The Chamber of Commerce, Hapur, and Three Others vs The State of Uttar Pradesh and Two Others

Rewritten Version Notice: This is a rewritten version of the original judgment.

Court: Supreme Court of India

Case Number: Petition No. 309 of 1953

Decision Date: 18 October 1954

Coram: Mehar Chand Mahajan, Ghulam Hasan, Natwarlal H. Bhagwati, B. Jagannadhadas, Das

In this matter the petitioner was the Chamber of Commerce, Hapur, together with three other parties, and the respondents were the State of Uttar Pradesh and two additional parties. The case was decided by the Supreme Court of India on 18 October 1954. The bench that heard the appeal consisted of Justices Mehar Chand Mahajan, Ghulam Hasan, Natwarlal H. Bhagwati and B. Jagannadhadas. The official citation for the judgment is 1955 AIR 8 and 1955 SCR (1) 838. The dispute concerned the Uttar Pradesh Food-grains (Futures and Options Prohibition) Orders of 1951 and 1945, which imposed restrictions on dealings in pulses other than gram. Both orders prohibited the entry into futures contracts dealing with such pulses and made the payment or receipt of any margin in connection with those futures punishable offences. Section 9 of the 1951 Order expressly repealed the earlier 1945 Order. The petitioners filed an application under Article 32 of the Constitution, seeking enforcement of their fundamental right under Article 19(1)(g) to carry on their business. They asked the Court to restrain the State from enforcing the 1951 Order insofar as it related to pulses other than gram and to declare that section 2(a) of the Order, read with items 6, 7, 8 and 9 of its schedule, was illegal and ultra vires the State Government. The Supreme Court, in its judgment dated 15 October 1952, granted that relief and directed the State of Uttar Pradesh to refrain from giving effect to the challenged provisions. Subsequently, on 10 June 1953, the Deputy Commissioner of Food for Uttar Pradesh circulated a letter (Exhibit B to the petition) to all Regional Food Controllers, Deputy Food Controllers and District Magistrates. The letter instructed them to treat all futures in foodgrains mentioned in the schedule of the 1945 Order, including pulses other than gram, as punishable offences. On behalf of the State, it was contended that section 3 of the 1946 Act, which reproduced section 3 of the 1946 Ordinance, conferred extensive powers on the Central Government to control the production, supply, distribution and trade and commerce of essential commodities. The State argued that this power had been delegated to the Provincial Government by a notification dated 21 October 1946 issued under section 4 of the 1946 Ordinance. Furthermore, the State asserted that subsequent amendments effected by two notifications dated 5 March 1947 and 15 November 1947 withdrew the delegated power only with respect to “edible oils and…”

The Court examined two principal contentions advanced on behalf of the State. First, the State argued that the withdrawal of power concerning oil seeds and pulses other than gram applied only to production, supply and distribution of those commodities and did not affect the power to regulate trade and commerce therein; second, the State contended that because the Order of 1951 had been declared ultra vires, the Order of 1945, which had been kept in force by section 5 of the Ordinance of 1946 and subsequently by section 17 of the Act of 1946, remained operative. The Court rejected both submissions. It held that the Order of 1945 had lost its effect with respect to price, production, distribution and movement of the commodities, and therefore it could not in any manner continue to regulate or control trade or commerce in those items. Moreover, the two notifications issued in 1947 had effectively superseded the Order of 1946 insofar as that Order attempted to regulate or control the price, production, distribution, movement or trade and commerce in edible oils, oil seeds and pulses other than gram. Regarding the second contention, the Court observed that the Order of 1951 had not been declared ultra vires and invalid in its entirety by the Supreme Court judgment dated 15 May 1952. The earlier judgment had struck down only the portion of the 1951 Order that attempted to restrict dealings in edible oils, oil seeds and pulses other than gram. The remaining provisions of the 1951 Order, particularly section 9, which effected the withdrawal of the 1945 Order, were left untouched by that judgment.

