Dr. Indramani Pyarelal Gupta vs W. R. Nathu And Others

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

Court: Supreme Court of India

Case Number: Civil Appeal No. 109 of 1957

Decision Date: 11 April 1962

Coram: N. Rajagopala Ayyangar, Bhuvneshwar P. Sinha, J.R. Mudholkar

In this matter the Supreme Court of India recorded a petition filed by Dr Indramani Pyarelal Gupta against W R Nathu and several others. The judgment was delivered on 11 April 1962, and the bench comprised Chief Justice Bhuvneshwar P Sinha, Justice J R Mudholkar, Justice N Rajagopala Ayyangar, Justice T L Venkata Rama Sinha, Justice Subba Rao and Justice K M Mudholkar. The case has been cited as 1963 AIR 274 and 1963 SCR (1) 721, among other references. The parties’ dispute centered on the validity of a bye‑law adopted by the East India Cotton Association, an association that had been recognised by the Central Government under the Forward Markets Regulation Act 1952. Prior to December 1955 the appellants, who were members of that association, entered into “hedge contracts” for cotton that were to be settled in February and May 1956, these contracts being executed in accordance with the association’s existing bye‑laws. By the close of 1955 a downturn in the forward cotton market was anticipated, prompting the Central Government to issue notifications that required the association to suspend its hedge‑contract business for the February and May 1955 deliveries for brief periods; however, those measures failed to alleviate the market distress. Consequently, on 21 January 1956, invoking section 12 of the Act, the Central Government promulgated a new bye‑law that replaced the earlier bye‑law 52AA of the association. This revised bye‑law conferred upon the Forward Markets Commission, a body established under the Act, the authority to issue a notification that would close out all hedge contracts at rates determined by the Commission. Three days later, on 24 January 1956, the Commission exercised that authority by issuing a notification that terminated every hedge contract, including those already existing on that date, and it fixed the settlement rates for the contracts so terminated. The appellants contended that the amended bye‑law 52AA was ultra vires because the power to close out hedge contracts could not lawfully be vested in the Commission, asserting that the association itself lacked the legal capacity to delegate such a power to the Commission or any other body, and further arguing that the bye‑law could not be applied retrospectively to affect contracts that had already been executed. The Court, by a majority consisting of Chief Justice Sinha, Justices Ayyangar, Mudholkar and Aiyar, held that the amended bye‑law 52AA was not beyond the authority of the Central Government and validly empowered the Commission to close all hedge contracts in cotton, including those that were already in existence. The Court relied on clause (f) of section 4 of the Act, which provides that one of the functions of the Commission shall be to perform such other duties and to exercise such other powers as may be assigned to it by or under the Act, as may be prescribed. The Court observed that the statute imposes no limitation on the nature of the power that may be conferred under this clause, except that it must relate to the regulation of forward trading in goods, and therefore the power vested in the Commission by the amended bye‑law was within the scope of the statutory framework.

In this case the Court stated that the power which may be conferred under clause (f) of section 4 has to relate specifically to the regulation of forward trading in goods. It explained that a limitation on that power could not be imposed by invoking the rule of ejusdem genesis because there was no single positive thread connecting clauses (a) to (e) of section 4. The Court further observed that the proper rule of interpretation for deciding whether a statutory body may be given a particular power is that, unless the nature of the power is inconsistent with the purpose for which the body was created or is expressly contradicted by a specific provision of the Act, any power that furthers the provisions of the Act may be legally conferred.

Applying that test, the Court held that the power created by the amended bye‑law could be validly vested in the Commission. It noted that the power was described as being conferred “under the Act”, a phrase which signified a power delegated to a subordinate law‑making authority that itself had been authorised by the Act. The impugned bye‑law, the Court said, fell squarely within the bye‑law‑making authority granted by sections II and 12 of the Act and did not breach article 64 of the Association’s Articles of Association because article 64 applies only to the Board and imposes no restriction on the Association’s power. The Court cited the authorities Western India Theaters Ltd. v. Municipal Corporation of Poona, [1959] Supp. 2 S.C.R. 71; Hubli Electricity Co. Ltd. v. Province of Bombay, 76 I.A. 57; and Narayanaswamy Naidu v. Krishnamurthi, I.L.R. 1958 Mad. 513 in support of this view.

