Prag Ice & Oil Mills & ANR Vs.
Union of India [1978] INSC 43 (21 February 1978)
BEG, M. HAMEEDULLAH (CJ) BEG, M. HAMEEDULLAH
(CJ) CHANDRACHUD, Y.V.
BHAGWATI, P.N.
FAZALALI, SYED MURTAZA SHINGAL, P.N.
SINGH, JASWANT DESAI, D.A.
CITATION: 1978 AIR 1296 1978 SCR (3) 293 1978
SCC (3) 459
CITATOR INFO :
R 1980 SC 738 (9) RF 1980 SC2097 (3) R 1981
SC 873 (30,68) R 1981 SC 998 (4) F 1983 SC 634 (22) R 1983 SC 937 (31) R 1983
SC1015 (9) F 1983 SC1019 (34) F 1984 SC 657 (17) R 1984 SC1130 (43) R 1985
SC1367 (37) RF 1986 SC1999 (11) R 1987 SC1802 (10) F 1987 SC2351 (7) R 1988
SC1737 (85) R 1990 SC1277 (40) E 1990 SC1851 (25) RF 1992 SC1033 (37)
ACT:
Constitution of India, 1950, Art. 31B read
with Ninth Schedule-Scope and ambit of-Whether Art. 31B affords protection only
to the Acts and Regulations specified in Ninth Schedule, or also to orders and
notifications issued under those Acts and Regulations.
Constitution of India, 1950, Art 32
"Locus Standi" of 'dealers' to invoke the jurisdiction of the Supreme
Court under Art. 32 and challenge the provisions of the Price Control Order as
offending fundamental rights under Arts.
14, 19(1) (f) and (g).
Mustard Oil Price Control Order 1977
constitutional validity of-Whether it violates Arts. 14 and 19 (1) (f) and (g)-
Whether it is open to such a challenge at all-Applicability of the doctrine of
derivative protection.
Distinction between (a) "merely
regulatory Order and those of price fixation or price control Order" under
s. 3(2) (c) of the Essential Commodities Act, and (b) "protection to a
mere grant of powers" and "exercise of that power", explained.
Price fixation, tests of-Courts cannot
interfere with economic policies of the Government in cases of beneficial
legislation.
HEADNOTE:
Sub-section (1) of section 3 of the Essential
Commodities Act, 1955 which is placed in the Ninth Schedule of the
Constitution, empowers the Central Govt. to provide by an order for regulating
or prohibiting the production, supply and distribution-of an essential
commodity or trade or commerce therein, if it is of the opinion, that it is
necessary or expedient so to do for maintaining or increasing supplies of any
essential commodity or for securing its equitable distribution- and
availability at a fair price. In exercise of the power conferred by s. 3 of the
Essential Commodities Act, 10 of 1955, the Government of India in its Ministry
of Civil Supplies and Cooperation issued on 'September 30, 1977 the Mustard Oil
(Price Control) Order, 1977. The Price Control Order provided by Clause (3)
that no dealer was either by himself or by arty person on his behalf to sell or
offer to sell any mustard oil at a retail price exceeding Rs. 10 per Kg.
exclusively of the cost of container but inclusive of taxes. Clause 2 defines a
dealer to mean a person engaged in the ,business of purchase, sale, or storage
for sale of mustard oil.
The Price Control Order was challenged in
this Court by several dealers on the ground mainly, that it violated Articles
14. 19(1)(f) and 19(1)(g) of the Constitution, Art.
301 was cited but not argued upon with any
seriousness.
Upholding the validity of the impugned Price
Control Order and dismissing the appeals the Court,
HELD: Per majority The Mustard Oil (Price
Control Order, 1977) is constitutionally valid. The impugned Price Control
Order is not an act of hostile discrimination against the traders.
It does not violate their right to property
or their right to trade or business. [319C; 331G] 294 Per Chandrachud, J. was
he then was] (On behalf of Bhagwati, Murtaza Fazal Ali, Shirghal, Jaswant
Singh, JJ. and himself).
1. On a plain reading of Art. 31 A it cannot
be said that the protective umbrella of the Ninth Schedule takes in not only
the acts and regulations specified therein but also orders and notifications
issued under those acts and regulations. [320 C] (a) Art. 31-B constitutes a
gave encroachment on fundamental rights, and though it is inspired by a radiant
social philosophy, it must be construed as strictly as one may, for the simple
reason that the guarantee of fundamental rights cannot be permitted to be
diluted by implications and inferences. The Constitution which prescribes the
extent to which a challenge to the constitutionality of a law is excluded, must
be construed as demarcating the farthest limit of exclusion. Considering the
nature of the subject- matter which, article 31-B deals with, there is no
justification for extending by judicial interpretation the frontiers of the
field which is declared by that article to be immune from challenge on the
ground of violation or abridgement of fundamental rights; [320 D-E] (b) The
article affords protection to Act and Regulation specified in the Ninth
Schedule. Therefore, whenever a challenge to the constitutionality of a
provision of law on the ground that it violates any of the fundamental rights
conferred by Part III is ought to be repelled by the State on the plea that the
law is placed in the Ninth Schedule the narrow question to which one must
address oneself is whether the impugned law is specified in that Schedule. If
it is, the provisions of Art. 31-B would be attracted and the challenge would
fail without any further inquiry. On the other hand, if the law is not
specified in the Ninth Schedule, the validity of the challenge has to be
examined in order to determine whether the provisions thereof invade in any
manner any of 'the fundamental rights conferred by Part III. It is then no
answer to say that though the particular law, as for example a Control Order,
is not specified in 'the Ninth Schedule, the parent Act under which the order
is issued is specified in that Schedule; [320 E-G] (c) Extending the benefit of
the protection afforded by Art. 31-B to any action taken under an Act or
Regulation which is specified in the Ninth Schedule. is an unwarranted
extension of the provisions contained in Article 31-B, neither justified by its
language nor by the policy or principle underlying it. When a particular Act or
Regulation is placed in the Ninth Schedule, the Parliament may be assumed to
have applied its mind to the provisions of the particular Act or Regulation and
to the desirability, property or necessity or placing it in the Ninth Schedule
in order to obviate a possible challenge to its provisions on the ground that
they offend against the provisions of part III. Such an assumption cannot, in
the very nature of things, be made in the case of an order issued by the Govt.
under an Act or Regulation which is placed in
the Ninth Schedule, The fundamental rights will be eroded of their significant
content if by, judicial interpretation a constitutional immunity is extended to
Orders to the validity of which the Parliament, at least theoretically, has had
no opportunity to, apply its mind. Such an extension takes for granted the
supposition that the authorities on whom power is conferred to take appropriate
action under a statute will act within the permissible constitutional
limitations, a supposition which past experience, does not justify and to some
extent falsifies.
[321 C-F]
2. The un-holding of laws, by the application
of 'he theory of derivative immunity is foreign to, the scheme of our
Constitution and accordingly Orders and Notifications issued under Acts and
Regulations which are specified in the Ninth Schedule must meet the challenge
that they offend against the provisions of Part III of the Constitution. The
immunity enjoyed by the parent Act by reason of its being placed in the Ninth
Schedule cannot proprio vigore be extended to an off-spring of the Act like a
Price Control Order issued under the authority of the Act. It is therefore open
to the petitioners to invoke the- 295 writ jurisdiction of this Court for
determination of the question whether the provisions of the Price Control Order
violates Art. 14, 19(11)(f) and 19(1)(g) of the Constitution. [321 F-G].
Vasantlal Maganbhai Sanjanmal v. State of
Bombay and Ors., [1961] 1 SCR 341, Latafat Alikhan and Ors. v. State of U.P.,
[1971] Supp. S.C.R. 719; Explained.
Godavari Sugar Mills Ltd. and Ors. v. S. B.
Kamble and Ors.
[1975] 3 S.C.R. 585; Applied.
3. Price Control Order does not offend
against Art. 14 of the Constitution [323 F] (a) The averments in the various
Writ Petitions are far too vague and general to justify the application of Art.
14. The petitioners have failed to show by acceptable data that they fall into
a separate class altogether, and cannot therefore be subjected to the
restraints of a single order of price fixation. [323 H, 324 A] (b) Variation in
economic factors governing the mustard oil trade from region to region or
differences in the pattern of trade. in different growing regions and
manufacturing centres cannot by itself justify the argument that different
prices must be fixed for different regions and that failure to do so would
necessarily entail discrimination. [324 A-B] (c) Dealers in mustard oil,
wherever they operate can legitimately comprise a single class for the purpose
of price fixation, especially as it is undisputed that the two basic constants
of the trade are : (i) the cost of mustard seed constitutes 94 per cent of the
cost of the mustard oil and (ii) about 3.12 kilograms of seed goes into the
extraction of one kilogram of oil. Fixation of different prices for different
regions will, in this background, frustrate the very object of the exercise
that an essential commodity should be made available to the consumer at a fair
price. [324 B-C] (d) There is no reliable, data to support the contention, that
dealers in different regions are so differently situated in the context of and
in relation to the, purpose for which the Price Control Order is issued that fixation
of common price for dealers all over the country can reasonably be described as
discriminatory as against some of them. [324 E] (e) The charge of
over-inclusiveness for the mere reason that dealers in a certain region have to
import their raw material from another region cannot be accepted. Perhaps the
high rate of turnover and consumption in a region like West Bengal may easily
absorb the additional cost of freight. The Government of India. in fixing one
common price for mustard oil for the whole country, has not acted like Herod
who ordered the death of all male children born on a particular day because one
of them would someday bring about his downfall. [324 F-F] State of Gujarat v.
Sri Ambica Mills Ltd., [1974] 3 SCR 760 @ 782 referred to.
(f) The mechanics of price fixation has
necessarily to be left to the judgment of the executive and unless it is patent
that there is hostile discrimination against a class of operators, the
processual basis of price fixation has to be accepted in the generality of
cases as valid. [325 B] Saraswati Industrial Syndicate Ltd. v. Union of India
[1975] 1 S.C.R. 956. referred to.
4. The Price Control Order is not violative
of the petitioners' rights under articles 19(1)(f) and 19(1)(g) of the
Constitution. [326 G] (a) It is impossible to determine in these writ petitions
the accuracy of the petitioners' allegation that they purchase mustard seed
from month to. month and from week to week as the crushing of the seed
progresses. Most of 296 the growers of mustard seed are small agriculturists
who have hardly any staying ability and are therefore compelled to. sell their
produce immediately after the harvesting season, that is to say, between March
and June. If the prices of mustard seed prevailing during that period are taken
into account, it is difficult to accept that the price of Rs. 10/- per kilogram
is so patently unreasonable as to be violative of the petitioners' right to
hold property or to do trade or business [326 G-H, 327 A] (b) Since the bulk of
the purchases are made by the petitioners immediately after the harvesting
season considering the general pattern of the trade in mustard seed, it is
wholly unnecessary to control the price of mustard seed, in order effectively
to control the price of mustard oil. [327 B-C] (c) The contention that the
consequence of the Price Control Order cannot be looked at for the purpose of
deciding whether the price of mustard oil was fixed in accordance with legally
acceptable principles cannot be upheld. No Court can shut its eyes to the fact
that the Price Control Order produced the salutary and tangible result of
bringing down the price of raw material. [327 C-D] (d) A mere literal or
mechanical construction is not appropriate where important questions such as
the impact of an exercise of a legislative power on constitutional provisions
and safeguards there under are concerned. In cases of such a kind, two rules of
construction have to be kept in mind : (1) that Courts generally lean towards
the constitutionality of a legislative measure upon the presumption that a
legislature will not deliberately flout a constitutional safeguard or right,
and that (2) while construing an enactment, the Court must examine its object
and the purpose, the mischief it seeks to prevent and ascertain from such
factors its true scope and meaning. [327 E-F] Vrajlal Manilal & Co. and
Ors. v. State of M.P. and Ors.
[1970] 1 S.C.R. 400, 409, reiterated.
(e) The dominant purpose of the provisions of
sub-section (1) and 2(c) of Section 3 of the Essential Commodities Act 1955 is
to ensure the availability of essential commodities to the consumers at a fair
price. And though patent injustice to the producer is not to be encouraged, a
reasonable return on investment or a reasonable rate of profit is not the sine
qua non of the validity of action taken in furtherance of the powers conferred
by s. 3(1) and s. 3(2)(c) of the Essential Commodities Act. The interest of the
consumer has to be kept in the forefront and the prime consideration that an
essential commodity ought to be made available to the common man at a fair
price must rank in priority over every other consideration. [328 A-B] (f) Even
in the absence of satisfactory proof of the extent of the profits made by the
petitioners in past years, the circumstance that the petitioners may have to
suffer a loss over a short period immediately following upon the promulgation
of the Price Control Order will not render the Order constitutionally invalid.
The interplay of economic factors and the laws of demand and supply are bound
eventually to. have their impact on the pattern of prices prevailing, in the
market. If the dealer cannot lawfully- sell the finished product at more than
Rs. 10/- per kilogram, the price of raw material is bound to adjust itself to
the piece of the product. Subsequent events unmistakably demonstrate the effect
of such interplay and the favourable reaction which the Price Control Order has
produced on the price of mustard seed. In matters of the present nature, such
provisions have to be viewed through a socially constructive. not legally
captious microscope to discover a glaring unconstitutional infirmity, that when
laws affecting large chunks of the community are enacted stray misfortunes are
inevitable and that social legislation without tears, affecting vested rights
is virtually impossible. [328 C-F] B. Panerjee v. Anita Pan, [1975] 2 SCR 774 @
782 followed.
