Union Of India (Uoi) And Ors. And State Of... vs Bhanamal Gulzarimal Ltd. And Ors.

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

Court: supreme-court

Case Number: Not extracted

Decision Date: 16 December, 1959

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

The Supreme Court of India delivered its judgment on 16 December 1959 in the matter titled Union of India and others versus Bhanamal Gulzarimal Ltd. and others. The opinion was authored by Justice Gajendragadkar and was pronounced by a bench consisting of Justices B P Sinha, J C Shah, K C Das Gupta, K Subba Rao and P B Gajendragadkar. The three appeals before the Court had been filed after obtaining certificates of appeal from the Punjab High Court pursuant to Article 132(1) of the Constitution. The appeals challenged the High Court’s orders that had declared clause 11B of the Iron and Steel (Control of Production & Distribution) Order, 1941 – hereinafter referred to as “the Order” – to be unconstitutional and inoperative, and that had also quashed the criminal proceedings instituted against M/s Bhanamal Gulzarimal Ltd. and several of its officers under clause 11B read with section 7 of the Essential Supplies (Temporary Powers) Act, 1946 – hereinafter referred to as “the Act”. M/s Bhanamal Gulzarimal Ltd. was a private limited company with its registered office situated at Chawri Bazar, Delhi, and had been listed as a stockholder by the Iron and Steel Controller since 1948 under clause 2(d) of the Order. Under clause 11B, the Controller had the authority to issue notifications specifying a schedule of base prices for iron and steel. On 10 December 1949, the Controller issued such a notification, reducing by Rs 30 per ton the prices previously fixed for all categories of steel. Subsequent to this reduction, criminal cases numbered 385 to 410 of 1954 were instituted against the company, its three directors, its general manager and two salesmen – collectively referred to as respondents 1 through 7 – on the allegation that they had sold their existing steel stock at rates exceeding those prescribed by the 10 December 1949 notification.

Facing these criminal prosecutions, the respondents filed three separate writ petitions in the Punjab High Court against the Union of India, the State of Punjab and other parties, who were collectively designated as the appellants. The first of these petitions, identified as Writ Petition No. 36 of 1954 and filed on 23 March 1954, sought a direction, order or writ restraining the appellants from enforcing or giving effect to clause 11B or the specific notification, and additionally requested that the criminal proceedings against them be set aside. The High Court’s decision on this petition gave rise to Criminal Appeal No. 36 of 1955 before the Supreme Court. The second petition, Writ Petition No. 37 of 1954, also filed on 23 March 1954, asked for a similar restraint specifically with respect to the pending criminal cases numbered 385 to 410 of 1954, and sought an interim stay of those proceedings. The order issued on that petition resulted in Criminal Appeal No. 37 of 1955. In addition, it was noted that in some of the criminal matters, the trial magistrate had issued search orders on 12 May 1953, thereby permitting searches in connection with the investigations against the respondents.

The respondents contested the orders by filing Writ Petition No 52-D of 1954 dated 7 April 1954, seeking a writ that would set aside the warrants that had been issued under those orders. The challenge to the orders gave rise to Criminal Appeal No 38 of 1955. In each of the writ petitions the respondents argued that clause 11B was both invalid and unconstitutional because it infringed the freedoms guaranteed by Articles 19(1)(f) and 19(1)(g) as well as Article 31 of the Constitution. They further contended that the clause exceeded the authority granted to the Central Government by section 3 of the relevant Act. The respondents also attacked the notification issued by the Controller on 10 December 1949, maintaining that the notification was founded on a clause that was invalid, unreasonable and therefore void. The High Court, after examining the submissions, upheld the respondents’ claim that clause 11B was ultra vires the statutory power and that it violated the fundamental rights protected by Articles 19(1)(f) and 19(1)(g). The present appeals filed by the appellants seek reversal of that conclusion. Consequently, the principal question that this group of appeals must resolve is whether clause 11B of the order stands on a valid legal foundation or whether it must be declared invalid.