Further, the Court explained that a proper construction of the amended bye‑law showed that it applied not only to contracts to be entered into in the future but also to contracts already existing. It observed that a statute which may validly enact a law with retrospective effect can, in express terms, confer on a rule‑making authority the power to make a rule or frame a bye‑law that operates retrospectively. In the present case, the power to make bye‑laws affecting subsisting contracts followed as a necessary implication from the language of section 11, and there was no provision in the Act that contradicted this implication.

Per Subba Rao J., the Court added that under section 12(1) the Central Government possessed no power to make a bye‑law with retrospective effect. The provision granting rule‑making power must be strictly construed, and unless it expressly confers a power to make a retrospective bye‑law, such a power is not to be inferred. Even if a necessary implication might permit such a power, the Court held that it could not be inferred in the present circumstances. The Court concluded that it could not be said that unless the provisions of section 12 were given retrospective operation, the object of the legislature would be defeated or the purposes for which the power was conferred could not be fulfilled. The Court further noted that the powers conferred on the Commission under the impugned bye‑law could not be exercised by the Commission under clause (f) of section 4.

The Court observed that the commission could not exercise the power to prepare a bye‑law under clause (f) of section 4. It noted that clauses (a) to (e) of section 4 clearly indicated that the commission’s functions were entirely supervisory and advisory. Consequently, the function described in clause (f) was analogous to those earlier clauses and could be interpreted only as supervisory or advisory. The Court further explained that the commission possessed no administrative authority, no management powers, and no power to interfere with the internal affairs of a registered association, which were the exclusive domain of the association itself. Moreover, the power granted to the commission was not a power “under the Act”; the language did not encompass a rule or a bye‑law and applied solely to an assignment made in exercise of an expressly conferred statutory power. Accordingly, the Court held that the Central Government, under section 12, lacked authority to issue a bye‑law that would assign any function to the commission.

The Court cited several authorities to support this view, including Union of India v. Madan Gopal Kabra (1954) S.C.R. 541; Modi Food Products Ltd. v. Commissioner of Sale’s Tax, U.P., A.I.R. 1956 All. 35; Strawboard Manufacturing Co. Ltd. v. Gupta Hill Workers’ Union (1953) S.C.R. 439; India Sugar & Belineries Ltd. v. State of Mysore, A.I.R. 1960 Mys. 326; C.W. Motor Service (P) Ltd. v. State of Kerala, A.I.R. 1959 Kerala 347; Howell v. Falmouth Boat Construction Co. Ltd. (1951) A.C. 837; The Western India Theatres Ltd. v. Municipal Crporation of the City of Poona (1959) Supp. 2 S.C.R. 71; and Hubli Electricity Co. Ltd. v. Province of Bombay (1948) 76 I.A. 57, all of which were referred to for guidance.

The judgment concerned Civil Appeal No. 109 of 1957, which had been taken on special leave from a Bombay High Court order dated 1 March 1956 in Appeal No. 20 of 1956. The appellants were represented by counsel G. S. Pathak, K. H. Bhabha, H. M. Vakeel and I. N. Shroff, while the respondents were represented by C. K. Daphtary, Solicitor General of India, B. K. Khanna and P. D. Menon. Additional interveners were represented by C. K. Daphtary, Solicitor General of India, S. N. Andley, Rameshwar Nath and P. L. Vohra. The appeal was decided on 11 April 1962 by the Supreme Court, with the judgment delivered by Justice Ayyangar, joined by Justices Sinha, Madholkar and Aiyar, while Justice Subba Rao authored a separate opinion.

Justice Ayyangar summarized that the appeal arose from a petition filed under Article 226 of the Constitution, wherein the appellants challenged the validity of a notification issued by the Forward Markets Commission, a statutory body created under the Forward Markets Regulation Act 1952. The notification had been sent to the authorities of the East India Cotton Association, Bombay, informing them that the continuation of trading in certain forward cotton contracts, including “hedge contracts,” was detrimental to the trade, public interest, and broader economic interests of India, and directed that those contracts be closed and settled at prices fixed by the notification.

