Bhatnagars And Co. Ltd vs The Union Of India

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

Court: Supreme Court of India

Case Number: Petitions Nos. 377 of 1955, 42 of 1956, 46 of 1956, 164 of 1956, 423 of 1956

Decision Date: 21 February, 1957

Coram: P.B. Gajendragadkar, Bhuvneshwar P. Sinha, S.K. Das

The petitioner, Bhatnagars and Co. Ltd., obtained a licence to import soda ash during the free‑licencing period of 1952. Under that licence several consignments of soda ash arrived at Bombay. Customs authorities, suspecting that the petitioner was trafficking in his licence, investigated and discovered that two of the consignments had in fact been imported by another party; consequently those consignments were confiscated. The petitioner appealed the confiscation first to the Central Board of Revenue and subsequently to the Government of India, but obtained no relief. The Collector of Customs then ordered that the seized goods be auctioned. In response, the petitioner filed five separate petitions in this Court under article 32 of the Constitution of India, seeking the issuance of appropriate writs to set aside both the confiscation of the goods and the seizure of the licence. The petitioner contended that the Imports and Exports (Control) Act, 1947, having not reenacted rule 84(2) of the Defence of India Rules, did not apply to soda ash and therefore no licence was required for its import. In the alternative, the petitioner argued that the legislation authorising the issue of licences amounted to delegated legislation and was consequently invalid. Further, the petitioner relied upon a Policy Statement issued by the Government in a Press Note dated February 1955 and a Public Notice dated 30 June 1956, asserting that these created a monopoly which infringed the petitioner’s fundamental right to carry on trade and business. Finally, the petitioner sought to have the licence, which he claimed had been improperly invalidated, reinstated for the unexpired period of its term.

The Court held that all of the petitioner’s contentions must fail and accordingly dismissed the petitions. The Court explained that the language of section 3(1)(a) of the Imports and Exports (Control) Act, 1947, made it abundantly clear that the provision was intended to apply to the import of every good of the description covered by rule 84(2) of the Defence of India Rules, including soda ash, rendering any reenactment of that rule unnecessary. The provision was required to be read disjunctively and distributively, and it was unreasonable to suggest that the words “import” and “export” could be qualified by expressions such as “carriage coastwise” or “shipment as ships’ stores” appearing elsewhere in the section. The Court further observed that the Act could not be held ultra vires on the ground of delegated legislation because its preamble and the relevant sections, together with the corresponding provisions of the Defence of India Act which it continued, clearly indicated the legislative policy and the principles to guide the authorities entrusted with its implementation. The purpose of the Act was identified as the maintenance of essential supplies to the community, and the Government retained the authority to modify its import‑export policy in response to the changing needs of the country.

The Court held that the expression in section three, sub‑section one, clause (a) of the Imports and Exports (Control) Act, 1947 must be read in a disjunctive and distributive manner, and it was wholly unreasonable to contend that the terms “import” and “export” could be qualified by the phrases “carriage coastwise” or “shipment as ships’ stores” that appear in the same provision. The Court further observed that the section could not be declared ultra vires on the basis of delegated legislation because the preamble and the relevant provisions of the Act, as well as those of the Defence of India Act which the statute was intended to continue, plainly demonstrate that the Legislature had unmistakably set out the policy and the guiding principles for the officials charged with implementing the legislation. The purpose of the Act, as indicated, was to ensure the maintenance of essential supplies for the community. In support of this reasoning, the Court referred to the decision in Harishankar Bagla v. State of Madhya Pradesh, (1955) I S.C.R. 380, and also cited Pannalal Binjraj v. Union of India, (1957) S.C.R. 233. The Court further stated that it was entirely within the power of the Government of India to modify its import‑export policy in order to meet the changing needs of the nation, and that where importers were found to be engaging in malpractices that caused price instability, the Government had a duty to intervene, to regulate distribution, and, if necessary, to do so with the assistance of importer‑stockists operating under its general supervision. No exception could be permitted to the policy on the ground that it created a monopoly or infringed the fundamental right to carry on trade or business. In the present matter, the goods had been lawfully confiscated by the Sea Customs Authorities following an investigation in which they were competent, and consequently the petitioner could not, under article 32 of the Constitution, challenge the conclusions of that investigation on the basis that they were not properly drawn. Therefore, no question of re‑validation of the petitioner’s licence arose. The judgment further recorded the original jurisdiction of the petitions: petitions numbered 377 of 1955 and 42, 46, 164 and 423 of 1956, filed under article 32 of the Constitution for enforcement of fundamental rights. The petitioner appeared in person in petitions 377 of 1955 and 164 and 423 of 1956, while counsel represented the petitioner in petitions 42 and 46 of 1956. The Solicitor‑General of India, assisted by counsel, represented the respondents in petitions 42, 46 and 423 of 1956, and also in petitions 377 of 1955 and 164 of 1956. The judgment dated 21 February 1957 was delivered by Justice Gajendragadkar, who noted that the group of five petitions was filed by the petitioners Messrs Bhatnagars & Co. Private Ltd. The petitioners, represented by the managing director, sought appropriate writs from the Court in respect of orders passed by the Sea Customs Authorities against them.

