Manick Chand Paul & Ors Vs. Union of
India & Ors [1984] INSC 84 (17 April 1984)
TULZAPURKAR, V.D.
TULZAPURKAR, V.D.
ERADI, V. BALAKRISHNA (J) MADON, D.P.
CITATION: 1984 AIR 1249 1984 SCR (3) 461 1984
SCC (3) 65 1984 SCALE (1)772
ACT:
Gold Control Act 1968, Sections 16(7)
52,79,100 read with rule 3(1) of the Gold Control (Identification of Customers)
Rules, 1960, whether violative of the provisions of Articles 14,19(1) (g) 301
and 302 of the Constitution.
Gold Control (Forms, Fees and Miscellaneous
Matters) Rules, 1968-Forms GS. 11 and GS 12 as amended are unworkable and
require modification Government of India's Letter of Instructions and the Trade
Notices withdrawing the facility of sale by licensed traders through their
travelling salesmen whether violative Articles 14, 19(1)(g) and 301 of the
Constitution.
HEADNOTE:
In Harak Chand Ratan Chand Banthia's case
[1970] 1 SCR 479, where the Gold (Control) Act, 1969 and some of its provisions
prior to the amendment by Act 26 of 1969 were challenged, the Supreme Court
pointed out that even though import of Gold into India had been banned,
considerable quantities of contraband gold were finding their way into the
country through illegal channels, affecting the national economy and hampering
the country's economic stability and progress, that the Customs Department was
not in a position to effectively combat the smuggling over the long borders and
coast lines, that, therefore, anti-smuggling measures had to be supplemented by
a detailed system of control over internal transactions and that the Gold
(Control) Act, 1968 was passed for this purpose. In other words, the several
restrictions that have been put on the activities of the traders doing business
in gold, gold ornaments and articles of gold, will have to be viewed from the
aforesaid perspective. The Court further held the enactment to be within the
legislative competence of Parliament and out of the several provisions that
were challenged only ss.5(2)(b), 27(2)(d), 27(6), 32, 46, 88 and 100 were
invalid. As a result of the aforesaid decisions and the observations made by
this Court therein the Act of 1968 was suitably amended by Gold Control
(Amendment) Act (26) of 1969. These amended provisions, the Gold Control
(Identification of Customers) Rules, 1969, the Gold Control (Forms, Fees and
Miscellaneous Matters) Rules 1968 are challenged by the Writ Petitioners as
being violative of the provisions of Article 14, 19(1)(g), 301, and 302 of the
Constitution. Some of the petitioners including the petitioners in S.L.P. Civil
538 of 1973 have also challenged the Government of India's Letter of
instructions and the Trade Notices withdrawing the facility of permitting
licensed dealers to send ornaments for sale through their travelling salesmen,
on the same grounds.
Dismissing the petitions, the Court 462 ^
HELD:1:1, Section 16(7) of the Gold (Control)
Act, 1968 as amended is constitutionally valid. [269E, 471B] 1:2. The
counter-affidavit of the Union of India not merely furnishes the intelligible
classification made between the licensed dealers and non-dealers and non-
refiners, but also shows that the classification has a reasonable nexus with
the object of the Act and the reasons for denying exemption limits to licensed
dealers or refiners are also valid and referable to the object of the Act,
namely "to provide, in the economic and financial interests of the
community, for the control of production, manufacture, supply distribution, use
and possession of and business in, gold ornaments and articles of gold and for matters
connected therewith or incidental thereto.,' [469F, 470D-E] While ordinary
citizens (non-dealers and non-refiners) are not permitted by law to have any
primary gold in their possession a dealer or a refiner is permitted under the
law to have unlimited quantity of primary gold in his possession and therefore,
it is easy for a dealer or a refiner to acquire smuggled gold and with a view
to preventing detection of such gold, to convert the same into ornaments and to
claim such ornaments as his personal property. This necessitated a provision
for a declaration of all ornaments and articles, owned, possessed. Held or
controlled by them so that they could not claim any clandestinely manufactured
ornaments, when detected to be their personal property and that is why it has
been provided in s.16(7) that every licensed dealer or refiner should declare
all gold articles and ornaments which belong to him or which are in his
custody, possession or control, and that is why it has been further provided
that the exemption. limits permissible for general public in relation to the
requirement of declaration of articles and ornaments should not be available to
the dealers and refiners. [469G-H, 470B-D] 1:3. the provision in section 16(7)
could not be regarded as unnecessary or one which casts an unreasonable burden
on the licensed dealer or refiner. The reasons for introducing the provision
justify its enactments, if the objects of the Act are to be achieved. On the
aspect of casting unreasonable burden on the dealer refiner, firstly, the
burden on the dealer or refiner is the same as that which has been cast on a
non-dealer (individual or family) whenever the latter comes to own, possess,
hold or have under his control articles or ornaments of gold in excess of the
exempted limit; secondly visits of guests and relations (including married
daughters and sisters) on festive occasions and requests proceeding from them
to the house- keeper to keep their ornaments in safe custody during their stays
with him, which are ordinary incidents in life, are common to licensed dealers
or refiners and non-dealers and therefore the requirement of making a
declaration under section 16(7) does not cast any additional burden on him;
and thirdly under section 16(7) it is
provided that the licensed dealer or refiner shall make a declaration "in
accordance with the provisions of this section" which means he has to do
so within 30 days of his acquiring the ownership, possession, custody or
control of such gold. With such time limit being provided the burden cast
cannot be said to be unreasonable, especially when the provision is found to be
necessary to carry out the objectives of the Act, [470E-H, 471A-B] 463 2:1.