The Court noted that the notification issued by the Forward Markets Commission required that the forward contracts in question be closed out and settled at prices determined in the notification. In order to understand the issues raised on appeal, the Court found it necessary to set out briefly certain factual matters. The East India Cotton Association is an association that has been recognised by the Central Government under section 6 of the Forward Markets Regulation Act. The three appellants are members of that association and they conduct their business in the form of a partnership. Before December 1955 the appellants had entered into hedge contracts with other members of the association for settlements that were to take place in February and May 1956. There was no dispute that, at the time the contracts were executed, they complied with the bye‑laws of the association as they then stood. The terms and conditions applicable to forward contracts in cotton, including hedge contracts, and the manner of their implementation, were governed by certain bye‑laws of the association. The particular bye‑law that was relevant to the matters before the Court was bye‑law 52‑AA, which on the date the appellants entered into their contracts read as follows: “52‑A.A. (1) Whether or not the prices at which the cotton may be bought or sold are at any time controlled under the provisions of the Essential Commodities Act, 1955, if the Textile Commissioner with the concurrence of the Forward Markets Commission and after consultation with the Chairman (of the Board), be of opinion that the continuation of hedge trading is likely to result in a situation detrimental to the larger interests of the economy of India and so informs the Board, the Board shall forthwith cause a notice to be posted on the Notice Board to that effect and on the posting of such notice and notwithstanding anything to be contrary contained in these bye‑laws or in any hedge or on‑call contract made subject to these Bye‑laws, the following provisions shall take effect. (2) Every hedge contract and every on‑call contract in so far as the cotton is uncalled thereunder or in so far as the price has not been fixed thereunder entered into between a member and a member or between a member and a non‑member then outstanding shall be deemed closed out at such rate, appropriate to such contract as shall be fixed by the Textile Commissioner and the provisions of Clauses (3), (4) and (6) of Bye‑laws 52A in so far as they apply to hedge and on‑call contracts, shall apply as if they formed part of this Bye‑law. After the affixation of the said Notice on the Notice Board trading in hedge and on‑call contracts shall be prohibited until the Textile Commissioner with the concurrence of the Forward Markets Commission and after consultation with the Chairman, permits resumption.”

The Court further observed that towards the end of 1955 the Chairman of the Association appeared to have apprehended that the forward market in cotton was moving toward a crisis, a situation that was partly caused by the widespread practice of unbridled option business. This apprehension formed the backdrop against which the subsequent actions of the Association and the government were taken.

In this matter the business of trading in cotton contracts, although expressly prohibited by the Act and by the Association’s bye‑laws, continued to be carried on on a large scale. The chairman brought this situation to the attention of the Board members at a meeting held on 16 December 1955 and urged that the problem be given serious consideration. It may be noted that the Government was also anxiously considering measures to resolve or avert the emerging crisis. Accordingly, the Government issued a notification on 23 December 1955, invoking the powers conferred on it by section 14 of the Act, and directed the Association to suspend its business in Indian cotton edge contracts for delivery in February 1956 and May 1956 for a period of seven days, effective from the date of the notification. The temporary suspension did not appear to improve the situation, and before the expiry of the fortnight the Government took further action under the same provision by issuing a notification dated 10 December 1955, which extended the seven‑day suspension by an additional seven days, thereby prolonging the suspension until 6 January 1956. On 6 January 1956, the day on which the suspension of forward business expired, the Board of the Association met and, by unanimous resolution, adopted the following: “In view of the suspension of forward trading by Government, the Board hereby resolves under bye‑law 52 that an emergency has arisen or exists and prohibits, until further notice and subject to the concurrence of the Forward Markets Commission, as from Saturday, 7 January 1956, trading in hedge contracts for February and May 1956 deliveries above a maximum rate of Rs 700 per candy.” Following this resolution, a suit numbered 2/1956 was filed in the original jurisdiction of the High Court at Bombay by a member of the Association who claimed to represent himself and all other members. The suit challenged both the validity of the Government’s notification suspending forward trading and the validity of the Board’s resolution. An application for an interim stay, seeking to restrain the Board from giving effect to its resolution, was made but was refused by the learned trial judge, and an appeal was filed against that refusal. While these proceedings were pending, the Central Government, exercising the powers conferred on it by section 12 of the Act, promulgated a new bye‑law that was published in the Gazette of India (Extra Ordinary) on 21 January 1956, thereby substituting the earlier bye‑law 52 AA. The new bye‑law commenced with the provision: “152 AA (1) Whether or not the prices at which cotton may be bought or sold are at any time controlled under the provisions of the Essential Commodities Act, 1955, if the Forward Markets Commission is of the”