In these petitions the petitioner claimed that, with respect to the licences that had been issued to him for importing soda ash, the appropriate authorities had not treated him fairly and that, since the impugned orders were passed, he had approached the High Court of Punjab and this Court by means of several constitutional petitions. The Court observed that the petitions displayed obvious signs of poor drafting; they were excessively diffuse and frequently incoherent. The statements of fact were not presented in a logical or chronological order, leading to complete confusion in the narration of the petitioner’s claim. Moreover, the petitions contained references to facts that were both irrelevant and immaterial, and the petitioner often failed to restrain himself from making unjustified and irrelevant suggestions against the authorities. Because of this lack of clarity, the Court found it difficult to discern exactly what grievance the petitioner was asserting and which specific writ he was seeking from the Court. Nevertheless, since the petitions purported to invoke the jurisdiction of this Court substantially under Article 32 of the Constitution, the Court deemed it necessary to address the material points in order to dispose of them.

The petitions numbered 423 and 164 of 1956 and petition 377 of 1955 were argued personally by the petitioner, while petitions numbered 42 and 46 of 1956 were presented by counsel on his behalf. The Court noted that the essential material facts were very few and fell within a narrow scope. It appeared that the petitioner had obtained a licence for the import of soda ash having a nominal value of about Rs 50,00,000 during the free‑licensing period of 1952. Relying on this licence, consignments of soda ash amounting to 100 tons, 200 tons and 20 tons respectively were received at Bombay. During this period the Customs Authorities received information that, although the petitioner held a licence in his own name for imports valued at Rs 50,00,000, his actual capital did not exceed Rs 15,000 and that he was allegedly trafficking in such licences. Following this report an investigation was launched and the matter was placed under the charge of the Special Police Establishment.

During the course of the investigation certain documents were seized from the petitioner’s office and from the office of Messrs N. Jivanlal & Co. at Bombay. The investigation confirmed the allegation that the petitioner was trafficking in licences. It emerged that the business carried on by Messrs N. Jivanlal & Co. exercised a free hand in dealing with the petitioner’s licences and that the petitioner received only a commission for the imports that were allowed to be made in the name of Messrs Bhatnagars & Co. Ltd. Regarding the two consignments of 100 tons and 20 tons of soda ash, inspection of the documents showed that they had been imported by Messrs N. Jivanlal & Co., which did not hold any licence, and consequently the consignments were seized by the Collector of Customs.

During the examination of the records it was discovered that the two consignments of soda ash, one of one hundred tons and the other of twenty tons, had been imported by Messrs N. Jivanlal & Co. Because Messrs N. Jivanlal & Co. did not possess a licence, the Collector of Customs seized both consignments. The offices of the petitioner and of Messrs N. Jivanlal & Co. were raided as part of the investigation on 7 November 1952 and 6 February 1953 respectively. The goods arrived in Bombay during March and April 1953 and were subsequently confiscated by the Collector of Customs in May and June 1953. After the seizure, the documents that had been taken, including the licences, were returned to the petitioner. The petitioner challenged the confiscation by filing an appeal before the Central Board of Revenue, but that appeal was dismissed. He then approached the Central Government for relief; however, on 22 September 1955 the Government declined to intervene. On 31 March 1956 the Collector of Customs issued an order directing that the seized goods be auctioned. When this order was issued, the petitioner instituted several petitions before this Court. He obtained an interim order staying the auction, but that stay was later set aside. These events constitute the factual background of the present petitions.

