole content of the words "under the Act" should
be discarded, and the words "by the Act" should be read in a very
restricted and, if one may add, in an unnatural sense as excluding a power
confered by necessary implication, when such a power would squarely fall within
the reach of these words would not, in our opinion, be any reasonable construction
of the provision We need only add that the construction we have reached of s.4
(f) is re inforood by the language of s. 3 (1) which is free from the ambiguity
created by the occurrence of the expression "'as may be prescribed"
in the former. We have therefore no hesitation in holding that there was no
incompetency in the Forward Markets Commission being the recipient of the power
which was conferred upon them by bye-law 52AA as amended.
The next part of the submission in relation
to this matter was that it was not competent for the Association to have framed
this bye-law and that the powers of the Central Government under s. 12 and of
the Association under s. 11 in regard to the framing of bye-law being
co-extensive, the bye-law framed was not competent to confer any power on the
commission.
741 This contention was urged with reference
to two considerations:
(a) that a bye-law of the type now in controversy
was not within s. II of the Act, and (b) that having regard to the provision
contained in the Articles of Association of the Association the bye-law was
beyond the powers of the Association to frame. These we should deal in that
order.
The first objection naturally turns upon whether
the bye-law is one which could be comprehended with s. 11 of the Act. Its first
sub-section enacts;
" 11 (1) any recognised association may,
subject to the previous approval of the Central Government, make bye-laws for
the regulation and control of forward contract." That the impugned bye-law
is one for the regulation and control of forward contracts cannot be disputed,
and the terms being very general would include a bye-law of the type now
impugned. In this connection reference may be made to byelaw 52AA which the
impugned bye-law amended, under which power was vested in the Textile
Commissioner with the concurrence of the Forward Markets Commission, (though
after consultation with the Chairman of the Board) to direct the enclosure of
hedge contracts and fix the rates at which such contracts might be closed out a
provision whose validity was not impugned in the present proceedings. Mr.
Pathak no doubt submitted that he was not precluded from challenging before us
even the earlier bye-law for the purpose of sustaining his argument that the
amended bye-law was ultra vires. Nevertheless it must be apparent that it was
always assumed that bye-laws which vest in authorities external to the
Association the 742 power to interfere with forward dealing was within the
scope of the bye-law making powers under This general provision apart, sub-s.
(2) of s. 11 enact:
"11(2). In particular, and without
prejudice to the generality of the foregoing power, such bye-laws may provide
for(a)...............................
(b)...............................
(c)...............................
(d)fixing, altering or postponing days for
settlement;
(e)determining and declaring market rates,
including opening, closing, highest and lowest rates for goods;
(f)..............................
(g)......................................
(h)........................................
(i)...........................................
(j)..........................................
(k).........................................
(1)...........................................
(m).........................................
(n) the regulation of fluctuations in rates
and prices;
(o) the emergencies in trade which may arise
and the exercise of powers in such eme regencies including the power to fix
maximum prices;
743 As the power of the Central Government to
make bye-laws under s. 12 is admittedly co-extensive with the power of the
Associations to frame byelaws, it is not necessary to refer to the terms of the
latter sections Before considering in detail the argument on this part of the
case we consider it useful to set out a few of the byelaws of the Association
whose validity has not been challenged and which would show the manner in which
the Association has been functioning in emergencies such as that for which the
impugned bye-law provides, Bye-law 52 which still exists:
"52.(1) If in the opinion of the Board
an emergency has arised or exists, the Board may, by a resolution, (i) passed
by a majority of not less than --and (ii) confirmed prohibit, as from the date
of such confirmation or from such later date as maybe fixed by the Board in the
resolution referred to in sub-clause (1), (a)trading in the Hedge Contract for
any delivery or deliveries -------or (b) all trading in such contracts as are
referred to in clause (a) for a specified period----------------------"52A.-If
the Board, at a meeting specially convened in this behalf, resolve that a state
of emergency exists or is likely to occur such as shall in the opinion of the
Board make free trading in forward contracts extremely difficult, the Board
shall so inform the Forward Markets Commission and upon the 744 Forward Markets
Commission intimating to the Board its agreement with such resolution, then
notwithstanding anything to the contrary contained in these bye-laws or in any
forward contract made subject to these Byelaws, the following provisions shall
take effect(1)The Board shall at a meeting specially convened in this behalf,
(a)fix a date for the purpose hereinafter contained, (b)fix settlement process
for forward contracts, (c)fix a special Settlement Day.
(2)............... Every hedge contract
entered into between a member and a member or between a member and a non-member
outstanding on the date fixed under clause (1)(a) hereof shall be demand closed
out at the rate appropriate to such contracts fixed under clause (1)(b)
hereof." 3 -6 and then follows Bye-law 52AAA.
Apart for the amended bye-law occurring in
the group of existing bye-laws making provision for emergencies to which
sub-clause (o)of s.11(2) refers, there is no dispute that there was an
emergency in the forward market and that the impugned bye-law was framed to
meet such a contingency. It was not contended before us that the method by
which the emergency was resolved by the impugned bye-law viz., by closing out
subsisting contract was not the usual method employed for the purpose. If
therefore the bye-law was provision for an emergency within s.11 (2)(o) then it
would seem to follow that for the resolution of that emergency, 745 every one
of the matters which could be included in such bye-laws would be attracted to
it, and so we find it impossible to accept Mr. Pathaks submission regarding the
invalidity of the bye-Law.
An analysis of the impugned bye-law 52AA and
comparison of it with that which it replaced would show that the main point of
difference is that whereas formerly action to stop forward trading and for
closing out contracts and to fix the rate at which contracts were to be closed
out was vested in the Textile Commissioner, acting with the concurrence of the
Forward Markets Commission, under the amended bye-law the power is directly
vested in the Forward Markets Commission itself. The arguments addressed to us
on this point are concerned not so much with the propriety as with the vires of
a provisions by which the power to close out contracts by the issue of a
notification is vested in the Commission.
Apart from an argument immediately to be noticed,
we do not see how, if such a power could validly be conferred upon a Textile
Commissioner or even exercised by the Board of the Association under a bye-law
framed under s. 11, the same would be beyond the power to make bye-laws under
s. 11 by the mere fact that the authority vested with the power is the Forward
Markets Commission. We are clearly of the opinion that bye-law 52AA is well
within the bye-law making power under s. 11 of the Act and therefore within 12.