(g) The impugned Price Control Order is not
so unreasonable as to be constitutionally invalid. It is enough compliance with
the constitutional mandate if the basis adopted for price fixation is not shown
to be so patently unreasonable as to be in excess of the power to fix the
price. [328 G] 297 Saraswati industrial Syndicate v. Union of India, [1975] 1
SCR 956; referred to.
(h) Immediately prior to the promulgation of
the price control order the consumer was denied the chance to get the mustard
'Oil at a price which he could reasonably afford.
For him, therefore, the supply had already
dried,up. If, after the issuance of the order, the supply position shows no
improvement, that consequence cannot be legitimately attributed to the
operation of the Price Control Order. At worst, the Order can then be said to
have failed to achieve its purpose. [329 A-B] (i) Just as the industry cannot
complain of rise and fall of prices due to economic factors in an open market
it cannot similarly complain of some increase or reduction in prices as a
result of a notification issued under section 3(1) of the Essential Commodities
Act because, such increase or reduction is also based on economic factors.
Ensuring a fair price to the consumer was the dominant object and purpose of
the Essential Commodities Act and that object would be completely lost sight
of, if the producer's profit was kept in the forefront. [329 D-E] Shree
Meenakshi Mills Ltd. v. Union of India, [1974] 2 SCR 398, Secretary of
Agriculture v. Central Reig Refining Co., 94 Law. Edn. 381; applied.
Panipat Cooperative Sugar Mills v. Union of
India, A.LR.
1973 SC 536; Anakapalle Cooperative
Agricultural and Industrial Society Ltd. v. Union of India, A.I.R. 1973 S.C.
734; held inapplicable.
Premier Automobiles Ltd. & Anr. v. Union
of India, [1972] 2 S.C.R. 526; distinguished, (j) Courts of law cannot be
converted into tribunals for relief from the crudities and inequities of
complicated experimental economic legislation. [331 A-B]
5. The contention that the Price Control
Order is arbitrary because it is not limited in point of time is without any
merit. In the very nature of things orders passed under s. 3(1) read with s.
3(2) of the Essential Commodities Act are designed primarily to meet urgent
situations which require prompt and timely attention. If a price control order
brings about an improvement in the supply position or if during the period that
such an order is in operation there is a fall in prices so as to bring an
essential commodity within the reach of the ordinary consumer, the order shall
have lost its justification and would in all probability be withdrawn. That in
fact is what has happened in the instant case. It appears that the supply
position having improved. or so at any rate seems to be the assessment of the
situation by the Government, the order has been recently withdrawn. [331 C-E]
6. The 'intervention of the middlemen is an
acknowledged reality of all trades and businesses. The fact that the
middleman's profit increases the price of 'goods which the consumer has to pay,
is axiomatic. It has been the endeavour in modern times for those responsible
for social control to keel) the middleman's activities to the minimum and to
attempt to replace them largely by cooperative purchase societies of consumers.
The elimination of the middlemen is bound to cause trouble and inconvenience,
but the ultimate saving in the cost of the finished product could more than
balance that inconvenience. The argument of the petitioners really amounts to a
rigid insistence that they are entitled to carry on their business as they
please, mostly in a traditional manner, regardless of its impact on public
interest. But, property rights are not absolute, and important as the right of
property may be, the right of the public, that such rights be regulated in
common interest is of greater importance,. [331 G-H, 332 A-B] Led Nebbia v.
People of, the State of New York, 78 Law Edn.
p. 940 and Narendra Kumar and' Ors. v. Union
of India and Ors., [1960] 2 SCR 375 referred to.
298
7. If the Government has got the power to fix
a fair price of an essential commodity, it cannot be said that they have under
a pretext trespassed upon a field which does not properly belong to them. The
power conferred by s. 3(1) of the Essential Commodities Act is undoubtedly
purposive. The Price Control Order was promulgated by the Government in order
to achieve the purpose set out in s. 3(1) of the Act.
The fact that a legislative remedy or an
administrative order passed in exercise of a statutory power is ineffective to
mitigate an evil may show that it has failed to achieve its purpose,
highlighting thereby the paradox of reform. By fixing a fair price for mustard
oil, the Government has not committed a veiled and subtle trespass upon private
rights or upon a legislative field which is not open to them to occupy. [332
E-G] K. C. Gajapati Narayannai Rao and Ors., v. State of Orissa [1954] SCR; 1;
Joseph Beauharis v. People of the State of Illinois, 96 Law. Edn. 919 referred
to.
8. To be able to find fault with a law is not
to demonstrate its invalidity. The Parliament having entrusted the fixation of
prices to the expert judgment of the Government it would be wrong for this
Court, to examine each and every minute detail pertaining to the Governmental
decision. The Government is entitled to make pragmatic adjustments which may be
called for by particular circumstances and the price control can be declared
unconstitutional only if it is patently arbitrary, discriminatory or
demonstrably irrelevant to the policy which the legislature is free to adopt.
The interest of the producer and the investor is only one of the variables in
the constitutional calculus of reasonableness and Courts ought not to interfere
so long as the exercise of Governmental power to, fix fair prices is broadly
within a "Zone of reascuableness". The impugned Price Control Order
is, therefore, valid and the challenge made, thereto by the petitioners has to
fail. [333 B-G] Metropolis Theater Co. v. City of Chicago, 57 Lawyers Edn.
730; Premier Automobiles & Anr. v. Union
of India [1972] S.C.R. 526; permian Basin Area Rate Cases, 20 Law. Ed. 2d.
312 referred to.
Per Beg, C.J. (On behalf of Desai J. and
himself) (Contra)
1. Article 31-B, no doubt, speaks of
"specified" Acts and Regulations. But it makes no distinction
whatsoever between any grants of powers and their exercise,. Powers are granted
or conferred so as to be exercised and not to be kept in cold storage for
purposes of some kind of display only as though they were exhibits in a show
case not meant for actual use. The whole object of a protection conferred upon
powers meant for actual use is to protect their use against attacks upon their
validity based upon provisions of Part ITT. If this be the correct position, it
would, quite naturally and logically, follow that their use is what really
protected. [30F-H]
2. A delegated or derivative power could not
rise higher or travel beyond the source of that power from which it derives its
authority and force If Bagla's case is good law (no party has questioned its
correctness, Articles 14 and 19(i) (f) d (g) could be deemed to be,
"written into" Section 3 of the Act itself? (They would control the
scope of orders which could be passed under it. That is, undoubtedly the way in
which guarantees of fundamental rights could and should function if the Act containing
Section 3 itself had not been placed in the Ninth Schedule so as to take away
the guarantees of fundamental rights from the substance of it. [309 B-C] Hart
Krishna Bagla v. State of M.P., [1955] 1 S.C.R. 380;
referred to.
3. If the effect was to widen the orbit of
section 3 of the Essential Commodities Act or to remove the limitations put by
Articles 14 and 19 upon the exercise of powers under it, the logical and
natural result would be to enlarge the scope or sweep of the Orders passed
under it. But, if it has no such upon section 3 of the Act itself, orders
passed under it would continue to subject to provisions of section 3 of the Act
as controlled by Articles 14 and of the Constitution so that they will have to
satisfy what may be described 299 as a "dual test", firstly, that of
provisions of section 3 of the Act itself; and secondly, that of provisions of
Chapter III of the Constitution containing fundamental rights. [309 D-F]
4. The Ninth Schedule does not provide any
protection at all against attacks based upon either the vice of excessive
delegation or want of legislative competence defects which could be said to
vitiate the grant of powers despite their place in the Ninth Schedule.
The distinction between protection to a mere
grant of powers and to their exercise, therefore, seem specious in the context
of the protection. It cannot ,explain why, if section 3 is protected by the
Ninth Schedule, the exercise of power granted by it, which manifests itself in
control orders is not protected. It would be so protected, if at all, not
because the Orders to be made in future, as such, are protected but because the
power actually conferred and found in existence in section 3 is protected. The protection
is given to a power which is specified and in existence which has to be used
for certain purposes and not to what may be specified in future. [310 A-C]
5. If orders passed under section 3 of the
Act also get a protection it would be what may be described as a
"derivative" protection so long as the Orders are covered by
section-3 of the Act. It is available only so long as and because the source of
their authority-Section 3 of the. Act is protected by the Ninth Schedule.
Orders purporting to be made under section 3 of the Act must, however satisfy
the tests found in section 3 itself in every case. 'They can never escape the
basic tests whether section 3, the source of their authority, is protected by
the Ninth Schedule or not. The further tests imported by Articles 14 and 19 of
the Constitution into section 3 could be applied to these orders only so long
as these added tests are attached to or can be read into section 3 of the Act,
but not after they have been deliberately delinked or removed from section 3.
The term "skeleton" legislation is used sometimes for denoting the
broad outlines of a particular scheme found in an Act of which details are to
be filled in later by administrative orders of experts. Essential Commodities
Act, 1955, cannot be spoken of as a piece of "skeleton" legislation.
[310 D, F-G]
6. Section 3, sub-section (1) of the Act
provides for delegation of powers to the Central Government in order that it
may carry out certain purposes by framing appropriate schemes and evolving
policies which may meet the purposes of the Act. These schemes and policies to
serve the stated purposes may differ ,as regards the nature of means adopted
and even in the particular objectives sought at particular times to accord with
changing circumstances. Orders passed under section 3 of the Act, in pursuance
of such schemes or policies, do not become parts of the Act for the purposes of
the Ninth Schedule of the Constitution. Orders passed under the Act, before its
inclusion in the Ninth Schedule, could also be said to be protected directly by
the Ninth Schedule if mentioned there. But, there could be no independent and
direct protection of this Schedule conferred upon orders passed under the Act.
[310 G-H, 311 A-B] Godavari Sugar Mills Ltd. and Ors. v. S. B. Kamble and Ors.,
[1975] 2 S.C.R. 885 referred to.
7. If the section under which the control
order was passed is protected from any attack based on the provisions. of Part
III of the Constitution, the only question will be whether the Control Order is
covered by the protected empowering provision. If it falls outside the
empowering Provisions it would be invalid in any case. If it falls within the
empowering Provision but could be found to be struck by the provisions of Art.
19(1)(f) and (g) of the Constitution, an attack on the Control Order by. reason
of Article 19(1)(f) and (g) would be really on against the empowering
provisions itself which is protected. The Control order, therefore, enjoys what
may be called derivative protection. [312 A-C.] Latafat Alikhan and Ors. v.
State of U.P., [1971] SUPP.
S.C.R. 719 @ 720; applied.
8. The Act was put in the Ninth Schedule to
prevent the invocation of Articles 14, 19 and 31 for obstructing measures to
necessary as price fixation of 300 essential commodities is for promoting the
objectives of a socialist welfare economy. This would be a sufficient answer to
all the argument& on the unconstitutionality of fixing the price of mustard
oil below what is claimed to be the cost price. [314 G] As the impugned order
of 30th September, 1977, falls within the provisions of s. 3, question of
violating a fundamental right does not arise. If an impugned order were to fall
outside section 3 of the Act, no question of applying any test of
reasonableness contemplated by Article 19(6) need arise because it would then
be purely illegal restriction upon the right conferred by Art. 19(1)(g) which
would fail for lack of authority of any law to support it. [315 B-C]
9. Section 3 makes necessity or expediency of
a control order for the purpose of maintaining or increasing supplies of an
essential commodity or for securing its equitable distribution at fair prices
the criteria of validity. It is evident that an assessment of either the
expediency or necessity of a measure, in the light of all the facts and
circumstances which have a bearing on the subjects of price fixation, is
essentially in a subjective matter. Objective criteria may enter into
determination of particular selling prices of each kilogram of mustard oil at
various times.
But, there is no obligation here to fix the
price in such a way as to ensure reasonable profits to the producer or
manufacturer, because the object is to secure equitable distribution aid
availability at fair prices so that it is the interest of the consumer and not
of the producer which is the determining factor in applying any objective tests
at any particular time. The most important objective fact in fixing the price
of mustard oil, which is consumed generally by large masses of people of
limited means, is the paying capacity of the average purchaser or consumer.
[312 D-G]
10. Principles of fair fixation of price
apply only in those cases where there is an obligation upon the price fixing
authority to take certain matters into account which have a bearing on cost of
production and are designed to secure fair share of profits to the producers.
Section 3 of the Act has very different purposes in view. It may be that the
cost of production and reasonable amount of profits to the manufacturers have
an indirect bearing on matters set out in section 3(1) of the Act. But, in
cases where the effects of a policy or a measure adopted in achieving purposes
set out in section 3(1) are matters of guess work, after experimentation, the
actual consequences can be indicated with a fair amount of certainty only by
giving sometime for a policy to work out and reveal its results.
Presence of such features in a case cannot
invalidate price fixation of which the direct objects are set out in s. 3(1) of
the Act. [315 D-F] A price fixation to meet the general purposes set out in
section 3(1) of the Act, aimed at reversing the vicious inflationary spiral of
rising prices. may appear arbitrary or unreasonable judged by standards
applicable to price fixation aimed at giving reasonable profits to producers
which is not the object of section 3(1) of the Act. [315 G- H] The whole
machinery of control of supplies with a view to their equitable distribution
and securing their availability at fair prices , 1 is much more comprehensive
than the machinery for price fixation in special cases on given principles.
Price fixation on certain given Principles is enjoined under s. 3(3) of the Act
only when there is an order under s. 2(f) of the Act compelling the sale of a
whole stock or a specified Part of it to the Central or a State Government or
to authorities or persons as directed by them. Again, section 3 (a) (iii)
provides a machinery for price fixation in special cases. Similar is position
with orders under sections 3B and 3C. [316 D-E]
11. It is not the function of Supreme Court
or of any Court to sit in judgment over matters of economic policy as must
necessarily be left to the Government of the day to decide.
