Judgment

AYYANGAR J.: This is an appeal by special leave from the judgment of a Division Bench of the Bombay High Court affirming the judgement of a learned Single Judge whereby a petition under Art. 226 of the Constitution by appellants was dismissed. By their petition, the appellants challenged the validity of a notification issued by the Forward Markets Commission - a statutory body created by the Forward Contract (Regulation) Act. 1952 (Act LXX1V of 1952), (hereinafter referred to as the Act) to the authorities of the East India Cotton Association, Bombay (which will be referred to as the Association.) intimating to them that the continuation of trading in certain types of forward contracts in cotton including that known as "hedge contract" was "detrimental to the interest of the trade and the public interest and to the larger interests of the economy of India" and directed these contracts to be closed out, to be settled at prices fixed in the notification.

2. It is necessary to set out briefly certain facts in order to appreciate the points raised by the appeal. The East India Cotton Association is an "association" which has been recognised by the Central Government under S. 6 of the Act. The three appellants are members of the Association carrying on business in partnership. The appellants had, prior to December 1955 entered into "hedge contracts" in respect of cotton with other members of the Association for settlements in February and May 1956. There was no dispute that these contracts were in accordance with the bye-laws of the Association as they stood at the date when the contracts were entered into. The terms and conditions of forward contracts in cotton including "hedge contracts" and the manner of their implementation, were governed by the provisions contained in certain bye-laws of the Association and of these that relevant to the consideration of the matters in this appeal was Bye-law 52AA which on the date when the appellants entered into their contracts ran as follows :

"52 AA (1) Whether or not the prices at which the cotton may be bought or sold are at any time controlled under the provisions of the Essential Commodities Act. l955, if the Textile Commissioner with the concurrence of the Forward Markets Commission and after consultation with the chairman (of the Board), be of opinion that the continuation of hedge trading is likely to result in a situation detrimental to the larger interest of the economy of India and so informs the Board, the Board shall forthwith cause a notice to be posted on the Notice Board to that effect and on the posting of such notice and notwithstanding anything to the contrary contained in these bye-laws or in any hedge or on call contract made subject to these Bye-Laws, the following provisions shall take effect.

2. Every hedge contract and every on call contract in so far as the cotton is uncalled thereunder or in so far as the price has not been fixed thereunder entered into between a member and a member or between a member and a nonmember then outstanding shall be deemed closed out at such rate, appropriate to such contract as shall be fixed by the Textile Commissioner and the provisions of clauses (3), (4) and (6) of Bye-Laws 52 A in so far as they apply to hedge and on call contracts, shall apply as if they formed part of this Bye-Law. After the affixation of the said Notice on the Notice Board trading in hedge and on call contracts shall be prohibited until the Textile Commissioner with the concurrence of the Forward Markets Commissioner and after consultation with the Chairman, permits resumption."

3. Towards the end of 1955 the Chairman of the Association appears to have apprehended that the Forward Market in cotton was heading for a crisis which was in part due to the transacting of unbridled option business, which though prohibited by the Act and also by the bye-laws of the Association was nevertheless indulged in on a large scale. The chairman brought this situation to the