Union of India and Others vs Messrs. Bhana Mal Gulzari Maland Others

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

Court: Supreme Court of India

Case Number: Criminal Appeals Nos. 36 to 38 of 1955

Decision Date: 16 December, 1959

Coram: P.B. Gajendragadkar, Bhuvneshwar P. Sinha, K.C. Das Gupta, J.C. Shah

The case titled Union of India and Others versus Messrs. Bhana Mal Gulzari Maland Others was decided on 16 December 1959 by the Supreme Court of India. The judgment was authored by Justice P. B. Gajendragadkar, and the bench was composed of Justice P. B. Gajendragadkar, Justice Bhuvneshwar P. Sinha, Justice K. C. Das Gupta and Justice J. C. Shah. The petitioners were the Union of India together with other respondents, while the respondents were the company Messrs. Bhana Mal Gulzari Maland and other associated persons. The decision was reported in the official law reports with citations 1960 AIR 475 and 1960 SCR (2) 627, and it has been subsequently cited in numerous later decisions, including RF 1961 SC 705, RF 1961 SC 928, R 1965 SC 1107, RF 1967 SC 1895, MV 1968 SC 1232, F 1971 SC 474, R 1974 SC 366, F 1987 SC 1802. The statutory framework involved the Iron and Steel (Control of Production and Distribution) Order, 1941, specifically clause 11B, which authorized the Iron and Steel Controller to fix the maximum price of steel. The order was issued under the powers conferred by rule 81(2) of the Defence of India Rules. On 10 December 1949 the Controller issued a notification under clause 11B reducing the previously fixed maximum prices for all categories of steel by Rs. 30 per ton. Subsequently, criminal proceedings were instituted against the company, its three directors, its general manager and two sales-men under clause 11B read with section 7 of the Essential Supplies (Temporary Powers) Act, 1946. The allegation was that they had sold their existing stock of steel at prices higher than those fixed by the notification. The respondents filed a petition under Article 226 of the Constitution in the High Court seeking to set aside the criminal proceedings. They contended that clause 11B of the 1941 Order was invalid because it violated Articles 19(1)(f) and 19(1)(g) of the Constitution, and that the clause was ultra vires the powers granted to the Central Government by section 3 of the Essential Supplies (Temporary Powers) Act, 1946, under which the Order was purportedly made. The High Court held that clause 11B indeed contravened Articles 19(1)(f) and 19(1)(g). The Union of India appealed this decision to the Supreme Court.

The Supreme Court examined the validity of clause 11B of the Iron and Steel (Control of Production and Distribution) Order, 1941, and the notification issued under it, and held that neither the clause nor the notification infringed Articles 19(1)(f) and 19(1)(g) of the Constitution. The Court observed that the constitutional validity of sections 3 and 4 of the Essential Supplies (Temporary Powers) Act, 1946, had already been affirmed in the earlier decision of Harishankar Bagla v. State of Madhya Pradesh, reported in 1955 SCR 380. From that precedent, the Court inferred that when the Central Government, instead of directly exercising the authority granted to it under section 3 of the Act, chooses to delegate the power through a notified order to the Controller, such delegation cannot be attacked on the ground of excessive delegation. The Court further explained that the purpose of the 1941 Order is to provide an integrated scheme guiding the Controller and other specified authorities in implementing the policy laid down in section 3 of the Act. Clause 11B, by authorising the fixation of maximum prices for different categories of iron and steel, directly advances the legislative objective of ensuring equitable distribution of the goods at fair prices. The power granted to the Central Government by section 3 and to the specified authority by section 4 is directed by the policy expressly stated in section 3, and clause 11B merely further canalises the exercise of that power rather than granting unbridled discretion. Consequently, the Court concluded that clause 11B does not suffer from the vice of excessive delegation and is constitutionally valid.