In the notice issued by the Forward Markets Commission it was stated that the Commission considered the continuation of trading in hedge contracts for any delivery to be harmful to the interests of the trade, to the public, and to the broader economic interests of India. Consequently the Commission informed the Chairman that, regardless of any contrary provisions in the existing bye‑laws or in any hedge or on‑call contract made under those bye‑laws, the following measures would become effective. First, every hedge contract and every on‑call contract in which the cotton had not been called or the price had not been fixed, and which related to the deliveries specified in clause (1), and which had been entered into either between two members or between a member and a non‑member, would be deemed to be closed out at a rate appropriate to each contract. The date of closure would be fixed by the Forward Markets Commission. Moreover, the provisions of clauses (3), (4) and (5) of Bye‑laws 52‑A, to the extent that they relate to hedge and on‑call contracts, would be treated as if they were part of the new bye‑law. This new bye‑law was communicated to the Board of the Association on 23 January 1956. The validity of the bye‑law was challenged on several grounds, and the alleged invalidity formed the principal basis for contesting the validity of the Forward Markets Commission’s notification issued under the powers conferred by the bye‑law. On 24 January 1956 the appeal against the order refusing an interim injunction in Suit No 2 of 1956 was settled by the parties on the terms that the resolution dated 6 January 1956 would be deemed valid and that the Board of Directors would meet on 25 January 1958 to consider, under bye‑law 52(2), whether the rate of Rs 700 fixed by that resolution should continue or be waived, with the Board exercising its own judgment. On the same day, 24 January 1956, the Forward Markets Commission exercised the powers granted by the newly enacted bye‑law 52‑AA, which had been promulgated three days earlier, and sent a communication to the Chairman of the Association. In that communication the Commission declared, pursuant to clause (1) of bye‑law 52‑AA of the bye‑laws of the E.I.C.A. Ltd., Bombay, that it was of the opinion that trading in hedge contracts for the February and May 1956 deliveries was detrimental to trade interests, to the public interest and to the larger economic interests of India, and that, under clause (2) of the same bye‑law, the rates prevailing at the time the trading in those contracts was closed on 24 January 1956 were Rs 700 for February delivery and Rs 686 ⅞ for May delivery.

The Court noted that the rates mentioned were to be deemed closed out as of January 25 1956, the date from which the hedge contracts and on‑call contracts for cotton that remained uncalled or whose price had not been fixed would be considered terminated. In response to this action, the three appellants, who were partners conducting a cotton business under the name Indramani Pyarelal Co., filed a petition in the High Court of Bombay under Article 226 of the Constitution on January 27 1956. The petition sought a writ of mandamus, or a direction of a similar nature, against the individual members of the Forward Markets Commission who had been impleaded as respondents. The relief claimed was an order directing the Commission to cancel or withdraw the notification dated January 24 1956, which the petitioners challenged on several grounds. A single learned judge heard the petition and dismissed it by an order dated February 23 1956. The petitioners then appealed to a bench of the High Court, and that appeal was also dismissed. Subsequently, they applied for a certificate of fitness to appeal to this Court, but the application was rejected. Thereafter, they obtained special leave to appeal to this Court, and the matter is now before us.

The counsel for the appellant, Mr Pathak, organized his submissions into three principal heads. First, he argued that the notification of January 24 1956, which had been served on the Board of the Association by the Forward Markets Commission, was ultra vires because by‑law 52AA, as amended by the Central Government on January 21 1956, was invalid. Second, he contended that even if the by‑law were held to be valid, it could not operate retrospectively or be applied retrospectively to affect rights under contracts that were already in existence on the day the amended by‑law was published in the Gazette; it could, at most, be applied only to forward hedge contracts entered into after that date. Third, he maintained that the notification issued by the Forward Markets Commission was improper and mala fide, and therefore it was invalid. The Court expressed that it would be convenient to address these points in the order in which they were presented. The first point raised the question of the validity of by‑law 52AA as amended on January 21 1956. The counsel divided his argument on this matter into two sub‑headings: (a) that, based on a proper construction of the Act, the Forward Markets Commission could not be validly vested with the power conferred by the amended by‑law; and (b) that the Association itself was beyond its authority to confer such power under the amended by‑law 52AA. In other words, the objections were that, given the statutory terms under which the Commission was created, it could not be a proper recipient of the power purportedly granted to it.