The Court expressed strong disapproval of the conduct of the officers of the State of Uttar Pradesh, characterising their attempt to evade the Supreme Court’s decision as wholly unwarranted and based on a flimsy pretext. It observed that the State’s arguments should have been presented before the Supreme Court at the time of the 15 May 1952 judgment, or the matter should have been referred to the Supreme Court for review should a review have been permissible. The judgment proceeded to note the original jurisdiction of the petition, identified as Petition No. 309 of 1953 filed under article 32 of the Constitution for the enforcement of fundamental rights, and listed the counsel appearing for the petitioners and respondents. The judgment, delivered on 18 October 1954 by Justice DAS, recounted that the petitioners – the Chamber of Commerce, Hapur, and three individual persons – sought a writ of mandamus directing the State of Uttar Pradesh and two of its Food Department officers to refrain from enforcing the Uttar Pradesh Food Grains (Futures and Options Prohibition) Order of 1945, or any related orders or directions contained in the letters annexed to the petition as exhibits B and D. The Court then set out to briefly state the facts and circumstances leading to the application, noting that the Chamber of Commerce, Hapur, was a company incorporated under the Indian Companies Act.

With its registered office situated in Hapur, the Chamber of Commerce comprises roughly two hundred members, among whom the petitioners numbered two to four are included. Petitioner number three is also a resident of the Chamber, and petitioner number two serves as a member of its Executive Committee. The members of the Chamber engage in the trade of food grains, including pulses, both on a spot (ready) basis and on a forward basis. In its capacity as a clearing agent, the Chamber collects a commission and guarantees the performance of forward contracts entered into by its members, provided that the members pay the required margin money in accordance with the applicable rules. On or about 1 September 1945, the Government of Uttar Pradesh, exercising the authority granted by rule 81(2) of the Defence of India Rules, issued Notification No. 8071/c.s. which promulgated the United Provinces Food Grains (Futures and Options Prohibition) Order, 1945, hereinafter referred to as “the 1945 Order”. Section 2(a) of that Order defined the term “foodgrains” to mean any of the foodgrains enumerated in the schedule annexed to the Order. The schedule listed arhar, peas, urd and moong as items 6, 7, 8 and 9 respectively. Section 3 of the Order stated: “3. No person shall- (a) enter into any futures in foodgrains or pay or receive or agree to pay or receive any margin relating to any such futures; (b) enter into any options in foodgrains.” The Defence of India Rules ceased to have effect on 30 September 1946, and consequently every order made under those rules was also slated to expire on that same date. Nevertheless, on 1 October 1946, the Essential Supplies (Temporary Powers) Ordinance, 1946, hereinafter called “the 1946 Ordinance”, came into force. The Ordinance had been promulgated by the Governor-General and was published in the Gazette of India on 25 September 1946. Section 3 of the Ordinance endowed the Central Government with extensive powers to control the production, supply, distribution, and the trade and commerce of essential commodities as defined in section 2(a) of the Ordinance. Section 4 authorized the Central Government to issue a notified order whereby the power to make orders under section 3 could, with respect to the matters specified therein and subject to any conditions laid down in the direction, also be exercised by a subordinate officer, by a Provincial Government, or by any officer of that Province as may be designated in the direction. Section 5 of the Ordinance provided as follows: “5. Continuance in force of existing orders. Until other provisions are made under this Ordinance, any order, whether notified or not, made by any authority under rule 80-B, or sub-rule (2) or sub-rule (3) of rule 81 of the Defence of India Rules, concerning any matter specified in section 3, which was in force immediately before the commencement of this Ordinance shall, notwithstanding the expiration of the said rules, continue in force so far as it is consistent with this Ordinance and shall be deemed to be an order made under section 3; and all appointments made, licences or permits granted and directions issued under any such order and in force immediately before such commencement shall continue in force and be treated as having been made, granted or issued pursuant to this Ordinance.”