In this case the Court observed that when the Central Government, by way of a notified order, authorises the Controller to issue the necessary orders, that order cannot be attacked on the ground of excessive delegation of power. The Iron and Steel (Control of Production and Distribution) Order of 1941 was intended solely to establish an integrated scheme that would guide the Controller and other designated authorities in implementing the policy set out in section 3 of the Essential Supplies (Temporary Powers) Act, 1946. Clause 11B of that Order, by authorising the fixation of the maximum price for various categories of iron and steel, directly achieves the legislative objective of ensuring that the goods are distributed equitably at fair prices. The power given to the Central Government by section 3 and to the specified authority by section 4 of the Act is already channelled by the policy expressly articulated in section 3. Clause 11B merely further channels the exercise of that power and therefore does not grant the delegate unrestricted or unbridled authority, nor does it suffer from the vice of excessive delegation. Consequently, reading clause 11B in isolation it cannot be said to violate Article 19 of the Constitution, and there is no foundation for the contention that the powers conferred on the Controller by that clause unreasonably curtail the exercise of the fundamental rights guaranteed by Article 19(1)(f) and ( g). Nonetheless, a party may still demonstrate that a particular price structure fixed by the Controller through a notification infringes Article 19. To succeed on such a claim, the party must show not merely that an individual stock-holder suffered loss in a few transactions, but that, in a substantial majority of cases, if not all, the impugned notification is likely to adversely affect the dealers’ fundamental rights under Articles 19(1)(f) and ( g). The Court distinguished the decisions in M/s. Dwarka Prasad Laxmi Narain v. State of Uttar Pradesh, [1954] S.C.R. 803 and State of Rajasthan v. Nath Mul and Mitha Mal, [1954] S.C.R. 982, and referred to the reasoning in Harishankar Bagla v. State of Madhya Pradesh, [1955] 1 S.C.R. 380, which was explained and applied earlier.

The judgment was delivered in the criminal appellate jurisdiction concerning Criminal Appeals Nos. 36 to 38 of 1955, which arose from the order dated 14 February 1955 of the Punjab High Court (Circuit Bench), Delhi, in Criminal Writs Nos. 36-D, 37-D and 52-D of 1954. Counsel for the appellants appeared on behalf of the Union of India, while counsel for the respondents represented the private parties. The judgment was handed down on 16 December 1959. Judges Sinha, C. J., Gajendragadkar, Das Gupta and Shah delivered a joint opinion, with Gajendragadkar, J. authoring the opinion reproduced here, and Justice Subba Rao, J. delivering a separate judgment. The Court noted that these three appeals, filed with certificates issued by the Punjab High Court under Article 132(1) of the Constitution, challenged the High Court’s orders which had declared clause 11B of the Iron and Steel (Control of Production and Distribution) Order, 1941 unconstitutional and inoperative, and had set aside the criminal proceedings initiated against M/s. Bhana Mal Gulzari Mal and others under that clause read with section 7 of the Essential Supplies (Temporary Powers) Act, 1946.

In this case, the Court observed that clause 11B of the Iron and Steel (Control of Production and Distribution) Order, 1941 had been declared unconstitutional and therefore inoperative. Consequently, the criminal proceedings that had been initiated against M/s Bhana Mal Gulzari Mal and others under that clause, read with section 7 of the Essential Supplies (Temporary Powers) Act, 1946, were set aside. M/s Bhana Mal Gulzari Mal Ltd. was identified as a private limited company whose registered office was situated at Chawri Bazar, Delhi. Since 1948 the company had been entered as a stockholder by the Iron and Steel Controller in accordance with clause 2(d) of the Order. It was noted that clause 11B authorized the issuance of notifications that listed base prices for iron and steel. On 10 December 1949 the Controller issued a notification under clause 11B that reduced the previously fixed prices for all categories of steel by thirty rupees per ton. Following that reduction, criminal cases numbered 385 to 410 of 1954 were filed against the company, its three directors, its general manager and two salesmen—referred to as respondents 1 to 7—on the allegation that they had sold their existing stock of steel at prices higher than those prescribed by the December 10, 1949 notification. In response to the criminal prosecutions, the respondents lodged three writ petitions in the Punjab High Court against the Union of India, the State of Punjab and other parties. Through Writ Petition No. 36 of 1954, dated 23 March 1954, they sought a direction, order or writ restraining the appellants from enforcing or giving effect to clause 11B or the December 10 notification, and also asked for a writ or order quashing the criminal proceedings against them. The order on that petition gave rise to Criminal Appeal No. 36 of 1955. Writ Petition No. 37 of 1954, also dated 23 March 1954, requested a similar order specifically concerning the pending criminal cases 385-410 of 1954 and asked for an interim stay of those proceedings; the order on that petition resulted in Criminal Appeal No. 37 of 1955. Additionally, in certain criminal cases the trial Magistrate had issued search orders on 12 May 1953, which the respondents challenged by filing Writ Petition No. 52-D of 1954 on 7 April 1954, seeking a writ to quash the warrants issued under those search orders. The decision on that petition gave rise to Criminal Appeal No. 38 of 1955. Across all the writ petitions, the respondents contended that clause 11B was invalid and unconstitutional because it infringed Articles 19(1)(f) and 19(1)(g) as well as Article 31 of the Constitution, and that the clause exceeded the powers granted to the Central Government under section 3 of the Essential Supplies (Temporary Powers) Act. They further argued that the notification issued by the Controller on 10 December 1949 was made under an invalid clause and was therefore unreasonable and void.