In total the petitioner presented five separate petitions. All of them centre on his objection to the confiscation of the soda ash consignments and to the seizure of his import licences by the investigating authorities. Although each petition is framed in a slightly different manner and the specific relief sought varies, the core request in each case is for the Court to grant relief against what the petitioner alleges to be an illegal seizure of the goods and a de facto nullification of his licences. The period during which the licences could have been used has now expired, and in one of the petitions the petitioner asks the Court to direct the Government to re‑validate the licences so that he may import the material within the remaining unexpired period. While it would have been possible to resolve all the petitions together, the Court has decided to consider each petition individually. Petition No. 423 of 1956 is particularly distinct because, besides reiterating the factual background, the petitioner primarily seeks a declaration that the Union of India and other respondents have committed contempt of the Court and that appropriate action should be taken against them.

In the earlier proceeding, the petitioner had filed a similar petition, numbered 571 of 1954, concerning one of the three consignments that were the subject of the present dispute. That petition was slated for hearing before this Court on 24 March 1955, and the petitioner was represented by Shri K. R. Chaudhury. In the order that followed, the learned Solicitor‑General of India informed the Court that the goods seized by the Customs Authorities would not be sold or otherwise dealt with for a period of one month from the date the petitioner received notice of the final order that the Central Government might issue in response to the petitioner's revisional petition before them. Acting on that statement, the Court granted the petitioner a period of one month, measured from the date he was communicated the final order of the Central Government, within which he could file a petition for Special Leave to appeal, if he so chose. The order also recorded the undertaking given by the Solicitor‑General. Subject to that order, the petition was dismissed, though no order as to costs was made. It is undisputed that for several months thereafter the revisional petition that the petitioner had presented to the Central Government remained undecided, and it was eventually dismissed. The petitioner appears to have been under the impression that the Solicitor‑General, on behalf of the Central Government, had promised that his revisional petition would be disposed of within a very short period—perhaps a day or two—and that the failure to meet that alleged time frame constituted contempt of the Court by all the respondents.

The Court observed that the petitioner’s grievance and his prayer for a writ of contempt were wholly misplaced. The petitioner was mistaken in assuming that any undertaking had been given by the Union of India that his revisional petition would be decided within a day or two. The Solicitor‑General had merely expressed a hope that the Central Government would handle the revisional petition at an early date; that hope was distinct from the specific undertaking that was incorporated into the Court’s order. The petitioner also seemed to believe that the Court’s order required the Central Government to dispose of the revisional petition within a month, an assumption that the Court found to be without basis. In fact, the one‑month period mentioned in the order related solely to the time allotted to the petitioner to apply to this Court for Special Leave after the Central Government’s decision on his revisional petition had been communicated to him. Consequently, the alleged breach of any undertaking could not be said to have occurred, and there was no ground for a finding of contempt.

The Court explained that when the Central Government decided against the petitioner, the petitioner was allotted a period of one month within which he could apply to this Court for Special Leave. During that one‑month period, the Union of India undertook not to deal with, or dispose of, the petitioner’s property. The Court found the order to be clear and unambiguous, leaving no room for any misunderstanding. Because no specific undertaking, as the petitioner claimed, was ever given, the Court held that no contempt could arise on the basis of alleged non‑compliance with such an undertaking. The Court further observed that the petitioner had not examined which individual or entity the Union of India represented as Respondent No. 1 in his petition, nor had he considered how any of the other respondents might be liable for contempt. Consequently, the Court stated that the petitioner’s request for a writ concerning the alleged contempt was wholly unjustified and, in the Court’s view, entirely irresponsible. Since this was the sole ground raised by the petitioner, the Court concluded that the petition could not succeed and ordered that it be dismissed with costs.

Regarding Petition No. 164 of 1956, the Court noted that the petitioner’s grievance concerned a policy statement issued by the Government in a Press Note dated 3 February 1955 and a Public Notice No. 25‑ITC (PN)/56 dated 30 June 1956. The petitioner argued that the policy set out in those documents created a monopoly, and he sought writs from this Court to terminate that monopoly and to protect his fundamental right to carry on his trade and business. The Court found this petition to be entirely misconceived and devoid of substantive merit. The Court emphasized that, in contemporary democratic states, export‑and‑import policy must remain flexible in order to meet the country’s needs, foreign‑exchange considerations, protection of national industries, and other relevant factors. Accordingly, the Central Government must periodically review and adjust the rules governing export and import. The Court warned against the notion of an unfettered, unrestricted freedom of export and import or a rigid, unchanging policy. In light of this principle, the Court turned to the specific policy statement in the Press Note. Although the Press Note addressed several commodities, the Court focused on the provision relating to light soda ash, wherein the Government declared that imports of light soda ash should be channelled through designated importer‑stockists.

