1. Challenge to price control and permit requirements for imported copper under the Essential Commodities Act — alleged violation of fundamental rights to property and trade. (Para 1 , 2 , 3 )
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1959 Supreme(SC) 214
SUPREME COURT OF INDIA
3rd December, 1959
B.P. SINHA, C.J.I., S.J. IMAM, J.L. KAPUR, K.N. WANCHOO AND K.C. DAS GUPTA, JJ.
Narendra Kumar and others, Petitioners
Versus
The Union of India and others, Respondents.
Petition No. 85 of 1958.
Advocates appeared
Mr. C. B. Agrawala, Senior Advocate, (M/s. R. Gopala Krishnan and K. P. Gupta, Advocates, with him), for Petitioners; Mr. H. N. Sanyal, Additional Solicitor General of India and Mr. B. Sen, Senior Advocate (Mr. R. H. Dhebar, Advocate, with them), for Respondents.
Advocates:
B.SEN, C.B.AGARWAL, H.N.SANYAL, K.P.GUPTA, R.GOPAL KRISHNAN, R.H.Dhebar
B.SEN, C.B.AGARWAL, H.N.SANYAL, K.P.GUPTA, R.GOPAL KRISHNAN, R.H.Dhebar
"Reasonable restriction" under Article 19 includes "prohibition" if it serves the public interest. However, subordinate legislation must strictly comply with statutory procedural requirements, such as official notification and parliamentary oversight, to be legally enforceable.
Headnote:(A) Constitution of India - Articles 14, 19(1)(f), 19(1)(g), 19(5), 19(6) and 13; Essential Commodities Act, 1955 - Section 3(5) and 3(6) - Control of imported metal - Price fixation and permit system - Total elimination of dealers from trade - Whether "prohibition" of a right falls within the scope of "reasonable restrictions" - Held: The term "restriction" is wide enough to include "prohibition," provided such prohibition is reasonable and in the interest of the general public (Paras 16, 18). Price fixation to prevent monopoly and ensure lower costs for consumers is a reasonable restriction, even if it results in the elimination of middlemen (Paras 21-23).
(B) Constitution of India - Article 14 - Classification between manufacturers and dealers - Held: Where the differentia has a reasonable connection with the object of the legislation, such classification does not violate the right to equality (Para 24).
(C) Essential Commodities Act, 1955 - Section 3 - Subordinate legislation - Requirement of notification in Official Gazette and laying before Parliament - Held: Principles governing the issuance of permits, if not notified in the Official Gazette and laid before both Houses of Parliament as required by statute, lack legal force and cannot be enforced (Paras 25-27).
Facts of the case:
Dealers in imported copper challenged a control order that fixed prices at landed cost plus a small percentage and required permits for acquisition. The principles for issuing permits, specified in a government communication, limited permits to manufacturers, effectively excluding dealers. These principles were not notified in the Official Gazette or laid before Parliament as required by the governing Act.
Findings of Court:
The price control and the permit system are reasonable restrictions in the interest of the general public to combat monopoly and reduce consumer prices. However, the specific principles used to deny permits to dealers were not legally promulgated according to the statutory requirements of the governing Act.
Issues: Whether the total prohibition of trade for dealers constitutes a "reasonable restriction" under Article 19; whether the price fixation is valid; and whether principles not notified in the Gazette or laid before Parliament have legal effect.
Ratio Decidendi: The court ruled that "reasonable restriction" includes "prohibition" if it serves the general public interest. While the objective of the control order was valid, the failure to comply with the mandatory procedural requirements of notification and parliamentary oversight rendered the specific principles for permit issuance void.
Result: Petition succeeded in part; respondents restrained from enforcing the permit clause until principles are legally published and laid before Parliament.
Legal Category Hierarchy
- constitutional law
- administrative law
- economic law
Table of Contents
2. Whether price and permit restrictions are reasonable under Article 19 — whether failure to notify principles under the Essential Commodities Act renders the regulation void. (Para 3 , 5 , 6 )
3. Price control and permit systems are reasonable restrictions to protect public interest, but procedural non-compliance with statutory notification requirements invalidates the permit regulation. (Para 7 , 8 , 13 , 15 , 16 , 18 , 19 , 20 , 21 , 22 , 23 , 24 , 25 , 26 )
4. The term reasonable restriction includes prohibition; however, subordinate legislation must adhere to mandatory statutory procedures of notification and parliamentary laying to be legally effective. (Para 16 , 18 , 25 , 26 )
5. Clause 4 of the Non-ferrous Metal Control Order is struck down as void pending legal publication and parliamentary laying of the governing principles. (Para 27 , 28 )