The respondents had contested the validity of the notification on the basis that it had been issued under a clause that they asserted to be invalid, unreasonable and therefore void. The High Court, in its judgment, confirmed the respondents’ contention that clause eleven-B was ultra vires because it infringed the fundamental rights guaranteed by Articles nineteen-one-f and nineteen-one-g of the Constitution. In the appeals presently before this Court, the appellants sought to overturn that finding and argued that the conclusion reached by the High Court was incorrect. Consequently, the principal issue that required determination in this group of appeals was whether clause eleven-B of the Order possessed any legal validity. The disputed clause formed part of an Order that had been issued by the Central Government pursuant to the powers conferred on it by sub-rule two of rule eighty-one of the Defence of India Rules. Before addressing the appellants’ submission that clause eleven-B was valid, it was necessary to briefly revisit the parent legislation, to trace the historical development of the statutory scheme, and to examine the substantive provisions that were relevant to the controversy before this Court. It was well known that the Defence of India Act had been enacted on 29 September 1939 to provide for special measures intended to safeguard public safety, public interest and the defence of British India, as well as to provide for the trial of certain offences arising out of the emergency created by the Second World War. The Act, together with the Rules framed thereunder, authorised the Central Government, under rule eighty-one(2)(b), to make orders that were deemed necessary or expedient for securing the defence of British India, for the efficient prosecution of the war, and for maintaining supplies and services essential to the community’s life. Such orders could, inter alia, control the prices or rates at which any articles or things of any description might be sold or hired, and could relax any maximum or minimum limits that were otherwise imposed on those prices or rates. After the war, the legislation was supplemented by Ordinance No XVIII of 1946, promulgated on 25 September 1946. For the purposes of the present case, clauses three and four of that Ordinance were of particular relevance. Clause three(1) empowered the Central Government, whenever it appeared necessary or expedient to maintain or increase the supplies of any essential commodity, or to secure an equitable distribution of such commodity at fair prices, to issue a notified order regulating or prohibiting the production, supply, distribution, trade and commerce of that commodity. Sub-clause two(c) further provided that, without limiting the generality of the powers conferred by sub-section (1), an order could also prescribe controls over the prices at which any essential commodity might be bought or sold. The Ordinance was introduced to ensure that, for a limited period, the Government retained the authority to control the production, supply, distribution and trade of commodities that were deemed essential to the national economy. The essential commodities covered by the Ordinance included items such as iron, steel and coal.

The Court noted that the essential commodities defined in clause 2(a) comprised any of the classes of commodities enumerated, specifically iron, steel and coal. It observed that clause 3 of the Ordinance authorized the Central Government to delegate the powers specified therein, and that clause 4 permitted further sub-delegation. Under clause 4 the Central Government could, by a notified order, direct that the authority to make orders under clause 3 be exercised, with respect to the matters and subject to the conditions specified in the direction, either by an officer or authority subordinate to the Central Government or by a Provincial Government or an officer or authority subordinate to a Provincial Government, as the direction might designate. The Court explained that the Ordinance was subsequently followed by Act XXIV of 1946, enacted on 19 November 1946, which reincorporated the preamble, the definition of essential commodity and the delegation and sub-delegation provisions from the Ordinance. The Court stated that the life of the 1946 Act was prolonged intermittently until the Essential Commodities Act No. 10 of 1955 was enacted as a permanent measure. It further observed that the provisions of the Defence of India Act and the Rules made thereunder had been brought into force to address the emergency created by the war; although hostilities ended, the emergency conditions persisted and the economic challenges required the continued operation of such emergency powers, which is why those provisions have remained in effect since 1939. The Court then turned to the Order containing clause 11B, which had been issued on 26 July 1941 by the Central Government under the authority vested by rule 81(2) of the Defence of India Rules, corresponding to the provisions of section 3 of the Act. It pointed out that, by virtue of the combined operation of clause 5 of Ordinance XVIII of 1946 and section 7 of the Act, the Order must now be regarded as having been issued under section 3 of the Act. The Court summarized the principal features of the Order: the Controller mentioned therein is the person appointed as Iron and Steel Controller by the Central Government and includes any person described in clause 2(a) of the Order; the Order applies to all iron and steel falling within the categories listed in its Second Schedule; clauses 4 and 5 regulate the acquisition and disposal of iron or steel; clause 8 mandates that the use of iron and steel conform to the conditions governing acquisition; and, in exercising the powers conferred on the Controller by the proviso, the Controller must take into account the requirements of persons holding stocks, the requirements of persons needing such stocks, the transport facilities available and any other factor, including