Section 52 of the Gold (Control) Act, 1968 as amended does not suffer from the
vice of excessive delegation of the power and therefore the said provision is
constitutional. [472G-H] 2:2. It is true that section 52 does not contain any
guide-lines or principles which would regulate the exercise of the power of the
Administrator in the matter of grant or refusal of approval to change in the
partnership of a firm but in the exercise of the powers conferred by s.114 read
with s.27(6) of the Act the Central Government has framed the 'Gold Control
(Licensing of Dealers) Rules 1969' and Rule 2 enlists matters to which regard
is to be had before issuing a licence and Rule 3 indicates the conditions on
the fulfillment of which a licence could be renewed. It is true that these
Rules, which deal with licensing of dealers and renewal of their licences, in
terms do not cover a case of a change in the partnership of a firm and the
approval to be accorded thereto by the Administrator but in a sense a case of a
change occurring in the partnership of the firm and the occasion to apply for
grant of approval thereto by the Administrator would be a case of seeking
renewal of the licence by the firm in which a change has occurred either by
death or retirement of a partner or as a result of reconstitution of the firm
and therefore to such a case these Licensing Rules, particularly Rule 3, must
and will apply and these rules, in so far as they are applicable to the
situation, afford the necessary guide-lines on the basis of which approval to
the change could be given or refused.
Obviously, if the change in the firm involves
introduction of a new partner into the firm these guide-lines under Rules 2 and
3 will play an important part in the matter of according or refusing to accord
the approval but if the change nearly involves alteration in the share-capital
or profit sharing basis amongst the self-same partners who continue the firm
the approval would be a matter of formality, in view of the Licensing Rules,
1969 which must apply, it cannot be said that any unfettered or unregulated
discretion has been conferred upon the Administrator in the matter of grant of
refusal of approval to a change in the partnership of a firm. [471H, 472A-E]
2:3. On the aspect of absence of a provision from appeal, a remedy by way of an
appeal to correct any erroneous order that may be passed under section 52 has
been provided for by Notification dated 26 August, 1983 issued by the
Administrator under sec. 4(4) of the Act where under the exercise of the power
under sec. 52 has been delegated to the Deputy Collector of the Centre Excise
with the result that an appeal against his order under s 52 will lie to the
Collector of Centre Excise under s.80 of the Act. [472E-G]
3. The power to grant extension under section
79 of the gold (Control) Act as amended is not arbitrary and does not suffer from
lack of guidelines. Of course two in built safeguards will have to be and must
be read into the provision. Since every extension involves civil consequence in
that the owner's or the concerned person's right to have the seized gold
returned to him is adversely affected by being postponed, before granting any
extension he must be given a notice and an opportunity to make representation
against the proposed extension. 474H,475A-B] 464 It is true that s.79 does not
expressly mention the guidelines on the basis of which the power to grant
extension of the initial period of six months is to be exercised but if regard
is had to the provisions dealing with Seizure (s.66), Confiscation (s.71),
Adjudication (s.78) and Giving of Opportunity (s.79) the Policy of the
Legislature becomes quite clear that whereas the power to seize can be
exercised by any Gold Control Officer if he has reason to believe" that in
respect of any gold any provision of the Act has been or is being or is
attempted to be contravened the confiscation of gold can take place only if
actual contravention has taken place or is apprehended or is attempted and such
confiscation can be adjudged or ordered without limit by a Gold Control Officer
not below the rank of a Collector of Central Excise or of Customs and subject
to such limits as may be specified in that behalf by such other Gold Control
officer not below the rank of a Superintendent of Central Excise as the Central
Governments may authorise in that behalf; but the power to grant extension of
the initial period of six months has been conferred under the second proviso to
s.79 only upon a superior officer, namely the Collector of Central Excise or of
customs, Further under the second proviso to s.79 the owner or the person
concerned has been given the right to have the seized gold returned to him
where no notice proposing confiscation is served upon him within a period of
six months from the date of the seizure of the gold which shows that the
Legislature clearly intended that ordinarily the investigation in connection
with the seized gold is expected to be over within six months; but only in
cases where such investigation may not be completed owing to some genuine or
bonafide difficulties the Legislature gave under the proviso power to the Collector
to extend that time. In other words Collector is expected to pass extension
orders neither mechanically nor as a matter of routine but only on being
satisfied that facts or circumstances exist which indicate that the
investigation could not be completed for bona fide reasons within the initial
period of six months.
Such guidelines would be implicit if the
extra-ordinary power to effect seizure and adjudge confiscation conferred by
the Act is considered in just apposition with the right conferred upon the
owner or the person concerned to have the seized gold returned to him normally
at the expiry of the initial period of six months. Presumably, the
ramifications of any gold smuggling activity which are usually extensive and
complicated must have led the Legislature not to impose a limit or ceiling on
the power to grant extension but if the above guidelines are to govern every
extension that may be granted then mere absence of a limit or ceiling will not
be of any consequence. [473H,474A-G] Assistant Collector of Customs v. Charan
Das Malhotra,[1971] 3 S.C.R. 802; applied.
4:1 Section 100 of the Gold Control Act read
with Rule 3(1) of the Gold Control (Identification of Customers) Rules, 1968 is
constitutionally valid and does not restrict the licensed dealers to carry on
their business including their inter-state trade.[478F-G] 4:2. Section 100 of
the Act as it originally stood prior to its amendment in 1969 imposed a
statutory obligation upon a dealer to take all reasonable steps to satisfy
himself about the identity of the person from whom gold was bought but it did
not specify the nature of steps which a dealer was supposed to take 465 for
such satisfaction and therefore this Court in Harakchand Ratanchand Banthia's
case took the view that the obligation cast there under was uncertain and
incapable of proper compliance and therefore the section was unconstitutional
on the ground that it imposed an impossible and unreasonable burden. In the
light of this decision, s.100 was appropriately amended and the 'Gold Control
(Identification of Customers) Rules, 1969 were framed and particularly Rule
3(1) now prescribed the several steps one or more of which have to be taken by
the licensed dealer to satisfy himself as to the identity of the Customer from
whom he proposes to accept, buy or otherwise receive any gold, 477E-G] 4:3.