It was then said that the amended bye-law
52AA wag invalid as in violation of the Articles of Association of the
Association being an impermissible delegation of the powers vested in the board
of the Association by its Memorandum of Articles. In this context Mr. Pathak
placed reliance on cl.
64 of the Articles as laying down the limits
within which 746 the Board might delegate their powers. He contended that the
conferment of the power to take action on the Forward Markets Commission was
thus contrary to and inconsistent with the powers of the Association under this
Article. It would be seen that if learned Counsel is right, this would render
invalid not merely bye-law 52AA as now amended but even the bye-law as it
originally stood, but as already stated learned Counsel urged that he was not
precluded from raising this contention. This point was not raised in the Court
below but having beard arguments on it we shall pronounce upon it. We consider
that there is no substance in this objection. Article 64 on which reliance was
placed runs in these terms:
"The Board may delegate any of their
powers, authorities and duties to committees consisting of such members or
member, of their body or consisting of such other members or members Associate
Members, Special Associate Members or Temporary Special Associate Members of
the Association not being Directors, or partly of Directors and partly of such
other members and/or Associate Members, Special Associate Members or Temporary
Special Associate Members as the Directors may think fit.
Any Committee so formed shall in the exercise
of the powers so delegated conform to any regulation that may from time to time
be imposed on it by the Directors".
In so far as the Memorandum is concerned, its
paragraph III states the objects for which the Association was established, as
being, inter alia " -" (e) To make from time to time bye-laws for--opening
and closing of markets in cotton and the 747 times during which they shall open
or closed;
the making performance and determination the
prohibition of specified classes of dealings and the time during which such
prohibition shall operate; the provision of an dealing with 'Croners' or ,Bear
Raids' in any and every kind of cotton and cotton transactions so as to prevent
or stop or mitigate undue speculation inimical to the trade as a whole;
the course of business between Original
Members inter be or between any of them on the one hand, and their constituents
on the other hand, the forms of contracts between them and their rights and
liabilities to each other in respect of dealings in The Articles dealing with
bye-laws, the manner in which they are to be made as well as the subject to
which they might relate is to be found in Articles 73 and 74. The relevant
portion of Article 73 runs:
""Under and in conformity with any
Statutory provisions for the time being in force, the Board may pass and bring
into effect such byelaws as may be considered in the interest of or conducive
to the objects of the and Article 74 runs:
"Without prejudice to the generality of
the powers to make bye-laws conferred by the Memorandum of Association and by
these Articles and under or in the absence or any statute or statutes in force
in that behalf, it is hereby expressly declared that the said powers to make,
alter, add to, or rescined Bye laws including power to do so in regard to all
or any of the following matters--" Sub-para (7) repeats inter alia the
contents of 748 Paragraph III (e) of the Memorandum of Association which we
have extracted, The entire argument of Mr. Pathak on Article 64 was based on
the footing that the power to make a bye-law was vested solely in the Board,
because it is only the powers of the Board that are subject to the limitation
imposed by Article 64. If however the power to make a byelaw was not confined
to the Board but bye-laws might be framed by the Association itself, the
argument based on Article 64 would be seen to have no validity. That the later
is the true position is clear from Article 73 which reads:
"The Board's powers as aforesaid in
relation to bye-laws shall not derogate from the powers hereby conferred upon
the Association who may also in the same way and for the same purpose from time
to time pass and bring into effect new bye-laws and rescind or alter or add to
any existing bye-law by resolution passed by a majority of two-thirds at the
least of the Members present and voting at the General Meeting previous to
which at least fourteen day's notice has been given that a Member intends at
such meeting to propose the making of such bye-law or the decision, alteration
of or addition to a bye law or bye-laws".
If therefore a bye-law could be made, by the
Association it is manifest that there is no limitation upon its powers such as
is to be found in Article 64 which applies only to the Board. The validity of
the bye-law therefore cannot be challenge by reference merely to the powers of
the Board, because what is contemplated by s. I I is the power of the
"recognised Association" to frame the bye-law. We have therefore no
hesitation in rejecting the contention that the bye-law as framed contravenes
the rules of the Association.
749 Mr. Pathak next contended that the
impugned bye-law was invalid because it operated retrospectively. This argument
he presented under two heads His first submission was that consistently with
the rule that an, enactment 'would not be construed as. retrospective unless
the same were to have that effect by express language or by necessary
intendment, the impugned bye-law should, be held to affect and close out only
those contracts which were entered into after the date on which the byelaw came
into operation and that if he was right in this construction the impugned
notification had gone beyond the powers conferred on the Commission by the new
bye-law. We are wholly unable to accept this submission as to the construction
of the bye law. The first paragraph of the ])ye-.law by its list words points
out the consequence of a notification by the Forward Markets Commission. It
provides that if the Chairman were notified that the continuation of trading in
hedge contracts for any delivery etc. "was detrimental to the interests of
the general public or the larger interests of the economy of India," then,
notwithstanding, anything to the contrary contained the bye-laws of the
Association or in any hedge etc. contract the provisions contained in the
second paragraph should have effect. , If one had regard only to paragraph and
nothing more there might be' some room for a plausible argument that subsisting
contracts were not to be affected, though the expression "notwithstanding
anything to the contrary contained in any badge etc. contract" would
undoubtedly militate against any such contention. But such ambiguity if any is
cleared by the provision in paragraph 2 which has effect on the notification
under paragraph 1, for by express terms it refers to "every had de
contract" and "every on call contract" "in so far as cotton
is uncalled there under or in so far as the pride has not been fixed there
under". This therefore places it beyond doubt that executory contracts 750
which were subsisting on the date of the notification were within its scope and
were intended to be affected by it.
And this, if anything more needed, is made
more certain by the I reference in parts (2) to the provisions of old. (3), (4)
and (6) of bye-law 52A. Bye-law 62A deals with cases where the Board of the
Association resolves repeat its terms "that a state of emergency exists or
is likely to occur which makes free trading in forward con. tracts difficult
and on obtaining the concurrence of the Forward Markets Commission, then
notwithstanding anything to the contrary contained in these Bye-laws subject to
these Bye-laws. The following provision %hall have effect "(1) The Board
shall at a meeting specially convened in this behalf, (a)fixa date for the
purposes herein. after contained, (b)fix settlement prices for forward
contracts, (c) fix a special Settlement Day." Clause (3) of bye-law 52A
runs :"52A (3) All differences arising out of every such contract between
members shall be paid through the Clearing House on the Settlement Day fixed
under clause (1) (c) her Clause (4) "52A (4) All differences arising out
of every such contract between a member and a nonmember shall become
immediately due and payable." and Clause (6) "52A (6 In hedge and on
call contracts entered into between a member and a non. member and in contracts
to which clause (5) 751 applies, any margin received shall be adjusted and the
whole or the balance thereof, as the case may be, shall be immediately
refundable.
