1. Challenge to the validity of the Madras Commercial Crops Markets Act and associated rules regarding licensing and market regulation for commercial crops. (Para 1 , 2 )
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1958 Supreme(SC) 127
SUPREME COURT OF INDIA
6th October, 1958.
S.R. DAS, C.J.I., N.H. BHAGWATI, B.P. SINHA, K. SUBBA RAO AND K.N. WANCHOO, JJ.
(1) M. C. V. S. Arunachala Nadar (In C. A. No. 169 of 1955);
(2) V. P. S. Aiyemperumal Nadar and Sons and others (In C. A. No. 170 of 1955) and
(3) V. K. Chinnaswamy Naicker and others (In C. A. No. 171 of 1955), Appellants
Versus
State of Madras and others, Respondents. 301
Civil appeals Nos. 169-171 of 1955.
Advocates Appeared
M/s. R. Ganpathy Iyer and Shanmugavel, Advocates, for Appellants; Mr. V. K. T. Chari, Advocate-General for the State of Madras (M/s. V. V. Raghavan & R. H. Dhebar, Advocates, with him), for Respondents; Mr. H. N. Sanyal, Additional Solicitor-General of India (Mr. R. H. Dhebar, Advocate, with him), (for No. 1); Mr. T. M. Sen, Advocate, (for Nos. 2 & 3) ; Mr. S. B. Sen, Additional Government Advocate for the State of Madhya Pradesh . Mr. I. N. Shroff, Advocate, with him ), (for No. 4), for Interveners.
Advocates:
H.N.SANYAL, I.M.SHROFF, R.Ganapathy Iyer, R.H.Dhebar, S.B.SEN, Shanmugavel, T.M.SEN, V.K.T.Chari, V.V.RAGHAVAN
H.N.SANYAL, I.M.SHROFF, R.Ganapathy Iyer, R.H.Dhebar, S.B.SEN, Shanmugavel, T.M.SEN, V.K.T.Chari, V.V.RAGHAVAN
Restrictions on the right to trade under Article 19(1)(g) are reasonable if they have a rational relation to the legislative object—such as protecting producers from exploitation—and are proportionate to the urgency of the evil sought to be remedied.
Headnote:(A) Constitution of India - Article 19(1)(g) and 19(6) - Commercial Crops Markets Act - Section 5 and 14 - Right to carry on trade or business - Reasonable restrictions - The test of reasonableness for restrictions on the fundamental right to trade must be applied to each individual statute and depends on the nature of the right, the underlying purpose of the restrictions, the extent and urgency of the evil sought to be remedied, the proportionality of the imposition, and prevailing conditions (Para 5). A restriction is reasonable if it has a rational relation to the object the legislature seeks to achieve and does not exceed that object (Para 5). Legislation aimed at protecting producers from exploitation by middlemen through regulated markets and licensing is a valid exercise of power under Article 19(6) (Paras 7, 13).
(B) Licensing and Market Regulation - Provisions requiring licenses for the purchase, sale, storage, or processing of commercial crops in notified areas, and the prohibition of licenses within a certain radius of an established market, are reasonable restrictions intended to eliminate middlemen and ensure fair prices for growers (Paras 9, 12, 13).
(C) Trade Allowance - A deduction in a transaction regarding commercial crops is a trade allowance if it is a deduction from the price or commodity agreed upon. If the payment is made as consideration for the use of premises or services rendered, it is not a deduction from the price and thus not a trade allowance (Para 16).
Facts of the case:
Appellants challenged the validity of a state act and rules regulating the buying and selling of commercial crops. The state had extended the act to certain districts, established market committees, and mandated licenses for traders. The appellants contended that these requirements, including licensing fees and the establishment of regulated markets, constituted unreasonable restrictions on their fundamental right to carry on business.
Findings of Court:
The court found that the act's objective to protect growers from exploitation by middlemen justifies the licensing and market regulations. The restrictions are reasonable as they have a rational connection to the legislative goal. The court declined to rule on the reasonableness of a specific notification to establish a market in a particular locality and the nature of a specific allowance due to insufficient evidence, leaving those issues open for future determination.
Issues: Whether the licensing provisions and the establishment of regulated markets under the act constitute unreasonable restrictions on the right to trade under Article 19(1)(g) of the Constitution; whether a specific notification for a market was unreasonable; and whether a particular deduction constitutes a "trade allowance" under the act.
Ratio Decidendi: The court held that marketing legislation designed to protect producers from exploitation by middlemen is valid if the restrictions imposed are reasonable and have a rational relation to the object of the act. The reasonableness of such restrictions is determined by the specific circumstances, the nature of the right infringed, and the urgency of the evil being remedied.
Result: Appeals dismissed.