The clause that is being challenged forms part of an order issued by the Central Government under the authority conferred by sub-rule (2) of rule 81 of the Defence of India Rules. Before the Court can examine the appellant’s contention that clause 11B is valid, it is necessary to briefly revisit the parent legislation and trace its evolution, in order to understand the substantive provisions that bear upon the controversy. The Defence of India Act, which was enacted on 29 September 1939, was intended to provide special measures for safeguarding public safety, the national interest and the defence of British India, as well as for the trial of certain offences. The Act and the Rules made under it were a response to the emergency created by the Second World War. Rule 81(2)(b) of those Rules empowered the Central Government, insofar as it deemed necessary or expedient for securing the defence of British India, for the efficient prosecution of war, or for maintaining supplies and services essential to the community’s survival, to issue orders that could control the prices or rates at which any articles or things of any description might be sold or hired, and to relax any maximum or minimum limits that had been previously imposed on such prices or rates. This legislative framework was later supplemented by Ordinance No XVIII of 1946, promulgated on 25 September 1946. The provisions of particular relevance are found in clauses 3 and 4 of that Ordinance. Clause 3(1) empowers the Central Government, when it appears necessary or expedient, to maintain or increase the supplies of any essential commodity, to secure their equitable distribution, and to ensure their availability at fair prices.

The Ordinance empowered the Central Government, by a notified order, to regulate or prohibit the production, supply, distribution, and trade of any essential commodity, and also to control the prices at which such commodities could be bought or sold, without limiting the broader powers granted under sub-section (1). This legislative measure was intended to give the Government, for a limited period, the authority to manage the production, supply, distribution, and commercial activities concerning certain commodities deemed essential for the national economy. The Ordinance defined “essential commodities” in clause 2(a) as any of the classes of commodities expressly listed, which included iron, steel and coal. While clause 3 delegated the specified powers to the Central Government, clause 4 allowed for further sub-delegation. Under clause 4 the Central Government could, by a notified order, direct that the authority to make orders under clause 3 could, with regard to particular matters and subject to any conditions specified in the direction, be exercised 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 determined in that direction. The Ordinance was subsequently superseded by Act XXIV of 1946, enacted on 19 November 1946, which reenacted the preamble, the definition of essential commodity, and the delegation and sub-delegation provisions originally contained in the Ordinance. The Act remained in force, with periodic continuations, until the Essential Commodities Act No. 10 of 1955 was enacted as a permanent statute. The Defence of India Act and its Rules were originally introduced to address the emergency created by the war; even after the cessation of hostilities, the economic difficulties faced by the country required the continuation of similar emergency powers, which is why those provisions have persisted since 1939. The specific Order that includes clause 11B was issued on 26 July 1941 by the Central Government, relying on the authority granted by rule 81(2) of the Defence of India Rules, which correspond to section 3 of the Act. Because of the combined effect of clause 5 of Ordinance XVIII of 1946 and section 7 of the Act, that Order is now deemed to have been issued under section 3 of the Act. A brief overview of the Order’s scheme shows that it identifies the Controller as the individual appointed by the Central Government as Iron and Steel Controller.

The Order expressly states that the term “Controller” embraces any individual who falls within the description provided in clause 2(a) of the Order. It further provides that the Order is applicable to every article of iron and steel that is listed in the Second Schedule attached to the Order. Under clauses 4 and 5, the Order sets out the procedures for the acquisition and the subsequent disposal of iron or steel, while clause 8 imposes the condition that any use of iron and steel must be in strict conformity with the conditions that govern such acquisition. This clause also makes clear that, when exercising the powers bestowed upon the Controller by the proviso to clause 8, the Controller is required to consider a range of relevant factors. These factors include the needs of persons who already hold stocks of iron and steel, the requirements of persons who are in need of such stocks, the availability of transport facilities, and any other circumstance that may affect the situation, such as a strike or a lock-out that could disrupt production or fabrication processes. Moreover, clauses 10B and 10C give the Controller the authority to direct the sale of iron and steel in the specific situations enumerated in those clauses. Clause 11A further authorises the Controller, whenever he is satisfied that it is necessary to coordinate the production of iron and steel with the present or anticipated demand, to either prohibit or to require the production of the commodities in the manner laid down in sub-clauses (a), (b) and (c) of that provision. The validity of clause 11B, which is the subject of the present appeals, therefore follows the framework established by the earlier clauses.