The Government observed that, in order to avoid price and supply fluctuations that consumers had recently endured, the importer‑stockists would be required to maintain buffer stocks and to sell the commodity in a manner that stabilized the market. It further recognized that, without a system of canalised distribution, consumers remained dependent on the importers and that delivering the commodity uniformly to all regions where it was needed proved difficult. Consequently, the Government resolved to organise the distribution of light soda ash with the assistance of two selling organisations, namely Messrs Tata Oil Mills Co. Ltd. and Messrs I.C.I. (India) Ltd. These two firms agreed to procure soda ash from suppliers selected on the basis of offers invited by a public notice issued on the same day as the Press Note. The Press Note thereafter stipulated that the imported soda ash would be stocked at convenient centres and sold in accordance with general directions that the Government might issue from time to time. The sale price would be fixed by the Government on a port‑basis, and the importer‑stockists would receive remuneration for their services at a rate of 12 1/2 percent of the landed cost. Any additional profit arising from the transaction would be transferred to the Government.

The public notice issued concurrently set out the relevant particulars concerning the import of soda ash and other commodities and invited tenders. Clause 4 of the notice provided that the offerer whose bid was accepted by the Chief Controller of Imports would be required to enter into a contract of sale within ten days of acceptance, with the importer‑distributor selected by the Government for that purpose. The Chief Controller retained discretion to reject any offer without assigning a reason. Subject to the terms and conditions specified in the notice, once a contract was concluded, an import licence for the contracted quantity would be issued to the buyer, subject to conditions that the Government might impose. Historically, before 1953, import licences were granted freely. From 1953 onward, licences were issued to established importers subject to certain conditions, and the Government also determined the total quantity of the commodity to be imported. The extent of each applicant’s business during the prescribed period was taken into account, and the total import quota was distributed pro rata among the applicants. When this method proved unsatisfactory, the Government introduced canalised distribution while still inviting tenders for import licences, which were then granted to several claimants.

In this case, the Court observed that although Tata Oil Mills Co. Ltd. and the Imperial Chemical Industries were among the applicants for import licences, their presence did not create a legal monopoly in the import of the commodity. The Court noted that competitors might have found it difficult to contend with these two large firms, but that difficulty was not equivalent to the Government having established a monopoly through the canalisation method. The Court further emphasized that the petitioner was not an established importer; he had obtained a licence only during the period when licences were granted freely. Consequently, the Court found it difficult to accept the petitioner’s claim that a monopoly had been created which deprived him of his fundamental right to conduct his trade.

The Court explained that the Government had discovered that importers of soda ash were engaged in malpractices that caused speculation and volatile price fluctuations. In view of these circumstances and the national interest, the Government was justified in intervening and regulating the distribution of the commodity, which it did through the policy statement that the petitioner contested. The Court held that the petitioner’s argument that the alleged monopoly infringed his right to carry on trade was untenable because, in substance, no monopoly had been established. Accordingly, the petition was deemed misconceived, dismissed, and the petitioner ordered to pay costs.

Petition No. 377 of 1955 was filed broadly against the orders of confiscation and sale issued by the relevant authorities, and the petitioner sought a writ directing those authorities to refrain from implementing the orders. The Court recalled the material facts concerning the confiscation of two consignments of soda ash, one of one hundred tons and another of twenty tons, which gave rise to the present proceedings. An order dated 3 May 1954, issued by the Controller of Imports and Exports for the Chief Controller of Imports and Exports, informed the petitioner that the Chief Controller had decided not to grant any licence or customs clearance permit for the licensing period ending in July 1953. The petitioner was told that his applications for the licensing period of January to June 1954 would be considered in the normal course according to the policy contained in the Red Book.

The order further stated that re‑validation of the licences listed in Annexure A to the petitioner’s advocate’s letter of 20 April 1954 could not be permitted, and therefore those licences were returned to the petitioner. The petitioner complained that this portion of the order caused his grievance and formed the basis of the present petition. He argued that, since he had been granted licences that were to remain in force for one year from 13 February 1952, the seizure of those licences and the unauthorized confiscation of the consignments were illegal. The Court noted the petitioner’s contention and proceeded to consider the validity of his claim.