It is thus clear that the entire machinery
for resolving emergencies such as is contemplated by byelaw 52A includes the
suspension of forward business now together with the closing out of forward
contracts of hedge and on call types whose volume or nature had led to the
emergency. It proceeds on the basis that the crisis could not be met unless
subsisting contracts were closed out and, so to speak a new chapter begun. That
is the ratio underlying the combined effect of bye-laws 52AA and 52 A and in
view of this circumstance the argument that on a reasonable construction of the
amended bye-law it would apply to contracts to be entered into in future and
not to subsisting contracts must be rejected.
If he was wrong in his argument that the
byelaw on its proper construction did not affect subsisting contracts such as
these of the Appellants, Mr. Pathak's further submission was that the impugned
bye-law was invalid and ultra vires of the Act because it purported to operate
retrospectively affecting vested rights under contracts which were subsisting
on the day on which the bye-law came into force.
Mr. Pathak invited our attention to a passage
in Craies' Statute Law, 5th Ed. p. 366 reading:
"Sometimes a statute, although not
intended to he retrospective, will in fact have a retrospective operation. For
instance if two persons enter into a contract, and afterwards a statute is
passed which, as Cockburn, C. J., said in Duke of Devonshire v. Barrow, etc.,
Co. (1877) 2 Q. B. D. 286, 289) "engrafts an enactment upon existing
contracts' and 752 thus operates so as to produce a result which is something
quite different from the original intention of the contracting parties, such a
statute has, in effect a retrospective operation." The bye-law in so far
as it affects executors contracts requiring such contracts to be closed out on
a (lay not originally: contracted for and at a price fixed by law is in the
above sense undoubtedly retrospective. The submission of learned 'Counsel was
that though a legislature which bad plenary power in this regard could enact a,
havind a retrospective operation, Subordinate legislation, be it a rule, a
bye-law or a notification, could not be made so as to have retrospective
operation and that to that extent the rule, bye-law or notification would be
ultra vires and would have to be struck down, relying for this position on -the
decision of the Mysore High Court reported in AIR 1960 Mys, 326. 'We do not
however consider it necessary to canvass the correctness of this decision or
the broad propositions laid down in it. It is clear law that a Statute which
could validly enact a law with retrospective effect could in express terms
validly confer upon a rule-making, authority a power to make a rule or frame a:
bye-law having retrospective operation and we would add that we did not
understand Mr. Pathak to dispute this position. If this were so the same
result, would follow where the power to enact a rule or, a byelaw with
"retrospective effect" so as to Affect Pending transactions, is
conferred not by express words but where the necessary intendment of I the Act
confers such A power. If in the present case the power to make a byelaw so as
to operate on contracts subsisting on the day the same was framed, would follow
as; a necessary implication from the term of S. 1 1, it would not be necessary
to discuss the larger question as to whether and the 753 circumstances in which
Subordinate legislation with retrospective effect could be validly made.
Before proceeding further it is necessary to
notice a submission that under the Act, far from there being a conferment of
power to make a bye-law, so as to -affect rights under subsisting contracts,
there was a contra indication of such a power being conferred.
In, this connection Mr. Pathak invited, our
attention to the: terms of ss. 16 and 17 and 19 of the Act under which the Act
has itself made special provision for affecting rights such as those, if the
appellants in the present case. Detailing the conseqences of a notification
under s. 15, s.16 (a:) enacts "16 (a,,) Every forward contract for the
sale or purchase of any goods specified in the notification, entered into
before the date of the notification and remaining to be performed after the
said, date and which is not in conformity with the provision of section 15,
shall be deemed to be closed out at such rate as the Central Government may fix
in this behalf.
S.17 (3) enacts "17. (3) Where a
notification has been issued under subsection (1), the provisions of section 16
shall, in the absence of anything to the contrary in the notification, apple to
all forward contracts for the sale or purchase of any goods specified in the
notification entered into before the date of the notification and remaining to
be performed after the said date as they apply to all forward contracts for the
sale or purchase, of any goods specified in the notification under section
15." and f 19 (2) runs:"19 (2). Any option in good which has been
entered into' before the date on which 754 this section comes into force and
which remains to be performed, whether wholly or in part, after the said date
shall, to that extent, becomes void." Based on these provisions the
submission was that Act had made special provisions for retrospective operation
of certain notifications so as to affect rights under subsisting contracts and
that in cases where there was no such specific provision it was not intended
that a bye-law or a notification could have that effect.
We see no force in this argument. The fact
that the Act itself makes provision for subsisting contracts being affected,
would in our opinion far from supporting the appellants indicate that in the
context of a crisis in forward trading the closing out of contracts was a
necessary method of exercising control and was the mechanism by which the
enactment contemplated that normalcy could be restored and healthy trading
resumed.
If therefore we eliminate the provisions in
as. 16, 17 and 19 as not containing any indication that a power to frame a
bye-law with retrospective effect was withheld from the Association, the
question whether such bye-law-making power was conferred has to be gathered
from the terms of s. II itself. Thus considered we are clearly of the opinion
that a power to frame a bye-law for emergencies such as those for which a
bye-law like 52 AA is intended includes a power to frame one so as to affect
subsisting contracts for resolving crisis in Forward Markets. We have already
referred to the terms of bye-law 52A which shows that when an emergency of the
type referred to a. It (2) (a) arises it is not practicable to rescue a forward
market from a crisis without (1) putting an end to forward trading, and (2)
closing out subsisting contracts so as to start with a clean slate for the 755
future. When therefore under s. 11 (2) power is conferred to frame a bye-law to
provide for:
" (O) the emergencies in trade which may
&rise and the exercise of power in such emergencies including the power to
fix maximum and minimum prices;" &-ad this is read in connection with
clause (g) reading:
"regulating the entering into, making,
performance, rescission and termination of contra eta............... If It is
manifest that the section contemplates the making of a bye-law regulating the
performance of contracts, the rescission and termination of contracts and this
could obviously refer only to the bye-law affeding rights under contracts which
are subsisting on the day the action is taken. It is therefore manifest that s.