Clause 11B deals with the power to fix prices and reads in full as follows: “11B. Power to fix prices – 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 differ from iron and steel obtainable from different sources and may include 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 clause continues by providing that the Controller may also, by a general or special order in writing, require any of the persons or classes of persons named above to pay an amount towards the Equalisation Fund, within a period and in a manner that the Controller shall specify. In sub-clause (2), the provision empowers the Controller, for the purpose of applying the notified prices, to classify any iron or steel and, where no appropriate price has been previously notified, to fix such a price at his discretion. The provision further stipulates that the Controller may direct that the maximum prices fixed under sub-clause (1) or (2) shall not apply to particular stocks of iron or steel, and for those specified stocks he may separately prescribe maximum selling prices, communicate the same in writing to the concerned persons, and require any holder of those stocks to observe the prescribed prices at the time of sale.

At the moment of any sale or partial sale of iron or steel, the seller was required to insert the order number and the date of the Controller’s order on every cash memo, bill or any other document that proved the sale or disposal of the relevant stock to which the Controller’s order applied. The order further prohibited any producer, stockholder or any other person from selling or offering to sell iron or steel, and barred any purchaser from acquiring such commodities at a price that exceeded the maximum price fixed under sub-clause (2). Clause 12 conferred on the Central Government the authority to issue directions to the Controller or to any other authority concerning the procedure to be followed in the exercise of their powers, and also to issue general directions necessary to give effect to the provisions of the Order. By issuing the Order, the Central Government therefore established a self-contained scheme intended to regulate the production, supply and distribution of steel and iron at prices that were deemed fair. The Controller was obliged to consider the overall needs of the national economy with respect to steel and iron, and to issue suitable directions that would implement the policy laid down in the Act. The appellants argued that when clause 11B was examined in the context of the overall scheme embodied in the Order, it could not be said to infringe Articles 19(1)(f) and 19(1)(g) of the Constitution.

Before dealing with the constitutionality of clause 11B, the Court observed that the validity of sections 3 and 4 of the Act had not been contested before it, and could not be contested in view of the decision rendered in Harishankar Bagla & Anr. v. State of Madhya Pradesh. Consequently, the challenge to clause 11B had to be assessed on the premise that sections 3 and 4 were valid. Accepting the validity of those sections meant that they did not suffer from the defect of excessive delegation of legislative power. When the Legislature had delegated authority to the Central Government to make orders regulating or prohibiting the production, supply and distribution of steel and iron, it had not surrendered its essential legislative function to the Central Government. The preamble to the Act and the material words of section 3(1) expressed the Legislature’s decision on legislative policy, thereby laying down a binding rule of conduct that guided the Central Government in exercising the powers conferred 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 also manifested a determination that, in the interest of the national economy, the supply of those commodities should be maintained or increased as circumstances required and that they should be made available for equitable distribution at fair prices.

The Court observed that the statute declares it to be desirable that the supply of the commodities specified in the Act be maintained or, where circumstances demand, be increased, and that those commodities be made available for equitable distribution at prices deemed fair. The term “fair prices,” which the Legislature deliberately introduced in section 3, furnishes the Central Government with adequate guidance for formulating the price structure for the commodities from time to time. The Court noted that fluctuations in national demand for the commodities or variations in their availability could, in the absence of well-planned regulation, result in erratic price charts that would be harmful to the national economy. Moreover, without rational and carefully designed regulation, achieving equitable distribution would become difficult. Consequently, the Legislature has authorized the Central Government to accomplish the objective of equitable distribution by fixing fair prices for the commodities in question. Accordingly, when the Court accepts that the delegation of authority to the Central Government under section 3 is valid, it means that the Central Government has been provided with sufficient and proper guidance for exercising its powers to implement the statutory policy.