From the mere fact that most of the customers who come from villages as also
from outside their own State prefer to receive payments in cash in lieu of gold
sold and are not prepared to receive payments by crossed cheques for the reason
that they do not have any bank account or their apprehension that the said
cheques may not be encashed, it cannot be said compliance is either incapable
or impossible even from a practical or commercial point of view. Moreover, the
provisions contained in sub-rule (2)(a) of Rule 3 is applicable in all cases
where gold is accepted bought or otherwise received by the dealer irrespective
of whether the customer is personally known to the dealer or not known to him.
The purpose served by sub-rule (2)(a) of Rule 3 is entirely different from the
purpose served by one or more of the steps that are required to be taken by a
dealer under sub-rule (1) of Rule 3 and therefore, it cannot be said that
because of the provisions contained in sub-rule 2(a) the steps contemplated
under sub-rule (1) are unreasonable.
[478A-B,EF] Bihar State Bullion Merchants,
Assn. & others v. Union of India and others, A.I.R. 1971 Pat. 240;
approved.
5. The amended prescribed forms Nos.G.S.11 and
G.S.12 required to be maintained under section 55 of the Gold Control Act read
with Rule 11 of the Gold control (Forms Fees, and Miscellaneous Matters) Rules,
1968 brought into force with effect from 31st October, 1975 do not provide, as
conceded by the Government, for all the situations under which gold would be
received by him in his possession or custody and keeping the account of their
gold in accordance with the said Forms would give rise to anomalies and the
dealer would not be able to discharge his statutory duty of disclosing a true
and complete account of the gold in his possession or custody.[478H, 479G-H]
Therefore, the Court directed the Administrator to look into these grievances
and remedy the same by taking appropriate action and hope that in the meanwhile
no action penal or otherwise would be taken against licensed dealers for
failure to maintain accounts in the amended Forms G,S.11 and G.S. 12. [480C-D]
6. Section 27(7)(b) of the Gold Control Act,
which confines a licensed dealer to carry on business as such dealer to the
premises specified in his licence, being regulatory in character does not
violate any of his rights under the constitution. The Letter of Instructions or
the trade Notices does not prevent or stop inter State trade but were issued
with a view to prevent the several malpractices that were indulged in while
availing of the facility of hawking ornaments through travelling salesmen.
[481C-F] 466
ORIGINAL JURISDICTION: Writ Petitions Nos.
918-953, 1159-1186 of 1977,88 of 1973,107,664 & 575 to 618 of 1973.
(Under Article 32 of the Constitution of
India) WITH Special Leave Petition (Civil No. 538 of 1973 (From the Judgment
and Order dated 24th July. 1972 of the Punjab and Haryana High Court in C.W.No.
1221 of 1972) A.K.Sen and G.S. Chatterjee for the Petitioners in WP. 918 and
953/77.
Gobindas, G.S. Chatterjee and D.P. Mukherjee
for the Petitioners in W.Ps. Nos. 1159-86 of 1977.
Dr. Y.S. Chitale, Mrs. A.K. Verma, R.N.
Banerjee and D.N. Mishra for the Petitioners in WP. No. 88 of 1973 & WP. No.107/73.
D.N. Mishra for the Petitioners in WPs. 564,
575-618/73 and (Civil) No. 538/73.
Ms. A. Subhashini for the Respondents in WPs.
918- 953/77, SLP 1159-86 of 1977.
Abdul Khadder, D. Goburdhan for the
Respondents in WP 88/73 D. Goburdhan for the Respondents.
The Judgment of the Court was delivered by
TULZAPURKAR. J. By these writ petitions, the petitioners who are licensed
dealers, are challenging the constitutional validity of the Gold (Control) Act,
1968 and in particular the provisions contained in ss. 2(p), 16,27 (as
amended), 44,48,52,79 and 100 (as amended) 467 and the Gold Control (Forms,
Fees and Miscellaneous Matters) Rules, 1968 (as amended in 1975/1976) and the
Gold Control (Identification of Customers) Rules, 1969 as being violative of
their fundamental rights under Arts. 14 and 19(1)(g) and are seeking suitable
directions restraining the respondents from giving effect to any of those
provisions, Some of the petitioners (including the petitioner in S.L.P. (Civil)
No. 538 of 1973) are challenging the Government of India's Letter of
Instructions and the Trade Notices withdrawing the facility of permitting
licensed dealers to send ornaments for sale though their travelling salesmen as
being violative of the constitutional guarantee under Art. 301 as also their
fundamental rights under Arts. 14 and 19(1)(g) of the Constitution.