Many of them, as a measure of price fixation
must necessarily be, are matters of prediction of ultimate results on which
even experts can seriously err and doubtless differ. Courts can certainly not
be expected to decide them without even the aid of experts. That a price fixed
at Rs. 10/- per kg., as a part of an attempt to break the vicious inflationary
circle, is not at all an unreasonable step. [313 C-D] 301 But the, Court can
take judicial notice of subsequent facts.
The effect of the order of 30-9-77 was so
beneficial that the rice, of mustard oil has fallen in the neighborhood of Rs.
7/- per kg. which illustrates the extreme inadvisability of any interference by
any. Court with measures of economic control and planning directed at
maximising general welfare.
It is not the function of the Courts to
obstruct or defect such beneficial measures devised by the Government of the
day. Courts cannot pass judgments on the wisdom of such actions, unless actions
taken are so completely unreasonable that no law can be cited to sanction them.
[314 H, 315 A-B]
12. Unless, by the terms of a particular
statute, or order, price fixation is made a quasi-judicial function for
specified purposes or cases, it is really legislative in character because it
satisfies the tests of legislation. A legislative measure does not concern
itself with the facts of an individual case. It is meant to lay down a general
rule applicable to all persons or objects or transactions of a particular kind
or class. In the case before us, the control order applies to sales of mustard
oil anywhere in India by any dealer. Its validity does not depend on the
observance of any procedure to be complied with or particular types of evidence
to be taken on any specified matters as conditions precedent to its validity.
The test of validity is constituted by the nexus shown between the order passed
and the purposes for which it can be passed, or, in other words by
reasonableness judges by possible or probably consequences. [317 G-H, 318 A]
Panipat Corporation Sugar Mills v. Union of India, [1973] 2 SCR 860; Meenakshi
Mills Ltd. v. Union of India [1974] 2 SCR 398; Premier Automobile Ltd. v. Union
of India, [1972] 2 SCR 526; Saraswati Industrial Syndicate Ltd. etc. v. Union
of India, [1975] 1 SCR 956; referred to.
13. Even executive or legislative action must
be confined to the limits within which it can operate. It must fall reasonably
within the scope of the powers conferred. The scope of the powers conferred
depends upon terms of the empowering provision. The empowering provision in the
instant case is widely worded. The validity of section 3 has not been
challenged. and it could not be challenged by reason of Article 31-B after its
inclusion in the 9th Schedule of the Constitution. [318 B-C]
14. In a case in which the Central Government
is judge of expediency and necessity to the extent that even the protection of
the guaranteed fundamental rights cannot stand in the way of its view or
opinion of such necessity and expediency, a challenge on the grounds on which
it was attempted could not succeed. [318 C-D]
15. Patent injustice and unreasonable injury
to the interests of consumers must be shown if a measure of price control, in
the nature of either legislative or purely administrative action, is assailed.
So long as the action taken is not so patently unjust and unreasonable as to
lead to the irresistible conclusion that it could not fall within section 3(1)
of the Act it cannot be set aside or declared invalid. The test has to be that
of consequences on objects sought by section 3(1) of the Act. Judged by this
test, the order of 30th September, 1977, fall within the purview of section 3
of the Act and it has served its purposes. [319 A- C] Leo Nebbia v. People of
the State of New York, 29 U.S. (78 Law. Edn.) 502; Permian Basin Area Rate
Cases (20 Law Edn.
2d) p. 312 referred to.
ORIGINAL JURISDICTION: Writ Petition Nos.
712, 715-739, 760- 764, 765-770, 779-780, 781-84, 838-855, 861-873 &
874-892 of 1977.
A. K. Sen (in WP. 712), V. M. Tarkunde (in WP
715-39) J.
L. Jain (in WP 861-892) & P. P. Juneja
for the petitioners in W. P. Nos. 712, 715-739, 874-892 and 861-873/77.
77. D. Goburdhan for the Petitioners in WP
Nos. 760-64 & 765-70/77 2-277 SCI/78 302 A. K. Sen (in WP 779-780), S. B.
Sanyal, Alit K. Mittar & P. K. Mukherjee for the petitioners WP 779-80/77
D. P. Mukherjee & A. K. Ganguli for the petitioners in W. P. Nos.
781-784/77.
S. S. Ray, A. K. Punja & H. K. Puri for
the Petitioners in W.P. Nos. 838-855/77 S. N. Kackar, Sol. Genl. (WP Nos. 812
& 838), R. P. Bhatt (WP 861), E. C. Agarwala and Girish Chandra for the
respondent.
770, L. N. Sinha & U. P. Singh for
R/State of Bihar in W. P. No. 765781-784/77 A. P. Chatterjee, Mukti Maitre
& G. S. Chatterjee for R/State of West Bengal The following Judgments were
delivered BEG, C.J.-The ninety-one writ petitions before us for delivery of our
reasons in support of our order dated 23 November, 1977 dismissing them, raised
a common question of the validity of an order (hereinafter referred to as 'the
Control Order), passed on 30th September, 1977, by the Ministry of Civil
Supplies and Cooperation of the Government of India, which runs as follows
"ORDER New Delhi, the 30th September 1977 S. O. WHEREAS the Central
Government is of opinion that it is necessary and expedient so to do for
securing equitable distribution and availability at fair prices, of mustard
oil;
NOW, THEREFORE, in exercise of the powers
conferred by section 3 of the Essential Commodities Act, 1955 (10 of 1955), the
Central Government hereby makes the following orders namely :
1. Short title, extent and commencement.
(1)This Order may be called the Mustard Oil (Price Control) Order, 1977.
(2) It extends to the whole of India.
(3) It shall come into force at once.
2. Definition.-In this Order,
"dealer" means a person engaged in the business of the purchase, sale
or storage for sale of mustard oil.
3. Price at which a dealer may sell.-No
dealer shall, either by himself or by any person on his behalf, sell or offer
to sell any mustard oil at a retail price exceeding Rs. 10/- per kilogram,
exclusive of the cost of container but inclusive of taxes.
Sd/- (T. Balakrishnan) Joint Secretary to the
Govt. of India (File No. 26(16)/77-ECR)" 303 The order WAS passed in
exercise of the powers conferred upon the Central Government by section 3 of
the Essential Commodities Act, 1955 (hereinafter referred to as 'the Act').
This provision lays down:
"3(1) If the Central Government is of
opinion that it is necessary or expedient so to do for maintaining or increasing
supplies of any essential commodity or for securing their equitable
distribution and availability at fair prices, or for securing any essential
commodity for the defence of India or the efficient conduct of military
operations it may, by order, provide for regulating or prohibiting the
production. supply and distribution thereof and trade and commerce therein.
(2) Without prejudice to the generality of
the powers conferred by subsection (1), an order made thereunder may provide-
(a) xxx xxx xxx xxx xxx (b) xxx xxx xxx xxx xxx (c) for controlling the price
at which any essential commodity may be bought or sold;
(d) for regulating by licences, permits or
otherwise the storage, transport, distribution, disposal, acquisition, use or
consumption of, any essential commodity;
(e) for prohibiting the withholding from sale
of any essential commodity ordinarily kept for sale;
(f) for requiting any person holding in
stock, or engaged in the production, or in the business of buying or selling,
of any essential commodity," (a) to sell the whole or a specified part of.
the quantity held in stock or produced or received by him, or (b) in the case
of any such commodity which is likely to be produced or received by him, to
sell the whole or a specified part of such commodity when produced or received
by him.
to the Central Government or a State
Government or an officer or agent of such Government or to a Corporation owned
or controlled by such Government or to such other person or class of persons
and in such circumstances as may be specified in the order.
Explanation I.-An order made under this
clause in relation to foodgrains, edible oilseeds or edible oils, may, having
regard to the estimated production, in the concerned area, of such foodgrains,
edible oilseeds and edible oils, 304 fix the quantity to be sold by the
producers in such area and may also fix, or provide for the fixation of, such
quantity on a graded basis, having regard to the aggregate of the area held by,
or under the cultivation of, the producers.
Explanation 2.-For the purpose of this
clause, "production" with its grammatical variations and cognate
expressions includes manufacture of edible oils and sugar;" We are not
concerned here with other provisions of section 3 (2).
Section 3(3), which will be relevant for the
purposes of interpretation, runs as follows :
"3 (3) Where any person sells any
essential commodity in compliance with an order made with reference to clause
(f) of sub-section (2), there shall be paid to him the price therefore as
hereinafter provided (a) where the price can, consistently with the controlled
price, if any, fixed under this section, be agreed upon, the agreed price;
(b) where no such agreement can be reached,
the price calculated with reference to the controlled price, if any;
(c) where neither clause (a) nor clause (b)
applies, the price calculated at the market rate prevailing in the locality at
the date of sale." Again, section 3A lays down:
"3A(1) If the Central Government is of
opinion that it is necessary so to do for controlling the rise in prices, or
preventing the hoarding, of any foodstuff in any locality, it may, by
notification in the Official Gazette, direct that notwithstanding anything
contained in sub-section (3), the price at which the foodstuff shall be sold in
the locality in compliance with an order made with reference to clause (f) of
sub-section (2) shall be regulated in accordance with the provisions of this
sub-section.
(ii) Any notification issued under this sub-
section shall remain in force for such period not exceeding three months as may
be specified in the notification.
(hi) Where, after the issue of a notification
under this sub-section, any person sells foodstuff of the kind specified
therein and in the locality so specified, in compliance with an order made with
reference to clause (f) of sub-section (2), there shall be paid to the seller
as the price therefore.- (a) where the price can, consistently with the
controlled price of the foodstuff, if any, fixed under this section, be agreed
upon, the agreed price;
305 (b) where no such agreement can be
reached, the price calculated with reference to the controlled price, if any;
(c) where neither clause (a) nor clause (b)
applies, the price calculated with reference to the average market rate
prevailing in the locality during the period of three months immediately
preceding the date of the notification.
(iv) For the purposes of sub-clause (c) of
clause (iii), the average market rate prevailing in the locality shall be
determined by an officer authorised by the Central Government in this behalf,
with reference to the prevailing market rates for which published figures are
available in respect of that locality or of a neighbouring locality and the
average market rate so determined shall be final and shall not be called in
question in any court." Additional sub-sections (3B) and (3C,) will also
require consideration in order to arrive at the correct meaning of section
3(2). They read as follows "(3B) Where any person is required, by an order
made with reference to clause (f) of sub-section (2), to sell to the Central
Government or a State Government or to an officer or agent of such Government
or to a Corporation owned or controlled by such Government, any grade or
variety of foodgrains, edible oilseeds or edible oils in relation to which no
notification has been issued under sub-section (3A), or such notification
having been issued has ceased to be in force, there shall be paid to the person
concerned notwithstanding anything to the contrary contained in sub-section
(3), an amount equal to the procurement price of such foodgrains, edible
oilseeds or edible oils, as the case may be specified by the State Government,
with the previous approval of the Central Government having regard to- (a) the controlled
price, if any, fixed under this section or by or under any other law for the
time being in force for such grade or variety of foodgrains, edible oilseeds or
edible oils;
(b) the general crop prospects;
(d) the recommendations, if any, of the Agricultural
grains, edible oilseeds or edible oils available at reasonable prices to the
consumers, particularly the vulnerable section of the consumers; and (d) the
recommendations, if any, of the Agricultural Prices Commission with regard to
the price of the concerned grade or variety of foodgrains, edible Oilseeds or
edible oils.
306 (3C) Where any producer is required by an
Order made with reference to clause (f) of subsection (2) to sell any kind of
sugar (whether to the Central Government or a State Government or to an officer
or agent of such Government or to any other person or class of persons and
either no notification in respect of such sugar has been issued under sub-
section (3A) or any such notification, having been issued hag ceased to remain
in force by efflux of time, then, notwithstanding anything contained in
sub-section (3), there shall be paid to that producer an amount therefore which
shall be calculated with reference to such price of sugar as the Central
Government may, by order, (determine, having regard to- (a) the minimum price,
if any, fixed for sugarcane by the Central Government under this, section;
(b) the manufacturing cost of sugar;
(c) the duty or tax, if any, paid or payable
thereon; and (d) the securing of a reasonable return on the capital employed in
the business of manufacturing sugar, and different prices may be determined
from time to time for different areas or for different factories or for
different kinds of sugar.
Explanation.-For the purposes of this sub-
section, "producer" means a person carrying on the business of
manufacturing sugar." It is necessary to keep other clauses of section 3
also in one's mind to get a true picture of the statutory context of the power
of price control. The drastic measures which the Central Government may adopt,
extending to virtually taking over of management of appointing Authorised
Controllers of particular undertakings, so as to carry out the objects 'stated
in section 3(1) of the Act, and the mechanism of control visualised to ensure
due and proper exercise of the statutory powers are also very significant. The
provisions containing these are :
"3(4) If the Central Government is of
opinion that it is necessary so to do for maintaining or increasing the
production and supply of an essential commodity, it may, by order, authorise
any person (hereinafter referred to as an authorized controller) to exercise,
with respect to the whole or any art of any such undertaking engaged in the
production and supply of the commodity as may be specified in the order such
functions of control as may be provided therein. and so long as such order is
in force with respect to any undertaking or part thereof," 307 (a) the
authorized controller shall exercise his functions in accordance with any
instructions given to him by the Central Government, so, however, that he shall
not have any power to give any direction inconsistent with the provisions of
any enactment or any instrument determining the functions of the persons in
charge of the management of the undertaking, except in so far as may be
specifically provided by the order; and (b) the undertaking or part shall be
carried on in accordance with any directions given by the authorized controller
under the provisions of the order, and any person having any functions of
management in relation to the undertaking or part shall comply with any such
directions.