It was observed that a strike or lock-out affecting the production or fabrication of iron and steel formed part of the circumstances contemplated by the Order. The Order contained Clauses 10B and 10C, which gave the Controller authority to order the sale of iron and steel in the specific situations described in those clauses. Clause 11A further authorized the Controller, when he was satisfied that such action was necessary to align the production of iron and steel with present or anticipated demand, to either prohibit or require the production of the commodities in the manner laid down in sub-clauses (a), (b) and (c) of that provision. The Court then turned to Clause 11B, whose validity was the issue before the appeals. Clause 11B read in full as follows: “11B. Power to fix prices- (1) The Controller may, from time to time, by notification in the Gazette of India, fix the maximum prices at which any iron or steel may be sold (a) by a producer, (b) by a stockholder including a Controller stockholder, and (c) by any other person or class of persons. Such price or prices may vary according to the source of the iron or steel and may incorporate allowances for contribution to and payment from any Equalisation Fund established by the Controller for equalising freight, the concession rates payable to each producer or class of producers under agreements entered into by the Controller with the producers from time to time, and any other disadvantages. The Controller may also, by a general or special order in writing, require any person or class of persons enumerated above to pay such amount on account of allowances for contribution to any Equalisation Fund, within such period and in such manner as the Controller may direct in this behalf. (2) For the purpose of applying the prices notified under sub-clause (1), the Controller may himself classify any iron and steel and, if no appropriate price has been so notified, fix such price as he considers appropriate, provided that the Controller may direct that the maximum prices fixed under sub-clause (1) or (2) shall not apply to any specified stocks of iron or steel and may, in respect of such stocks, specify the maximum prices at which such iron or steel may be sold and communicate the same in writing to the persons concerned. Any person or persons holding such stocks of iron and steel for which prices have been so specified shall, at the time of the sale of such iron or steel or part thereof, mention the number and date of the order of the Controller in every cash memo, bill or other document evidencing the sale or disposal out of the respective stocks to which the order of the Controller applies. (3) No producer or stockholder or other person shall sell or offer to sell, and no person shall acquire any iron or steel at a price exceeding the maximum prices fixed under sub-clause (1) or (2).” Clause 12 granted the Central Government the power to give directions to the Controller or other authorities concerning the procedure to be followed by them in exercising their powers and generally for the purpose of giving effect to the provisions of the Order.