At the outset we would like to observe that
the several grounds of challenge will have to be considered in the background
of two things: (a) the object with which the Act was enacted and (b) this
Court's decision and the observations made by it in Harakchand Ratanchand
Banthia's(1) case where the Gold (Control) Act and some of its provisions prior
to its amendment by Act 26 of 1969 were challenged. The Long Title to the Act
shows that it was put on the Statute Book with a view ("to provide, in the
economic and financial interests of the community, for the control of
production, manufacture, Supply distribution, use and possession of, and
business in, gold ornaments and articles of gold and for matters connected
therewith or incidental thereto.") In Harakchand Banthia's case this Court
has further pointed out that even though import of Gold into India had been
banned, considerable quantities of contraband gold were finding their way into
the country through illegal channels, affecting the national economy and
hampering the country's economic stability and progress, that the Customs
Department was not in a position to effectively combat the smuggling over the
long borders and coast lines, that, therefore, anti-smuggling measures had to
be supplemented by a detailed system of control over internal transactions and
that the Gold (Control) Act, 1968 was passed for this purpose. In other words,
the several restrictions that have been put on the activities of the traders
doing business in gold, gold ornaments and articles of gold, will have to be
viewed from the aforesaid perspective. We might also mention that in Harakchand
Banthia's case the enactment (prior to its amendment in 1969) had 468 been
challenged not merely on the ground of legislative incompetence on the part of
the Parliament but several of its provisions were also challenged on the ground
that the same were in violation of the petitioners fundamental rights under
Arts. 14 and (1)(f) & (g). This Court held the enactment to be within the
legislative competence of Parliament and out of the several provisions that
were challenged only ss. 5(2)(b), 27(2) (d) 27(6), 32,46,88 and 100 were held
to be invalid. As a result of the aforesaid decision and the observations made
by this Court thererin the Act of 1968 was suitably amended by Gold Control
(Amendment) Act (26) of 1969). It is the provisions of the Act as amended in
1965 that are being challenged by the petitioners before us and we may state
that though a large number of provisions have been made the subject of
challenge in the writ petitions, at the hearing only some provisions were
selected against which the challenge was pressed before us and we propose to
deal with only those provisions.
The first provision that has been challenged
is s. 16(7) of the Act which provides:
"Every licensed dealer or refiner shall
make a declaration in accordance with the provisions of this section in
relation to any gold owned, possessed, held or controlled by him, in any
capacity other than the capacity of a licensed dealer or refiner and the
provisions of sub-s.(5) shall not apply to such gold".
The requirement of making a declaration under
this provision is in respect of any gold owned, possessed, held or controlled
by a licensed dealer or refiner otherwise than in his capacity as a licensed
dealer or refiner and the exemption granted to a non dealer in respect of
articles and ornaments of gold, total weight whereof does not exceed 2,000 gms.
in the case of an individual and 4,000 gms. in case of a family in the matter
of making a declaration under sub-sec (5) is not applicable. Counsel for the
petitioners challenged this provision on two ground: (a) it is discriminatory
under Art. 14 and (b) it imposes unreasonable restriction on licensed dealers
and is violative of Art.
19(1)(g). It was pointed out that every
licensed dealer is required to furnish, under s. 56. returns in I described
form as to the quantity, description and other prescribed particulars of gold
owned, possessed, held or controlled by him as such dealer and the aforesaid
requirement of making a declaration in respect of any other gold owned,
possessed.
held or controlled 469 by him as non-dealer
is an additional requirement and while prescribing such additional requirement
the exemption under s. 16(5) which is available to non-dealers (individuals and
families) has been denied to him and according to counsel the classification
made is not based on any intelligible differentia having any nexus to the
object sought to be achieved by the Act; in other words, every licensed dealer
in his capacity as a non-dealer is subjected to discriminatory treatment.
Secondly, counsel urged that imposing such a requirement on a licensed dealer
to make declarations on every occasion in respect of any quantity of gold
coming in his possession or custody as an individual or a member of a family
amounts to putting an unnecessary and unreasonable burden on him and the
requirement may at times become impossible to comply with; counsel elaborated
his submission by giving an example that if guests or relations, particularly
married daughters and sisters visit the residence of a gold dealer for a short
stay on festive occasions and request him, as it frequently happens in normal
course of events, to keep their ornaments in safe custody during their stay he
has to oblige them, but in terms of the requirement of s. 16(7) the dealer has
to make a declaration in respect of such gold which has come in his custody or
possession and to require him to do so on every occasion is to cast
unreasonable burden on him amounting to unreasonable restriction especially as
non-compliance there entails penal consequences and therefore the provision must
be regarded as unreasonable and arbitrary.
In our view neither of the contentions has
any force.
As regards the attack under Art. 14,
sufficient material has been placed before us in the counter affidavit of Shri
K.S. Venkataramani, Deputy Secretary, Ministry of Finance (filed in W.P. Nos.
918-953 of 1977) showing how the classification made between the two categories
in the context of making a declaration under s. 16 in relation to gold owned,
possessed, held or controlled by them is based on intelligible differentia
having a nexus to the object of the Act. In para 5 of the counter affidavit it
has been pointed out that while ordinary citizens (non-dealers and non
refiners) are not permitted by law to have any primary gold in their
possession, a dealer or a refiner is permitted under the law to have unlimited
quantity of primary gold in his possession and therefore, it is easy for a
dealer or a refiner to acquire smuggled gold and with a view to preventing
detection of such gold, to convert the same into ornaments and to claim such
ornaments as his personal property. It is further pointed out that it had been
repeatedly observed, that licensed dealers in gold, when found in possession of
stocks of ornaments in excess of those entered in the prescribed accounts.
Often took the plea that these represented their personal property and it was
further noticed that they kept the ornaments manufactured by them clandestinely
at their residences and at other places and when such stocks were detected
these were claimed as their personal property; it therefore became necessary to
provide for a declaration of all ornaments and articles owned, possessed, held
or controlled by them so that they could not claim any clandestinely
manufactured ornaments, when detected, to be their personal property and that
is why it has been provided in s. 16(7) that every licensed dealer or refiner
should declare all gold articles and ornaments which belong to him or which are
in his custody, possession or control, and that is why it has been further
provided that the exemption limits permissible for general public in relation
to the requirement of declaration of articles and ornaments should not be
available to the dealers and refiners. The aforesaid materials in the
counter-affidavit not merely furnishes the intelligible differentia for the
classification made but also shows that the classification has a reasonable
nexus with the object of the Act and the reasons for denying the exemption
limits to licensed dealers or refiners are also valid and referable to the
object of the Act.
