Judgment

BOSE J.: This is a petition made by the Madhya Bharat Cotton Association Limited, under Article 32 of the Constitution, complaining of discrimination under Article 14 and restraint of trade under Article 19(1)(g). The restraint of trade is because the petitioner has been prevented by certain notifications, which it impugns, from carrying on the business of hedge contracts; the discrimination lies in the fact that whereas the petitioner has been prevented from carrying on this trade, the East India Cotton Association Limited, Bombay. has been allowed to do so and has been given a virtual monopoly in India.

2. The action of which complaint is made was taken under the Cotton Control Order of 1950. Clause 4 of this Order banned all cotton contracts and options in cotton except those permitted by the Textile Commissioner by a general order made under Clause 6. The Textile Commissioner was also authorised to place such restrictions and conditions as he thought fit on the contracts and options which he permitted.

3. Acting under this authority the Textile Commissioner made the following orders:

(1) S.R.O. 2045, dates 11-12-1952

(2) S.R.O. 1425, dated 16-7-1953

(3) S.R.O. 1651, dated 3-9-1953

Under the first he lifted the ban on

"Hedge Contracts: that is to say Forward Contracts entered into by members of the East India Cotton Association Limited, entitled to the use of the Clearing House of the Association where such contracts are made in accordance with rules and bye-laws of the Association in the official markets of the Association."

The second order gave the same exemption but limited the lifting of the ban to hedge contracts for February 1954 delivery. The third order added contracts for may 1954 delivery. These are the orders which are impugned. The petition was filed in August 1953. The last of the three orders was made after this, namely on 3-9-1953, and was included at a later date.

3. Cotton was listed as an essential commodity" under Section 2(a) of the Essential Supplies (Temporary Powers) Act, 1946 (Act XXIV of1946), so the right of the State to control, and even to prohibit, transactions in it is evident. "Hedging" is of vital importance in cotton trading. It not only acts as an insurance and protects cotton growers, manufacturers and merchants but also acts as a check on reckless speculation and gambling when properly controlled. Consequently, it is important to have this type of dealing under proper supervision and control, other-wise, as in the case of Banks and insurance companies, innocent persons may have to suffer for the reckless gambling and speculation of handful of persons anxious to get rich quickly. Further, cotton being a commodity essential to the life of the community, it is reasonable to have restrictions which may, in certain circumstances, extend to total prohibition for a time, of all normal trading in the commodity. Accordingly, we are of opinion that Clause 4 of the Cotton Control Order of 1950 does not offend Article 19(1) (g) of the Constitution because sub-clause (5) validates it.

4. Turning now to Article 14. It is not disputed that the East India Cotton Association of Bombay is a well organised association which has been dealing in hedge contracts for some twenty years and the fitness of that Association to be given an exemption has not been challenged. What the petitioner alleges is that the Madhya Bharat Cotton Association of Ujjain is also well organised and has almost identical rules and is also capable of operating hedge contracts. Therefore, it complains that it has been discriminated against.

5. Now the Madhya Bharat Cotton Association was not incorporated till 3-10-1952. It is therefore an association of very recent date, and as the first of the three Orders under review was made on 11-12-1952 and the last on 3-9-1953 it was within the Textile Commissioner s discretion to view it with caution and to wait until it was better established before allowing it to operate hedge contracts. "Hedg