In this case, the Court noted that the provision stating that all appointments, licences, permits and directions made under an order would continue in force and be deemed to be made, granted or issued in pursuance of the Ordinance applied to the 1945 Order, which therefore remained effective until the 1946 Ordinance introduced new provisions. Acting under the authority granted by section 4 of the 1946 Ordinance, the Government of India on 21 October 1946 issued Notification No. C.G.603(2)-III(1), directing that the powers conferred by section 3(1) of that Ordinance with respect to foodstuffs could also be exercised by any Provincial Government, subject to conditions specified in the Notification. Subsequently, in November 1946, Parliament passed the Essential Supplies (Temporary Powers) Act, 1946 (referred to as “the Act”). Section 3 of the Act reproduced section 3 of the 1946 Ordinance with only immaterial modifications, and section 4 of the Act corresponded to section 4 of the Ordinance. Section 17 of the Act contained a repeal and savings clause, which read in part: “(1) The Essential Supplies (Temporary Powers) Ordinance, 1946 (XVIII of 1946), is hereby repealed. (2) Any order made or deemed to be made under the said Ordinance and in force immediately before the commencement of this Act shall continue in force and be deemed to be an order made under this Act; and all appointments made, licences or permits granted and directions issued under any such order and in force immediately before such commencement shall likewise continue in force and be deemed to be made, granted or issued in pursuance of this Act.” Exercising the powers under section 4 of the Act, the Central Government issued Notification No. C.G.603(2)-III(1) on 5 March 1947, amending the earlier Notification No. PY 603(2)-I of 21 October 1946 by inserting after the word “foodstuff” the words “including cocoanut oil but excluding other edible oils and oilseeds.” This amendment effectively removed “edible oils and oilseeds” from the scope of the delegated authority, meaning that the Provincial Government could no longer issue any order regulating the production, supply, distribution, trade or commerce of such items. On the same day, the Central Government issued another Notification, No. C.G.603(2)-III(2), under the authority of section 3 of the Act, stipulating that no order made or deemed to be made by a Provincial Government under the Act would, from that date, have the effect of prohibiting or restricting the movement of edible oilseeds or oils other than cocoanut oil from one place in a Province to any other place within or outside the Province, nor of regulating or controlling the price, production or distribution of those commodities. Consequently, the 1945 Order lost its capability to affect the movement, price, production or distribution of edible oilseeds or oils other than cocoanut oil.

In this matter the Court recorded that the Central Government had issued two notifications on 15 November 1947 which altered the scope of the powers previously delegated to Provincial Governments under the 1945 Order. The first notification, identified as Notification No. PY. 603(2)-VI(1) and made pursuant to section 4 of the Act, amended the earlier Notification No. PY. 603(2)-1 dated 21 October 1946 by inserting the words “and pulses other than gram” immediately after the term “oil-seeds”. By this insertion the amendment expressly excluded “pulses other than gram” from the operation of the delegated authority, so that the power previously vested in the Provinces to control the production, supply, distribution, trade or commerce in edible oils and oilseeds was also withdrawn with respect to pulses other than gram. Simultaneously, the second notification, labelled Notification No. PY. 603(2)-VI(2) and issued on the same day under section 3 of the Act, directed that no order made or deemed to be made by a Provincial Government under the Act should, from that date forward, prohibit or restrict the movement of pulses other than gram from any place in a Province to any other place within or outside the Province, nor should it regulate or control the price, production or distribution of those pulses in any manner. As a result of this second directive, the 1945 Order ceased to have effect insofar as it sought to prohibit or restrict the movement of pulses other than gram or to regulate or control their price, production or distribution. Subsequently, the State of Uttar Pradesh promulgated the Uttar Pradesh Foodgrains (Futures and Options Prohibition) Order, 1951 on 20 September 1951. Section 2(a) of that Order defined the term “foodgrains” to mean any of the items enumerated in the schedule annexed to the Order. The schedule listed arhar, peas, urd and moong as items numbers 6, 7, 8 and 9 respectively. Section 3 of the Order imposed a comprehensive prohibition, providing that no person shall (a) enter into any “futures in foodgrains” or pay or receive any margin in connection with such futures, or (b) enter into any options in foodgrains. Section 8 declared that any contravention of any provision of the Order, or of any order issued under its authority, would be punishable under sections 7 and 7-A of the 1946 Act. Furthermore, section 9 expressly withdrew the 1945 Order. By virtue of these provisions, the Uttar Pradesh Order directly criminalised the act of entering into futures contracts or options concerning the listed pulses, including arhar, peas, urd and moong, and made the receipt or payment of any margin in respect of such contracts a punishable offence. Members of the Chamber of Commerce, Hapur, including the present petitioners numbered 2 to 4, on 29 October 1951.