As regards the second ground of challenge it
is difficult to appreciate how the provision could be regarded as unnecessary
or one which casts an unreasonable burden on the licensed dealer or refiner. In
fact the reasons for introducing the provision as indicated above justify its
enactment if the objects of the Act are to be achieved. On the aspect of
casting unreasonable burden on the dealer or refiner it must in the first place
be observed that the burden on the dealer or refiner is the same as that which
has been cast on a non-dealer (individual or family) whenever the latter comes
to own, possess, hold or have under his control articles or ornaments of gold
in excess of the exempted limit. Visits of guests and relations (including
married daughters and sisters on festive occasions and requests proceeding from
them to the house- keeper to keep their ornaments in safe custody during their
stays with him. which are ordinary incidents in life, are common to licensed
dealers or refiners and non-dealers and there is no reason to suppose that the
requirement of making a declaration under s. 16(7) casts any additional burden
on him than on a non-dealer when he has in his possession 471 or custody
articles and ornaments in excess of the exemption limit. Moreover, under
s.16(7) it is provided that the licensed dealer or refiner shall make a
declaration "in accordance with the provisions of this section" which
means he has to do so within 30 days of his acquiring the ownership,
possession, custody or control of such gold. With such time limit being
provided the burden cast cannot be said to be unreasonable, especially when the
provision is found to be necessary to carry out the objectives of the Act.
Having regard to the above discussion, the challenge to the constitutionality
of s. 16(7) must fail.
The next provision challenged is sec. 52 of
the Act which provides for licence issued to a firm becoming invalid if there
is any change in the partnership of the firm. That section runs thus:-
"52. Where any firm has been licensed under this Act to carry on business
as dealer or refiner, such licence shall, not with standing anything contained
in this Act, become invalid on and from the date on which there is a change in
the partnership of such firm, unless such change in the partnership has been
approved by the Administrator".
Counsel for the petitioners contended that
change in partnership is a normal and usual thing that occurs when business is
carried on by a firm and such change may arise on account of death or
retirement of a partner or reconstitution of the firm but the above provision
imposes an unreasonable restriction in so far as it provides that the licence
of a firm shall become invalid on and from the date on which there is a change
in the partnership of such firm unless the change has been approved by the
Administrator. According to counsel the restriction imposed is excessive and
what is more no guide-lines or principles are laid down on the basis of which
approval to a change may or may not be given by the Administrator; besides
there is no appeal or other corrective machinery provided against an adverse
order of the Administrator refusing approval.
Counsel therefore, urged that this provision
clearly suffers from the vice of excessive delegation of legislative power and
is liable to be declared unconstitutional.
It is true that sec. 52 does not contain any
guide- lines or principles which would regulate the exercise of the power of
the Administrator in the matter of grant or refusal of approval to a change in
the partnership of a firm but in the exercise of the powers 472 conferred by
sec.114 read with sec. 27 (6) of the Act the Central Government has framed the
'Gold Control (Licensing of Dealers Rules 1969' and Rule 2 enlists matters to
which regard is to be had before issuing a licence and Rule 3 indicates the
conditions on the fulfillment of which a licence could be renewed. It is true
that these Rules, which deal with licensing of dealers and renewal of their
licences, in terms do not cover a case of a change in the partnership of a firm
and the approval to be accorded thereto by the Administrator but in a sense a
case of a change occurring in the partnership of the firm and the occasion to
apply for the grant of approval thereto by the Administrator would be a case of
seeking renewal of the licence by the firm in which a change has occurred
either by death or retirement of a partner or as a result of reconstitution of
the firm and therefore to such a case these Licensing Rules, particularly Rule
3, must and will apply and these Rules, in so far as they are applicable to the
situation, afford the necessary guide-lines on the basis of which approval to
the change could be given or refused.
Obviously, if the change in the firm involves
introduction of a new partner into the firm these guide-lines under Rules 2 and
3 will play an important part in the matter of according or refusing to accord
the approval but if the change nearly involves alteration in the share-capital
or profit sharing basis amongst the self-same partners who continue the firm
the approval would be a matter of formality. In view of the Licensing Rules,
1969 which must apply it is difficult to accept the contention that any
unfettered or unregulated discretion has been conferred upon the Administrator
in the matter of grant or refusal of approval to a change in the partnership of
a firm. On the aspect of there being no appeal or other corrective machinery
provided against an adverse order of refusing approval that may be passed under
this section it may be stated that Counsel for the respondents produced before
us copy of a (Notification dated 26th August, 1683 issued by the Administrator
under sec.4(4) of the Act where under the exercise of the power under sec. 52
has been delegated to the Deputy Collector of Central Excise with the result
that an appeal against his order under sec. 52 will lie to the Collector of
Central Excise under sec.80 of the Act. In other words, a remedy by way of an
appeal to correct any erroneous order that may be passed under sec.52 has been
provided for. In this view of the matter it is difficult to accept the
contention that s. 52 suffers from the vice of excessive delegation of
legislative power or for that reason the said provision is unconstitutional.
The challenge to that section therefore, has to be rejected.
