Utkal
Contractors & Joinery (P) Ltd. & Ors Vs. State Of Orissa [1987] INSC
268 (24 September 1987)
SHETTY,
K.J. (J) SHETTY, K.J. (J) REDDY, O. CHINNAPPA (J)
CITATION:
1987 AIR 2310 1988 SCR (1) 314 1987 SCC Supl. 751 JT 1987 (4) 1 1987 SCALE
(2)639
CITATOR
INFO : D 1991 SC 672 (4)
ACT:
Constitution
of India: Articles 19, 32, 245 and 246- Laws for creating State monopolies
either partially or complete in respect of any trade/business/industry/service-
Whether State empowered to make-Laws relating to trading activities-Whether can
be presumed to be reasonable and in general public interest-Legislation
rendering judicial decision ineffective by enacting valid law-Whether
Legislature competent to enact-Whether such law can be retrospective.
Orissa
Forest Produce (Control of Trade) Amendment and Validation ordinance, I987:
Sections 1 to 5-ordinance promulgated to render ineffective Supreme Court's
decision striking down 1981 Act-Validity of-Whether encroachment on judicial
power-Notification validated by ordinance-Effect of.
Statutory
Interpretation: Executive Policy/Statement of objects and Reasons of
Act/ordinance-Whether can control actual words used in the legislation.
HEADNOTE:
The
Orissa Forest Produce (Control of Trade) Act, 1981 was enacted to prevent
smuggling forest produce and also to provide State monopoly in such forest
produce. The State was empowered under section 1(3) of the Act, from time to
time to issue a notification specifying the area or areas, the forest produce
in relation to which and the date from which the Act shall come into force. The
State Government issued a notification dated December 9, 1982 directing that
the Act shall come into force at once in the whole of the State of Orrisa in
relation to sal seeds The petitioners were holders of long term license from
the Government for collection of sal seeds from certain specified forest 315
divisions on payment of royalty. Consequent upon the issue of the above
notification, the Government refused to accept royalty from the petitioners in
respect of certain forest divisions on the ground that the notification had the
effect of rescinding the existing contracts between the Government and the
petitioners.
The
petitioners thereupon filed writ petitions before the High Court for a declaration
that the above notification was void, and did not have the effect of rescinding
their contracts in relation to sal seeds. The High Court dismissed the writ
petitions. The Supreme Court, allowing the appeals of the petitioners, held
that the Act and the notification issued there under did not apply to forest
produce grown in Government forests and that it was not, therefore, open to the
Government to treat the contract dated May 25,1979. as rescinded.
On
May 29, 1987, the Governor of Orissa promulgated orissa Forest Produce (Control
of Trade) (Amendment and Validation) ordinance 1987 deeming it to have come
into force with effect from September 5,1981, when the principal Act was
notified in the Gazette, rendering the aforesaid decision ineffective.
The
petitioners challenged the validity of this ordinance in this Court.
Dismissing
the writ petitions, this Court, ^
HELD:
1.1. The impugned ordinance is valid and cannot be challenged on any ground.
[327B]
1.2
The object to the Act was to prevent smuggling and to provide for State
monopoly in the specified forest produce and not to provide State monopoly only
to prevent smuggling. The validity of the statutory notification cannot be
judged merely on the basis of statement of objects and reasons accompanying the
Bill. Nor could it be tested by the Government policy from time to time. [318B]
The executive policy of the Government or the statement of objects and reasons
of the Act or ordinances cannot control the words used in the legislation.
[323F] Central Bank of India v. Their Workmen, [1960] 1 SCR 200 and State of
West Bengal v. Union of India, [1964] 1 SCR 371 at p. 382, relied on. 316
1.3
It is open to the State to make laws for creating State monopolies either
partially or complete in respect of any trade or business or industry or
service. The State may enter into trade like any other person either for
administrative reasons or with the object of mitigating the evils in the trade,
or even for the purpose of making profits in order to enrich the State
exchequer. The law relating to such trading activities must be presumed to be
reasonable and in the interest of general public. [324D-E] Akadasi Padhan v.
State of Orissa, [19631 2 Supp. SCR 691, relied on.
