1. Non-tribal trader — Refusal of trading license renewal by District Council — Challenge to validity of Regulation under Article 19(1)(g) of the Constitution. (Para 2 , 3 )
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1966 Supreme(SC) 299
SUPREME COURT OF INDIA
K. SUBBA RAO, C.J.I., R.S. BACHAWAT AND J.M. SHELAT JJ.
Hari Chand Sarda, Appellant
Versus
Mizo District Council and another, Respondents.
Civil Appeal No. 648 of 1964, D/- 28-10-1966.
Advocates appeared
Mr. Sukumar Ghose, Advocate, for Appellant.
Advocates:
SUKUMAR GHOSH
SUKUMAR GHOSH
A statutory provision restricting the fundamental right to trade is void if it grants an authority unguided and arbitrary discretion to grant or refuse licenses without providing objective standards, guiding principles, or a mechanism for appeal and review.
Headnote:(A) Constitution of India - Article 19(1)(g) and 19(6) - Sixth Schedule, Paragraph 10 - Regulation for trading by non-tribals - Requirement of license - Validity of restriction - Power to refuse license without guiding principles - Whether such power is arbitrary and unreasonable - A restriction on the fundamental right to carry on trade must be reasonable and in the interest of the general public - If a statute confers unguided and untrammelled power on an authority to grant or refuse a license without providing any standards, principles, or a mechanism for appeal or review, such a provision constitutes an unreasonable restriction - Mere recording of grounds for refusal is insufficient if no superior authority exists to examine the legality or propriety of the order. (Paras 6, 7, 8, 10)
(B) Fundamental Rights - Burden of proof - Where a provision restricts a fundamental right, it is for the State to establish the reasonableness of such restriction. (Para 7)
(C) Legislative Policy - Even if a statute is enacted in pursuance of a constitutional policy, such as the protection of tribal interests, the implementation mechanism must not be arbitrary or excessive; a provision leaving unbridled power to an authority cannot be characterized as reasonable. (Para 10)
Facts of the case:
A non-tribal trader operated in an autonomous district under temporary licenses. The licensing authority refused to renew the license on the ground that the maximum number of licenses had been reached and directed the trader to remove properties from the district. The trader challenged the validity of the regulation requiring such licenses and the specific order of refusal as being violative of fundamental rights.
Findings of Court:
The court found that the regulation requiring a license for non-tribals to trade did not provide any guiding principles, standards, or criteria for the authority to exercise its discretion. Furthermore, there was no provision for appeal or review, leaving the trader entirely at the mercy of the executive committee.
Issues: Whether the provision requiring a license for non-tribals to trade in an autonomous district, and the power to refuse such license without specified guidelines or an appellate remedy, constitutes an unreasonable restriction on the right to carry on trade under Article 19(1)(g) of the Constitution.
Ratio Decidendi: A law restricting the fundamental right to trade is void if it confers uncanalized and arbitrary power on an authority without providing ascertainable standards or a review mechanism. The absence of guiding principles makes the restriction unreasonable, regardless of the underlying policy objective.
Result: Appeal allowed.
Legal Category Hierarchy
Table of Contents
2. Validity of licensing regulation — Whether power to refuse license is arbitrary and uncanalized — Whether restriction on trade is unreasonable under Article 19(6). (Para 3 , 4 )
3. Analysis of reasonableness test — Lack of guiding principles for license refusal — Absence of appellate remedy — Arbitrary exercise of unguided power. (Para 6 , 7 , 8 , 9 , 10 )
4. A law restricting fundamental rights is unreasonable if it confers unguided and arbitrary power on an authority without providing guiding principles or a remedy. (Para 7 , 10 )
5. Section 3 of the Regulation declared void as an unreasonable restriction on Article 19(1)(g) — Order refusing license renewal set aside. (Para 11 , 21 )