In the same vein, the Court held that the validity of section 4 implies that the powers conferred on a sub-delegate do not suffer from excessive delegation. Sub-delegation under section 4 is justified because, like the delegate under section 3, the sub-delegate receives ample guidance to exercise the authority that the Central Government may confer upon it. The Court explained that if the Central Government decides 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 the matters covered by sub-clauses 3(1) and 3(2). When the Central Government takes such a course, it is exercising its own authority under section 3, and that exercise cannot be challenged on the ground of excessive delegation. Similarly, when the Central Government, by a notified order made under section 3, authorizes the Controller to pass appropriate orders, that notified order is likewise immune from challenge on the basis of excessive delegation. The Court opined that this position is implicit in the assumption that sections 3 and 4 are valid.

The Court then examined the purpose of the Order in question. It stated that the Order purports to lay down a scheme to guide the Controller or any other authorities specified therein when they exercise their powers to implement the policy of the Act. The Court emphasized that, in exercising its powers under section 3, the Central Government could itself have prescribed a price structure for steel and iron from time to time. Likewise, if the Central Government, by a notified order under section 3, authorized the Controller, the Controller could have independently prescribed a price structure for steel and iron from time to time. The Court observed that instead of issuing a bare notice merely authorizing the Controller to take appropriate steps to effectuate the policy, the Order chooses to provide additional guidance by including several relevant provisions concerning the production, supply and sale of steel and iron. Thus, the Order constitutes an integrated scheme intended to enable the Controller to take steps that give effect to the policy laid down by section 3 of the Act.

The Order does not merely instruct the Controller to take appropriate steps to implement the policy of the Act; instead, it provides the Controller with detailed guidance by incorporating a number of specific provisions that relate to the production, supply and sale of steel and iron. The various clauses of the Order together form an integrated scheme intended to enable the Controller to give effect to the policy set out in section 3 of the Act. In particular, clause 11B authorises the fixation of maximum prices for iron and steel. Under this clause the Controller must first classify iron and steel into distinct categories, such as tested and untested goods. The Controller is also required to establish an Equalisation Fund to offset freight costs, and to consider the concessions payable to each producer or class of producers under existing valid agreements as well as any other disadvantages that may apply. The Controller is empowered to require the parties concerned to contribute to the Equalisation Fund, and he must fix the maximum prices separately for producers, for stock-holders—including controlled stock-holders—and for other persons or categories of persons. Once the maximum prices are fixed in accordance with clause 12, the provision gives the Controller the authority to grant exemptions to specific stocks of iron and steel that fall within the said proviso. After prescribing the procedure for fixing the maximum prices and indicating some of the factors that must be taken into account, sub-clause (3) of clause 11B imposes a statutory prohibition on the persons specified in the clause from selling or offering to sell iron and steel at a price that exceeds the maximum price fixed under sub-clause (2). It is clear that by prescribing maximum prices for the different categories of iron and steel, clause 11B directly furthers the legislative object embodied in section 3, 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 exhaustive detail all the relevant factors that should be considered in fixing a fair price for an essential commodity, given that such factors may vary over time. Accordingly, when prescribing a schedule of maximum prices, the Controller must consider the prevailing condition of production of the commodities, the level of demand, 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 must be based on a rational evaluation of these varied factors from time to time, the legislature appears to have intended that this problem be left to the delegate, granting him sufficient freedom to assess the situation, while still guiding his exercise of power through the policy articulated in section 3.