1.4
The legislature may, at any time, in exercise of the plenary power conferred on
it by Articles 245 and 246 of the Constitution render a judicial decision
ineffective by enacting a valid law. There is no prohibition against
retrospective legislation. The power of the legislature to pass a law postulates
the power to pass it prospectively as well as retrospectively, subject, of
course, to the legislative competence and other constitutional limitation.
[325E-F]
1.5
The rendering ineffective of judgments or orders of competent Courts by
changing their basis by legislative enactment is a well known pattern of all
validating acts.
Such
validating legislation which removes the cause of ineffectiveness or invalidity
of action or proceedings cannot be considered as encroachment on judicial
power. The legislature, however, cannot by a bare declaration, without more,
directly overrule, reverse or set aside any judicial decision. [325F-G] In the
instant case, having regard to the then existing provisions of the Act, this
Court declared that the Act and notification issued thereunder in relation to
sal seeds did not apply to sal seeds grown in Government forests. The Act has
been suitably amended by the impugned ordinance by removing the cause of
ineffectiveness pointed out by this Court. The definition of "forest
produce" under section 2(c) has been enlarged to include, among others,
sal seeds, grown or found on Government lands or in Government forests.
Clause
(a) of subsection (1) of section 5 has been substituted covering all contracts
for the purchase, sale, gathering or collection of 'specified forest produce'
grown or found in the area specified in the notification issued under section
1(3) of the Act. Such contracts shall stand rescinded when a notification under
s. 1(3) of the Act is issued. Both these provisions shall be deemed to have
come into force with effect from September 5, 1981, the date on which the Act
had come into force. [326A-B, E-F] 317 The notification dated December 9, 1982
has been validated under A section 5 of the ordinance notwithstanding any
judgment, decree or order of any Court to the contrary.
It
shall be deemed to have been issued in respect of sal seeds also grown or found
in Government forests. lt shall be valid and effectual as if it were issued
under section 1(3) of the Act as amended by the ordinance. This validation is
more than sufficient to make it operative to cover the contracts of the
petitioners. It does not suffer from any infirmity. [326H; 327A-B]
1.6
It would be impermissible for the State to enter into such contracts in future.
The parties or Agents employed by the State cannot work for their own benefits.
They
must work on behalf of the State. [324F-G ] Utkal Contractors & Joinery
Pvt. Ltd. and Ors. v. State of Orrisa & ors., AIR 1987 SC 1455-[1987] 3 SCC
279; Hari Singh & ors. v. The Military Estate officer & Anr., [19731 1
SCR 515;Government of Andhra Pradesh & Anr. v. Hindustan Tools Ltd., 119751
Supp. SCR 394; V.N. Saxena v. State of M.P., [1976] 3 SCR 237 and Misri Lal
Jain Etc. v. State of Orissa & Anr., [1977] 3 SCR 714, referred to. D
Original
Jurisdiction:
Writ Petition Nos 7597-99 of 1983.
And
Writ Petition Nos. 7606-09 of 1983.
(Under
Article 32 of the Constitution of India). A.K. Sen, F.S. Nariman, S.N. Kacker,
A.K. Ganguli, R.F. Nariman, A. Patnaik and M.M. Kshatriya for the Petitioners.
F Shanti Bhushan, S.N. Chatterjee, G.L. Sanghi, Dr. Y.S. Chitale, G. Rath,
Advocate General, R.K. Patra, R.K. Mehta and H. K . Puri for the Respondents.
The
Judgment of the Court was delivered by G JAGANNATHA SHETTY, J. "Sal
seed" which is a minor forest produce at Orissa has again become the major
subject of litigation between commercial users and the State of orissa.
The
petitioners herein are holders of long term license from the 318 Government of
orissa for collection of sal seeds from certain A specified forest divisions on
payment of royalty.
The
State of orissa enacted Orissa Forest. Produce (Control of Trade) Act, 1981
(The "Act"). It received the assent of President on August 21, 1981.