The Court observed that the order prescribed a procedure to be followed by the Controller and other authorities in exercising their powers, and that the purpose of the procedure was generally to give effect to the provisions of the order. It noted that by issuing the order the Central Government had laid down a self-sufficient scheme for regulating the production, supply and distribution of steel and iron at fair prices. The Court explained that the Controller was required to take an overall view of the needs of the national economy with respect to steel and iron and to issue appropriate directions in order to effectuate the policy of the Act. The appellants contended that if clause 11B was considered in the light of the scheme which the order had in view, the clause could not be said to violate Articles 19(1)(f) and (g) of the Constitution. Before addressing the question of the vires of clause 11B, the Court found it necessary to make clear that the validity of sections 3 and 4 of the Act had not been disputed before it, and that such validity could not be doubted in view of the decision of the Court in Harishankar Bagla & Anr. v. State of Madhya Pradesh (1) [1955] 1 S.C.R. 380. Accordingly, the challenge to the vires of clause 11B had to be examined on the assumption that sections 3 and 4 were valid. The Court set out the implications of that position. Assuming the validity of sections 3 and 4 meant that those provisions did not suffer from the vice of excessive delegation. When the Legislature delegated its authority to the Central Government to provide, by order, for regulating or prohibiting the production, supply and distribution of steel and iron, it had not surrendered its essential legislative function in favour of the Central Government. The preamble to the Act and the material words used in section 3(1) embodied the Legislature’s decision on legislative policy, and their effect was to lay down a binding rule of conduct in the light of which the Central Government had to exercise the powers conferred on it by section 3. The Legislature had declared that the commodities in question were essential for the maintenance and progress of the national economy, and it had expressed its determination that, in the interest of the national economy, it was expedient that the supply of the said commodities should be maintained or increased as circumstances required and that the commodities should be made available for equitable distribution at fair prices. The concept of “fair prices” deliberately introduced by the Legislature in section 3 gave sufficient guidance to the Central Government in prescribing the price structure for the commodities from time to time. The Court observed that with the rise and fall of national demand for the said commodities or fluctuations in their supplies, the chart of prices might, in the absence of well-planned regulation, prove erratic and prejudicial to

The Court observed that without rational and well-planned regulation the national economy could be harmed and achieving equitable distribution of the commodities would be difficult; therefore the Legislature empowered the Central Government to attain the goal of equitable distribution by fixing fair prices for those commodities. The Court explained that when it is said that the delegation of authority to the Central Government under section 3 is valid, this signifies that the Central Government has been provided with sufficient and proper guidance to exercise its powers in implementing the policy set out in the statute. In the same manner, the Court held that the validity of section 4 rests on the premise that the powers granted to the sub-delegate do not suffer from an excess of delegation. The sub-delegation authorized by section 4 is justified because, just as the delegate under section 3 received ample guidance, the sub-delegate under section 4 is also given adequate direction to exercise the authority that the Central Government may confer upon him.

If the Central Government elects to exercise its powers under section 3 directly, it may issue appropriate orders to give effect to the policy of the Act with respect to matters covered by sections 3(1) and 3(2). The Court noted that in such a scenario the Central Government would be exercising its own authority under section 3, and that exercise of power could not be attacked on the ground that it involves excessive delegation. Likewise, when a notified order issued by the Central Government under section 3 authorizes the Controller to pass suitable orders, that notified order is not susceptible to challenge on the basis of excessive delegation. The Court stated that this position assumes the validity of sections 3 and 4.

The Court then examined the purpose of the Order in question, observing that it seeks to prescribe a scheme that will guide the Controller or other specified authorities as they exercise their powers to implement the policy of the Act. The Court affirmed that the Central Government could itself, while exercising its powers under section 3, prescribe a price structure for steel and iron from time to time. Similarly, if the Central Government, by a notified order under section 3, authorizes the Controller to act, the Controller could also prescribe such a price structure. Instead of issuing a bare notice merely authorizing the Controller to take appropriate steps, the Order provides additional guidance by incorporating several relevant provisions concerning the production, supply and sale of steel and iron. The multiple clauses of the Order together form an integrated scheme that enables the Controller to take steps to give effect to the policy laid down in section 3 of the Act. Clause 11B, for example, provides for the fixation of maximum prices for iron and steel, and requires the Controller to classify iron and steel into different categories based on whether they are tested or untested.

In this case, the Controller must first classify iron and steel as either tested or untested. He must then establish an Equalisation Fund for equalising freight, and he must consider the concession payable to each producer or class of producers under existing valid agreements as well as any other disadvantages. The Controller is authorised to require the parties concerned to contribute to the Equalisation Fund. The maximum prices that the Controller is required to fix must be fixed separately for producers, for stockholders including controlled stockholders, and for other persons or classes of persons. After fixing the maximum prices in accordance with clause twelve, the proviso gives the Controller the power to grant exemptions to specified stocks of iron and steel falling within that proviso. Sub-clause (3) of clause eleven-B then imposes a statutory prohibition on the specified persons from selling or offering to sell iron and steel at a price that exceeds the maximum price fixed under sub-clause (2). It is evident that by prescribing maximum prices for the different categories of iron and steel, clause eleven-B directly implements the legislative objective set out in section three, because fixing maximum prices makes stocks of iron and steel available for equitable distribution at fair prices. The Legislature evidently considered it impractical to define or describe in detail every factor that must be taken into account in fixing a fair price for an essential commodity, and therefore left that determination to the delegate. In fixing a schedule of maximum prices, the Controller must take into account the production situation of the commodities, the demand for those commodities, the availability of the commodities from foreign sources, and the anticipated increase or decrease in supply or demand. Foreign prices for the commodities may also be relevant. Since the decision on maximum prices depends on a rational evaluation of these varied factors from time to time, the Legislature appears to have intended that the delegate be given sufficient freedom to address the problem, while the policy of the Legislature was clearly indicated by section three. The object is the equitable distribution of the commodity, and to achieve that object the delegate must ensure that sufficient quantities are available to meet demand at fair prices. Accordingly, if clause eleven-B is examined as part of the composite scheme embodied in the whole Order and its validity is assessed in light of sections three and four of the Act, it would be difficult to sustain the contention that it confers un-canalised or unbridled power on the delegate.