The Court observed that the seizure of the consignments in question had caused the petitioner considerable prejudice. It noted that the return of the licences was of little consolation because the period for which the licences were valid had already elapsed. Consequently, the petitioner sought revalidation of the licences so that the period during which he could operate under them would be suitably extended. The Court acknowledged that the authorities, if inclined, could have chosen to revalidate the licences in that manner, but it found it difficult to see how the petitioner could invoke the jurisdiction of this Court under article 32 of the Constitution to obtain such relief. The Court declined to discuss the matter at length, stating that the legal position was abundantly clear. It recorded that the authorities had concluded, after inquiry, that although the licences were obtained in the petitioner’s name, the petitioner had been trafficking in those licences and that the consignments had been ordered by another party, Messrs N. Jivanlal & Co., which did not hold a licence for the import of soda ash. As a result, the consignments received by that party were liable to be confiscated. The Court held that if the petitioner’s grievance was that the view taken by the appropriate authorities was erroneous, such a grievance could not be legitimately raised in a petition under article 32. The Court noted, in line with the suggestion of the learned Solicitor‑General, that the petitioner might have a remedy by a suit for damages, but that avenue was not before this Court. Since the goods had been seized in accordance with law and on the basis of findings recorded by authorities competent to conduct an enquiry under the Sea Customs Act, the Court could not be asked to direct those authorities to exercise discretion in the petitioner’s favour and to grant the licences a further lease of life. Essentially, the petitioner’s grievance concerned the factual conclusions reached by the authorities, and those conclusions could not be challenged in the present writ petition. Accordingly, the petition failed and was dismissed with costs. The Court then turned to two further petitions filed by the petitioner, identified as Petitions Nos. 42 of 1956 and 46 of 1956, which had been argued before it by counsel for the petitioner. Counsel raised three points: first, that the Import‑Export Act did not apply to soda ash and that every citizen had the right to import and export that commodity without a licence; second, that the legislation authorising the issue of licences amounted to delegated legislation and was therefore invalid; and third, that the authorities’ conclusion that the petitioner was trafficking in licences was based on no legal evidence and should be reversed, the petitioner having obtained the licences bona‑fide for personal use, making the confiscation ultra vires.

The petitioner advanced three separate contentions. First, he claimed that the licence scheme was a form of delegated legislation and therefore invalid; consequently, the confiscation of the two consignments would be unlawful and the petitioner would be entitled to a writ. Second, he argued that if the legislation were invalid for the reason just mentioned, the confiscation would likewise be invalid and a writ would follow. Third, the petitioner contended that the authorities’ conclusion that he was trafficking in licences rested on no legal evidence. He urged that this conclusion be set aside, that the licences he had obtained were issued in good faith for his personal use, and that the authorities’ contrary view and the subsequent seizure of the consignments were illegal and ultra vires. The Court indicated that it would address these three points in the order in which they were presented.

The first point relied on the observation that, when the Imports and Exports (Control) Act, 1947 (Act No. XVIII of 1947) was enacted, the provisions contained in rule 84(2) of the Defence of India Rules were omitted. The petitioner’s argument, described as at best ingenious, was that the omission was intentional so as to remove from the operation of the Import Act those articles that would otherwise fall under the omitted rule. Rule 84 of the Defence of India Rules, by sub‑rule (1), defined “import” as bringing goods into British India by sea, land or air, and defined “export” as taking goods out of British India by sea, land or air. Sub‑rule (2) authorised the Central Government, by a notified order, to prohibit or restrict the import or export of any goods or of any specified description, from or to any specified person or class of persons. Sub‑rule (3) further empowered the Central Government, by a notified order, to make provisions for prohibiting, restricting or otherwise controlling, in all cases or in specified classes of cases and subject to any exceptions, the import, export, carriage coastwise or shipment as ships’ stores of goods of any specified description; the shipment of fresh water on seagoing vessels; and the bringing into any port or place in British India of goods of any specified description intended to be taken out of British India without being removed from the ship or conveyance in which they were being carried. The petitioner argued that the import of soda ash could legitimately have been regulated under rule 84(2), but because this sub‑rule was not incorporated into Act XVIII of 1947, every regulation made by the Central Government and every term and condition relating to the grant of licences were ultra vires of the Act. He further noted that Act XVIII of 1947 gave substantially the same meaning to the words “export” and “import” as those definitions contained in the omitted rule.