473 The next provision that has been
challenged is s.79 read with the second proviso thereto. Section 79 provides
that no order of confiscation of any gold, in respect whereof contravention of
any provision of the Act or any rule or order made there under has occurred or
is apprehended or attempted, shall be made unless the owner of such gold has
been given a notice in writing informing him of the grounds on which it is
proposed to confiscate such gold and is further given a reasonable opportunity
of making a representation in writing against the proposed confiscation and if
he so desires, of being heard in the matter; and the second proviso which is
material runs thus:
"Provided further that where no such
notice is given within a period of six months from the date of the seizure of
the gold, or such further period as the Collector of Central Excise or of
Customs may allow, such gold shall be returned after the expiry of that period
to the person from whose possession it was seized." Counsel for the
petitioners contended that the section does not provide for any guidelines or
principles regarding the conditions and circumstances governing the grant of
further extension of the initial statutory period of six months on the expiry
of which, in the absence of extension, the owner or the person from whose
possession the gold has been seized is entitled to have the seized gold
returned to him; furthermore, there is no limit or ceiling over the period a
for which further extension may be granted. In contrast, counsel pointed out
that in parallel legislation like the proviso to sec. 110(2) of the Customs
Act, 1962 such limit or ceiling is laid down by providing that the initial
period of six months may, on sufficient cause being shown, be extended by the
Collector of Customs for a period not exceeding six months; moreover the words
"on sufficient cause being shown" that occur in the Customs Act are
absent here. Counsel, therefore, urged that in the absence of any guidelines
and in the absence of any limit over the period of extension that could be
granted, the provision (s.79 read with second proviso) will have to be regarded
as conferring an arbitrary power and is unreasonable and hence violative of
Arts. 14 and 19(1)(g) of the Constitution.
It is true that s. 79 does not expressly
mention the guidelines on the basis of which the power to grant extension of
the initial period of six months is to be exercised but if regard is had to the
provisions dealing with Seizure (sec. 66) Confiscation (sec. 71), 474
Adjudication (sec. 78) and Giving of opportunity (sec. 79) the policy of the
Legislature becomes quite clear that whereas the power to seize can be
exercised by any Gold Control Officer if he has "reason to believe"
that in respect of any gold any provision of the Act been or is being or is
attempted to be contravened the confiscation of gold can take place only if
actual contravention has taken place or is apprehended or is attempted and such
confiscation can be adjudged or ordered without limit by a Gold Control Officer
not below the rank of a Collector of Central Excise or of Customs and subject
to such limits as may be specified in that behalf by such other Gold Control
Officer not below the rank of a Superintendent of Central Excise as the Central
Government may authorise in that behalf; but the power to grant extension of
the initial period of six months has been conferred under the second proviso to
s.79 only upon a superior officer, namely, the Collector of Central Excise or
of Customs. Further under the second proviso to s. 79 the owner or the person
concerned has been given the right to have the seized gold returned to him
where no notice proposing confiscation is served upon him within a period of
six months from the date of the seizure of the gold which shows that the
Legislature clearly intended that ordinarily the investigation in connection
with the seized gold is expected to be over within six months; but only in case
where such investigation may not be completed owing to some genuine or bonafide
difficulties the Legislature gave under the proviso power to the Collector to
extend that time. In other words the Collector is expected to pass extension
orders neither mechanically nor as a matter of routine but only on being
satisfied that facts or circumstances exist which indicate that the
investigation could not be completed for bona fide reasons within the initial
period of six months. Such guidelines would be implicit if the extraordinary
power to effect seizure and adjudge confiscation conferred by the Act is
considered in juxtaposition with the right conferred upon the owner or the
person concerned to have the seized gold returned to him normally at the expiry
of the initial period of six month.
Presumably, the ramifications of any gold
smuggling activity which are usually extensive and complicated must have led
the Legislature not to impose a limit or ceiling on the power to grant
extension but if the above guidelines are to govern every extension that may be
granted then mere absence of a limit or ceiling will not be of any consequence.
It is, therefore, not possible to accept the
contention that the power to grant extension is arbitrary or suffers from lack
of guide- 475 lines. Of course two inbuilt safeguards will have to be and must
be read into the provision. Since every extension involves civil consequences
in that the owner's or the concerned person's right to have the seized gold
returned to him is adversely affected by being postponed, before granting any
extension he must be given a notice and an opportunity to make representation
against the proposed extension. In Asstt. Collector of Customs v. Charam Das
Malhotra,(1) a case under sec. 110(2) proviso of the Customs Act, 1962 this
Court has taken the view that such opportunity is necessary, not merely on the
ground that the proviso contains the words "upon sufficient cause being
shown" but also on the ground that the civil right of the concerned person
to the restoration of the goods on the expiry of the period whether initial or
extended is affected. Secondly since the Collector's decision or order granting
extension of time is appealable under sec. 81(2) at the instance of the
Administrator, who could be moved by the aggrieved person, and in any case
could be challenged by the aggrieved person in an appeal against the order of
confiscation every order granting extension must record reasons for it as
otherwise the appeal will be ineffective.
In other words the power to extend the
initial period or the extended period must be exercised subject to the
observance of the aforesaid two safeguards. In view of the above discussion it
is clear that the challenge to s. 79 and the second proviso thereto has to
fail.
The next provision challenged is s. 100 of
the Act as amended) read with Rule 3(1) of the 'Gold Control (Identification of
Customs) Rules 1969' on the ground that the said provision is incapable of
compliance in a practical sense and from a commercial point of view and has the
effect of running the business of the petitioners and since the said Rule 3(1)
unreasonably restricts the right of the petitioners to carry on their business
including their interstate trade the same is violative of Art.19(1)(g) 301 and
302 of the Constitution. Section 100 as amended by the Amending Act 26 of 1969
provides for certain precautions to be taken by a licensed dealer before
acquiring any Gold. It runs thus:
"100(1) Every licensed dealer or refiner
or certified goldsmith, as the case may be, shall, before accepting, buying or
otherwise receiving any gold from any person, take such 476 steps as are
specified by the Central Government by rules made in this behalf, to satisfy
himself as to the identity of the person from whom such gold is proposed to be
accepted bought or otherwise received by him." The Gold Control
(Identification of Customers) Rules framed by the Central Government in
exercise of the powers conferred under sec. 114 read with sec. 100(1) of the
Act provide for the several steps, one or more of which have to be taken by the
licensed dealer to satisfy himself as to the identity of the customer from whom
he proposes to accept, buy or otherwise receive any gold. Under Rule 3(1) it
has been provided that except in cases where the customer is personally known
to the licensed dealer or cases where transactions are put through by means of
crossed cheques the licensed dealer shall take one or more of the following
steps to satisfy himself as to the identity of the customer, namely:- (1)
Introduction or identification of the customer by a person who is either
personally known to the licensed dealer or whose identity has been established
to the satisfaction of the licensed dealer, (2) The production of any document
which establishes.