11 authorises the framing of a byelaw which would operate retrospectively in
the sense that it affects rights of parties under subsisting contracts. Finally
it should be borne in mind is that ultimately what we are concerned in a. 1 1
of the Act is the power of the Association to frame the bye-law' for if the
Association could validly frame such a bye-law the Central Government could
under s. 12 have a similar power. We did not hear any argument to establish
that the Association had no such power.
There is one other aspect in which the same
problem might be viewed and it is this : The contract entered into by the
respondents purported to be one under the bye-laws for the time being in force
and any change in the bye-laws therefore would in to be contemplated and
provided for by the contract itself, so that it might not be correct to speak
of the new bye-law as affecting any accrued 756 rights under a contract. For
when those-by-laws were altered the changes would get incorporated into the
contracts themselves, so as to afford no scope for the argument that there has
been an infringement of a vested right. In the view however which we have taken
about the validity of the bye-law on the ground that it was well within the
terms of as.' 'II and 12 we do not consider it necessary to pursue this aspect
further or to rest our decision on it.
What remains to consider is the challenge to
the notification based on the ground that it was vitiated by having been issued
malafide. The ground of malafides alleged was that the impugned notification
was issued in order to prevent the Board of Directors of the Association.
from applying their minds and exercising
their judgment which they were directed to do by the terms of the Consent Memo
filed on which the appeal from the judgment in C.S. 2 of 1956 was disposed of
on January 24, 195 . To the allegation made in this form in the petition the
first respondent, the, Chairman: of the Forward Markets Commission, filed an
affidavit in the course of which he pointed out that the continuance of trading
in futures was in the circumstances then prevailing in the market detrimental
to the interests of the trade and that a conclusion on this matter had been
reached by the Commission even before by-law 52 AA was amended, that the
question of closing out existing contracts was engaging the attention of even
the Board of the Association from as early as the beginning -of January 1956
and it was for the purpose of enabling the Commission to take action to set
right matters that bye-law 52AA was amended and that immediately the amended
bye-law came into force the Commission took action and issued: the notification
now managed. He also pointed out that the liberty given to the Association to
consider the matter 757 under' the terms of the Compromise Memo was a factor
which had also boon taken into account before the notification had been issued.
The learned Judges of the High Court accepted this explanation of the
circumstances in which the notification came to be issued and considered that
on the allegation in the petition no mala fides could be inferred.
We are in entire agreement with the learned
Judges of the High Court on this point. No personal motive or mala fided in
that sense has been attributed to the members of the Commission and in these
circumstances we consider that there is no basis for impugning the notification
on the ground that it was not issued bonafide.
This completes all the points urged by the
learned Counsel for the appellants. We consider that there is no merit in the
appeal which fails and is dismissed with costs.
SUBBA RAO, J.-I regret my inability to agree
with the judgment prepared by my learned brother Rajagopala Ayyangar, J.
As the fact,-; have been fully stated in the
judgment of my learned brother, I need not repeat them except to the extent
necessary to appreciate the two points on which I propose to express my
opinion.
The appellants carry on business in cotton
under, the name and style of Indramani Pyarelal Gupta & Co. The said firm
is a member of the East India Cotton Association Limited, which is a recognized
Association within the meaning of the Forward Contracts (Regulation) Act, 1952,
hereinafter called "the Act". The Association has been formed for the
purpose of, inter alia, promoting and regulating trade in cotton and providing
a cotton Exchange and a Clearing House. Under the Act a formed by the Central
Government and respondent is its man and respondents 2 and 3 are its Members.
758 Prior to January 21, 1956, on behalf of
themselves and their constituents, the appellants entered into hedge contracts
in cotton for February 1956 and May, 1956 Settlements with other members of the
Association in accordance with its byelaws. When the said contracts were
effected, bye-law 52 AA ran as follows :
"(I) Whether or not the prices at which
cotton may be bought or sold are at any time controlled under the provisions of
the Essential Commodities Act, 1955, if the Textile Commissioner with the
concurrence of the Forward Markets Commission and after consultation with the
Chairman, be of opinion that the continuation of hedge trading is likely to
result in a situation detrimental to the larger interests of the economy of
India and so informs the Board, the Board shall forthwith cause a notice to be
posted on the Notice Board to that effect and on the posting of such notice and
notwithstanding anything to the contrary contained in these Bye-laws or in any
hedge or on call contract made subject to these Bye-law, the following
provision shall take effect.
(2)Every hedge contract and every on call
contract in so far as the cotton is uncalled there under, or in so far as the
price has not been fixed there under, entered into between a member and a
member or between a member and a non-member then outstanding shall be deemed
closed out at such rate, appropriate to such contract, as shall be fixed by the
Textile Commissioner and the provisions of clauses (3), (4) and (6) of Bye-law
52-A, in so far as they apply to hedge and on call contracts shall apply as if
the formed part of this Bye-law. After the affixation of the said notice on the
Notice Board, trading in hedge 759 and on call contracts shall be prohibited
until the Textile Commissioner with the concurrence of the Forward Markets
Commission and after consultation with the Chairman, permits resumption".
On January 21, 1956, the Central Government,
in exercise of power conferred upon it by sub-s. (1) of s. 12 of the Act,
notified a new bye-law 52-AA to be substituted in place of the earlier bye-law
52-AA. The new bye-law reads as follows :
"(1) Whether or not prices at which
cotton may be bought or sold are at any time controlled under the provisions of
the Essential Commodities Act, 1955, if the Forward Markets Commission is of
the opinion that continuation of trading in hedge contract for any delivery or
deliveries is detrimental to the interest of the trading or the public interest
or the larger interests of the economy of India and so notified the Chairman,
then notwithstanding anything to the contrary contained in these Bye-laws or in
any hedge or on call contract made subject to these Bye-laws the following
provisions shall take effect.