The Legislature, by provision 3, had unmistakably indicated its intention that the purpose of the scheme was the equitable distribution of the commodity. To achieve that purpose, the delegate was required to ensure that the commodity remained available in sufficient quantities to satisfy demand at all times and that it was sold at fair prices. The Court considered that, when clause 11B is viewed as an integral component of the overall scheme embodied in the whole Order and its validity is assessed in relation to sections 3 and 4 of the Act, it is difficult to sustain the contention that the clause grants the delegate an unrestricted or unbridled authority. Accordingly, the Court was inclined to hold that the power vested in the Central Government by section 3 and in the authority named in section 4 is already constrained by the clear statement of legislative policy contained in section 3, and that clause 11B further narrows the exercise of that power. Consequently, the clause could not be successfully challenged on the ground of excessive delegation of authority. The Court noted that this discussion was elaborated at length because it appeared to have shaped the final conclusion of the judgment under appeal. The Court then turned to the principal issue before it, namely whether clause 11B infringed article 19 of the Constitution. It was modestly argued that clause 11B should have specified the prices of a particular year as the basic prices of the commodities and should have required the Controller to set maximum prices by reference to those basic prices. The argument relied upon section 3 of the English Prices of Goods Act, 1939. That Act’s section 1 prohibits the sale of price-regulated goods at a price exceeding the permitted limit, while section 3 defines “basic price” as the price at which, in the ordinary course of business, the goods were agreed to be sold or offered for sale on 21 August 1939. Section 4 of the same Act defines the permissible increases. The effect of sections 3 and 4 is what activates the prohibition contained in section 1. Reference was also made to the American Emergency Price Control Act, 1942, which directs the administrator, insofar as practicable, to consider prices prevailing during a designated base period and to adjust for relevant general factors, as explained in Yakus v. United States (1943) 321 U.S. 414. The Court concluded that the analogy with these two statutes did not convincingly support the proposition that, in the absence of a corresponding provision in clause 11B, the clause must be held unconstitutional. In determining the appropriate nature and extent of the guidance that should be provided to the delegate, the Court emphasized that the legislative policy already set out in section 3 guides the delegate’s discretion.

In this case, the Court observed that when a legislature delegates authority, it must consider the specific purpose that the statute seeks to achieve. The Court reiterated that the legislature had clearly set out both the objective to be attained and the means necessary to accomplish that objective as a matter of legislative policy. Whether additional matters should have been included in that legislative policy was a question left to the legislature itself. The issue before the Court was whether the power given to the delegate was without any limits or guidance. The Court concluded that the answer favored the appellants. Considering the nature of the problem that the legislature intended to address, the Court reasoned that the legislature may have decided that it would be unwise to restrict the delegate’s discretion in fixing maximum prices by tying it to any basic price. Accordingly, the Court held that clause 11B was not unconstitutional on the ground of excessive delegation. The Court further noted that even if clause 11B is not invalid for excessive delegation, its validity could still be challenged on the ground that it infringes Articles 19(1)(f) and (g) of the Constitution. Counsel for the petitioner observed that the lower court had failed to consider the effect of the earlier decision in Bagla’s case, and therefore did not argue the point of excessive delegation. Instead, counsel argued that clause 11B was void because the power granted to the Controller imposed an unreasonable restriction on the respondents’ fundamental rights guaranteed by Article 19. Counsel relied on the decisions of this Court in M/s. Dwarka Prasad Laxmi Narain v. The State of Uttar Pradesh & Two Ors. ([1954] S.C.R. 803) and The State of Rajasthan v. Nath Mal and Mitha Mal ([1954] S.C.R. 982). In contrast, counsel for the Government contended that the decision in Harishankar Bagla effectively settled the dispute between the parties in the present appeals. The Court indicated that it would refer to those decisions after summarising the material facts underlying the dispute. The Court explained that the challenge to the criminal proceedings against the respondents could be based on three alternative grounds. First, it could be argued that sections 3 and 4 of the Act are beyond the legislative competence, and if that were true, then the subsequent order, clause 11B, and the price fixation would all be invalid. The Court observed that the respondents had not adopted this line of argument. Second, it could be argued that either the entire order issued by the Central Government or clause 11B in particular is invalid because it offends the Constitution.