3(5) An order made under this section shall,-
(a) in the case of an order of a general nature or affecting a class of
persons, be notified in the Official Gazette; and (b) in the case of an order
directed to a specified individual be served on such individual- (i) by
delivering or tendering it to that individual, or (ii) if it cannot be so
delivered or tendered, by affixing it on the outer door or some other
conspicuous part of the premises in which that individual lives, and a written
report thereof shall be prepared and witnessed by two persons living in the
neighbourhood.
3 (6) Every order made under this section by
the Central Government or by 'any officer or authority of the Central
Government shall be laid before both Houses of Parliament as soon as may be,
after it is made." It has also to be remembered that if the mechanism of
price/, control of some essential commodities fails, there is under our
Constitution, with its socialistic orientation and objectives, the provision in
Article 19 (6) (ii) for "the carrying on by the State, or by a corporation
owned or controlled by the State, of any trade, business, industry or service,,
whether to the exclusion, complete or partial, of citizens or otherwise".
The petitioners assail the control order on
four grounds:
firstly, that it violates the fundamental
rights of the petitioners to property under Article 19 (1) (f) and to carry on
their trade and business guaranteed by Article 19(1) (g) of the Constitution;
secondly, that the petitioners are denied the benefits of Article 14 of the
Constitution; thirdly, that the order is hit by Article 301 of the
Constitution;
308 and, fourthly, that the Central Order is
outside the scope of section 3 of the Act.
We need not consider Article 301 of the
Constitution as the petitions do not, beyond citing the provision, set out any
facts to show how this Article is involved. This Article is meant for
protecting inter-State as well as intrastate "freedom of trade, commerce,
and intercourse". But, Article 302 provides "Parliament may by law
impose such restrictions on the freedom of trade, commerce or intercourse
between one State and another or within any part of the, territory of India as
may be required in the public interest." Although, Article 302 does not
speak of "reasonable" restrictions, yet, it is evident that
restrictions contemplated by it must bear a reasonable nexus with the need to
serve "public interest". It the tests of Section 3 of the Act are
satisfied by an Order, it could not fail to serve public interest. Hence, from
this point of view also, it is enough if we consider whether the Control Order
falls within section 3 of the Act. It was evidently for this reason that,
beyond mentioning Article 301, counsel for the petitioners did not, quite
rightly, advance much argument to show how Article 301 is involved here. We
will, therefore, not consider it any more here.
It was, however, vehemently urged on behalf
of the petitioners that the Control Order is assailable for violating Article
14 and 19(1) (f) and (g) despite the fact that the Act itself was placed in
1976 in the 9th Schedule of the Constitution. The result of placing it there by
a constitutional amendment is that section 3 of the Act became free from any
limitations based on the provisions of Part III of the Constitution. Article
31B, providing for a removal of the protection to fundamental rights given by
Part III of our Constitution, lies down:
"31B. Validation of certain Acts and
Regulations.- Without prejudice to the generality. of the provisions contained
in article 31A, none of the Acts and Regulations specified in the Ninth
Schedule nor any of the provisions thereof shall be deemed to be void, or ever
to have become void, on the ground that such Act, Regulation or provision is
inconsistent with, or takes away or abridges any of the rights conferred by,
any provisions of this Part, and notwithstanding any judgment, decree or order
of any court or tribunal to the contrary, each of the said Acts and Regulations
shall, subject to the power of any competent legis- lature to repeal or amend
it, continue in force." It is evident that Article 31B protects only Acts
and Regulations specified in the Ninth Schedule from the vice of invalidity for
inconsistency with provisions of Part III of the Constitution but not anything
done or to be done in future under any of the provisions of 3 0 9 any Act so
specified, such as an order passed under section 3 of the Act., If section 3 of
the Act, which was held in Shri Hari Kishan Bagla v. State of Madhya Pradesh(1)
to pass the tests of validity imposed by articles 14 and 19 (1) (f) and (g),
read with articles 19 (5) and (6), a Control Order passed under section 3 would
also be required to pass these tests as its scope could not be wider than that
of the provisions which authorises its promulgation. A delegate or derivative
power could not rise higher or travel beyond the source of that power from
which it derives its authority and force.
If Bagla's case (supra) is good law (no party
has questioned its correctness) Articles 14 and 19(1) (f) and (g) could be
deemed to be, if one may so put it, "written into" section 3 of the
Act itself. They would control the scope of orders which could be passed under
it. That is, undoubtedly' the way in which guarantees of fundamental rights
could and should function if the Act containing section 3 itself had not been
placed in the Ninth Schedule so as to take, away ',be guaranteed of fundamental
rights from the substance of it.
The question of interpretation before us is:
What is the effect of putting the Act in the Ninth Schedule upon Control Orders
passed under section 3 of the Act? The answer to this question must necessarily
depend upon the effect of such a change of the legal position upon the
provisions of section 3 itself which authorise control orders passed- under it.
If the effect was to widen the orbit of section 3 of the Act or to remove the
limitations put by Article 14 and 19 upon the exercise of powers under it, the
logical and natural result would be to enlarge also the scope or sweep of the
orders passed under it. But, if it has no such effect upon section 3 of the Act
itself, orders passed under it would continue to be subject to provisions of
section 3 of the Act as controlled by Articles 14 and 19 of our Constitution so
that they will have to satisfy what may be described as a "dual test"
: firstly that of provisions of section 3 of the Act itself; and, secondly,
that of provisions of Chapter III of the Constitution containing fundamental
rights.
Learned Counsel for the petitioners suggested
that the placing of the Act in the Ninth Schedule protected only the grant of
powers under section 3 of the Act but not their exercise. Article 31B, no
doubt, speaks of "specified" Acts and Regulations. But it makes no
distinction whatsoever between any grants of powers and their exercise. Powers
are granted or conferred so as to be exercised and not to be kept in cold
storage for purposes of some- kind of display only as though they were exhibits
in a show case not meant for actual use. The whole object of a protection
conferred upon powers meant for actual use is to protect their use against
attacks upon their validity based upon provisions of Part 111. If ',his be the
correct position, it would, quite naturally and logically, follow that their
use is what is really protected.
(1) [1955] 1 SCR380.
310 In practice, it is the- exercise of power
which is generally assailed and not the mere conferment of it which raises the
somewhat different question of legislative competence.
Indeed, the Ninth Schedule does not provide
any protection at all against attacks based upon either the vice of excessive
delegation or want of legislative compete defects which could be said to
vitiate the grant of powers despite their place in the Ninth Schedule. But,
questions of conflict with fundamental rights and of transgression of
Legitimate or reasonable, limit.% upon their exercise arise when citizens
complain of unreason able impediments to the exercise of their fundamental
rights. The distinction between protection to a mere grant of powers and to
their exercise, therefore, seems specious in the context of the protection. It
cannot explain why, if section 3 is protected by the Ninth Schedule. The exercise
of power granted by it, which manifests itself in control orders, is not
protected. It would be so protected, if at all, not be- cause the orders to be
made in future, as such are protected, but because the power actually conferred
and found in existence in section 3 is protected. The protection is given to a
power which is specified and in existence which has to be used 'of certain
purposes and not to what may be specified in future.
If orders passed under section 3 of the Act
also get a protection it would be what may be described as a
"derivative" protection so long as the orders are covered by section
3 of the Act. It is available only so long as and because the source of their
authority--section 3 of the Act- is protected by the Ninth Schedule. Orders
purporting to be made under section 3 of the Act must, however, satisfy the
tests found in section 3 itself in every case. They can never escape the basic
tests whether section 3, the source of their authority, is protected by the
Ninth Schedule or not. The further tests imported by Articles 14 and 19 of the
Constitution into section 3 could be applied to these orders only so long as
these added tests are attached to or can be read into section 3 of the Act, but
not after they have been deliberately delinked or removed from section 3, if
one may so describe the effect of the inclusion of the Act in the Ninth
Schedule.
The Solicitor-General contended that section
3 of the Act constituted what he described as "skeleton" legislation,
over which the exercised of powers given by section 3 built, so to say, a body
of "flesh and blood". The term "skeleton" legislation is
used sometimes for denoting the broad outlines of a particular scheme found in
an Act of which details are to be filled in later by administrative orders of
experts. It is doubtful whether the Essential Commodities Act, 1955, could be
spoken of as a piece of "skeleton" legislation. Section 3, sub-s.(1)
of the Act provides for delegation of powers to the Central Government in order
that it may carry out certain purposes by framing appropriate schemes and
evolving policies which may meet the purposes of the Act. These schemes and
policies to serve the stated purposes may differ as. regards the nature of
means adopted and even in the particular objectives sought at particular times
to accord with changing circumstances.
311 Orders passed under section 3 of the Act,
in pursuance of such schemes or policies, do not become parts of the Act for
the purposes of the Ninth Schedule of the Constitution. On the strength of the
views expressed by this Court in Godavari Sugar Mills Ltd. & Ors. v. S. B.
Kamble & Ors.,(1) with which we respectfully agree, the most one can say is
that orders passed under the Act, before, its inclusion in the Ninth Schedule,
could also be said to be protected directly by the Ninth Schedule if mentioned
there. But, there could be no independent and direct protection of this
Schedule conferred upon orders passed under the Act before us just as none
could be given to either the amendments of an Act or to regulations passed
under the Act which were considered in Godavari Sugar Mills case (supra).
As already indicated above, the impugned
control order is assailed mainly on the ground that it violates Articles 14 and
19(1) (f) and (g) of the Constitution. It is alleged that the manufacturers of
oil having invested a great deal of capital in Mustard oil manufacturing
industry and having purchased oil seeds at higher rates than those which have
entered into the calculation of the Government in fixing the price of mustard
oil for the consumer cannot be made to sell oil, into which Mustard seed is
converted, at prices below those at which they could themselves produce oil. It
is submitted that to-require them to do so amounts to confiscation of property
contrary to law as well as a restriction upon the right guaranteed by Article
19(1)(g) of the Constitution upon them to carry on an industry or business free
from unreasonable restrictions. Valid restrictions, it is submitted, can only
be reasonable and in the interests of the general public. It was suggested that
the protection of Article 31(1) against deprivation of property contrary to law
was also involved here. The main question ,to be decided therefore, is whether
Part III of the Constitution is available at all to test the validity of the
impugned control order.
In Latafat Ali Khan & Ors. v. State of
U.P.,(1) a Constitution Bench of this Court decided such a question quite
rightly in our opinion as follows (at p. 720) :
"It seems to us that if a statutory rule
is within the powers conferred by a section of a statute protected by Art. 3 1
B, it is difficult to say that the rule must further be scrutinised under Arts.
14, 19 etc, Rule 4(4) seems to us to be a rule which does not go beyond the
powers conferred under s. 6(xvii), read with s. 44 of the Act. At any rate, s. 6(xvii)
and rule 4(4) are part of a scheme of land reform in U.P. and would be
protected from attack under Art. 31B of the Constitution".
In that case, the rule made under the
provisions of the Imposition of Ceiling on Land Holdings Act 1960 of U.P. was
under attack. The section under which the rule was made enjoyed the protection
of both Articles 3 1 A and 3 1B of the Constitution. Hence, it was held that
the rule was not to be questioned if it fell within the empowering (1) [1975] 3
S.C.R. 885.
(2) [1971] Suppl.S.CR.719at720.
312 provision of the Act. The position before
us is very similar. The Control order passed under section 3 of the provisions
of the Act before us, included in the Ninth Schedule, is assailed on the ground
that, although section 3 of the Act may be protected by the 9th Schedule of the
Act, yet, an order passed under this provision is not so protect- ed. Although,
we agree that the impugned order is not protected for this reason, yet, if the
section under which it was passed is protected from any attack based on the
provisions of Part III of the Constitution, the only question which survives is
whether the control order is covered by the protected empowering provision. If
it falls outside the empowering provision it would be invalid in any case. If
it falls within the empowering provision but could be found to be struck by the
provisions of Art. 19 (1 ) (f) and (g) of the Constitution, an attack on the
control order, by reason of Article 19(1) (f) or (g), would be really one
against the empowering provision itself which is protected.
The control order, therefore, enjoys what may
be called a derivative protection. All that has to be shown by the Central
Government is that it falls within the empowering provision. No further test,
based on fundamental rights in Chapter III of the Constitution, can be applied
to it in such a case.
All the tests of validity of the impugned
price control or fixation order are, therefore, to be found in section 3 of the
Act. Section 3 makes necessity or expediency of a control order for the purpose
of maintaining or increasing supplies of an Essential commodity or for securing
its equitable distribution at fair prices the criteria of validity. it is
evident that an assessment of either the expediency or necessity of a measure,
in the light of all the facts and circumstances which have a bearing on the
subjects of price fixation, is essentially a subjective, matter. It is true
that objective criteria may enter into determinations of particular selling
prices of each kilogram of mustard oil at various times. But, there is no
obligation here to fix the price in such. a way as to ensure reasonable profits
to the producer or manufacturer. It has also to be remembered that the object
is to secure equitable distribution and availability at fair prices so that it
is the interest of the consumer and not of the producer which is the
determining factor in applying any objective tests at any particular time.
Hence the most important objective fact in fixing the price of mustard oil,
which is consumed generally by large masses of people of limited means is, the
paying capacity of the average purchaser or consumer.