The object of the Act was to prevent smuggling forest and also to provide State
monopoly in such forest produce. Under Section 1(3) }3 of the Act the State is
empowered from time to time to issue a notification specifying the area or
areas the forest produce in relation to which and the date from which the Act
shall come into force. Purporting to act under this provision a notification
dated December 9. 1982 was issued by the State Government directing that the
Act shall come into force at once in the whole of the State of Orissa in
relation to sal seeds.
Thereafter,
the Government refused to accept royalty from the petitioners in respect of
certain forest divisions on the ground that the notification had the effect of
rescinding the existing contracts between the Government and the petitioners.
The petitioners thereupon moved the orissa High Court with Writ Petitions for
declaration that the said notification was void and did not have the effect of
rescinding their contracts in relation to sal seeds. The orissa High Court
dismissed the Writ Petitions. The matter was brought before this Court in Civil
Appeal Nos. 6230-31 of 1983. This Court allowed the appeals by judgment dated
May 5, 1987. which has been since reported in Utkal Contractors & Joinery
Pvt. Ltd. and ors. v. State of orissa and ors., AIR 1987 SC 1455 = 1987 (3) SCC
279.
The
nub of the arguments in those appeals was that the Act was not concerned with
the sal seeds grown in the Government lands or Government Forests, and in any
event, the petitioners' contract remained untouched by the notification dated
December 9, 1982. It was also contended that since the Government was already
the owner of forest produce in Government lands, all that was necessary to
create a State monopoly in any forest produce, was to vest in the Government
the exclusive right to such forest produce grown in private holding. After
dealing with the object of the Act and relevant provisions, a bench of this
Court consisting one of us (o. Chinnappa Reddy, J.) said:
"Thus
none of these provisions deals with forest produce grown in Government lands
nor is there any other provision in the Act which expressly deals with forest
produce grown in Government lands. The scheme of the Act is, 319 therefore,
fully in tune with the object set out in the Statement of objects and Reasons
and in the Preamble, namely that of creating a monopoly in forest produce by
making the Government the exclusive purchaser of forest produce grown in
private holdings. It as argued by the learned Additional Solicitor General that
S. 5(1)(1) was totally out of tune with the rest of the provisions and, while
the rest of the provisions dealt with forest produce grown in private holdings
the very wide language of S. S(1)(a) made it applicable to all forest produce
whether grown in private holdings or Government forests. We do not think that
it is permissible for us to construe S. 5(1)(a) in the very wide terms in which
we are asked to construe it by the learned Additional Solicitor General because
of its wide language, as that would merely introduce needless confusion into
the scheme of the Act. Having scanned the object and the scheme of the Act,
having examined each of the provisions of the Act textually and contextually,
we do not think it is proper for us to construe the words of S. S(1)(a) in
their literal sense; we think that the proper way to construe. S. 5(1)(a) is to
give a restricted meaning to the wide and general words there used so as to fit
into the general scheme of the Act and S. 5(1)(b) are concerned by the conjunction
'and', and having regard to the circumstances leading to the enactment and the
policy and design of the Act, we think that clauses (a) and (b) must be
construed in such a way as to reflect each other. We have no doubt that the
contracts relating to specified forest produce which stand rescinded are
contracts in relation to forest produce grown in private holdings only. If the
very object of the Act is to create a monopoly in forest produce in the
Government so as enable the Government, among other things, to enter into
contracts, there was no point in rescinding contracts already validly entered
into by the Government. Again S. 5(1) does not bar any future contracts by the
Government in respect of forest produce; if so, what is the justification for construing
S. 5(1) in such a way as to put an end to contracts already entered into by the
Government. Viewing S. 5(1)(a) and 5(1)(b) together and in the light of the
preamble and the Statement of objects and Reasons and against the decor of the
remaining provisions of the Act, we have no doubt that S. 5(1) like the rest of
the provisions applied to forest produce grown in private holdings and not to
forest produce grown in Government land S. " Then the conclusion was
expressed in the following terms:
"We
declare that the Act and the notification issued under the Act do not apply to
forest produce grown in Government forests and that it was not, therefore, open
to the Government to treat the contract dated May 25, 1979, as rescinded.