In this case the respondents contended that the provisions of Articles 19 (1)(f) and (g) of the Constitution were infringed. They argued either that the very existence of clause 11B violated those constitutional guarantees, or alternatively that the actual price fixation – a flat reduction of thirty rupees per ton – was unreasonable and therefore violative of Articles 19 (1)(f) and (g). On the question of whether clause 11B alone could be said to infringe Article 19, the Court found no basis for such a conclusion. The argument that clause 11B granted the Controller an un-canalised, unbridled or unguided authority had already been rejected, and the Court reiterated that the clause does not suffer from any such defect. Consequently, reading clause 11B in isolation, the Court could not hold it to be inconsistent with Article 19. In fact, assuming that sections 3 and 4 of the Act are valid, clause 11B merely sets conditions for the exercise of the delegated authority, conditions that are in harmony with section 3. Therefore, any violation of Article 19 would have to arise from the specific price structure fixed by the Controller, not from the clause itself. The Court therefore turned to consider whether the respondents were entitled to challenge the price structure on the grounds of unreasonableness in the present appeal.

The respondents, in their writ petition, challenged the validity of the notification issued by the Controller on 10 December 1949 on the basis that it was made under clause 11B, which they claimed to be void. During the arguments before the High Court, it was submitted that the flat deduction of thirty rupees per ton directed by the impugned notification was unreasonable; the High Court described that deduction as “confiscatory.” The petition also disclosed the price differentials: the price for sale by registered producers of untested articles was three hundred and thirty-three rupees per ton, the price for sale by controlled stock-holders was three hundred and sixty-three rupees per ton, and the price at which the respondents could sell was three hundred and seventy-eight rupees per ton. Because of the thirty-rupee deduction, the respondents were compelled to sell at three hundred and forty-eight rupees per ton. The respondents alleged that they had purchased the commodity from the controlled stock-holders at three hundred and sixty-three rupees per ton, and that being forced to sell at the reduced price caused them a loss of fifteen rupees per ton. This particular contention was not adjudicated by the High Court, as it was a factual dispute that could not be resolved in writ proceedings. Moreover, apart from this issue, the petitions did not demonstrate that the respondents had seriously challenged the validity of the notification on the basis of this price deduction. Accordingly, the Court noted that the writ petition did not pursue a thorough attack on the notification’s price structure, limiting the scope of the present appeal.

In assessing the validity of the impugned notification, the Court observed that it was insufficient to demonstrate that a single registered stockholder had incurred a loss in a particular transaction. The burden of proof, the Court explained, lay in showing the overall impact of the notification on all classes of dealers taken together. If it could be established that, in a substantial majority of cases, the notification impaired the fundamental rights of dealers guaranteed under Articles 19(1)(f) and 19(1)(g), such a finding might amount to a serious infirmity in the notification’s validity. The Court noted that the present proceedings failed to establish this broader prejudice, and therefore it could not embark on an inquiry of that nature on appeal.

The Court then turned to the authorities cited by counsel for the petitioners. It referred to the decision in M/s Dwarka Prasad Laxmi Narain ([1954] S.C.R. 803), where clause 4(3) of the Uttar Prasad Coal Control Order, 1953, was held void for imposing an unreasonable restriction on the freedom of trade and business protected by Article 19(1)(g) of the Constitution. The judgment expressly observed that the constitutionality of sections 3 and 4 of the Act had not been challenged. The Court further explained that the impugned clause granted the licensing authority unfettered discretion without any rules or directions to guide that discretion, and that the power could be exercised not only by the State Coal Controller but also by any person to whom the Controller might delegate it, without limitation. Because of these features, the Court found the clause could not be justified as reasonable.

The Court indicated that this precedent offered little assistance to the respondents in contesting clause 11B of the present notification. It had already pointed out that the powers conferred on the Controller under clause 11B were subject to the general authority of the Central Government to issue directions under clause 12. While clause 4(3) was struck down, clauses 7 and 8, which empower the Coal Controller to prescribe the terms and prices for the commodity, were upheld as valid. Counsel for the petitioners argued that the Court’s upholding of those two clauses reflected consideration of the formula laid down in Schedule III, and that the application of that formula did not, on the whole, produce unreasonable results. Moreover, the explanation appended to clause 8 was said to provide guidance to the authority fixing the price structure, and that guidance had been taken into account by the Court in affirming the validity of the two impugned clauses. The Court acknowledged that observation without dispute.