(2) Every hedge contract and every on call
contract in so far as cotton is uncalled thereunder and relating to the
delivery or deliveries notified under clause (1) entered into between a member
and a member or between a member and non-member then outstanding shall be
deemed closed out at such rate appropriate to such contract and with effect
from such date as shall be fixed by the Forward Markets Commission and the
provisions of Clauses (3), (4) and (6) of Bye-law 52A in so far as they apply
to hedge and on call contract" shall apply as if they formed part of this
Bye-law." 760 On January 24, 1956, the Forward Markets Commission, in
exercise of the power conferred on it under the new bye-law, issued a
notification closing out all contracts of February 1956 and May 1956
Settlements at the rates mentioned in the said notification. The, petition for
a writ of mandamus filed by the appellants in the High Court of Judicature at
Bombay for ordering the respondents to cancel or withdraw the said notification
dated January 24, 1956, was dismissed in the first instance by Coyajee, J.,
and, the appeal preferred against the judgment of Coyajee, J., was also
dismissed by a division Bench consisting of Chagla, C.J., and Tendolkar, T. Hence
the appeal.
I purpose, as I have already indicated, to
consider the following two questions, as in the view I will be taking on those
questions, the appeal will have to be allowed, and no other question,
therefore, will arise for consideration. The said questions are : (1) Whether
under s. 12 (i) of the Act the Central Government. has power to make a bye-law
with retrospective effect; and (21 whether under s. 4 (f) of the Act, the
Forward Markets Commission can exercise a, power assigned to it under a bye-law
made by the Government under s. 12 of the Act.
Before considering the scope of the power of
the Central Government under s. 12 (1) of the Act, it is necessary to consider
whether the new byelaw notified on January 21, 1956, has retrospective There are
material differences between the old bye-law 52-AA and the new one substituted
in its place Under the now bye-law the important provision is that all hedge
Contracts outstanding at the time it came into force shall be deemed to be
closed out at such rates as shall be fixed by the Textile Commissioner. Whereas
under the old by law the, Textile Commissioner had to form his opinion with the
concurrence of the Forward Markets Commission and after consultation with 761
the Chairman, under the new bye-law the said power of forming an opinion is
conferred solely on the For-ward Markets Commission where as under the old,
bye-law the opinion and was in regard to the question whether hedge trading was
likely to result in a situation detrimental 'to the larger interests of the
economy of; India under the new bye-law the opinion is in respect of the
question whether the continuation of trading in hedge contracts will be
detrimental to the interests of trading or the public interest or the larger
interests of the economy of India. While under the old byelaw the question to
he considered was in regard to hedge trading as such, under the new bye-law it
is in respect of the continuation of trading in hedge contracts for any
delivery or deliveries. While under the old bye law the, said opinion was
Communicated to the Board for action, under the new bye-law it is notified to
the Chairman. While under the old bye -law trading, in hedge and on call
contracts could be resumed if the Textile Commissioner, with the concurrence of
the Forward Markets Commission and after consultation with the Chairman,
permitted the resumption, under the now bye-law the said provision for
resumption is omitted.
It is, therefore, manifest that the power of
closing out a contract under the new bye-law differs from that Under the old
bye law in respect of the purpose of closing out, the authority empowered to
order the close out and the consequences of such closing out. It is idle to
contend that the new bye-law makes only inconsequential changes in the old
bye-law. The new bye-law operates upon an important term of a contract entered
into before it came into force, namely, the mode of performance: it carries oil
its face the vice of retroactivity. In Craies on Statutes, 5th Edn'. p, 366,
the following passage appropriate to the question now raised is found.
762 renders the performance of a contract
impossible, the rule of law is that the contract to frustrated by supervening
impossibility, consequently in this case also the statute operates retrospectively."
The learned author proceeds to state at p. 367:
"The principle of this case has been
applied in later cases to contracts the performance of which in manner
contemplated by the parties has been rendered impossible by reason of some
change in the law." It is, therefore, clear that the said bye-law, in so
far as it purports to effect the mode of performance of the preexisting
contracts, is certainly retrospective in operation. I am assuming for the
purpose of the present question that the byelaw cannot be construed in such a
way as to confine its operation only to contracts that are entered into after
it came into force. If so, the question arises whether the Central Government
had power to make a bye law under s. 12 (1) of the Act with retrospective
effect-Section 12 (1) of the Act reads "The Central Government may, either
on a request in writing received by it in this behalf from the governing body
of a recognized association, or if in its opinion it is expedient so to do,
make bye-laws for all or any of the matters specified in section II or amend
any bye laws made by such association under that section.' Section 11
enumerates the matters in respect of which the recognized associations can make
bye. laws for the regulation and control of forward contracts. Neither s. 12
nor a. 11 expressly states that a bye-law with retrospective operation can be
made under either of those two sections.
Full effect 763 can be given to both the
sections by recognizing a power only to make bye-laws prospective in operation,
that is, bye-laws that would not affect any vested rights. In the
circumstances, can it be held that the Central Government to which the power to
make bye-laws is delegated by the Legislature without expressly conferring on
it a power to give them retrospective operation can exercise a power there
under to make such bye-laws. Learned counsel for the respondents contends that,
as the Legislature can make a law with retrospective operation, so too a
delegated authority can make a bye-law with the same effect. This argument
ignores the essential distinction between a Legislature functioning in exercise
of the powers conferred on it under the Constitution and a body entrusted by
the said Legislature with power to make subordinate Legislation. In the case of
the Legislature, Art. 246 of the Constitution confers a plenary power of
Legislation subject to the limitations mentioned therein and in other
provisions of the Constitution in respect of appropriate entries in the Seventh
Schedule. This Court, in Union of India v. Madan Gopal Kabra (1), held that the
Legislature can always Legislate retrospectively; unless there is any
prohibition under the Constitution which has created it. But the same rule
cannot obviously be applied to the Central Government exercising delegated
Legislative power for the scope of their power is not co-extensive with that of
Parliament.
This distinction is clearly brought out by
the learned Judges of the Allahabad High Court in Modi Food Products Ltd. v.
Commission of sales-Tax, U. P. (2), wherein the learned Judges observed:
"A Legislature can certainly give
retrospective effect to pieces of Legislation passed by it but an executive
Government exercising subordinate and delegated legislative (1) [1954] S.C. R.
541.
(2) A. T. R. 1956 All. 35.