On the twenty-ninth day of October, 1951, certain members of the Chamber of Commerce of Hapur, who were identified in the petition as respondents numbered two to four, filed an application before the Supreme Court invoking article 32 of the Constitution. Their application sought enforcement of the guarantee of their fundamental right under article 19 (1) (g), which authorises them to carry on any trade, business, or profession. In support of that right they asked the Court to issue a mandamus that would restrain the State of Uttar Pradesh from giving effect to the Uttar Pradesh Foodgrains (Futures and Options Prohibition) Order, 1951, to the extent that the Order concerned pulses other than gram. They further prayed for a declaration that the wording of section 2 (a) of that Order – which read “with items 6, 7, 8 and 9 of the schedule thereto” – was illegal and beyond the legislative powers, that is, ultra vires, of the State Government.

The Supreme Court granted the relief sought. It declared the portion of the 1951 Notification that dealt with arhar, peas, urd and moong to be invalid, and it directed the State of Uttar Pradesh to refrain from implementing that part of the Order. The judgment delivered on the fifteenth day of May, 1952 made clear that the principal point of dispute was minimal. It observed that the amendments discussed earlier had the effect of altering the power that had originally been delegated to the Provincial Government by Notification No. PY-603(1)-I, dated twenty-first October, 1946. Specifically, the amendment removed from the scope of the delegation the authority to control and regulate trade in pulses other than gram.

Subsequently, on the tenth day of June, 1953, the Deputy Commissioner of Food for Uttar Pradesh issued a circular, marked as Exhibit B to the petition, addressed to all Regional Food Controllers, Deputy Regional Food Controllers and District Magistrates throughout the State. The circular instructed these officials to treat any futures contracts involving the foodgrains listed in the schedule to the 1945 Order – including pulses other than gram – as punishable offences. The basis given for this instruction was that, since the 1951 Order had been held ultra vires by the Court’s decision of 15 May 1952, it could no longer be enforced, and consequently the earlier 1945 Order was deemed to continue in operation. A copy of this circular was also transmitted to the Chamber of Commerce, Hapur, for its information and guidance.

In response, the Chamber sent a letter dated the twenty-fifth day of June, 1953, pointing out that the 1945 Order had been expressly withdrawn by section 9 of the 1951 Order. Because that particular section of the 1951 Order had not been struck down as ultra vires by the Supreme Court, the Chamber argued that the 1945 Order could not be said to remain in force.

Later, on the seventeenth day of September, 1953, the Regional Food Controller of Uttar Pradesh addressed a further communication, identified as Exhibit D, to the President of the Chamber of Commerce, Hapur. In that letter the Controller demanded that the Chamber immediately cease all future transactions involving any of the foodgrains enumerated in the schedule to the 1945 Order, where such transactions envisaged delivery within the State of Uttar Pradesh. The letter warned that the Chamber would face legal action if it failed to comply. This threat of enforcement action formed the immediate impetus for the present petition, in which the Chamber sought the reliefs previously described.

The counsel appearing for the State attempted to justify the State’s position on two principal grounds. The first ground asserted that section 3 of the 1946 Act, which reproduced the provisions of the 1946 Ordinance with certain modifications, conferred extensive powers on the Central Government to control the production, supply, distribution and trade of essential commodities. The counsel argued that these powers had been lawfully delegated to the Provincial Governments by Notification No. PY-603(2)-1, dated twenty-first October, 1946, under section 4 of the 1946 Ordinance. Further amendments issued by Notification No. C.G.-603(2)-III(1) on the fifth of March, 1947, and Notification No. PY-603(2)-VI(1) on the fifteenth of November, 1947, had withdrawn the delegated authority only with respect to the production, supply and distribution of edible oils, oilseeds and pulses other than gram, while leaving the authority over trade and commerce in those commodities untouched. The second ground asserted that, because the 1951 Order had been struck down as ultra vires, the 1945 Order – which had originally been continued by section 5 of the 1946 Ordinance and later by section 17 of the Act – remained fully operative. The Court, however, found that neither of these contentions possessed any substantive merit.