" On May 29, 1987, the Governor of (Orissa promulgated orissa Forest
Produce (Control of Trade) (Amendment and Validation) ordinance, 1987, (The
"ordinance"). The ordinance shall be deemed to have come into force
with effect from September 5, 1981 when the principal Act was notified in the
Orissa Gazette. The ordinance purports to render the aforesaid decision
ineffective. The petitioners have again approached this Court challenging the
validity of the ordinance.
Before
we examine the contentions raised in these petitions, lt will be useful to set
out the provisions of ordinance:
"(2)
It shall be deemed to have come into force on the date on which the Orissa
Forest Produce (Control of Trade) Act 1981 (hereinafter referred to as the
principal Act) had come into force, i.e. 5.9.1981 when the principal Act was
notified in the orissa Gazette.
2.
3 In clause (c) section 2 of the principal Act, the full stop at the end of the
clause shall be substituted by a comma and thereafter the following shall be
added at the end, namely:- "Whether grown or found on land owned by
private persons or on land owned by the State Government (j, or in Government
forests."
3.
In Section 5 of the principal Act, in sub- section (1)- (1)- "(i) for
clause (a) the following clause shall be substituted, namely:
321
"(a) all contracts for the purchase, sale, gathering or collection of
specified forest produce grown or found in the said area shall stand rescinded,
whether such forest produce is grown or found on land owned by private persons
or on land owned by the State Government or in Government forests." (ii)
After Explanation III, the following Explanation shall be added, namely:-
"Explanation IV-The Explanations I to III shall be deemed to be
explanations to clause (b) of this sub-section only and shall not be deemed as
in any manner qualifying or detracting from clause (a) of this sub- section or
saving any contracts referred to in clause (a) from the operation of the
provision for recission of contracts contained in the said clause (a)".
4.
In section 9 of the principal Act for sub- section (4) the following
sub-section shall be substituted namely:- "(4) The State Government or its
authorised officer or agent shall be entitled to take delivery of any specified
forest produce collected by any person from land owned by the State Government
or Government Forests on payment of only such collection charges as may be
determined by the State Government from time to time.
Provided
that it shall be open to the State Government or the authorised officer or
agent to refuse to take delivery of any such forest produce which is not fit
for consumption or use as raw- material for manufacture or for trade:
Provided
further that in the case of any dispute, the Divisional Forest officer or such
other officer who may be specifically empowered in this behalf, as specified in
sub section (2), shall hear and dispose of the same in the manner provided in
this Act and the Rules made thereunder. " 5.Notwithstanding any judgment,
decree or order of any Court to the contrary, the Notification dated the 9th
322 December, 1982, issued by the State Government under sub-section (3) of
section 1 of the principal Act in respect of sal seeds shall be deemed to have
been issued in respect of sal seeds whether grown or found on land owned by private
persons or on land owned by the State Government or in Government forests and
shall be as valid and effectual as if it were issued under sub-section (3) of
section 1 of the principal Act as amended by this ordinance and all
instructions and orders issued or made and all actions taken or things done
pursuant to the said Notification in respect of sale, purchase and collection
of sal seeds shall be deemed to have been validly made, taken or done under the
principal Act as amended by this ordinance." Section 2(c) of the Act has
now been enlarged to include forest produce whether grown or found on land
owned by private persons or on land owned by the State Government or in
Government forests Section 5 of the Act has been amended to nullify all
existing private contracts in relation to specified forest produce. It reads:
"5.
Restriction on the purchase and transport and rescission of subsisting
contracts.
(1)
on the issue of a notification under sub-S. (3) of S. 1 in respect of any area-
(a) All contracts for purchase, sale gathering or collection of specified
forest produce grown or found in the said area shall stand rescinded, whether
such forest produce is grown or found on land owned by the State Government or
in Government forests, (b) No person, other than (i) the State Government, (ii)
an officer of the State Government authorised in writing in that behalf; or
(iii) an agent in respect of the unit in which the specified forest produce is
grown or found shall purchase or transport any specified forest produce in the
said area.
323
Section 5 would come into effect only upon the notification issued by the
Government under Section 1(3) of the Act. The Government has not issued a fresh
notification under Section (3) so far as sal seeds are concerned. But the
ordinance itself by Section 5 purports to validate the notification issued by
the Government on December 9, 1982 the legality of which we will presently
consider.