Statistics of rise in prices of mustard oil
throughout the country indicated a very sharp rise during the period preceding
the control order. It was no longer available at a reasonable price to the
average consumer. It is difficult to understand how the average consumer could
buy mustard oil at more than Rs. 10/- for each kilogram of mustard oil unless
his purchasing capacity was increased by pumping money into his pocket
artificially. This would necessarily imply a general rise in wages of the
working classes and salaries of middle classes which do not share the profits
of an inflationary economy. In other words, a 313 fixation of price above Rs.
10/- per kg. of mustard oil could have, contributed to push the country down
the slippery slope of inflation towards economic crisis and disaster.
Price control and planning may have been
forced upon all nations of the world due to the needs and exigencies of modern
"total" warfare. But, as has been observed, the problems of the
aftermath or of the peace and reconstruction, which follow (according to some
they "break out") are no less demanding. In addition, it is common
knowledge that the population explosion, unemployment, and rising prices in our
country, due to the inflationary spiral pose problems with no less grave
implications for the whole country than a war. It would be no exaggeration to say
that the fate of every government depends ultimately upon a satisfactory
solution of these problems, and, particularly, on its capacity to check rise in
prices of essential commodities.
We have listened to long arguments directed
at showing us that producers and sellers of oil in various parts of the country
will suffer so that they would give up producing or dealing in mustard oil. It
was urged that this would, quite naturally, have its repercussions on consumers
for whom mustard oil will become even scarcer than ever ultimately. We do not
think that it is the function of this Court or of any Court to sit in judgment
over such matters of economic policy as must necessarily be left to the Govt.
of the day to decide. Many of them, as a
measure of price fixation must necessarily be, are matters of production of
ultimate results on which even experts can seriously err and doubtless differ.
Courts can certainly not be expected to decide them without even the aid of
experts.
It is impossible for any Court to take
evidence from all over the country to determine whether particular concerns or
parties which have come up before this Court or could not reasonably produce
mustard oil at a cost which could make it reasonable for them to sell it at Rs.
10 /per kg. Learned Counsel before us have tried to perform this impossible
task. We think that it should not even have been attempted in a case of this
kind because the price at which mustard oil was sold commonly in the market not
very long ago and the price which prevailed at the time when the control order
of 30th September, 1977, was passed are matters of common knowledge. All that
the Govt. need have done was to take a policy decision based on what could
reasonably be the paying capacity of the average buyer of mustard oil and the
likely effects of the intended price fixation. It seems to us to have done
that. It is true that sufficient material, from these points of view, was 'not
placed before us by the Union of India. Nevertheless, the matter is so obvious
and glaring that we do not think that detailed statistics are needed. We
deliberately do not go into the great mess of materials which have been sought
to be placed before us from the point of view of present cost of producing
mustard oil and the fixation of a reasonable price based on a determination of
that. The more essential questions to answer, from the point of view of
provisions of section 3 of the Act were : Can the mass of ordinary consumers
pay more than Rs. 10/- per kg ? Even if the price of mustard oil is fixed at
less than the cost price to the ducers, is it not necessary to take such a
measure in order to break the 314 vicious inflationary spiral and bring down prices?
The last question could only be answered by waiting and watching the ultimate effects
of a particular price, fixation on prices of mustard seed and cost of
production of mustard oil ultimately. If the object of price fixation suggested
by this question is very 'necessary to take into account, from the point of
view of availability of mustard oil at fair prices to consumers, as we think it
is, the actual cost of production to the purchasers could certainly not be the
sole or the decisive factor. It could only be one out of a Dumber of relevant
facts and circumstances.
The net result of the mass of statistics
placed before us on behalf of the petitioners is that the price fixed should
have been about Rs. 3/-per kg. more, that is to say, about Rs. 13/- per kg.
Even if we accept this to be correct estimate for normal times, when fair and reasonable
profits to the producers could be an important consideration, we think that a
price fixed at Rs. 10/- per kg., as a part of an attempt to break the vicious
inflationary circle, is not at all an unreasonable step.
Students and observers of economic systems
tell us that inflation is no problem in socialist countries because the whole.
economy is so completely controlled that there is no question of a rise in
prices. Under which our system is known as a "mixed economy" planning
and price fixation are part of that social control which becomes inevitable
under certain conditions. Indeed, it seems quite unavoidable, under any system
which adopts socialistic measures to achieve the common good. The argument on
behalf of the Union is that the result of this fixation, even below cost price,
will necessarily produce desired effects upon the free sector in which price of
mustard seed is still not controlled. The control imposed will make it
impossible for producers to offer excessive prices for mustard oil seed
demanded by the growers. Hence, it was argued that the cost of production was
bound to come down in course of time if petit-loners could only wait a little.
Fixation at even uneconomic selling price implied temporary loss to the
producers, so as to serve their own ultimate interests and-those of general
welfare.
Such sacrifices ought it was suggested, be
readily borne by producers of mustard oil in a, system like ours. If they were
not able to bear them, they could close down their factories. They could hot
claim a right to carry on business or manufacture on their own terms. Such is
not the right guaranteed even by article 19 (1) (g) of the Constitution.
However, as we have already indicated, it seems that the Act was put in the
Ninth Schedule to prevent the invocation of Articles 14, 19 and 31 for
obstructing measures so necessary as price fixation of essential commodities is
for promoting the objectives of a socialist welfare economy. This, in our
opinion, would be a sufficient answer to all the arguments which had been put
forward at considerable length before us on the unconstitutionality of fixing
the price of mustard oil below what is claimed to be the cost price.
It may be mentioned, en passant, that even
during the interval between the passing of our order dismissing Writ Petitions
for the enforcement of fundamental rights protected by Part III of the
Constitution and the delivery of these reasons, so beneficial was the effect of
the order of 30th September, 1977, that price of mustard oil has 315 fallen in
the neighbourhood of Rs. 7/- per kg. Apparently, this is enough to cover
reasonable profits of producers as well as middlemen. We are informed that the
impugned Control Order has itself been withdrawn by the Central Government. We
can take judicial notice of those facts which illustrate the extreme
inadvisability of any interference by any court with measures of economic
control and planning directed at maximising general welfare. It is not the
function of the Courts to obstruct or defeat such beneficial measures devised
by the Govt. of the day. Courts cannot pass judgments on the wisdom of such
actions, unless actions taken are so completely unreasonable that no law can be
cited to sanction them.
If the impugned order of 30th September,
1977, falls within this provision, as we think it does, no question of
violating a fundamental right could arise. If an impugned order were to fall
outside section 3 of the Act, no question of applying any test of
reasonableness contemplated by Article 19(6) need arise because it would then
be a purely illegal I restriction upon the right conferred by Article 19(1) (g)
which would fall for lack of authority of any law to support it.
We have also heard considerable argument on
principles of fair fixation of price which, it was submitted, must take into
account the cost of production as well as a reasonable amount of profit to the
manufacturer and the middleman. As indicated above, such principles apply only
in those cases where there is an obligation upon the price fixing authority to
take certain matters. into account which have a bearing on cost of production
and are designed to secure fair share of profits to the producers. Section 3 of
the Act set out above,, as already indicated, has very different purposes in view.
It may be that the cost of production and reasonable amount of profits to the
manufacturers have an indirect bearing on matters set out in section 3(1) of
the Act. But, in cases where the effects of a policy or a measure adopted in
achieving purposes set out in Section 3 (1 ) are matters of guess work, after
experimentation, the actual consequences can be indicated with a fair amount of
certainty only by giving sometime for a policy to work and reveal its results.
Presence of such features in a case cannot invalidate price fixation of which
the direct objects are set out in section 3(1) of the Act.
Mr. Kacker, learned Solicitor General has
rightly drawn our attention to a distinction between merely, regulatory orders
and those of price fixation or price control under section 3 (2) (c) of the
Act. A price fixation to meet the general purposes set out in section 3(1) of
the Act, aimed at reversing the vicious inflationary spiral of rising prices,
may appear arbitrary or unreasonable judged by standards applicable to price
fixation aimed at giving reasonable profits to producer,-, which is not the
object of section 3(1) of the Act. The whole evidence of the petitioners is
misdirected inasmuch as it proceeds on the assumption that what could be no
more than a relevant consideration is the whole and sole object of section 3(1)
of the, Act. About other matters there is practically no evidence so that we
are left in the region of guesswork.
316 No case has been cited before us to show
that an Order meant to serve a purpose the execution of which may, as indicated
above, require fixation of price even below cost price for the time being, is
outside Section 3 (1) of the Act. It was rightly urged on behalf of the Union
that the Control order is a temporary and experimental device for achieving a
particular purpose, covered by Section 3(1) of the Act at a particular time, in
a particular state of affairs. It was submitted that, after the purpose is
achieved, the order could be and will be withdrawn by the Govt. of India.
As already 'stated above, that order has been
withdrawn because the purpose has been achieved. Even if that purpose had not
been achieved, the order could be withdrawn if it became evident to the
Government that such control would not achieve the desired object. It is
extremely hazardous for Courts to enter the sphere of experimentation in
matters of economic policy which must be, left to the Government of the day.
It will be seen from the provisions of
Section 3 (3) of the Act that price fixation on certain given principles is
enjoined only when there is an order under Section 2 (f) of the Act compelling
the sale of a whole stock or a specified part of it to the Central or a State
Government or to authorities or persons as directed by them. Again, Section 3
(a) (iii) provides a machinery for price fixation in special cases. Similar is
the position with orders under sections 3B and 3C. The whole machinery of
control of supplies with a view to their equitable distribution and securing
their availability at fair prices, it will be seen, is much more comprehensive
than the machinery for price fixation in special cases on given principles.
The cases cited before us on price control
relate to the sphere in which the criteria for fixation of were indicated either
by a statutory provision or by orders= thereunder.
In Panipat Cooperative Sugar Mills v. Union
of India (1), this Court said :
"Two principal questions arise in these
appeals : (1) what is the true interpretation of s. 3 (3C) and (2) whether the
price of Rs.
124.63 was in accordance with the provisions
of S. 3 (3C) ?" Thus, statutory principles for price fixation were under
consideration there. Again, in Shree Meenakshi Mills Ltd.
v. Union of India(2), there were directions
given under the Cotton Textiles Control Orders prescribing sales through
certain channels. The principles on which the sale prices of textiles were to
be fixed, in accordance with relevant rules, were explained by this Court.
In Meenakshi Mills' case (supra) may, C.J.,
disapproved of the decision of this Court in Premier Automobiles Ltd. v. Union
of India(3), in the following words (1) [1973] 2 S.C.R. 860.
(2) [1974] 2 S.C.R. 398.
(3) [1972] 2 S.C.R. 526.
317 .lm15 "The Premier Automobiles
(supra) decision does not consider that the concept of fair prices vanes with
circumstances in which and the purposes for which the price control is sought
to be imposed. This decision because of the special agreement there does not
consider that the fixation of fair price with a view to holding the prices line
may be stultified by allowing periodic increase in price." It was also
observed there :
"In Premier Automobiles case (supra)
this Court said that the concept of fair price fixed under section 18G takes in
all the elements to make it fair for the consumer leaving a reasonable margin
of profit to the manufacturer without which no one will engage in any
manufacturing activity.
These observations were made on the basis of
the agreement of the parties there that irrespective of technical or legal
points the Court should base its judgment on examination of correct and
rational principles and should direct deviation from the report of the
Commission of Inquiry appointed by it with the concurrence of the parties only
when it is shown that there has been a departure from the established princi-
ples or the conclusions of the commission are shown to be demonstrably wrong or
erroneous.'.' In other words, the judgment was not to provide a precedent for
anything similar to be done by Courts in other cases.
In Saraswati Industrial Syndicate Ltd. etc.
v. Union of India(1) the cases mentioned above were discussed by this Court in
the context of Suger Control Order, 1966, where clause (7) laid down certain
matters to be considered in determining fair price. It was held there
"Price fixation is more in the nature of a legislative measure even though
it may be based upon objective criteria found in a report or other material. It
could not, therefore, give rise to a complaint that a rule of natural justice
has, not been followed in fixing the price. Nevertheless, the criterion adopted
must be reasonable." The guiding factors laid down in clause (7) of the
Sugar Control Order, 1966, were held to afford only indicate to help the
Government in fixing prices on the lines indicated in the Control Order.
We think that unless, by the terms of a
particular statute, or order, price fixation is made a quasi-judicial function
for specified purposes or cases, it is really legislative in character in the
type of control order which is now before us because it satisfies the tests of
legislation. A legislative measure does not concern itself with the facts of an
individual case. It is meant to lay down a general rule applicable to all
persons or objects or transactions of a particular kind or class. In the case
before us, the Control Order applies to sales of mustard oil anywhere in India
by any dealer. Its validity does not depend on the observance (1) [1975] 1
S.C.R. 956.
3-277SCI/78 318 of any procedure to be
complied with or particular types of evidence to be taken on any specified
matters as conditions precedent to its validity. The test of validity is
constituted by the nexus shown between the order passed and the purposes for
which it can be passed, or in other words by reasonableness judges by possible
or probably consequences.
It is true that even executive or legislative
action must be confined to the limits within which it can operate. It must fall
reasonably within the scope of the powers conferred.
The scope of the powers conferred depends
upon the terms of the empowering provision. As we have already mentioned, the
empowering provision in the instant case is widely worded.
The validity of section 3 has not been
challenged before us.
As indicated above, it could not be
challenged by reason of Article 31B after its inclusion in the 9th Schedule of
the Constitution. The result necessarily is that, in a case in which the
Central Government is the judge of expediency and necessity to the extent that
even the protection of guaranteed fundamental rights cannot stand in the way of
its view or opinion of such necessity and expediency, it challenge on the
grounds on which it was attempted before us could not succeed.