6. Does the term reasonable restriction under Article 19 include total prohibition of a right?
Yes. The court held that the word restriction is sufficiently wide to include cases of prohibition, provided such prohibition is reasonable in the interests of the general public. However, when a restriction reaches the stage of prohibition, the court applies stricter scrutiny to ensure reasonableness. (Para 16 , 18 )
7. What criteria does the court use to determine the reasonableness of a restriction on fundamental rights?
The court considers the facts and circumstances of the order, the nature of the evil sought to be remedied, the ratio of harm caused to individuals versus the beneficial effect on the general public, and whether the restraint is more than necessary for the public interest. (Para 19 )
8. What is the legal effect of failing to notify subordinate legislation as required by the parent Act?
If a statute requires that rules or principles be notified in the Official Gazette and laid before Parliament, failure to comply with these mandatory procedural requirements renders the regulation legally ineffective and void, as it falls outside the authority granted by the Act. (Para 25 , 26 , 27 )
9. Can subordinate legislation be challenged for violating fundamental rights if the parent Act is not challenged?
Yes. Even if the parent Act is valid and the government has the power to regulate, any order or subordinate legislation made under that power must not violate the fundamental rights conferred by the Constitution. (Para 6 )
Judgment
DAS GUPTA, J. : The three persons who have filed this petition under Art. 32 of the Constitution for enforcement of their fundamental rights conferred by Art. 14, Art. 19(1)(f) and Art. 19(1)(g) thereof are dealers in imported copper and carry on their business at Jagadhri in the State of Punjab. On different dates prior to April 3, 1958, they entered into contracts of purchase of copper with importers at Bombay and Calcutta, Before, however, they could take delivery from the importers the Government of India issued on 2-4-1958, an order called the "Non-ferrous Metal Control Order, 1958" hereafter referred to as "the order" in exercise of its powers under S. 3 of the Essential Commodities Act (Act X of 1955) - referred to hereafter as "the Act". In this order "non-ferrous metal" was defined to mean "imported copper; lead, tin and zinc in any of the forms specified in the Schedule of the order." The Order was from the very beginning made applicable to imported copper. The price was controlled by Cl.3 of the Order which provides in its first sub-clause that
"no person shall sell or offer to sell any non-ferrous metal at a price which exceeds the amount represented by an addition of 3 1/2 p. c. to its landed cost,"
and in its second sub-clause that
"no person shall purchase offer to purchase from any person non-ferrous metal at a price higher than at which it is permissible for that other person to sell to him under sub-Cl. (i)."
Clause 4 is designed to regulate the acquisition of non-ferrous metal by permit only and provides that
"no person shall acquire or agree to acquire any non-ferrous metal except under and in accordance with a permit issued in this behalf by the Controller in accordance with such principles as the Central Government may from time to time specify."
Clauses 5 and 6 of the Order made it obligatory on the importers to notify quantities of non-ferrous metal imported and to maintain certain books of account, while the last clause i.e., Cl. 7 confers powers on the Controller to enter and search any premises in order to inspect any book or document and to seize any non-ferrous metal in certain circumstances. This Order was published in the Gazette of India on 2-4-1958. No principles specified by the Central Government in accordance with Cl. 4 of the Order were however published either on this date or any other date. Certain principles were however specified by the Central Government in a communication addressed by the Deputy Secretary to the Government of India dated 18-4-1959, to the chief Industrial Adviser to the Government of India, New Delhi. The relevant portion of this communication is in these words:
"The following principles shall govern the issue of permits by the Controller :
(1) In respect of the scheduled industries under the Control of the Development Wing, the Controller will determine the 6 monthly requirements of actual users based on their production in the year 1956;
(2) In the case of small scale industries the Chief Controller of Imports and Exports on the certificate of the State Directors of Industries will inform the Controller of the quantities that the units would be entitled to and thereupon the Controller will make such quantities available to these units from time to time,
(3) The Controller shall normally release one month s requirements at a time to the consuming units and the permit shall be valid for a period of two months; but if heavy imports are reported the Controller shall have the discretion to issue stocks in larger quantities."
2. The position immediately on the issue of the Order on 2-4-1958, thus was that no person could buy or sell imported copper at a price above the landed cost plus 3 1/2 p. c. thereof and that no person could acquire or agree to acquire such copper except under a permit issued by the Controller. In issuing such permits the Controller was to be governed by such principles as the Central Government would specify. After the principles were specified in th