The operative part of the statute was found in section three, which corresponded exactly to rule eighty‑four, sub‑rule three, of the Defence of India Rules. In order to render his contention plausible, Shri Umrigar attempted to impose a very narrow, artificial and unreasonable limitation on subsection one, clause (a), of section three of Act XVIII of 1947. Before addressing that contention, the Court set out the text of the section for clarity. Section three provided that the Central Government, by means of an order published in the Official Gazette, could make provisions for prohibiting, restricting or otherwise controlling, in all cases or in specified classes of cases, and subject to any exceptions that might be made by or under the order, the following matters: (a) the import, export, carriage coastwise or shipment as ships’ stores of goods of any specified description; and (b) the bringing into any port or place in India of goods of any specified description intended to be taken out of India without being removed from the ship or conveyance in which they were being carried. The section further stated that all goods to which any order under sub‑section (1) applied would be deemed to be goods whose import or export had been prohibited or restricted under section nineteen of the Sea Customs Act, 1878, and that all provisions of that Act would have effect accordingly, except that section one‑eighty‑three of the Sea Customs Act would operate as if the word “shall” were replaced by the word “may”. Finally, subsection three provided that notwithstanding anything else in the Act, the Central Government could, by Gazette order, prohibit, restrict or impose conditions on the clearance, whether for home consumption or for shipment abroad, of any goods or class of goods imported into India. Shri Umrigar argued that subsection one, clause (a), could not apply to the import of soda ash because, in his view, only goods of a specified description that were imported, exported, carried coastwise or shipped as ships’ stores fell within the mischief of the provision. In other words, he interpreted the expressions “carriage coastwise” and “shipment as ships’ stores” as adjectival clauses that qualified the words “import” and “export”. The Court found such a construction wholly unreasonable. It held that the provision must be read disjunctively and distributively, so that the import of goods of any specified description would attract the operation of the provision. Considering the definition of “import” and “export”, it was clear that articles carried coastwise never fell within the category of either import or export. The assumption that the Legislature intended to release all kinds of goods from the application of subsection one, clause (a), was deemed completely inconsistent with the plain and natural meaning of the material clause. Consequently, the Court rejected Shri Umrigar’s argument as untenable.

The Court observed that when the words of the clause were given their ordinary meaning, it was evident that the Legislature, in passing the Act, had considered the provisions of rule 84(2) unnecessary to repeat in the new legislation. The specific matters dealt with in that rule were, in effect, incorporated in section 3(1)(a) of the Act. Consequently, the Court held that the contention that a licence was not required for the import of soda ash, and that therefore every order issued by the competent authorities for the seizure of such consignments was void, could not succeed. The next point raised before the Court was that the material provision was ultra vires because it amounted to delegated legislation. The Court noted that challenges to the validity of statutes on the ground of delegated legislation often present difficult questions. Nonetheless, recent case law had begun to outline certain settled principles. The Court explained that a clear distinction existed between conditional legislation, which is properly termed so, and delegated legislation. It was accepted that when the Legislature enacts a statute, it may lay down the underlying principles and provide guidance for the implementation or enforcement of those principles, while leaving the actual execution to a delegate chosen by the Legislature. The Legislature could, in appropriate circumstances, validly leave to the delegate decisions concerning the timing, duration, or place of implementation of the provision.

Shri Umrigar argued, however, that in the impugned Act the Legislature neither set out any principle nor gave any guidance to the delegate, and that by entrusting the implementation of the statutory provisions entirely to the delegate, the Legislature had relinquished its legislative authority, rendering the enactment invalid. The Court explained that to address this narrow ground of attack, it was necessary to examine the preamble and the operative provisions of the Act to determine whether the Legislature had clearly decided the policy questions and provided guidance to the delegate for effecting the statute. The Court found that Shri Umrigar’s challenge was fully foreclosed by the decision of this Court in Harishankar Bagla v. The State of Madhya Pradesh (1). In that case, sections 3 and 4 of the Essential Supplies (Temporary Powers) Act, 1946, had been challenged on the basis of ultra vires delegated legislation and the challenge had been rejected. While rejecting the argument of delegated legislation, Chief Justice Mahajan, delivering the judgment, acknowledged that “the Legislature must declare the policy of the law and the legal principles which are to control any given cases and must provide a standard to guide the officials or the body in power to execute the law”. He further noted that “the essential legislative function … consists in the determination or choice of the legislative policy and of formally enacting that policy into a binding rule of conduct”. The Court concluded that the Legislature in the impugned Act had indeed laid down a clear principle—namely, the maintenance or increase of supply of essential commodities and their equitable distribution at fair prices—and that this principle offered sufficient guidance to the delegate, thereby defeating the claim of ultra vires delegated legislation.