In the case, the learned counsel argued that the Forward Markets Commission could not legally receive the power granted by the amended bye‑law 52 AA, and further that the Association was legally incapable of conferring that power on the Commission or any other body. The Court first considered the contention that the Commission was, by law, an improper recipient of the authority created by the bye‑law for issuing the impugned notification. To address this point, the Court examined in detail the relevant provisions of the Act. Section 2(b) defined the term “Commission” to mean “The Forward Markets Commission” established under section 3. Section 3(1) provided that the Central Government could, by a notification in the Official Gazette, establish a Commission called the Forward Markets Commission for the purpose of exercising such functions and discharging such duties as may be assigned to the Commission by or under this Act. The counsel submitted that the function or duty imposed on the Commission by the amended bye‑law 52 AA was not of a character that could be assigned to it “by or under” the Act. Consequently, the meaning of the words “by or under” and the scope and nature of the duties that the Act could assign to the Commission required careful analysis. Section 4 set out the functions of the Commission, and the Court noted that a proper construction of this provision was central to the dispute. Section 4 stated that the functions of the Commission were: (a) to advise the Central Government on the recognition or withdrawal of recognition of any association and on any other matter arising out of the administration of the Act; (b) to observe forward markets and to draw the Central Government’s or any other prescribed authority’s attention to developments of sufficient importance, and to make recommendations thereon; (c) to collect and, when deemed necessary, publish information on trading conditions of goods applicable under the Act, including supply, demand and price data, and to submit periodic reports to the Central Government on the operation of the Act and on forward market activities; (d) to make general recommendations for improving the organization and functioning of forward markets; (e) to inspect the accounts and other documents of any recognised association when considered necessary; and (f) to perform such other duties and exercise such other powers as may be assigned to the Commission by or under the Act, or as may be prescribed. The Court further observed that the expression “prescribed” appearing in clause (f) was defined by section 2(h) of the Act to mean “prescribed by rules made under the Act.” Having set out these provisions, the Court indicated that it would next consider the construction of section 4 in conjunction with the terms of section 3(1), and would also refer to other provisions of relevance, such as section 3(2) which empowers the Central Government to call for periodic returns from recognised associations and to direct the Commission to inspect accounts and submit reports, and section 3(4) which mandates that recognised associations and their members maintain books of account and documents as specified by the Commission, preserving them for a period not exceeding three years.

In this case, the Court noted that the expression at the end of clause (f) had been defined by section 2(h) of the Act to mean “Prescribed by rules made under the Act”. Before analysing the construction of the section in question together with the terms of section 3(1), the Court referred to several other provisions that were relevant. Section 3(2) gives the Central Government the authority to require periodic returns from recognised associations and to order inquiries that it deems necessary. That same provision also empowers the Government to direct the Commission to examine the accounts and other documents of any recognised association or any of its members and to submit a report of its findings to the Central Government, as provided in subsection 3(2)(c). Sub‑section 3(4) states that every recognised association and each of its members must keep books of account and other documents as specified by the Commission; those books and documents must be retained for a period not exceeding three years, as determined by the Commission, and must be available for inspection by the Commission at reasonable times. Section 28 of the Act further provides that the Central Government may, by notification in the Official Gazette, make rules to give effect to the objects of the Act. Sub‑section (2) of that section clarifies that, without limiting the general scope of this rule‑making power, the rules may address several specific matters. These matters include: (a) the terms and conditions of service of members of the Commission; (b) the procedure for making applications for recognition under section 5 and the levy of fees in respect thereof; (c) the procedure for conducting inquiries for the purpose of recognising any association and the form in which recognition is granted; (d) the particulars to be included in the annual reports of recognised associations; (e) the manner in which by‑laws made, amended or revised under this Act must be published for criticism before they take effect; (f) the constitution of the advisory committees established under section 26, the terms of office, the method of filling vacancies, the interval between meetings, the procedure to be followed at meetings, and the matters that the Central Government may refer to the advisory committee for advice; and (g) any other matter that may be prescribed. The submissions made on this point were brief. Counsel argued that the Forward Markets Commission is a statutory body created specifically by the Act, and therefore the powers that may be conferred on the Commission and the duties it may be required to perform are confined to those provided for in the Act. No power beyond those enumerated in the Act may be lawfully attached to the Commission.