Mr.
Nariman, learned Counsel for the petitioners, contended that the object and
drift of the Act was to provide state monopoly in specified forest produce only
to prevent smuggling and the notification dated December 9, 1982 was extraneous
to the purpose of the Act. In support of the contention, the Counsel relied
upon the Statement of objects and Roasons of the Act, the ordinance and
Industrial Policy of the State Government. We do not think that the purpose of
the Act or the ordinance was to provide State monopoloy only to prevent
smuggling. Even in the previous decision of this Court, it was observed that
the object of the Act was to prevent smuggling and to provide for State
monopoly in the specified forest produce. The Preamble of the Act which is a
key to the enactment is also clear on the object. It reads:
"An
Act to provide for control and regulation of trade in certain forest produce by
creation of State monopoly in such trade " Secondly, the validity of the
statutory notification cannot be judged merely on the basis of statement of
objects and reasons accompanying the Bill. Nor it could be tested by the
Government policy taken from time to time. The executive policy of the
Government, or the Statement of objects and reasons of the Act or ordinance
cannot control the actual words used in the legislation. In the Central Bank of
India v. Their Workmen, [ 1960] 1 SCR 200. S. K., Das. J. said:
"The
statement of objects and reasons is not admissible, however, for construing the
section;
far
less can it control the actual words used." In State of West Bengal v.
Union of India, [ 1964] 1 SCR 371 at p. 382. Sinha, C.J. Observed:
"It
is however well settled that the Statement of objects and reasons accompanying
a bill, when introduced in Parliament cannot be used to determine the true
meaning and effect of substantive provisions of the statute. They 324 cannot be
used except for the limited purpose of understanding the background and the
antecedent state of affairs leading up to the legislation.
But
we cannot use this statement as an aid to the construction of the enactment or
to how that the legislature did not intend to acquire the proprietary rights
vested in the State or in any way to affect the State Governments' rights as
owner of minerals. A statute, as passed by Parliament, is the expression of the
collective intention of the legislature as a whole, and any statement made by
an individual, albeit a Minister, of the intention and objects of the Act
cannot be used to cut down the generality of the words used in the
Statute." The petitioners cannot also contend that the annulment of their
contracts and the restrictions brought about on their rights to trade are
unreasonable or arbitrary. Such restrictions must be presumed to be reasonable
and in the interest of general public. It is open to the State to make laws for
creating State monopolies either partially or complete in respect of any trade
or business or industry or service. The State may enter into trade like any
other person either for administrative reasons or with the object of mitigating
the evils in the trade, or even for the purpose of making profits in order to
enrich the State exchequer. The law relating to such trading activities must be
presumed to be reasonable and in the interest of general public. That was the
view taken by this Court in Akadasi Padhan v. State of Orissa, [1963] 2 Supp.
SCR 691 where it was observed that the law relating to such state monopoly
should be presumed to be reasonable and in the interest of general public
within the scope of Article 19(6)(ii) of the Constitution.
As
to the contention of Mr. Nariman, that the provisions of the Act and the Rules
made there under do not bar future contracts the like of which the petitioners
are having, we may say that it would be impermissible for the State to enter
into such contracts hereafterwards. The parties or Agents employed by the State
cannot work for their own benefits. They must work on behalf of the State.
That
is what has been stated in Akadasi Padhan v. State of orissa, (Supra).
"It
seems to us that when the State carries on any trade, business or industry it
must inevitably carry it on either departmentally or through its officers
appointed in that be half. In the very nature of things, the States as such,
cannot function without the help of its servants or employees and 325 that
inevitably introduce the concept. Of agency in a narrow and limited sense. If
the State cannot act without the aid and assistance of its employees or
servants, it would be difficult to exclude the concept of agency altogether.
Just as the State can appoint a public officer to carry on the trade or its
business so can it appoint an agent to carry on the trade on its behalf.