We may also mention that the view we have
taken of the dominant purpose of section 3(1) of the Act is in accordance with
the following elucidation of its purpose in Meenakshi Mills case (supra):
"The question of fair price to the
consumer with reference to the dominant object and Purpose of the legislation
claiming equitable distribution add Availability at fair price is completely
lost sight of if profit and the producer's return are kept in the forefront.
The maintenance or increase of supplies of
the commodity or the equitable distribution and availability at fair prices are
the fundamental purposes of the Act." We do not think that we need deal
with American cases in price 'fixation such as Leo Nebbia v. People of the
State of New York(1), where the guarantee of due process against capricious action
was involved. in this country, such guarantees in regard to rights of property
or to carry on industry or trade or business could only arise by reason of
Articles 14 and 19 of the Constitution which it, excluded here because of the
protection conferred upon section 3 of the Act by the 9th Schedule of the
Constitution. I may, however, mention that in Permian Basin Area Rate cases(2),
where the majority of learned judges of the U.S. Supreme Court laid down, inter
alia, with regard to price fixation by a body of experts of Federal Power
Commission required to proceed quasi-judicially, that in order to "over
turn the Commission's judgment" the petitioners must "undertake the
heavy burden of making a convincing showing that it is invalid, because it is
unjust and unreasonable in its consequences". That was a case in which a
Commission was charged with a duty to fix rates in accordance (1) 291 U.S. (78
Law. En.) 502.
(2) 20 L. Ed. 2d. p. 312.
319 with certain principles after taking
evidence and hearing parties effected. Nevertheless, the duty of the
petitioners was held to extend to demonstrating the unreasonableness and
injustice of the consequences. A fortiori, patent injustice and unreasonable
injury to the interests of consumers must be shown if a measure of price
control, in the nature of either legislative or purely administrative action,
is assailed. So long as the action taken is not so patently unjust and
unreasonable as to lead to the irresistible conclusion that it could not fall
within section 3(1) of the Act it cannot be set aside or declared invalid. The
test has to be that of consequences on objects sought by section 3 ( 1 ) of the
Act. Judged by this test we think that the Order of 30th September, 1977, fell
within the purview of section 3 of the Act and it has served ,its purposes.
For reasons given above, the order of
dismissal of Writ Petitions already passed by us on 23rd November, 1977 is, in
our opinion, fully justified.
ORDER Y. V. CHANDRACHUD, P. N. BHAGWATI, S.
MURTAZA FAZAL ALI, P. N. SHINGHAL AND JASWANT SINGH JJ.
We will give our reasons later since as at
present advised, with great respect, we are not disposed to agree with a part
of the reasoning of the learned C.J.
(Dated May 5, 1978) CHANDRACHUD, C.J.-On
September 30, 1977, the Government of India in its Ministry of Civil Supplies
and Cooperation issued the Mustard Oil (Price Control) Order 1977, in exercise
of the power conferred by section 3 of the Essential Commodities Act, 10 of
1955. The Price Control Order provides by clause 3 that no dealer shall either
by himself or by any person on his behalf sell or offer to sell any mustard oil
at a retail price exceeding Rs. 10/- per kilogram, exclusive of the cost of
container but inclusive of taxes. Clause 2 defines a 'dealer' to mean a person
engaged in the business of purchase, sale, or storage for sale of mustard oil.
The Price Control Order was challenged in
this Court by several ,dealers on the ground, mainly that it violates articles
14, 19 (1 ) (f) and 19 (1) (g) of the Constitution.
Article 301 was cited but not argued upon
with any seriousness.
The argument that the Price Control Order
offends against the right to property and the right to carry on trade or business
requires 'for its appreciation and decision the awareness that by the 40th
Amendment passed in 1976, the Essential Commodities Act was placed in the
'Ninth Schedule to the Constitution as item 125. One of the main con- tentions
of the Union Government in answer to the petitioners' challenge to the
constitutionality of the Price Control Order is that since the Act, by reason
of its being placed in the Ninth Schedule, is immune from attack on the ground
that its provisions violate the fundamental rights guaranteed by Part III of
the Constitution, the Price Control Order which is but a creature of the Act
must enjoy the same immunity. This contention has found favour with the learned
Chief Justice, Shri M. H. Beg but, with respect, we are unable to share his
view.
Article 3 1 A of the Constitution saves laws
which provide for matters mentioned in clauses (a) to (e) thereof from a
challenge under articles 14, 19 or 31 notwithstanding anything contained in
article 13 of the Constitution.
Article 31A which was introduced by the
Constitution (First Amendment) Act, 1951, validates certain Acts and
Regulations providing that without prejudice to the generality of the
provisions contained in Article 31A, "none of the Acts and Regulations
specified in the Ninth Schedule nor any of the provisions thereof" shall
be deemed to be void, or ever to have become void, on the ground that such Act,
Regulation or provision is inconsistent with, or takes away or abridges any of
the rights conferred by, any provisions of Part III.
On a plain reading of this article it seems
to us impossible to accept that the protective umbrella of the Ninth Schedule
takes in its ever widening wings not only the Acts and Regulations specified
therein but also Orders and Notifications issued under those Acts and
Regulations.
Article 31B constitutes a grave encroachment
on fundamental rights and doubtless as it may seem that it is inspired by a
radiant social philosophy, it must be construed as strictly as one may, for the
simple reason that the guarantee of fundamental rights cannot be permitted to
be diluted by implications and inferences. An express provision of the
Constitution which prescribes the extent to which a challenge to the
constitutionality of a law is excluded, must be construed as demarcating the
farthest limit of exclusion. Considering the nature of the subject-matter which
article 31B deals with, there is, in our opinion, no justification for
extending by judicial interpretation the frontiers of the field which is
declared by that article to be immune from challenge on the ground of violation
or abridgement of fundamental rights. The article affords protection to Acts
and Regulations specified in the Ninth Schedule. Therefore, whenever a
challenge to the constitutionality of a provision of law on the ground that it
violates any of the fundamental rights conferred by Part III is sought to be
repelled by the State on the plea that the law is placed in the Ninth Schedule,
the narrow question to which one must address oneself is whether the impugned
law is specified in that Schedule. If it is, the provisions of article 31B
would be attracted and the challenge would fail without any further inquiry. On
the other hand, if the law is not specified in the Ninth Schedule, the validity
of the challenge has to be examined in order to determine whether the
provisions thereof invade in any manner any of the fundamental rights conferred
by Part III. It is then no answer to say that though the particular law, as for
example a Control Order, is not specified in the Ninth Schedule, the parent Act
under which the Order is issued is specified in that Schedule.
The Mustard Oil (Price Control) Order, 1977,
was passed under section 3 of the Essential Commodities Act, 1955, which by the
relevant part of its sub-section (1) empowers the Central Government to provide
by an order for regulating or prohibiting the production, 321 supply and
distribution of an essential commodity or trade and commerce therein, if it is
of the opinion that it is necessary or expedient so to do for maintaining or
increasing supplies of any essential commodity or for securing its-equitable
distribution and availability at a fair price. Since the Act of 1955 has been
placed in the Ninth Schedule, none of its provisions, including of course
section 3(1), is open to attack on the ground that it ever was or is
inconsistent with or takes away or abridges any of the rights conferred by any
provision of Part III of the Constitution. But that is the farthest that the
immunity offered by article 31B can go. In other words, speaking of a provision
directly in point, s. 3(1) of the Act of 1955 is not open to challenge on the
ground, to take a relevant instance, that it violates the guarantee contained
in article 19 (1) (f) or 19 (1) (g) of the Constitution. But there is no
justification for extending the protection of that immunity to an Order passed under
section 3 of the Act like the Mustard Oil (Price Control) Order. Extending the
benefit of the protection afforded by article 31B to any action taken under an
Act or Regulation which is specified in the Ninth Schedule, appears to us to be
an unwarranted extension of the provisions contained in article 31B, neither
justified by its language nor by the policy or principle underlying it. When a
particular Act or Regulation is placed in the Ninth Schedule, the Parliament
may be assumed to have applied its mind to the provisions of the particular Act
or Regulation and to the desirability, propriety or necessity of placing it in
the Ninth Schedule in order to obviate a possible challenge to its provisions
on the ground that they offend against the provisions of Part III. Such an
assumption cannot, in the very nature of things, be made in the case of an
Order issued by the Government under an Act or regulation which is placed in
the Ninth Schedule. The fundamental rights will be eroded of their significant
content if by judicial interpretation a constitutional immunity is extended to
Orders the validity of which the Parliament at least theoretically, has had no
opportunity to apply its mind. Such an extension takes for granted the
supposition that the authorities on whom Dower is conferred to take appropriate
action under a statute will act both within the framework of the statute and
within the permissible constitutional limitations, a supposition which past
experience does not justify and to some extent falsifies. In fact, the
upholding of laws by the application of the theory of derivative immunity is
foreign to the scheme of our constitution and accordingly orders and
Notifications issued under Acts and Regulations which are specified in the
Ninth Schedule must meet the challenge that they offend against the provisions
of Part III of the Constitution. The immunity enjoyed by the parent Act by
reason of its being placed in the Ninth Schedule cannot proprio vigore be
extended to an offspring of the Act like a Price Control Order issued under the
authority of the Act.
it is therefore open to the petitioners to
invoke the writ jurisdiction of this Court for determination of the question
whether the provisions of the Price Control Order violate articles 14, 19 (1)
(f) and 19 (1) (g) of the Constitution.
The learned Solicitor General relies,
justifiably, on two decisions of this Court in Vasantlal Maganbhai Sanjanwala
v. The State of Bom- 32 2 bay and Others(1) and Latafat Ali Khan and Ors. v.
The State of U.P.(2), in support of his argument that the Price Control Order
must receive the protection of the Ninth Schedule to the same extent as the Essential
Commodities Act under which that order was issued and which has been placed in
the Ninth Schedule. In Vasantlal Maganbhai(1), the vires of section 6(2) of the
Bombay. Tenancy and Agricultural Lands Act, 1948, was challenged on the ground
that it suffered from the vice of excessive delegation. In exercise of the
power con feared by section 6(2), the State Government had issued a
Notification fixing the maximum rent payable by tenants of lands situated in
the areas specified in the schedule appended to the Notification. The validity
of that Notification was challenged on the ground. that it offended against
Article 31 of the Constitution. The first contention was rejected by the
majority which held that section 6(2) did not suffer from excessive delegation.
'On the second question it was held by the Court that since the Bombay Tenancy
Act was placed in the Ninth Schedule, the Notification which was issued under
section 6(2) of that Act could not be challenged on the ground that it violated
article 31. Subba Rao J., who was in minority, did not consider the latter
point regarding the validity of the Notification issued under section 6(2)
because he took the view that section 6(2) suffered from the vice of excessive
delegation and was therefore unconstitutional. This decision undoubtedly lends
support to the contention of the Union Government that if an Act or Regulation
is specified in the Ninth Schedule, any order or notification issued under it
would equally be entitled to the protection of that Schedule. We are, however,
of the opinion, respectfully, that the decision in Vasantlal Maganbhai (supra)
does not reflect the true legal position which, according to us, is that the
immunity enjoyed by an Act placed in the Ninth Schedule cannot be extended to
an order or notification issued under it. The decision of. the Court appears to
have been influenced largely by the consideration that the only argument
advanced against the validity of the notification was that in substance it
amended the provisions of section 6(1) and was therefore a fresh legislation to
which article 31B could not apply. The Court rejected that argument and held
that if section 6(2) was 'Valid, the exercise of the power validly conferred on
the Provincial Government could not be treated as a fresh legislation.
The decision in Latafat Ali Khan (supra)
contains no reasons beyond the bare statement that "if a statutory rule is
within the powers conferred by a section of a statute protected by Art. 3 1 B,
it is difficult to say that the rule must further be scrutinised under arts.
14, 19, etc.".
It is clear from the judgment that since the
Court was of the opinion that " at any rate" the impugned provisions
of U.P. Imposition of Ceiling on Land Holdings Act and the Rules were part of a
scheme of land reform and were therefore protected from attack under article 31
A of the Constitution, it did not think it necessary to examine the question
whether statutory rules framed under the Act which was placed in the Ninth
Schedule would enjoy the same immunity.
(1) [1961] 1 S.C.R. 341.
(2) [1971] Supp. S.C.R. 719.
323 The decision of this Court in Godavari
Sugar Mills Ltd. and Ors v. S. B. Kamble and Ors.(1), appears to us to be in
point and it supports the petitioners' contention that the benefit of article
31B of the Constitution cannot be extended to an order or notification issued
under an Act which is placed in the Ninth Schedule. The Bombay High Court while
affording protection of article 31B to the Maharashtra Agricultural Lands
(Ceilings on Holdings) Act, 1961, which was included in the Ninth Schedule,
also granted the benefit of that protection to the later Amending Acts of 1968,
1969 and 1970 on the ground that they were only ancillary or incidental to
section 58 of the Principal Act.
That view was rejected by this Court on the
ground that if the protection afforded under article 31 B is. extended to
amendments made to an Act or Regulation subsequent to its inclusion in the
Ninth Schedule, the result would be that even those provisions would enjoy the
protection which were never scrutinised and could not, in the very nature of
things, have been scrutinised by the prescribed majority vested with the power
of amending the, Constitution. That, according to the Court, would be
tantamount to giving a power to the State Legislature to amend the Constitution
in such a way as would enlarge the contents of the Ninth Schedule to the
Constitution. Khanna, J., who spoke for the Court, observed that "Article
31B carves out a protected zone", that any provision which has the effect
of making an inroad into the guarantee of fundamental rights must be construed
very strictly and that it is not permissible to the Court to widen the scope of
such a provision or to extend the frontiers of the protected zone beyond what
is warranted by the language of the provision. In the result, it was held that
the entitlement to protection cannot be extended to provisions which were not
included in the Ninth Schedule and that this principle would hold good
irrespective of the fact whether the provision in regard to which the protection
was sought dealt with new, substantive matters or with matters which were
merely incidental or ancillary to those already protected. This decision shows
unmistakably that the circumstance that a Control Order is a mere creature of
the parent Act and is incidental or ancillary to it cannot justify the
protection of the Ninth Schedule being extended to it on the ground that the
parent Act is incorporated in that Schedule.