It was acknowledged that the observation made by counsel was correct, but the Court expressed the view that it would be unreasonable to accept the argument advanced by that counsel which suggested that, in the absence of an explanatory provision to clause 8 or the formula contained in Schedule III, clause 11B should be declared void in the present matter. The Court noted that such a contention had no support in the earlier decision of M/s Dwarka Prasad Laxmi Narain ( [1954] S.C.R. 380 ). The Court then referred to the case of Nath Mal ( [1954] S.C.R. 982 ), where it had struck down the latter part of clause 25 of the Rajasthan Foodgrains Control Order, 1949. In that case the challenge to the impugned clause was premised on the explicit assumption that section 3 of the Act was valid. The Court observed that the impugned clause in the present context appeared to empower the Government to requisition stocks at a price lower than the selling price, thereby causing loss to the stock-holders whose holdings were frozen, while simultaneously permitting the Government to sell the same stocks at a higher price and earn a profit. The respondent’s case, which illustrated this pernicious effect, was treated as a typical example showing how grain-dealers’ businesses would be paralyzed by the operation of the clause. On the basis of this general view of the clause’s effect, the offending portion had been struck down as violative of article 19(1)(g) of the Constitution and was also held to contravene article 31(2). The Court explained that this earlier decision did not aid the respondents, because, as previously pointed out, the present proceedings had not challenged the validity of the impugned notification on any such ground. Turning to the decision in Harishankar Bagla, on which the appellants heavily relied, the Court noted that it had held sections 3 and 4 of the Act to be within constitutional limits. Although the Nagpur High Court had declared section 6 ultra vires, this Court reversed that finding and declared section 6 also valid. In that appeal, the petitioner had challenged not only sections 3, 4 and 6 of the Act but also the impugned Control Order, namely the Cotton Textile (Control of Movement) Order, 1948. Specifically, section 3 of that Control Order was contested as infringing the fundamental rights guaranteed under articles 19(1)(f) and 19(1)(g). The Court described that provision as broadly prohibiting transport except when carried out under a general or special permit as prescribed by the Order. The argument advanced was that the power conferred by section 3 amounted to an unreasonable restriction on the citizen’s fundamental rights under articles 19(1)(f) and 19(1)(g), and that, in substance, it suffered from the same defect as clause 4(3) of the Uttar Pradesh Coal Control Order, which had previously been struck down by this Court.

The Court examined the contention that the clause presently before it was analogous to clause 4(3) considered in the earlier decision of M/s. Dwarka Prasad Laxmi Narain ([1954] S.C.R. 803). That contention was rejected, and the Court observed that the impugned clause was not at all similar to the clause 4(3) with which the Court had been concerned in that earlier case. The appellants further argued that the reasons the Court had given for upholding section 3 of the Order should apply with equal force to clause 11B in the present appeals. The Court noted that this argument possessed some merit and could not be dismissed out of hand. Consequently, the Court held that neither clause 11B of the Order nor the notification issued by the Controller on December 10, 1949, infringed the respondents’ fundamental rights under Articles 19(1)(f) and (g). Accordingly, the validity of those provisions could not be successfully challenged. In accordance with this finding, the orders previously passed by the High Court on the writ petitions filed by the respondents were set aside and those petitions were dismissed. Justice Subba Rao, after having the advantage of perusing the judgment of his learned brother Justice Gajendragadkar, expressed agreement with that conclusion. Justice Subba Rao then identified the principal question in the case as whether clause 11B of the Iron and Steel (Control of Production and Distribution) Order, 1941, violated the fundamental rights guaranteed by Article 19(1)(f) and (g) of the Constitution. Relying on the binding precedent of Harishankar Bagla v. The State of Madhya Pradesh, he concurred that clause 11B of the said Order was valid. He declined to express a view on any other issue raised in the appeal. The appeals were allowed.