the identity of the customer, such as- (a) a
valid passport held by the customer, (b) a valid identity card issued to the
customer by the postal authorities, (c) a valid identity card issued by the
Secretariat of Parliament or of any Legislature in a State or Union Territory;
(d) a valid identity card issued to the
customer by his employer if such employer is a local authority or a body
corporate or Government or a corporation owned or controlled by Government, (e)
a motor driving licence held by the customer as a paid employee;
(f) an identity card issued by the Gold
Control Officer.
477 Sub-rule (2) of Rule 3 which is also
material runs thus:- (2) Before accepting, buying or otherwise receiving any
gold from a customer, a licensed dealer shall, in every case:- (a) obtain on
the voucher, the signature and full postal address of the customer, (b) where
the licensed dealer's satisfaction as to the identity of the customer is based
on the identification made by another person, obtain on the voucher the
signature and full postal address of such identifier, and where such identifier
is not personally known to him, he shall also note, on the voucher, the
particulars of the documents on the strength of which he has been satisfied as to
the identity of such identifier, (c) where the licensed dealer's satisfaction
as to the identity of the customer is based on any other document, note on the
voucher, the date and other particulars of such document.
It may be stated at the outset that sec. 100
as it originally stood prior to its amendment in 1969 imposed a statutory
obligation upon a dealer to take all reasonable steps to satisfy himself about
the identity of the person from whom gold was bought but it did not specify the
nature of steps which a dealer was supposed to take for such satisfaction and
therefore this Court in Harakchand Ratanchand Banthia's case took the view that
the obligation cast thereunder was uncertain and incapable of proper compliance
and therefore the section was unconstitutional on the ground that it imposed an
impossible and unreasonable b under. In light of this decision, s. 100 was
appropriately amended and the 'Gold Control (Identification of Customers)
Rules, 1969, were framed and particularly Rule 3(1) now prescribes the several
steps one or more of which have to be taken by the licensed dealer to satisfy
himself as to the identity of the customer from whom he proposes to accept, buy
or otherwise receive any gold.
A two-fold submission challenging the amended
s. 100 read with Rule 3(1) was made by counsel for the petitioners.
In the first 478 place it was submitted that
the steps indicated in Rule 3(1) one or more of which are required to be taken
by the licensed dealer to satisfy himself about the identity of the customer
are incapable or impossible of compliance in a practical sense and from a
commercial point of view. The precise argument was that most of the customers
of the petitioners come from villages as also from outside their own State and
it becomes extremely difficult for the dealer to demand from them production of
either a passport or identity card specified in the Rules and further that most
of the customers prefer to receive payments in cash in lieu of gold sold and
are not prepared to receive payments by crossed cheques since many of them do
not have bank accounts and even the dealers equally have the apprehension that
the cheques issued by the customers may not be encashed.
Secondly, it was urged that since sub-rule
(2)(a) of Rule 3 provides for sufficient safeguards regarding the identity of
the customers when the leader is required to obtain their signatures on the
vouchers and the full address of the customer and or of the identifier, the
insistence upon a dealer to take steps as contemplated under sub-rule (1) of
Rule 3 would be unreasonable. We are not impressed by either of the
submissions. The grievances articulated under the first submission do not at
all indicate that compliance of one or more of steps indicated in Rule 3(1) is
either incapable or impossible even from a practical or commercial point of
view. Moreover, the provision contained in sub-rule (2)(a) of Rule 3 is
applicable in all cases where gold is accepted bought or otherwise received by
the dealer irrespective of whether the customer is personally known to the
dealer or not known to him. The purpose served by sub- rule (2)(a) of rule 3 is
entirely different from the purpose served by or more of the steps that are
required to be taken by a dealer under sub-rule (1) of Rule 3 and therefore, it
cannot be said that because of the provision contained in sub-rule (2)(a) the
steps contemplated under sub-rule (1) are unreasonable. The validity of the
amended sec. 100 read with Rule 3(1) must therefore be upheld. We were informed
that a similar contention challenging the said provision (amended sec. 100 read
with sub-rule (1) of Rule 3) was raised before the Patna High Court in the case
of Bihar State Bullion Merchants' Asstt. & Ors. v. Union of India &
Ors.(1) and the same was rejected. We approve of that decision Lastly the
petitioners as licensed dealers seem to have some grievance against the amended
prescribed Forms Nos. G.S. 11 and 479 G.S. 12 required to be maintained under
s. 55 of the Act read with Rule 11 of the Gold Control (Forms, Fees and
Miscellaneous Matters) Rules, 1968, Forms which have been brought into force
with effect from 31st October, 1975.