But having. won the battle on a point of law,
undoubtedly of public importance, the petitioners have to lose the war of price
fixation because there is no substance in their grievance that the Price
Control Order offends against articles 14, 19(1)(f), and 19(1)(g). Taking first
the challenge under article 14 for consideration, the argument is that the
impugned Order treats the entire country as one unit regardless of regional
variations relating to factors like the cost of procurement of raw material and
freight.
The contention, in other words, is that the
order is over- inclusive since it treats unequals as equals by imposing an
identical burden upon a wider range of individuals than those who can
legitimately be treated as constituting one single class for the purpose of
remedying the mischief at which the law aims. In the first place, the averments
in the various Writ Petitions are far too vague and general to justify the
application of article 14. The petitioners have failed (1) [1975] 3 S.C.R.885.
324 to show by acceptable data that they fall
into a separate class altogether and cannot therefore be subjected to the
restraints of a single order of price fixation. It may be that economic factors
governing the mustard oil trade vary from region to region as in the case of
any other trade and further, the pattern of the trade may differ in different
growing regions and manufacturing centres like Uttar Pradesh, Rajasthan, Bihar,
West Bengal, Punjab and Orissa.
But that by itself cannot justify the
argument that different prices must be fixed for different regions and that
failure to do so would necessarily entail discrimination. 'Dealers' in Mustard
Oil, wherever they operate, can legitimately comprise a single class for the
purpose of price fixation, especially as it is undisputed that the two basic
constants of the trade are that the cost of mustard seed constitutes 94 per
cent of the cost of the mustard oil and that about 3.12 kilograms of seed goes
into the extraction of one kilogram of oil. Fixation of different price this
background, frustrate the very object commodity should be made available for
different regions will, in of the exercise that an essen to the consumer at a
fair price. Consumer goods have a disconcerting tendency to disappear from
regions where prices are lower and they notoriously migrate to areas where
higher prices rule.
Besides, the grievance of the West Bengal
dealers, that since they have to import mustard seed from Uttar Pradesh their
cost of production is higher than in Uttar Pradesh can be met with the answer
that in any event, West Bengal has also to import at least 1/3rd of its total
annual requirement of 1.3 lakhs of Metric tonnes of Mustard Oil.
Uttar Pradesh grows 66% of the total
production of mustard seed whereas West Bengal grows only 6%. The question
really is whether dealers in different regions can be said to be so differently
situated in the context of and in relation to the purpose for which the Price
Control Order is issued that one common price for dealers all over the country
can reasonably be described as discriminatory as against some of them. As
observed earlier, there is no reliable data to support this contention and we
cannot accept the charge of over-inclusiveness for the mere reason that dealers
in a certain region have to import their raw material from another region.
Perhaps, the high rate of turnover and consumption in a region like West Bengal
may easily absorb the additional cost of freight. We are therefore unable to
hold, to use the language of Mathew J., in State of Gujarat vs. Shri Ambica
Mills Ltd. (1) that the Government of India, in fixing one common price for
mustard oil for the whole country, has acted like Herod who ordered the death
of all male children born on a particular day because one of them would some
day bring about his downfall.
It is interesting that in matters of price
fixation, whichever method the authorities adopt is made the subject- matter of
challenge for one reason or another, often conflicting and contradictory. In
Saraswati Industrial Syndicate Ltd. vs. Union of India(1) one of the
contentions on behalf of the manufacturers of sugar was that sugar prices
should not have been determined on the basis of 22 different zones but should
have been determined either on an All-India basis or for a unit of fix zones.
That contention was rejected by this Court but the case is (1) [1974] 3 S.C.R.
760, 762.
(2) [1975] 1 S.C.R. 956.
325 an instance of how a division of the
country into separate zones for the purpose of fixing the price of an essential
commodity does not offer a commonly acceptable solution. It is doubtless that
if lower prices were fixed for Uttar Pradesh on the ground that the dealers
there were not required to import raw material from outside, a hue and cry
would have been raised that the Government of India was victimising the dealers
in a particular area for the irrelevant reason that it grew the raw material in
abundance. In the ultimate analysis, the mechanics of price fixation has
necessarily to be left to the judgment of the executive and unless it is patent
that there is hostile discrimination against a class of operators, the
processual basis of price fixation has to be accepted in the generality of
cases as valid.
That takes us to the petitioners' contention
that the Price Control Order is violative of the petitioners' right under
articles 19(1) (f) and 19 (1 ) (g) of the Constitution. The case of M/s Prag
Ice & Oil Mills who are petitioners in Writ Petition No. 712 of 1977 is as
follows :
The average cost of production mustard oil,
when the Price Control Order was issued, was about Rs. 1351.10p ' per quintal
i.e. Rs. 13.51 per kilogram. Taking into consideration overhead costs and
allowing for a reasonable margin of profit, the fair selling price of mustard
oil would come to Rs. 14.01 per kilogram at the factory gate.
Petitioners, being wholesalers, sell their
goods to other wholesalers and retailers some of whom have to transport the
goods at considerable distances from the petitioners' factory. Under the
impugned Order the price of mustard oil is fixed at Rs. 10/- per kilogram
'which means that the petitioners have to sell the goods to the retailer at
about Rs. 8.50 per kilogram since the retailer has to provide for a margin of
at least Rs. 1.50 per kilogram for his costs and a small I profit. Thus the
petitioners have to suffer a loss of over Rs. 5/- per kilogram as a result of
the Price Control Order. By this method, the petitioners are deprived of their
right to acquire and hold their property and carry on their trade or business
of extracting, manufacturing and selling mustard oil. The price of Rs. 10/- per
kilogram has been fixed, according to the petitioners, arbitrarily and without
any application of mind. These allegations contained 'in the Writ Petition of
M/s. Prag Ice & Oil Mills may be taken as representing broadly the
grievance of the other petitioners who are more or less similarly situated.
Those allegations have been traversed by Shri
V. Srinivasan, Deputy Secretary to the Ministry of Civil Supplies and
Cooperation Government of India, on behalf of the Union Government. Shri Srinivasan
has stated in his affidavit that in March 1977, the retail price of mustard oil
in several mustard oil consuming centres ranged between Rs. 9.75 and Rs. 10.81
per kilogram. It became necessary to issue the impugned Order in view of the
fact that the price of mustard oil was increasing persistently in spite of the
fact that-the prices of other edible oils were showing a declining trend. The
available stocks disappeared from the market suddenly and the Government had to
intervene in order to control the distribution of an essential commodity in
public interest. The fixation of price in these circumstances was necessarily
empirical, for which purpose the Government took into account prices which were
326 prevailing in the market when the goods were freely available, the general
level of prices of other edible, oils the purchasing power of the consumer and
the amount of loss which the industry was able to absorb after it had made huge
profits in prosperous years. The affidavit further says that even at Rs. 10/-
per kilogram, it was possible for the petitioners to make a small profit but,
whether or not the dealers. made any profit, the validity of the Price Control
Order was not liable to be challenged on the ground that the dealers would
incur a loss if they were obliged to sell mustard oil at Rs. 10/- per kilogram.
The question as to which was the fair price to the consumer was kept by the
Government in the forefront and by that method alone could the dominant object
of the Essential Commodities Act be achieve effectively.
Shri Srinivasan's affidavit further states
that mustard seed is grown mainly in the rabi season, i.e., from September to
October and February to March and the peak marketing season is from April to
June. The mustard crop is by and large grown by small farmers who have no
staying ability and who, in their anxiety to dispose of their produce as
quickly as possible after the harvest, sell their produce between April and June.
From this it is stated to follow that the millers effect the bulk of their
purchases during the first quarter of the year and therefore, the petitioners
could not be heard to contend that the price of mustard seed after the coming
into force of the impugned Price Control Order should be taken into account for
determining the cost which they have to incur in producing mustard oil. The
affidavit con- tains a table showing the prices paid by the millers and the
prices, received by the farmers for the mustard seed. The fair price of the
mustard oil, according to the Government, could be fixed on the basis, of
weighted average price or the mean price of the mustard seed. But in order not
to cause hardship to the dealers, the price was fixed at Rs. 10 per kilogram on
the basis of the average of the highest and the lowest of the market prices
prevailing during the period of bulk arrivals of the seed in the market, The
prices ranging at ten different centres are alleged to have been taken into
account, namely, Aligarh, Allahabad, Hapur, Gauhati, Hathras, Jullundur,
Kanpur, Moga, Rohtak and Sriganganagar., Those prices yield a mean price of
around Rs. 350/- per quintal of mustard seed and upon that basis the retail
price works out to be less than Rs. 10/- viz., Rs. 9.95 per kilogram.
Considering these rival contentions and the
data which has been produced,before us in support thereof, we are unable to
accept the petitioners' submission that the Price Control Order is violative of
their rights under articles 19 (1) (f ) and 19 (1) (g) of the Constitution. In
the first place, it is impossible to determine in these Writ Petitions the
accuracy of the petitioners' case that they purchase mustard seed from month to
month and from week to week as the crushing of the seed progresses. We see no
reason to doubt the statement contained in the affidavit filed on behalf of the
Government of India that most of the growers of mustard seed are small
agriculturists who have hardly any staying ability and are therefore compelled
to sell their produce immediately after the harvesting season, that is to say,
between March 32 7 and June. If the prices of mustard seed prevailing during
that period are taken into account, it is difficult to accept that the price of
Rs. 10 per kilogram is so patently unreasonable as to be violative of the
petitioners right to hold property or to do trade or business.
the petitioners that it is futile to fix the
price of oil without at the same time fixing the ceiling price of the raw
material, namely, the mustard seed. This Contention is also effectively met by
the: respondent's plea that the bulk of the, purchases are made by the
petitioners immediately after the harvesting season and that, considering the
pattern of the trade in mustard seed it is wholly unnecessary to control the
price of the seed in order effectively to control the price of mustard oil. It
is significant that whereas mustard seed was sold in certain areas at prices
ranging between Rs. 480/- and Rs. 530/- per quintal in September 1977, prices
after the promulgation of the impugned Price Control Order had come down to a
range between Rs. 365/and Rs. 390/- per quintal. This has not been denied by
the petitioners but they describe the phenomenon as irrelevant for the purpose
of determining the legality of the Price Control Order. Their contention, in
which we find no' substance, is that the. consequence of the Price Control
Order cannot be looked at for the purpose of deciding whether the price of
mustard oil was fixed in accordance with legally acceptable principles. The
proof of pudding, as the saying goes, is in the eating, and no court can shut
its eyes to the fact that the Price Control Order produced the salutary and
tangible result of bringing down the price of raw material.
The basic rule of construction in these
matters, as observed in Vrajlal Manilal & Co. & Ors. v. State of Madhya
Pradesh & Ors.(1) is that a mere literal or mechanical construction is not
appropriate where important questions such as the impact of an exercise of a
legislative power on constitutional provisions and safeguards ,hereunder are
concerned. In cases of such a kind, two rules of construction have to be kept
in mind : (1) that courts generally lean towards the constitutionality of a
legislative measure impugned before them upon the presumption that a
legislature would not deliberately flout a constitutional safeguard or right,
and (2) that while construing such an enactment the court must examine the
object and the purpose of the impugned Act,. the mischief it seeks to prevent
and ascertain from such factors its true scope and meaning.
Section 3(1) of the Essential Commodities
Act, 1955, empowers the Central Government to fix the prices of essential
commodities if it is of the opinion that it is necessary or expedient so to do
for maintaining or increasing supplies of any essential commodity or for
securing their equitable distribution and availability at a fair price.
Sub-section (2) (c) of section 3 provides that without prejudice to the
generality of the power conferred by sub-section (1), an order made under that
sub-section may provide for controlling the price at (1) [1970] S.C.R.400,409.
328 which any essential commodity may be
bought or sold. The dominant purpose of these provisions is to ensure the
availability of essential commodities to the consumers at a fair price. And
though patent injustice to the producer is not to be encouraged, a reasonable
return on investment or a reasonable rate of profit is not the sine qua non of
the validity of action taken in furtherance of the powers conferred by section
3(1) and section 3(2)(c) of the Essential Commodities Act. The interest of the
consumer has to be kept in the forefront and the prime consideration that an
essential commodity ought to be made available to the common man at a fair
price must rank in priority over every other consideration.