The Court explained that the Legislature must set out the law and the legal principles that will control any particular case, and it must provide a standard to guide the officials or body that is empowered to implement the law. The judgment further observed that “the essential legislative function” consists in choosing the legislative policy and formally enacting that policy into a binding rule of conduct. The learned Chief Justice then noted that the Legislature had already laid down a guiding principle, namely the maintenance or increase of supply of essential commodities and the securing of equitable distribution and availability at fair prices. According to the Court, this principle was clear and gave sufficient direction to the Central Government in exercising its powers under section 3. In other words, when the question arose whether the delegate had been given guidance to bring the material provisions of the Act into operation by setting out principles, the Court examined both the preamble of the Act and the substantive content of section 3. The decision demonstrated that if a reasonably clear statement of policy underlying the Act can be found either in the Act’s provisions or in its preamble, then no part of the Act can be attacked on the ground of delegated legislation by claiming that questions of policy were left to the delegate.

Turning to the sections of the present Act that are under challenge, the Court observed that the Act seeks only to continue, for a limited period, the powers to prohibit or control imports and exports that had previously been created by the Defence of India Act and the rules made thereunder. Consequently, the present Act does not create the material provisions anew but merely extends the already existing framework. Accordingly, the Court held that it was proper to examine the preamble of the predecessor Act and the relevant provisions therein to determine whether the Legislature had clearly articulated the policy underlying that Act and had set out principles to guide those to whom authority to implement the Act was delegated. The preamble of the present Act states that it is expedient to continue, for a limited period, powers to prohibit, restrict, or otherwise control imports and exports. The preamble of the Defence of India Act, by contrast, referred to the emergency that existed when that Act was passed and highlighted the necessity of taking special measures to ensure public safety and the public interest. Section 2 of the Defence of India Act further declared that the Central Government considered it essential to secure public safety, maintain public order, and, importantly, preserve supplies and services essential to the life of the community. These statements collectively demonstrate that the broad and main principle underlying the present Act, like its predecessor, was the maintenance of supplies essential to the community’s life.

The Court noted that the broad and principal purpose of the present Act, just as with its predecessor, was to maintain supplies essential to the life of the community. Accordingly, when the preamble and the relevant provision of the earlier Act were read in the light of the preamble of the present Act, the Court found it difficult to distinguish the present legislation from the Essential Supplies Act that had been the subject of the Harishankar Bagla case. The Court further observed that, in the decision of Pannalal Binjraj v. The Union of India (2), the validity of section 5(7‑A) of the Income‑Tax Act had been examined, the challenge was rejected, and, in the judgment delivered on 21 December 1956, the Court considered the legislative history of earlier Income‑Tax Acts to ascertain the policy underlying the impugned provision. Turning to the arguments presented by counsel for the petitioner, the Court described the final submission of Shri Umrigar as patently untenable. Shri Umrigar had initially contended that the finding that the petitioner was trafficking in his licences and that the consignments did not truly belong to him was unsupported by evidence, yet he ultimately conceded that certain circumstances had been relied upon by the appropriate authorities against the petitioner. The Court explained that while it is easy to claim that a finding of a competent authority lacks legal evidence, such a claim can succeed only by demonstrating that absolutely no legal evidence supports the authority’s view. In the present matter, the Court could not accept the assumption that no legal evidence existed against the petitioner. The Court listed the petitioner’s poor financial resources, his conduct at all material times when consignments were ordered, the suspicions surrounding the existence of the firm Messrs N. Jivanlal & Co. in Bombay, the prominent role of that firm throughout the transaction, and the reckless allegations made by the petitioner that had been found untrue by the authorities, all of which could not be dismissed as irrelevant or non‑evidentiary. The Court observed that, although Shri Umrigar pointed to a few circumstances in support of his client’s good faith, a much larger number of circumstances weighed against the petitioner, as reflected in the concurrent findings of all the appropriate authorities. Consequently, the Court held that this issue could not be legitimately raised in the present petition and therefore declined to pursue it further. In the result, the Court dismissed Petitions Nos 42 of 1956 and 46 of 1956, ordered their dismissal with costs, and entered a final order of dismissal of the petitions.