Legal Category Hierarchy
- constitutional law
- administrative law
- commercial law
Table of Contents
2. Contention that the Act's licensing provisions and market notifications impose unreasonable restrictions on the fundamental right to carry on business, defeating the legislative purpose. (Para 4 , 10 , 11 , 12 , 13 , 14 , 15 )
3. The Act's objective to protect producers from exploitation by middlemen justifies licensing restrictions as reasonable under Article 19(6) of the Constitution. (Para 5 , 6 , 7 , 9 , 10 , 11 , 12 , 13 )
4. A restriction on the right to trade is reasonable if it has a rational relation to the legislative object and does not exceed that object. (Para 5 )
5. Appeals dismissed. (Para 17 )
6. What is the test for determining whether a restriction on the fundamental right to carry on trade or business is reasonable under Article 19(6)?
A restriction is reasonable if it has a rational relation to the object the legislature seeks to achieve and does not go in excess of that object, considering the nature of the right, the purpose of restrictions, and prevailing conditions. (Para 5 )
7. Are licensing restrictions in agricultural marketing legislation intended to protect producers from middlemen considered reasonable restrictions on the right to business?
Yes, such restrictions are valid if they provide a regulated market to eliminate middlemen and ensure fair prices for growers, provided the provisions are not unnecessarily harsh or overreach the legislative object. (Para 6 , 7 , 9 , 13 )
8. What constitutes a trade allowance under the Madras Commercial Crops Markets Act?
A trade allowance is a deduction from the price or commodity in a transaction involving commercial crops. If a payment is made as consideration for premises or services, it is not a deduction from the transaction and thus not a trade allowance. (Para 15 , 16 )
Judgement
K. SUBBA RAO, J. : These three appeals by certificate granted by the High Court are directed against the common order of the High Court of Judicature at Madras, date 10th July 1953,* dismissing three writ petitions filed by the appellants impugning the validity of the provisions of the Madras Commercial Crops Markets Act (Mad. 20 of 1933), hereinafter referred to as the Act, and the Rules framed thereunder, and certain notifications issued by the first respondent herein in pursuance thereof.
* See A. I. R. 1954 Madras 621.
2. The Act was passed to provide for the better regulation of the buying and selling of commercial crops in the State of Madras and for that purpose to establish markets and make rules for their proper administration. On 18th May 1951, the State Government issued G. O. No. 1049 (Food and Agriculture Department) extending the provisions of the Act to Ramanathapuram and Tirunelveli Districts in respect of cotton and groundnuts. On 25th February 1952, the State Government issued G. O. No. 251 (Food and Agriculture Department) ordering the constitution of a Market Committee at Koilpatti and Sankarankoil in Tirunelveli District. By a similar G. O., viz., G. O. No. 356 (Food & Agriculture Department) dated 8th March 1952, the Government directed the constitution of a Market Committee at Virudhunagar and markets at (1) Virudhunagar ; (2) Rajapalayam and (3) Sattur in Ramanathapuram District. The Market Committees were duly constituted, and, on 9th January 1953, the Market Committee at Virudhunagar issued a notice stating that the Act and the Rules had come into force in Ramanathapuram District on lst January 1953, and requiring persons who did business in cotton and groundnut to take out licences as provided therein. A further notice dated 17th January 1953, stated that all the traders in cotton and groundnut, who failed to take out licences on or before 15th February 1953, were liable to prosecution. Similar notices dated 22nd January 1953, and 14th February 1953, were issued by the Chairman, Tirunelveli Market Committee at Koilpatti calling upon all traders, producers and weighmen dealing in cotton to take out licences before 28th February 1953, and threatening prosecution for failure to comply therewith. The appellants in the above three appeals and others filed Writ Petitions in the High Court of Madras against (1) the State of Madras; (2) the Collectors of the concerned Districts and (3) the Chairmen of the Market Committees, for the issue of Writ of Mandamus directing the respondents to forbear from enforcing any or all the provisions of the Act as amended and the Rules and Bye-laws framed thereunder.
3. A Bench of the Madras High Court, consisting of Rajamannar C. J., and Venkatarama Aiyar J., by an order dated 10th July 1953,* dismissed the applications. The learned Judges held that S. 5 (4) (a) of the Act was void to the extent it conferred on the Collector authority to refuse a licence at his own discretion and Rule 37 was void in so far as it prohibited persons whose names had not yet been registered as buyers and sellers, from carrying on business in the notified area. Subject to that, the impugned Act and the Rules were upheld under Art. 19 (6) of the Constitution as a valid piece of marketing legislation. In the result, the applications were dismissed. The aforesaid three appellants have filed these appeals against the order of the High Court in so far as it dismissed their applications.
* See A. I. R. 1954 Madras 621.
4. Learned counsel for the appellants contends that the provisions of the Act and the Rules framed thereunder constitute an unreasonable restriction upon the appellants fundamental right to do business and that they not only do not achieve the object for which they are enacted but defeat their purpose. Elaborating this argument he took us through some of the provisions of the Act and the Rules made thereunder in an attempt to establish that the provisions cripple the business of th