The Court observed that the power given to the Central Government by section 3 and to the authority named in section 4 was not left without direction, because the legislature had clearly expressed its policy in section 3. It further held that clause 11B added an extra layer of direction to the way that power should be exercised, and therefore the clause could not be successfully attacked on the ground of excessive delegation. The Court explained that it had discussed this point in some detail because it seemed to affect the final conclusion reached in the judgment that was under appeal. The Court then turned to the principal issue before it, namely whether clause 11B infringed article 19 of the Constitution. One of the submissions put forward was that clause 11B ought to have specified the prices of a particular year as the “basic prices” of the commodities and should have required the Controller to set the maximum prices by reference to those basic prices. The counsel supporting this submission relied on section 3 of the English Prices of Goods Act, 1939. According to that Act, section 1 prohibited the sale of price-regulated goods at a price higher than the permitted price; section 3 defined “basic price” as the price at which, in ordinary business practice, the goods were agreed to be sold or offered for sale on the twenty-first day of August 1939. Section 4 of the same Act described the permissible increases, and the effect of sections 3 and 4 gave force to the prohibition in section 1. The argument also invoked the American Emergency Price Control Act of 1942, which directed the administrator, when fixing prices, to give practical consideration to prices prevailing during a designated base period and to adjust for general factors, as discussed in Yakus v. United States (1943) 321 U.S. 4314. The Court expressed the view that the comparison with those two statutes could not support the contention that, because clause 11B lacked a similar provision, it must be unconstitutional. In determining the amount of guidance that should be given to the delegate, the Court noted that the legislature must necessarily consider the special characteristics of the objective it seeks to accomplish through a particular law. It reiterated that the legislature had clearly set out both the purpose to be achieved and the means required to achieve it, and that any decision as to whether additional matters should have been included in the legislative scheme was a matter for the legislature itself. Consequently, the Court identified the remaining question as whether the power…

In this case, the Court examined whether the power given to the delegate was unchanneled or unguided. The Court concluded that the answer was favorable to the appellants. Considering the problem that the Legislature intended to address, the Court reasoned that the Legislature might have decided that it would be inappropriate to restrict the delegate’s discretion in setting maximum prices by tying it to any fixed basic price. Accordingly, the Court held that clause 11B was not unconstitutional on the ground of excessive delegation. The Court acknowledged that, although clause 11B did not violate the Constitution through excessive delegation, its validity could still be challenged on the basis that it infringed Articles 19(1)(f) and (g). The counsel for the petitioners observed that a failure to consider the effect of the decision in Bagla’s case constituted the principal weakness in the lower judgment, and therefore he did not pursue the excessive-delegation argument. He argued that clause 11B was void because it breached Articles 19(1)(f) and (g) by imposing an unreasonable restriction on the respondents’ fundamental rights guaranteed under Article 19. To support this claim, he cited the decisions of this Court in M/s. Dwarka Prasad Laxmi Narain v. The State of Uttar Pradesh & Two Ors. (1) [1955] 1 S.C.R. 380, (2) [1954] S.C.R. 803, and The State of Rajasthan v. Nath Mal and Mitha Mal (1). Conversely, the learned Solicitor-General argued that the decision in Harishankar Bagla (2) effectively resolved the dispute between the parties in the present appeals. The Court noted that it would refer to those decisions later, but first it set out the material facts underlying the contention. The Court explained that the challenge to the criminal proceedings against the respondents could be raised on three alternative grounds. One ground was that sections 3 and 4 of the Act were ultra vires; if that were true, then neither the subsequent order, nor clause 11B, nor the price fixation would be valid. The Court observed that the respondents had not pursued this line of attack. A second ground was that either the entire order issued by the Central Government or clause 11B specifically was invalid because it contravened Articles 19(1)(f) and (i). The Court stated that this was the argument presently before it. A third ground was that the actual price fixation, which imposed a flat reduction of Rs 30 per ton, was unreasonable and violated Articles 19(1)(f) and (g). Regarding the challenge to clause 11B on the basis that it violated Article 19, the Court found it difficult to see how the clause alone could be said to infringe Article 19. The argument, however, proceeded on the assumption