764 powers, cannot make legislation
retrospective in effect unless that power is expressly conferred." In
Strawboard Manufacturing Co. Ltd. v. Gutta Mill Workers Union (1) a question
arose whether the Governor of U. P., who referred an industrial dispute to a
person nominated by him with a direction that he should submit the award not
later than a particular date could extend the date for a making of the award so
as to validate the award made after the prescribed date. Reliance was placed upon
s. 21 of the U. P. General Clauses Act, 1904, in support of the contention that
the power of amendment and modification conferred on the State Government under
that section might be so exercised as to have retrospective operation. In
rejecting that contention, Das, J., as he then was, observed :
"It is true that the order of April 26,
1950, does not ex facie purport to modify the order of February 18, 1950, but,
in view of the absence of any distinct provision in section 21 that the power
of amendment and modification conferred on the State Government may be so
exercised as to have retrospective operation the order of April 26, 1950,
viewed merely as an order of amendment or modification cannot, by virtue of
section 21, have that effect." This decision is, therefore, an authority
for the position that unless a statute confers on the Government an express
power to make an order with retrospective effect, it cannot exercise such a
power. The Mysore High Court in a considered judgment in India Sugar &
Refineries Ltd. v. State of Mysore (2) dealt with the question that now arises
for consideration. There, the Government issued (1) [1953] S.C.R. 439. 447-448.
(2) A. 1. R. 1960 Mys. 3 765 there
notifications dated 9-4-1956, 15-10-1957 and 13-2-1958 purporting to act under
s. 14 (1) of the Madras Sugar Factories Control Act, 1949, whereby cess was
imposed on sugarcane brought and crushed in Petitioner's factory for the
crushing season 1955. 56, 1956-57 and 1957-58 respectively. One of the question
raised was whether under the said section the Government had power to issue the
notifications imposing a cess on sugarcane brought and crushed in petitioner's
factory for a period prior to the date of the said notifications. Das Gupta, C.
J., delivering the judgment of the division Bench, held that it could not. The
learned Advocate General, who appeared for the State, argued, as it is now
argued before us, that in a case where power to make rules is conferred on the
Government and if the provision conferring such a power does not expressly
prohibit the making of rules with retrospective operation, the Government in
exercise of that power can make rules with retrospective operation. In
rejecting that argument, the learned Chief Justice, delivering the judgment of
the division Bench, observed at p. 332:
"In my opinion a different principle
would apply to the case of an executive Government exercising subordinate and
delegated legislative powers. In such oases, unless the power to act
retrospectively is expressly conferred by the Legislature on the Government,
the Government cannot act retrospectively." With respect, I entirely agree
with the said observations.
The same question was again raised and the
same view was expressed by the Kerala High Court in C. W. Motor Service (P)
Ltd. v. State of Kerala (1). There the Regional Transport Authority, Kozhikode,
granted a stage carriage permit to the third respondent therein in respect of a
proposed (1) A. 1. R. (195) Ker. 347, 348.
766 Ghat route. The grant of the permit was
challenged on the ground that when that order was passed there was no
constituted Regional Transport Authority for the district.
It was contended on behalf of the contesting
respondent that the said defect was cured by a subsequent notification issued
by the Government whereby Government ordered the continuance of the Road
Transport Authority from the date of the expiry of the term of the said
'Authority till its successor was appointed. The High Court held that the
notification with retrospective operation was bad. In that context, Varadaraja
lyengar, J., observed :
"The rule is well-settled that even in a
case where the executive Government acts as a delegate of a legislative
authority, it has no plenary power to provide for retrospective operation unless
and until that power is expressly conferred by the parent enactment." The
House of Lords in Howell v. Folmouth Boat Construction Co. Ltd. (1) expressed
the same opinion and also pointed cut the danger of conceding such a power to a
delegated authority. There, a licence was issued to operate retrospectively and
to cover works already done under the oral sanction of the authority. Their
Lordships observed:
"It would be a dangerous power to place
in the hands of Ministers; and their subordinate officials to allow them, when.
ever they had power to license, to grant the licence ex post facto; and a
statutory power to license should not be construed as a power to authorise or
ratify what has been done unless the special terms of the statutory provisions
clearly warrant the construction." It is true that this is a case of a
licence issued by an (1) (1951) A. C. 837.
767 authority in exercise of a statutory
power conferred on it, but the same principle must apply to a byelaw made by an
authority in exercise of a power conferred under a statute.
Our Constitution promises to usher in a
welfare State. It involves conferment of powers of subordinate legislation on
government and governmental agencies affecting every aspect of human activity.
The regulatory process is fast becoming an ubiquitous element in our life. In a
welfare State, perhaps, it is inevitable, for the simple reason that Parliament
or Legislature cannot be expected to provide for all possible contingencies.
But there is no effective machinery to control the rule-making powers, or to
prevent its diversion through authoritarian channels. If the conferment of
power to make delegated Legislation proportion vigor carried with it to make a
rule or bye-law with retrospective operation, it may become an instrument of
oppression. In these circumstances, it has been rightly held that the provision
conferring such a power must be strictly construed and unless a statute
expressly confers a powers to make a rule or bye-law retrospectively, it must
be held that it has not conferred any such power. It is said that such a strict
construction may prevent a rule making authority from making a rule in an
emergency, though the occasion demands or justifies a rule with retrospective
effect. The simple answer to this alleged difficulty is that if the Legislature
contemplates or visualizes such emergencies, calling for the making of such
rules or bylaws with retrospective effect, it should expressly confer such
power. It is also said that the Government can be relied upon to make such
rules only on appropriate occasions. This Court cannot recognize implied powers
pregnant with potentialities for mischief on such assumptions. That apart, the
scope or ambit of a rule cannot be made to depend upon the status of a
functionary entrusted with a 768 rule making power. In public interest the
least the court can do is to construe provisions conferring such a power
strictly and to confine its scope to that clearly expressed therein.
Applying that rule of strict construction, I
would hold that s. 12 (1) does not confer a power on the Central Government to
make a bye-law with retrospective effect and, therefore, the new bye-law made
on January 21, 1956, in so far as it purports to operate retrospectively is
invalid.
Assuming that it is permissible to infer such
a power by necessary implication, can it be said that it is possible to so
imply under s. 12 of the Act ? The phrase "necessary implication", as
applied in the law of statutory construction means an implication that is absolutely
necessary and unavoidable; that is to say, a court must come to the conclusion
that unless such an implication is made, the provisions of the section could
not be given full effect on the wording as expressed therein. Under s. 12 of
the Act, the Central Government may either on a request in writing received by
it from the governing body of a recognized association, or if in its opinion it
is expedient so to do, make byelaws for all or any of the matters specified in
s. 11 or amend any bye-law made by such association under that section. Now s.