Normally and ordinarily, the trade should be carried on departmentally or with
the assistance of public servants appointed in that behalf. But there may be
some trade or business in which it would be in exponent to undertake the work
of trade or business department or with the assistance of State servants. In
such cases, it would be open to the State to employ the services of agents,
provided the agents work on behalf of the State and not for themselves."
The next question to be considered is whether the State while purporting to
amend the Act has encroached upon the judicial power and set aside the binding
judgment of this Court. We do not think that Mr. Nariman was justified in
contending so. The principles have been well established in a string of
decisions of this Court, and we may briefly summarise as follows:
The
legislature may, at any time, in exercise of the plenary power conferred on it
by Articles 245 and 246 of the Constitution render a judicial decision
ineffective by enacting a valid law.
There
is no prohibition against retrospective legislation. The power of the legislature
to pass a law postulates the power to pass it prospectively as well as
retrospectively. That of course, is subject to the legislative competence and
subject to other constitutional limitation.
The
rendering ineffective of judgments or orders of competent Courts by changing
their basis by legislative enactment is a well known pattern of all validating
acts. Such validating legislation which removes the causes of ineffectiveness
or invalidity of action or proceedings cannot be considered as encroachment on
judicial power. The legislature, however, cannot by a bare declaration, without
more, directly overrule, reverse or set aside any judicial decision.
[Hari
Singh & ors. v. The Military Estate officer & Anr., [ 19731 1 SCR 515;
Government of Andhra Pradesh & Anr. v. Hindustan Tools Ltd., 11975] Supp.
SCR 394; V.N. Saxena v. State of M.P., [1976] 3 SCR 237 326 and Misri Lal Jain
Etc. v. State of Orissa & Anr., [ 1977] 3 SCR 71. ] In the instant case
having regard to the then existing provisions of the Act, this Court declare.
that the Act and notification issued thereunder in relation to sal seeds did
not apply to sal seeds grown in Government forests. The Act has been suitably
amended by the impugned ordinance by removing the cause of ineffectiveness pointed
out by this Court. The new provisions would now cover specified forest produce
whether grown or found on land owned by private persons or on land owned by the
State Government or in Government forests and the contracts relating thereto.
Such contracts shall stand rescinded when a notification under Section 1(3) of
the Act is issued.
What
remains to be considered is, whether it is necessary for the Government to
issue a fresh notification under Section 1(3) of the Act. Mr. Nariman contended
that the notification issued on December 9, 1982 was held to be applicable only
to sal seeds grown in the private holdings, and in the absence of amendment to
section 1(3), the validation of such a notification would not be effective to
nullify the con tracts which the petitioners are having. It was also urged that
the notification was "still born" and could not have been validated.
We are unable to accept this contention also. The definition of "forest
produce" under Section 2(c) has been enlarged to include among others, sal
seeds, grown or found on Government lands or in Government forests. Clause (a)
of Sub-section (1) of Section 5 has been substituted covering all contracts for
the purchase, sale, gathering or collection or 'specified forest produce' grown
or found. in the area specified in the notification issued under Section 1(3)
of the Act. Both these provisions shall be deemed to have come into force with
effect from September S, 1981 the date on which the Act had come into F; force.
The
notification dated December 9, 1982 issued under Section 1(3) of the Act reads:
"SRO
No. 852/82-In exercise of the powers conferred by sub-section(3) of Section 1
of the Orissa Forest Produce (Control of Trade) Act, 1981 (orissa Act 22 of
1981), the State Government do hereby direct that the Act shall come into force
at once in the whole of the State of Orissa in relation to sal seeds. "
This notification has been validated under Section 5 of the ordinance not
withstanding any judgment, decree or order of any Court to the contrary. It
shall be deemed to have been issued in respect of sal 327 seeds also grown or
found in Government forests. It shall be valid and effectual as if it were
issued under Section 1(3) of the Act as amended by the ordinance. This
validation, in our opinion is more than sufficient to make it operative to
cover the contracts of the petitioners. It does not suffer from any infirmity.
The
impugned ordinance is, therefore, valid and cannot be challenged on any ground.
In
the result, these petitions fail and are dismissed, but we make to order as to
costs.
N.P.V.
Petitions dismissed.
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