Section 4 of the Act enumerates the functions of the Forward Markets Commission under five general headings labelled (a) to (e), and includes a residuary clause labelled (f). The powers listed in sub‑clauses (a) through (e) are essentially either recommendatory or advisory in nature. Consequently, any additional duties or powers that might be assigned to the Commission under clause (f) must either be of the same general character as the advisory or recommendatory powers, or must be similar to the powers specifically enumerated in the preceding sub‑clauses. Counsel for the respondent referred to a number of decisions in which courts had recognised ancillary powers that could be implied from expressly granted powers. In particular, it was argued that courts would not imply a power unless it was absolutely necessary to give effect to an expressly granted power or to avoid nullifying that express grant. The Court considered those decisions to be of no assistance in resolving the present controversy, because the present question does not concern the derivation of an implied power from an express one. Instead, the issue before the Court is the precise scope of the express power conferred by the amended bye‑law 52AA and whether that power can be said to fall within the residual authority provided for in clause (f).

The Court noted that clause (f) contains no intrinsic limitation on the nature of a power that may be conferred, other than the requirement that the power must relate to the regulation of forward‑trading in goods, which is the purpose of the Act. Any limitation therefore must be derived from provisions outside clause (f) of Section 4. When the Court examined sub‑clauses (a) to (e), it found that they could not be grouped together under a single positive genus that would permit the application of the ejusdem generis rule of construction. While it is true that none of those five clauses expressly confer an executive power such as that given by bye‑law 52AA, the absence of such an executive power cannot, by itself, trigger the ejusdem generis rule that counsel relied upon. Conversely, because there is no common positive thread linking clauses (a) through (e) and because, in the negative sense, they do not specifically contain administrative or executive functions, the Court reasoned that the term “other” in clause (f) may be interpreted to include such a function. Counsel further suggested that, even if the ejusdem generis rule did not apply, an allied interpretive rule discussed in the report of Western India Theatres Ltd. v. Municipal Corporation of Poona might be invoked. The Court, however, found no scope for applying that variant in the present context.

In the matter concerning the Corporation of Poona, the Court observed that although the matters expressly referred to might provide some indication of the kind and nature of the power in question, such reference could be invoked; however, the Court considered that, given the surrounding circumstances, there was no scope for applying that particular interpretative variant. The central issue before the Court was whether it is legally permissible to vest a specific power in a statutory body. For that purpose, the appropriate rule of construction, the Court held, is that a power may be conferred on a statutory body unless the nature of the power is incompatible with the purpose for which the body was created or unless a specific provision of the enactment establishing the body expressly or implicitly prohibits that power. Accordingly, any power that furthers the provisions of the Act may be legally vested in the body. Applying this test, the Court found it obvious that the power created by the bye‑law could validly be vested in the Commission. A more substantial argument was raised by counsel, who submitted that a power conferred by a bye‑law made under sections 11 or 12 was not a power “conferred by or under the Act or as may be prescribed.” Counsel correctly pointed out that a power conferred by a bye‑law is not a power “conferred by the Act,” because in context the phrase “conferred by the Act” means a power expressly created or necessarily implied by the Act itself. It was also agreed that a bye‑law framed under sections 11 or 12 does not fall within the phrase “as may be prescribed,” since the term “prescribed” has been defined to mean “by rules under the Act,” those rules being framed under section 28, and a bye‑law does not satisfy that definition. Consequently, the question turned on whether a power created by a bye‑law could be regarded as a power “conferred under the Act.” The Court explained that the expression “under the Act” is well understood: “by” an Act refers to a provision directly enacted in the statute, either explicit in its language or necessarily implied, whereas “under the Act” refers to powers that are not found directly in the statute but are imposed by virtue of subordinate authority empowered by the parent Act. This distinction separates powers exercised directly by the enactment from those exercised indirectly by rule‑making bodies vested with authority by the Act. The Court referred to the decisions of Hubli Electricity Company Ltd. v. Province of Bombay and Narayanaswami Naidu v. Krishna‑Murthi to illustrate that, in this sense, bye‑laws constitute subordinate legislation “under the Act,” a view supported by the language of sections 11 and 12 themselves. Section 11(1) provides: “Any recognised association may, subject to the previous approval of the Central …”