11 says that any recognized association may, subject to the previous approval
of the Central Government, make bye-laws for the regulation and control of
forward contracts; under sub a. (2) thereof, the association is authorized to
make laws providing for any of the matters mentioned therein. A glance at those
matters shows that all the bye-laws providing for those matters could be framed
without giving s. 12 any retrospective effect. It is said that s. II (o) gives
an indication that a bye-law contemplated by that sub-clause must necessarily
provide for its retrospective operation. It reads:
769 "the emergencies in trade which may
arise and the exercise of powers in such emergencies including the power to fix
maximum and minimum prices;" The learned Solicitor General contends that
an occasion may arise when by a determined action of a "bear" or a
"bull" the rates may about up beyond a reasonable level or fall down
steeply below a particular point creating an emergency in the market and in
that emergency it would be necessary for the authorities concerned to step in
and close out the contracts, and unless the bye-law is made retrospective such
an emergency cannot be met and, therefore, the power to make a by-law to meet
an emergency contemplated in s. 11(o) of the Act must necessarily imply a power
to make a bye-law retrospectively. There is an underlying fallacy in this
argument. The conferment of a power on the Government to make a bye-law with
retrospective operation must be absolutely necessary and unavoidable to provide
for the matter mentioned in sub-cl. (o) of s. 11 or any other clause of sub-s.
(2) of s. 11. A bye-law could certainly be made to provide for an emergency
visualized by the learned Solicitor General or for any other emergency
contemplated by that clause with only prospective operation. It cannot, therefore,
be said that unless retrospective operation was given to the provisions of s.
12, the objects of the legislation would be defeated or the purposes for which
the power was conferred could not be fulfilled. 1. Therefore, hold that s.
12(1) of the Act does not confer any such power on the Central Government by
necessary implication.
The second question turns upon the
interpretation of a. 4 of the Act. It reads:
"The function of the Commission shall be(a)
to advise the Central Government in.
770 respect of the recognition of, or the
withdrawal of recognition from, any association or in respect of any other
matter arising out of the administration of this Act;
(b) to keep forward markets under observation
and to take such action in relation to them as it may consider necessary, in
exercise of the powers assigned to it by or under this Act;
(c) to collect and whenever the Commission
thinks it necessary publish information regarding the trading conditions in
respect of goods to which any of the provisions of this Act is made applicable,
including information regarding supply, demand and prices, and to submit to the
Central Government periodical reports on the operation of this Act and on the
working of forward markets relating to such goods;
(d) to make recommendation generally with a
view to improving the Organisation and working of forward markets;
(e) to undertake the inspection of the accounts
and other documents of any recognized association or registered association or
any member of such association when. Ever it considers it necessary; and (f) to
perform such other duties and exercise such other powers as may be assigned to
the Commission by or under this Act, or as may be prescribed." Two
questions arise under this section, namely, (i) whether the duties imposed and
the powers conferred on the Commission under cl. (f) of s. 4 shall 771 be read
ejusdem generis with those imposed or conferred under cls. (a) to (e), and (ii)
whether the powers assigned to the Commission by or under a bye-law can be
performed by the Commission under cl. (f). To appreciate the first question it
would be necessary to know the constitution of the Commission and its rule in
the scheme of control provided by the Act. Under a. 2(b), ", Commission’
means the Forward Markets Commission established under s. 3. Section 3 empowers
the Central Government to "establish a Commission to be called the Forward
Markets Commission for the purpose of exercising such functions and discharging
such duties as may be assigned to the Commission by or under this Act".
Clauses (a) to (e) of s. 4 show that the function
of the Commission is wholly supervisory and advisory in nature.
It keeps the forward markets under
observation, collects and publishes information, undertakes the inspection of
the accounts and other documents, and makes recommendations to the Central
Government in respect of matters mentioned in that section. Under s. 8(2)(c),
the Central Government may also direct the Commission to inspect the accounts
and other documents of any recognized association or any of its member,% and
submit its report thereon to the Central Government. It is, therefore, manifest
that the Commission has no administrative functions or powers of management or
powers of interference in the internal management of the registered
associations on the other hand, s. 11 and the bye-laws framed there under it is
not necessary to go into them in detail show that the regulation and control of
the business of forward contracts and other businesses is entirely in the hands
of the Association. The doctrine of ejusdem generis is very well-settled. The
expression of ejusdem generis" means of the same kind', and "it is only
an illustration of specific application of the broader maxim noscuntur a socia
i. e., general and specific 772 words which are capable of an analogous
meaning, being associated together, take colour from each other, so that the
general words are -restricted to a sense, analogous, to the less general".
While to invoke the application of the doctrine of ejusdem generis there must
be a distinct genus or category., that is to say, the specific words preceding
the general word must belong to the same class, the maxim noscuntur a sociis is
of wider application. This Court in The Western India The acres Ltd. v.
Municipal Corporation of the City of Poona, though did not expressly say so, in
my view was dealing with the said two doctrines, and it observed therein:
"........... although the rule of
construction based on the principle of ejusdem generis cannot be invoked in
this case, for items (i) to (x) do not, strictly speaking, belong to the same
genus, but they do indicate, to our mind the kind and nature of tax which the municipalities
are authorized to impose." So, in the present case, it way be said that
cls. (a) to (f) may not belong to the same class, but they indicate that the
functions described in the said clauses, being supervisory and advisory in character,
are so analogous to each other that they take colour from each other and
therefore the general words following must be restricted to a sense analogous
to the said functions. It is said that cl.(f) provides for duties and powers,
whereas cls. (a) to (e) only deal with functions and, therefore, cl. (f) must
be deemed to provide for altogether a different subject-matter. I cannot agree
with this contention, for the heading of s.4 is "Function of the
Commission", and the action opens out with the words "The functions
of the Commission shall be" and the functions are mentioned in cls.(&)
to 773 (f). It is, therefore, manifest that the duties and powers mentioned in
cl.(f) are also functions. To put it differently, all the clauses deal with
functions of the Commission. That apart, a power and a duty are, the two facts
of the same concept. Clauses (a) to (e) also, though ex facto they read as if
they impose only duties, on a closer scrutiny indicate that the duties cannot
be exercised without the corresponding powers for the discharge of those
duties. I would, therefore, hold that the duties and powers that may be
assigned to the Commission under cl. (f) can be only supervisory or advisory
functions other than those mentioned in cls.(a) to (e). The power conferred on
the Commission under the bye-law made by the Government to close out contracts
and thus terminate the contracts is neither an advisory nor a supervisory
power, and, therefore, the Commission cannot legally exercise the same.