The Court observed that section 3 of the 1946 Ordinance, with certain modifications, gave the Central Government extensive authority to control the production, supply, distribution and trade of essential commodities. This authority was delegated to the Provincial Governments by Notification No PY.603(2)-1 dated 21 October 1946, issued under section 4 of the same Ordinance. The Court then noted that later amendments were made by Notification C.G.603(2)-III(1) of 5 March 1947 and Notification PY.603(2)-VI(1) of 15 November 1947. These later notifications withdrew the delegated power only with respect to “edible oils and oilseeds and pulses other than gram,” and the withdrawal applied solely to the production, supply and distribution of those commodities, not to their trade and commerce. The State had also advanced a second argument, contending that because the 1951 Order had been held ultra vires the 1945 Order, and because the 1945 Order had been continued first by section 5 of the 1946 Ordinance and then by section 17 of the Act, the 1945 Order remained fully effective. The Court rejected both contentions as lacking substance. It reiterated that two notifications were published on 5 March 1947 and two on 15 November 1947. By Notification C.G.603(2)-III(1) and Notification PY.603(2)-VI(1) the earlier Notification No 603(2)-I of 21 October 1946 was amended to insert the terms “edible oils and oilseeds” and “pulses other than gram,” thereby excluding those commodities from the scope of the delegation. Consequently, from the dates of those amending notifications onward, the Provincial Governments could not issue any order controlling the production, supply, distribution or trade of those commodities. The Court further explained that at the same time two additional notifications—Notification C.G.603(2)-III(2) of 5 March 1947 and Notification PY.603(2)-VI(2) of 15 November 1947—directed that no order made under the Act by a Provincial Government should prohibit or restrict the movement of edible oils, oilseeds and pulses other than gram, nor regulate or control their price, production or distribution. The combined effect of these notifications caused the 1945 Order to lose its power to prohibit or restrict movement, or to regulate price, production or distribution of those commodities. As the 1945 Order no longer affected price, production, distribution or movement, the Court found it implausible that it could still regulate trade or commerce in those commodities, since such regulation presupposes control over the other aspects as well.

In this case, the Court observed that any commodity could not be brought under control unless the price, production, distribution and movement of that commodity could also be brought under control. Accordingly, the Court held that, contrary to the State’s submissions, the two Notifications issued in 1947 effectively superseded the 1945 Order to the extent that the latter attempted to regulate or control the price, production, distribution, movement, trade or commerce of edible oils, oilseeds and pulses other than gram. The Court then turned to the second branch of the State’s argument and described it as equally untenable. It stated that it was wholly incorrect to claim that the judgment delivered on 15 May 1952 had declared the Uttar Pradesh Foodgrains (Futures and Options Prohibition) Order, 1951, to be ultra vires and invalid in its entirety. The Court clarified that the 1952 judgment had struck down only those provisions of the 1951 Order that imposed restrictions on dealings in edible oils, oilseeds and pulses other than gram, and that the remainder of the 1951 Order, including section 9 which effected the withdrawal of the 1945 Order, remained fully effective. The Court found it difficult to understand how, in the present circumstances, the 1945 Order could be said to have been revived by the 1952 judgment with respect to edible oils, oilseeds and pulses other than gram, especially when section 9 of the 1951 Order expressly withdrew the 1945 Order and continued to operate. After examining both strands of the State’s contentions, the Court concluded that no substance existed in either argument and that the present application therefore succeeded. Consequently, the Court granted the reliefs sought in prayers (a), (b), (c) and (d) of the petition. Before closing, the Court expressed strong disapproval of the attitude adopted by the officers of the State of Uttar Pradesh. It noted that, had the State’s contentions possessed any merit, they should have been raised before the Court at the earlier stage, because a well-founded argument would have resolved the application entirely. The Court added that, if the State’s contentions had been discovered only later, the proper course would have been to approach the Court for a review, provided that a review was permissible. Instead, the Court observed, the State officers chose to circumvent the prior judgment on a flimsy pretext, attempting covertly to challenge the correctness of the decision on a plea that lacked even apparent plausibility. The Court warned that such conduct approached contempt of the Court and declared that it regarded the attempt to evade the earlier judgment with great disfavour.