Under s. 55 of the Act every licensed dealer
is required to keep, in such form and in such manner as may be prescribed, a
true and complete account of the gold owned, possessed, held, controlled,
bought or otherwise acquired or accepted or otherwise received or sold,
delivered, transferred or otherwise disposed of by him in his capacity as such
licensed dealer and Rule 11 provides that the account of gold shall be kept in
Forms G.S. 11 and G.S. 12. It appears that prior to the amendment of the Rules
on 31st October, 1975 the licensed dealer was required to keep the account of
gold in prescribed Forms No. G.S. 10 and G.S. 11 and G.S. 12 but after the
amendment Form No. G.S.10 was completely deleted while new amended Form G.S. 11
and G.S. 12 were prescribed and according to the petitioners the deletion of
old Form No. G.S.10 and insertion of the new Forms G.S. 11 and G.S. 12 has resulted
in the licensed dealer being prevented from maintaining a true and correct
account of the gold owned, possessed, held, controlled, etc. by him. The
precise grievance is that the new prescribed Forms G.S. 11 and G.S. 12 do not
provide for all situations under which gold would be received by him in his
possession or custody and keeping the account of their gold in accordance with
the said Forms would give rise to anomalies and the dealer would not be able to
discharge his satutory duty of disclosing a true and complete account of the
gold in his possession or custody. For instance, it was pointed out that old
Form G.S.
10 contained a comprehensive column No. 2
which required the dealer to indicate "name and address of the person from
whom (gold was) received or to whom (gold was) sold", which Form under the
amended Rules has been deleted, while the new amended Form No. G.S. 11 requires
the licensed dealer to indicate in column No. 3 only two categories of persons
from whom gold is received, namely, (a) Seller's name and full address or (b)
Dealer's name and Licence No. and that there is no provision in the Form to
account for the receipts of gold by the licensed dealer from artisans or
certified gold- smiths; further. Form No. G.S. 11 does not provide for accounting
the receipts of samples and old ornaments intended to be converted into new
ornaments from the customers. Counsel further pointed out that in the amended
Form No. G.S. 11 column 11 requires a dealer to record the weight in terms of
pure gold which requirement cannot be satisfied by any dealer unless and until
the gold ornaments received from the customers are broken and refined. It was
further pointed out 480 that in the old Form No.G.S.11 column No.12 was
provided to record the loss of weight ('ghat') which would necessarily follow
an account of remaking, melting, refining and polishing of new ornaments from
old ornaments received by the dealer from his customers but in the amended new
Form G.S. 11 there is no such column where this 'ghat' (loss of weight) could
be recorded. Similarly other deficiencies in the amended Form G.S.12 were
pointed out by counsel for the petitioners. In brief the contention has been
that the old Forms were better but the new Forms lack in providing adequate or
proper columns with the result that by filing these a true and complete account
of gold owned or possessed or held or controlled, etc. by the dealer could not
be reflected. We find some substance in the aforesaid grievance made by the
petitioners and when these aspect of the amended Forms were put to the counsel
for the Respondents, he fairly conceded that either the new Forms will have to
be suitably revised or the old Forms could again be revived. We, therefore,
direct the Administrator to look into these grievances and remedy the same by
taking appropriate action and hope that in the mean while no action penal or
otherwise would be taken against licensed dealers for failure to maintain
accounts in the amended Forms G.S.11 and G.S.12 Some of the petitioners have challenged
Government of India's Letter of Instructions issued to all the Collectors of
Central Excise throughout the country directing them to withdraw the facility
till then afforded to the licensed dealers to send ornaments for sale through
travelling salesman and the Trade Notice issued by the Collectors of Central
Excise pursuant thereto actually withdrawing the said facility with immediate
effect (specimen Letter of Instructions dt. 15th February, 1972 and Trade
Notice dt. 17th March 1972 are enclosed as Annexures A & B to Writ Petition
No. 88/1973) on the ground that it has the effect of preventing the licensed
dealers from undertaking inter- State trade and commerce which is in violation
of the constitutional guaranteed under Art. 301 of the Constitution as also
their fundamental rights under Arts. 14 and 10(1)(g) of the Constitution. It
appears that the said Letter of Instructions and the Trade Notice have been
issued with a view to prevent the several malpractice that were being indulged
in while availing of the said facility (of hawking ornaments through travelling
salesman) and in the counter- affidavit of Shri Kulwant Ram Mehta, Deputy
Secretary, Ministry of Finance (filed in W.P. No. 88 of 1983) these
malpractices have been enlisted. But apart from this aspect of the 481 matter
it has been clarified in the said counter-affidavit that there is no intention
to prohibit or stop inter-State trade or commerce in gold ornaments but that
merely the facility of permitting the licensed dealers to send ornaments for
sale outside their licensed premises through their salesman has been withdrawn;
in paragraph 12 the relevant averment in that behalf runs thus:
"I reiterate that the dealers can send
ornaments, on such orders having been placed with them, through post parcels,
air freight or through any other means of commercial transportation of goods,
besides delivering the ornaments to the customers in their own premises. I
emphatically say that no direction or notice is issued which may result in any
stoppage of inter-State trade." In view of this statement the contention
that the Letter of Instructions or the Trade Notice has the effect of
preventing or stopping inter-State trade has no substance.
Realising this position and in view of the
aforesaid statement contained in paragraph 12 of the aforesaid
counter-affidavit counsel for the petitioners did not press the challange to
the impugned Letter of Instructions and the Trade Notice. The challenge to
s.27(7) (b) of the Act, in furtherance whereof the facility of effecting
peripatetic sales of gold ornaments through travelling salesman in various
parts of the country was withdrawn, must also fail.
Section 27(7) (b), which confines a licensed
dealer to carry on business as such dealer to the premises specified in his
licence, being regulatory in character does not violate any of his rights under
the Constitution.
In view of the foregoing discussion all the
writ petitions as also S.L.P. No.538 of 1973 are dismissed. In all the
circumstances of the case there will be no order as to costs.
S.R. Petitions dismissed.
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