The second question turns upon the
interpretation of the provisions of cl. (f) of s.4. The said clause reads:
"to perform such duties and exercise
such other powers as may be assigned to the Commission by or under this Act, or
as may be prescribed." The crucial words are ,by or under this Act, or as
may be prescribed". Under s. 2(h) of the Act "Prescribed" means
"prescribed by rules made under this Act" ; an( a. 2 (k) defines
"rules" thus ;
"rules", with reference to the
rules relating in general to the constitution and management t of an
association, includes in the case of an incorporated association its memorandum
and articles of association." If read with the definition of the word
"Prescribed" 774 cl. (f) indicates that the commission can perform
the functions assigned to it by or under the Act, or as may be prescribed by
the rules made under the Act. The specific mention of the rules made under the
Act in the clause makes it abundantly clear that the phrase "'under the
Act" excludes a rule made in exercise of the power conferred under the
Act, for if the said phrase takes in a rule, the word "Prescribed"
becomes redundant. Such ineptitude and went of precision in drafting shall not
be attributed to the Legislature, except for compelling reasons. If a rule was not
comprehended by the phrase "Under the Act", it would be illogical to
hold that it would take in a bye-law. It would mean that the Legislature
specially provided for a rule, which has certainly a higher status than a
bye-law in legislative practice, while it treated a bye-law as a provision of
Act: that cannot be. The other reason that may be suggested is that the word
"Prescribed" was used in superabundant caution or by mistake. If
superabundant caution was required to mention separately the rules, greater
caution would have been necessary to provide separately for a bye-law. A court
ordinarily shall attempt to give meaning to every word used by the Legislature,
unless it is impossible to do so. Here there is not only no such impossibility,
but there is also a good reason for the Legislature in excluding the bye-laws
from the operation of cl.(f) of s. 4 of the Act.
Subordinate or delegated legislation takes
different forms.
Subordinate legislation is divided into two
main classes, namely, (i) statutory rules, and (ii) bye-laws or regulations
made, (a) by authorities concerned with local government, and (b) by persons,
societies, or corporations.
The Act itself recognizes this distinction
and provides both for making of the rules as well as bye-laws. A comparative study
of ss. 11 and 12 where under 775 power is conferred on the Central Government
and the recognized associations to make bye-laws on the one hand, and s. 28, where
under the Central Government is empowered to make rules on the other, indicate
that the former are intended for conducting the business of the association and
the letter for the purpose of carrying into effect the objects of the Act. In
considering the question raised in this case in this distinction will have to
be borne in mind.
It would be unreasonable to assume that a
private association, though registered under the Act, could confer powers on a
statutory authority, under the Act. That is why under s. 4(f), the Legislature
did not think fit to provide for the assignment of a function to the commission
in exercise of a power under a bye-law. The no mention of byelaw in cl. (f) is
not because of any accidental omission but a deliberate one, because of the
incongruity of an assignment of a function to the Commission under a bye-law.
I would, therefore, construe the words
"by or under this Act, or as may be prescribed" as follows : (by this
Act" applies to powers assigned proportion vigor by the provisions of the
Act ; 'under this Act" applies to an assignment made in exercise of an
express power conferred under the provisions of the Act; and 'may be
prescribed" takes in an assignment made in exercise of a power conferred
under a rule. This construction gives a natural meaning to the plain words used
in the section and avoids stretching, the language of a statutory provision to
save an illegal bye-law. In this context two decisions are cited at the Bar.
The first is that of the Judicial Committee in Hubli Electricity Company Ltd.
v. Province of Bombay (1). There, under s. 3(2)(f) of the Indian Electricity
Act (No. TX of 1910) "the provisions contained in (1)(1948) 26 I.A. 57.
776 the Schedule shall be deemed to be
incorporated with, and to form part of, every licence granted under this
Part". Under s. 4(1)(a) of the said Act, ",The Provincial Government
may, if in its opinion the public interest so requires, revoke a licence",
inter alia, if "the licensee in the opinion of the Provincial Government
makes wailful and unreasonably prolonged default in doing anything required of
him by or under this Act". Under sub-cl. (6) of the Schedule, a licensee
had to comply with certain conditions. The Government revoked the licence on
the ground that the licensee did not comply with the conditions laid down in
Schedule VI, which were deemed to be incorporated in the licence by virtue of
s. 3(2), and therefore he did not do the thing required of him within the
meaning of s. 4 of that Act. The Privy Council held that the performance by the
licensee of the conditions of the Schedule to the Act was clearly required to
be made under the Act. This decision does not help us very much in the present
case, as the question of bye-law did not arise therein'. Nor the decision of
the Madras High Court in Narayanaswamy v. Krishnamurthi (1) is of any
assistance. There the question was whether the regulations framed by the Life
Insurance Corporation by virtue of the powers vested in it by Act 31 of 1956
prohibiting the employees from standing for election fell within the meaning of
the words ,under any law" in Art.
191 (1) (e) of the Constitution. The High
Court held that the regulations were law made under the Act of Parliament.
The conclusion was based on the principle
that the rule made in pursuance of the delegated power has the same validity
and has the same characteristic as a law made directly by the Parliament. Apart
from the fact that the words to be construed there were different and in a
sense wider than the words to be construed in the present case, the principle
accepted in the decision is only (1) I.L.R. 1958 Mad 513.
777 of a general application and does not
help to construe the specific words of cl. (f) of s. 4 ; their meaning can be
gathered only by interpreting the said words, having regard to the setting and
the context in which they are used.
For the foregoing reasons, I would hold that
the Government had no power under s. 12 of the Act to make a bye-law assigning
any function to the Commission. It follows that notification dated January 24, 1956, by the Forward Markets Commission was illegal and the appellants would
be entitled to the issue of a writ of mandamus in the terms prayed for.
In the result, the appeal is allowed with
costs.
ORDER In view of the Judgment of the
majority, the appeal stands dismissed with costs.
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