We are not impressed by the play of
statistics on the part of the petitioners which is designed to show that as a
result of the Price Control Order, they are faced with a loss of about Rs. 5/-
per kilogram on the sale of mustard oil. We will ignore, while we are on this
point, the pronounced reiteration of the respondent that the, petitioners have
made huge profits in past years and that their concerns are sufficiently
prosperous to be able to absorb a small loss for a temporary period. But even
in the absence of satisfactory proof of the extent of the profits made by the
petitioners in past years, we are of the opinion that the circumstance that the
petitioners may have to suffer a loss over a short period immediately following
upon the promulgation of the Price Control Order will not render the Order
constitutionally invalid. The interplay of economic factors and the laws of
demand and supply are bound eventually to have their impact on the pattern of
prices prevailing in the market. If the dealer cannot lawfully sell the
finished product at more than Rs. 10/- per kilogram, the price of raw material
is bound to adjust itself to the price of the product. Subsequent events
unmistakably demonstrate the effect of such interplay and the favourable
reaction which the Price Control Order has produced on 'the, price of mustard
seed. But above all things, it is necessary to bear in mind in matters of the
present nature what Krishna Iyer, J., said in B. Banerjee v. Anita Pan.(1) that
such provisions have to be viewed through a socially constructive, not legally
captious microscope to discover a glaring unconstitutional infirmity, that when
laws affecting large chunks of the community are enacted stray misfortunes are
inevitable and that social legislation without tears, affecting vested rights, is
virtually impossible.
Having considered the matter from every
possible angle, we are unable to accept the petitioners' contention that the
impugned Price Control Order is so unreasonable as to be constitutionally
invalid. As observed by Beg J., in Saraswati Industrial Syndicate, (supra) it
is enough compliance with the constitutional mandate if the basis adopted for
price fixation is not shown to be so patently unreasonable as to be in excess
of the power to fix the price.
Learned counsel for the petitioners expressed
the fear that the fixation of an uneconomic price will drive the manufacturers
out of the market and thus the very source of supply of an essential (1)
[1975](2) S.C.R. 774, 782.
329 commodity will dry up , thereby
frustrating the object of the Essential Commodities Act that the consumer must
get his basic needs at a fair price. The fallacy of this contention is that
immediately prior to the promulgation of the Price Control Order the consumer
was denied the chance to get the mustard oil at a price which lie could
reasonably afford.
For him, therefore, the supply had already
dried up. If, after the issuance of the order, the supply position shows no
improvement, that consequence cannot be legitimately attributed to the
operation of the Price Control Order, At best, the Order can then be said to
have failed to achieve its purpose.
This discussion will not be complete without
reference to the decision of a Constitution Bench of this Court in Shree
Meenakshi Mills Ltd. v. Union of India(1). The question which arose in that
case was as regards the validity of a notification fixing fair prices of cotton
yarn. It was contended on behalf of the petitioners therein that the price
fixed was arbitrary because the fluctuation in the price of cotton was not
taken into consideration, the price of raw materials, the liability for wages
and the necessity for ensuring reasonable profit to the trader were not taken
into account; and above everything else, the industry was not ensured a
reasonable return on its investment. These contentions were rejected by this
Court on the ground that, just as the industry cannot complain of rise and fall
of prices due to, economic factors in an open market, it cannot similarly
complain of some increase in or reduction of prices as a result of a
notification issued under section 3(1) of the Essential Commodities Act
because, such increase or reduction is also based on economic factors. Dealing
with the contention that a reasonable profit must be assured to the
manufacturers, the Court held that ensuring a fair price to the consumer was
the dominant object and purpose of the Essential Commodities Act and that
object would be completely lost sight of, if the producer's profit was kept in
the fore-front. Ray C.J., speaking for the Court, observed :
"In determining the reasonableness of a
restriction imposed by law in the field of industry, trade or commerce, it has
to be remembered that the mere fact that some of those who are engaged in these
are alleging loss after the imposition of law will not render the law
unreasonable. By its very nature, industry or trade or commerce goes through
periods of prosperity and adversity on account of economic and sometimes social
and political factors. In a , largely free economy when controls have to be
introduced to ensure availability of consumer goods like foodstuff, cloth and
the like at a fair price, it is an impracticable proposition to require the
Government to go through the exercise like that of a Commission to fix the
prices." Another passage from the judgment of the learned Chief Justice
which has an important bearing on the instant case is to the following effect
(1) [1974] 2 S.C.R.398.
330 "When available stocks go
underground and the Government has to step in to control distribution and
availability in public interest, fixing of price can, therefore, be only
empirical. Market prices at a time when the goods did not go underground and
were freely available, the general rise in prices, the capacity of the consumer
specially in case of consumer goods like food-stuff, cloth etc.
the amount of loss which the industry is able
to absorb after having made huge profits in prosperous years, all these enter
into the calculation of a fair price in an emergency created by artificial
shortages." On this aspect of the matter, the Court cited with approval a
passage from an American decision, Secretary of Agriculture v. Central Reig
Refining Company(1) to the effect that Courts of Law cannot be converted into
tribunals for relief from the crudities and inequities of complicated
experimental economic legislation.
Counsel for the petitioners relied upon the
decisions in Panipat Co-operative Sugar Mills v. Union of India(2) and
Anakapalle Cooperative Agricultural and Industrial Society Ltd. v. Union of
India(3) in support of their contention that fixation. of a price without
ensuring a reasonable return to the producers or dealers is unconstitutional.
The infirmity of this argument, as pointed out in Meenakshi Mills v. Union of
India, (supra) is that these two decisions turn on the language of section
3(3c) of the Essential Commodities Act under which it is statutorily obligatory
to ensure to the industry a reasonable return on the capital employed in the
business of manufacturing sugar. These decisions can, therefore, have no
application to cases of price fixation under section 3 (1) read with section 3
(2) (c) of the Act. Cases failing under sub-sections 3A, 3B and 3C of section 3
of that Act belong to a different category altogether.
It is customary in price fixation cases to
cite the oft- quoted decision in Premier Automobiles Ltd. & Anr. etc. v. Union
of India(4) which concerned the fixation of price of motor cars. It is time
that it was realized that the decision constitutes. No precedent in matters of
price fixation and was rendered for reasons peculiar to the particular case. At
page 535 of the Report Grover J., who spoke for the Court, stated at the outset
of the judgment:
"Counsel for all the parties and the
learned Attorney General are agreed that irrespective of the technical or legal
points that may be involved, we should base our judgment on examination of
correct and rational principles and should direct deviation from the report of
the Commission which was an expert body presided over by a former judge of a
High Court only when it is shown that there has been a departure from,
established principles or the conclusions of the Commission are shown to be
demonstrably wrong or erroneous." By an agreement of parties the (1) 94Law
Ed. 381.
(2) A.T.R. 1973 S.C. 536.
(3) A.T.R. 1973 S.C. 734.
(4) [1972] 2 S.C.R. 526.
331 Court was thus converted into a Tribunal
for considering every minute detail relating to price fixation of motor cars.
Secondly, as regards the escalation clause, the Court recorded at page 543 that
it was not disputed on behalf of the Government, and the Attorney General
accepted the position, that a proper method should be devised-for escalation or
de-escalation. Thirdly, it is clear from page 544 of the Report that the
Learned Attorney General also agreed that a reason-able return must be allowed
to the manufacturers on their investment. The decision thus proceeded partly on
an agreement between the parties and partly on concessions made at the Bar.
That is the reason why the judgment in Premier Automobiles (supra) cannot be
treated as a precedent and cannot afford any appreciable assistance in the
decision of price fixation cases.
The contention that the Price Control Order
is arbitrary because it is not limited in point of time is without any merit.
In the very nature of things, orders passed under section 3(1) read with
section 3(2) of the Essential Commodities Act are designed primarily to meet
urgent situations which require prompt and timely attention. If a price control
order brings about an improvement in the supply position or if during the
period that such an order is in operation there is a fall in prices so at to
bring an essential commodity within the reach of the ordinary consumer, the
order shall have lost its justification and would in all probability be
withdrawn. That in fact is what has happened in the instant case. It appears
that the supply position having improved, or, so at any rate seems to be the
assessment of the situation by the Government, the order has been recently withdrawn.
Learned counsel for the petitioners laid
great stress on the circumstance that, as is shown by the affidavit filed on
behalf of the Union Government, the Price Control Order did not take into
account the circumstance that the cost of production of mustard oil includes a
fairly large margin of profit of the middleman. It is urged that small millers
cannot afford to take large investments and lock up their limited capital and
therefore resort is required to be had to the intervention of the middleman who
is in a position to invest a: large capital in the purchase of raw material and
who, naturally, expects a fair return on his investment.
The intervention of the middleman is an
acknowledged reality of all trades and businesses. The fact that the middleman's
profit increases the price (A goods which the consumer has to pay, was
described by this Court in Narendra Kumar and Others v. The Union of India and
Others(1) as 'axiomatic.
As observed in, that case, since the middle
mans charges often add to a considerable sum, it has been the endeavour in
modern times for those responsible for social control to keep the middleman's
activities to the minimum and to attempt to replace them largely by cooperative
sale societies of producers and cooperative purchase societies of consumers.
The elimination of the middleman is bound to cause trouble and inconvenience, 1
[1960] 2S.C.R.375.
332 but the ultimate savings in the cost of
the finished product could more than balance that inconvenience. The argument
of the petitioners really amounts to a rigid insistence that they are entitled
to carry on their business as they please, mostly in a traditional manner,
regardless of its impact on public interest. But, property rights are not
absolute, and important as the right of property may be, the right of the
'public that such rights be regulated in common interest is of greater
importance. These correlative rights, as observed in Lea Nebbia v. People of
the State of New York(1), are always in collision : "No exercise of the
private right can be imagined which will not ever slight, affect the public; no
exercise of the to regulate abridge his liberty or affect his property. But
subject only to constitutional restraint the private right must yield to the
public the words of Justice Roberts who delivered the opinion of in Leo Nebbia
(supra) :
"The Constitution does not secure to any
one liberty to conduct his business in such fashion as to inflict injury upon
the, public at large, or upon any substantial group of the people. Price
control, like any other form of regulation, is unconstitutional only if
arbitrary, discriminatory, or demonstrably irrelevant to the policy the
legislature is free to adopt, and hence an unnecessary and unwarranted
interference with individual liberty." Counsel for the petitioners
characterised the fixation of price in the instant case as a veiled
transgression of power conferred by section 3 ( 1 of the Essential Commodities
Act.
In support of that submission the judgment of
this Court in K. C. Gajapati Narayan Deo anti Others v. The State of Orissa(2)
was cited in which it was said that when a legislative power is defined by
reference to purpose, legislation not directed to that purpose will be invalid.
We are unable to appreciate how, if the
Government has got the power to fix a fair price of an essential commodity, it
can be said that they have under a pretext trespassed upon a field which does
not properly belong to them. The power conferred by section 3(1) of the Essential
Commodities Act is undoubtedly purposive. But it seems to us incontrovertible
that the Price Control Order was promulgated by the Government in order to
achieve the purpose set out in section 3(1) of the Act. The fact that a
legislative remedy or an administrative order passed in exercise of a statutory
power is effective to mitigate an evil may show that it has failed to achieve
its purpose, highlighting thereby the paradox of reform. But, as observed in
Joseph Beaubarnais v. People of the State of Illinois(1) , that "is the
price to be paid for the trail- and-error inherent in legislative efforts to
dial with obstinate social issues". We are, therefore, unable to hold that
by fixing a fair price for mustard oil, the Government has committed a veiled
and subtle trespass upon private rights or upon a legislative field which is
not open to them to occupy.
(1) 78 Lawyers' Edition 940.
(2) [1954] S.C.R. 1.
(3) 96 Lawyers'Edition 919.
333 To sum up, it seems to us impossible to
accept the contention of the petitioners that the impugned Price Control Order
is an act of hostile discrimination against them or that it violates their
right to property or their right to do trade or business. The petitioners have
taken us into the mutest details of the mechanism of their trade operations and
they have attempted to demonstrate in relation thereto that a factor here or a
factor there which ought to have been taken into account while fixing the price
of mustard oil has been ignored. Dealing with a similar argument it was
observed in Metropolis Theater Company v.
City of Chicago(1) that to be able to. Find
fault with a law is not to demonstrate its invalidity. "It may seem unjust
and oppressive, yet be free from judicial interference. The problems of
government are practical ones and may justify, if they do not require rough
,accommodations, illogical, it may be, and unscientific. But even such criticism
should not be hastily expressed. What is best is not always discernible, the
wisdom of any choice may be disputed or condemned. Mere errors of government
are not subject to our judicial review. It is only its palpably arbitrary
exercises which can be declared void. . . . " The Parliament having
entrusted the fixation of prices to the expert judgment of the Government, it
would be wrong for this Court, as was done by common consent in Premier
Automobiles (supra) to examine each and every minute detail pertaining to the
Governmental decision. The Government, as was said in Permian Basin Area Rate
Cases, (supra) is entitled to make pragmatic adjustments which may be called
for by particular circumstances and the price control can be declared
unconstitutional only if it is patently arbitrary, discriminatory or
demonstrably irrelevant to the policy which the legislature is free to adopt.
The interest of the producer and the investor is only one of the variables in
the "constitutional calculus of reasonableness' and Courts ought not to
interfere so long as the exercise of Governmental power to fix fair prices is
broadly within a "zone of reasonableness'. If we were to embark upon an
examination of the desperate contentions raised before us on behalf of the
contending parties we have no doubt that we shall have exceeded our narrow and
circumscribed authority.
Before closing, we would like to mention that
the petitioners rushed to this Court too precipitately on the heels of the
Price Control Order. Thereby they deprived themselves of an opportunity to show
that in actual fact, the Order causes them irreparable prejudice. Instead, they
were driven through their ill-thought haste to rely on speculative hypotheses
in order to buttress their grievance that their right to property and the right
to do trade were gone or was substantially affected. A little more patience,
which could have been utilised to observe how the experiment functioned, might
have paid better dividends.
The impugned Price Control Order is,
therefore, valid and the challenge made thereto by the petitioners his to fail.
These are our reasons in support of the order
passed earlier that the Petitions be dismissed with costs.
S.R. Petitions dismissed.
(1) 57Lawyers Edition730.
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