The Court noted that the respondents had alleged that the authority conferred on the Controller by clause 11B was unchannelled, unbridled or unguided; however, the Court had already held that the clause did not suffer from any such defect. Consequently, when reading clause 11B in isolation, the Court saw no basis on which it could be declared violative of article 19. The Court explained that, assuming sections 3 and 4 of the Act were valid, clause 11B merely prescribed conditions for the exercise of the delegate’s authority that were consistent with section 3. Accordingly, only the actual price structure fixed by the Controller in a particular case could be challenged as infringing article 19, not the clause itself. The Court therefore turned to the question of whether the respondents were permitted to challenge the price structure in the present appeals. The Court referenced two earlier decisions, namely (1) [1954] S.C.R. 982 and (2) [1955] 1 S.C.R. 380. In the respondents’ writ petition, they had contested the validity of a notification issued by the Controller on 10 December 1949, chiefly on the ground that it was issued under clause 11B, which they claimed to be void. The Court observed that, during the arguments before the High Court, it appeared that counsel had urged that the flat deduction of Rs 30 per ton directed by the impugned notification was unreasonable, and the High Court had described that deduction as confiscatory. The Court recorded that the price at which registered producers of untested articles could sell was Rs 333 per ton, the price for controlled stock-holders was Rs 363 per ton, and the price at which the respondents could sell was Rs 378 per ton. Because of the deduction of Rs 30 per ton directed by the notification, the respondents were required to sell at Rs 348 per ton. The respondents claimed that they had purchased the commodity from the controlled stock-holders at Rs 363 per ton; therefore, being forced to sell at the reduced price caused a loss of Rs 15 per ton. The Court noted that this particular aspect of the respondents’ case had not been tried by the High Court, as it was a matter in dispute between the parties and could not be adjudicated in writ proceedings. Apart from this, the petitions did not demonstrate that the respondents had seriously challenged the validity of the notification on that ground. The Court further observed that, in assessing the validity of the notification, it would not suffice merely to show that an individual registered stock-holder suffered loss in specific transactions. Instead, the respondents would have to prove the general effect of the impugned notification on all classes of dealers taken together. If it could be shown that, in a large majority, if not all, cases, the notification adversely affected the fundamental rights of dealers guaranteed under articles 19(1)(f) and ( g), such a finding might constitute a serious infirmity in the notification.

Concerning the validity of the notification, the Court noted that the material before it did not establish any claim on that ground, and consequently it could not entertain an inquiry of that nature on appeal. The Court then turned to the earlier decisions of this Court on which the counsel for the respondents relied. In the earlier case of M/s. Dwarka Prasad Laxmi Narain (1) the Court had held that clause 4(3) of the Uttar Pradesh Coal Control Order, 1953 imposed an unreasonable restriction on the freedom of trade and business guaranteed by Article 19(1)(g) of the Constitution and that the restriction did not fall within the protection afforded by clause (6) of the same article. The judgment was explicit that the validity of sections 3 and 4 of the Act had not been challenged. The Court further observed that the impugned clause conferred an unrestricted power on the licensing authority, without any rule-making or directional framework to guide the exercise of discretion. Moreover, the power could be exercised not only by the State Coal Controller but also by any person to whom the Controller might delegate it, and the delegation could be made in favour of any individual. Because of these features, the Court concluded that the clause could not be regarded as reasonable.