6. What is the test for determining the reasonableness of laws restricting fundamental rights?
Reasonableness is determined by examining both substantive and procedural aspects, the underlying purpose of the restriction, the urgency of the evil sought to be remedied, the proportionality of the imposition, and the prevailing conditions at the time. (Para 6 , 7 )
7. When does a licensing power constitute an unreasonable restriction on the right to carry on trade?
A licensing power is unreasonable if it is uncontrolled, uncanalized, and lacks ascertainable standards or principles to guide the authority, leaving the citizen at the mercy of the executive without any remedy or superior authority for review. (Para 7 , 8 , 10 )
8. Does a valid legislative policy justify an arbitrary implementation mechanism?
No. Even if a statute is enacted in pursuance of a valid policy, it is unreasonable if the implementation mechanism is arbitrary, provides no guiding criteria for the exercise of power, and offers no remedy to the affected person. (Para 10 )
Judgment
SHELAT, J. : (K. Subba Rao CJI. Concurring) - We regret our inability to agree with the conclusion reached by Bachawat, J.
2. The appellant, a non-tribal, started trading at Aijal, Mizo District, in 1957 under a temporary licence issued by the Mizo District Council investing about Rs. 50, 000 therein. The temporary licence could be issued at a time for a year only and therefore he applied for and obtained its renewal from time to time up to May 31, 1960. He applied for a further renewal whereupon the Executive Committee of the District Council passed an order dated July 1l, 1960 refusing any further renewal and directing him to remove his properties from the District by the end of July 1960 and imposed a fine of Rs. 500 in case he failed to comply with it.
3. The appellant filed a petition under Article 226 of the Constitution in the High Court of Assam against the said order contending that the said order was mala fide in the sense that though the reason given for refusal was that the number of non-tribal traders had reached the maximum the Committee had in fact granted licences to new traders, and that the said order and Section 3 of the Lushai Hills District (Trading by non-Tribals) Regulation, 2 of 1953 were invalid being violative of Article19 (1) (e) and (g) of the Constitution. The High Court struck down that part of the said order which directed him to remove his properties from the District and which imposed fine but dismissed the rest of the petition, firstly, on the ground of delay and secondly on the ground that the said order was a valid order and was not discriminatory. The High Court also repelled the contention that the power of the Council was unrestricted or arbitrary. The High Court observed :
"The power cannot be said to be unrestricted. The licence is to be granted or refused having regard to the underlying object of the enactment. This Regulation was passed in pursuance of the provisions of the Sixth Schedule of the Constitution which gives specific power to, the District Council to pass regulations affecting the right of non-Tribals to trade within the tribal areas and in order to effect the purpose underlying the provision of the Sixth Schedule this Regulation was enacted. If having regard to the scope of trade in that locality the number of licences is restricted by the authorities, it cannot be said that the exercise of such a power is discriminatory."
This appeal by special leave challenges the correctness of this order by which the High Court dismissed the petition.
4. The appellant s contention before us was that the said order was invalid as it was based on an invalid provision of law which infringed his fundamental right to carry on business at Aijal under Art. 19 (1) (g), that the refusal to allow him to carry on his business amounted to an unreasonable restriction and that Section 3 of the Regulation which empowers the Council to refuse to permit him to carry on business was invalid as it conferred on the Council an arbitrary and uncanalized power enabling it to refuse to grant a licence or its renewal according to its sweet will.
5. The Sixth Schedule to the Constitution constitutes the Mizo District, formerly known as the Lushai Hills District, as an autonomous district. Paragraph 10 of that Schedule provides for the power of the District Council to make Regulations for the control of money-lending and trading by non-tribals. Clauses l and 2 of that paragraph read as under:
(1) The District Council of an autonomous district may make regulations for the regulation and control of money-lending or trading within the district by persons other than Scheduled Tribes resident in the District.
(2) In particular and without prejudice to the generality of the foregoing power, such regulations may
(a) prescribe that no one except the holder of a licence issued in that behalf shall carry on the business of money-lending;
(b) * * * * *
(c) * * * * *
(d) prescribe that no person who is not a member of the Sc