The Court found it difficult to see how the reasoning in Dwarka Prasad Laxmi Narain could assist the respondents in attacking clause 11B of the present order. It had already indicated that the powers exercisable by the Controller under clause 11B were subject to the general power of the Central Government to issue directions prescribed by clause 12. The Court also pointed out that, although clause 4(3) was struck down, clauses 7 and 8, which empower the Coal Controller to prescribe the terms and prices at which the commodity may be sold, were upheld as valid. The counsel for the respondents argued that, in upholding clauses 7 and 8, this Court had relied on the formula prescribed in Schedule III and that the application of that formula did not, on the whole, lead to an unreasonable result. The Court acknowledged that the explanation to clause 8 also supplied guidance to the authority fixing the price structure, and that such guidance had been considered in sustaining the validity of the two impugned clauses.

While accepting that observation, the Court expressed the view that it would be unreasonable to suggest, as the counsel for the respondents attempted, that the absence of an explanatory provision to clause 8 or the formula in Schedule III should render clause 11B void. The Court found no support for that contention in the decision of Dwarka Prasad Laxmi Narain. The Court further referred to the case of Nath Mal (2), where it had struck down the latter part of clause 25, indicating that the present challenge could not be sustained on similar grounds.

In the matter concerning the Rajasthan Foodgrains Control Order of 1949, the Court observed that the challenge to the contested clause was premised expressly on the assumption that section 3 of the Act was constitutionally valid. The contested clause, as described, authorised the Government to requisition grain stocks at a price that was lower than the price at which the same stocks could subsequently be sold, thereby inflicting a loss on the owners whose stocks were frozen while permitting the Government to sell the same stocks at a higher price and to realise a profit. The respondent’s case was presented as an illustration of this deleterious effect, portraying the clause as a typical example that would cripple the commercial operations of grain dealers. On the basis of this assessment of the general impact of the clause, the Court noted that the offending portion had been struck down on the ground that it violated article 19(1)(g) of the Constitution and was also held to be inconsistent with article 31(2). The Court further stated that this earlier decision did not aid the respondents, because, as already pointed out, the present proceedings did not challenge the validity of the impugned notification on either of those constitutional bases.

The discussion then turned to the precedent set by the Court’s decision in Harishankar Bagla. In that case, the Court had held that sections 3 and 4 of the Act were not beyond the powers of the legislature. Although the Nagpur High Court had found section 6 of the Act to be ultra vires, the Supreme Court reversed that conclusion and affirmed the validity of section 6 as well. The appellant in that case had contested not only sections 3, 4 and 6 of the Act but also a separate control order, namely the Cotton Textile (Control of Movement) Order, 1948. Section 3 of that Control Order had been challenged on the ground that it infringed the rights guaranteed under articles 19(1)(f) and (g). Broadly, section 3 prohibited the transport of cotton unless it was carried out under a general permit or a special transport permit as prescribed by the order. The argument advanced was that the power conferred by section 3 amounted to an unreasonable restriction on the fundamental rights protected by articles 19(1)(f) and (g), and that, in substance, it suffered from the same defect as clause 4(3) of the Uttar Pradesh Coal Control Order, which had been struck down in the case of M/s Dwarka Prasad Laxmi Narain. The Court rejected that argument, observing that the disputed clause was not at all comparable to clause 4(3) examined in the earlier case. The appellants in the present proceedings contended that the reasoning employed by the Court in upholding section 3 of the 1948 Control Order should equally apply to clause 11B of the order now under consideration. The Court, however, indicated that such a contention could not be sustained.

It cannot be said that there is any force in this contention. Accordingly, the Court held that neither clause 11B of the Order nor the notification issued by the Controller on 10 December 1949 infringes the respondents’ fundamental rights under Articles 19(1)(f) and (g). Consequently, the validity of those provisions could not be successfully challenged. The Court therefore set aside the orders of the High Court that had been passed on the respondents’ writ petitions and dismissed those petitions. Justice Subba Rao, having read the judgment of his learned brother Justice Gajendragadkar, expressed agreement with that judgment. He stated that the question in this case was whether clause 11B of the Iron and Steel (Control of Production and Distribution) Order, 1941, violates the fundamental rights guaranteed by Article 19(1)(f) and (g) of the Constitution. Relying on the binding precedent of Harishankar Bagla v. State of Madhya Pradesh, the Court affirmed that clause 11B of the said Order is constitutionally valid. Justice Subba Rao further indicated that he would not express any view on any other question raised in the appeal. The appeal was allowed. (1) [1954] S.C.R. 803 (2) [1955] 1 S.C.R. 380.