The Court noted that Section 11(1) authorised any recognised association, subject to prior approval of the Central Government, to make bye‑laws for the regulation and control of forward contracts, and that subsection (2) listed the matters on which such bye‑laws could legislate. Subsection (3) described the bye‑laws as those made under this section, while subsection (4) removed any doubt by providing that any bye‑law made under Section 11 must satisfy the conditions of prior publication prescribed by law, and that, once approved by the Central Government, the bye‑law had to be published in the Gazette of India as well as in the Official Gazette of the State where the association’s principal office was situated. The Court then turned to Section 12, under which the impugned bye‑law had been made, and observed that subsection (2) required that any bye‑law made or amended pursuant to this section also be published in both the Gazette of India and the State Gazette, and that, upon such publication, the bye‑law would have effect as if it had been made or amended by the recognised association itself. Subsection (4) of Section 12 reiterated that the making, amendment or revision of any bye‑law under this section was always subject to the condition of prior publication. Considering these provisions, the Court held that it was untenable to argue that, although the bye‑laws were rules made by an association under Section 11 or compulsorily made by the Central Government under Section 18 as the association’s bye‑laws, they were not subordinate legislation under Sections 11 or 12. Accordingly, the Court concluded that the bye‑laws fell squarely within the expression “under the Act” in clause 4(f). The Court further observed that it did not perceive Mr Pathak to dispute this basic proposition. However, Mr Pathak contended that because clause (f) specifically provided for powers conferred by “rules” using the phrase “or as may be prescribed,” the term “rules” was effectively taken out of the reach of the words “under the Act.” He argued that this construction implied that every power given to a subordinate law‑making body should be excluded from the expression, and that therefore the phrase “by the Act” ought to be interpreted as meaning “directly by the Act,” i.e., by positive enactment, while “under the Act” should refer only to powers that could be inferred by necessary implication from the Act’s provisions. As an illustration, counsel referred the Court to the power of the Central Government to direct the Commission, under Section 8(2)(c), to inspect the accounts and other documents of any recognised association or its members and to submit a report to the Central Government, and suggested that this power would be covered by the words “under the Act.” The Court found itself unable to accept this line of reasoning.

The Court examined the contention that the provision identified as clause 8 (2)(c) represented a power or duty that would be encompassed by the expression “under the Act”. It concluded that it could not accept this submission. The Court explained that, if the phrase “as may be prescribed” were omitted, the words “under the Act” might be read to include powers that could be created both by bye‑laws and by rules. However, the Court could not discern a logical basis for excluding powers conferred by bye‑laws merely because the provision made a specific reference to powers created by rules. The Court acknowledged that the inclusion of the phrase “as may be prescribed” after the broad reference to powers “under the Act” creates a slight tautology, but it held that a rule of construction should not be adopted merely to eliminate redundancy if such a rule would narrow the scope of the language. Accordingly, the Court stated that the greatest that could be said is that, although in their ordinary sense the words “under the Act” would normally cover both rules framed under section 28 and bye‑laws framed under sections 11 or 12, the mention of “rules” following the phrase might be treated as redundant because the succeeding words already specify them. The Court rejected the further proposition that, because part of the expression was redundant, the entire phrase “under the Act” should be discarded and replaced by a restricted interpretation of “by the Act” that would exclude powers implied by necessary implication. The Court found such an interpretation to be unreasonable and unnatural. It added that its own construction of section 4 (f) is supported by the clear language of section 3 (1), which does not suffer from the ambiguity created by the phrase “as may be prescribed” in section 4 (f). Consequently, the Court expressed no hesitation in holding that the Forward Markets Commission was not incompetent in receiving the power conferred upon it by bye‑law 52AA as amended. The Court then turned to the subsequent submission that the Association lacked authority to frame the bye‑law and that the powers of the Central Government under section 12 and the powers of the Association under section 11 were co‑extensive, rendering the bye‑law incapable of conferring any power on the Commission. This contention was advanced on two grounds: first, that a bye‑law of the type under dispute did not fall within section II of the Act; second, that, considering the provisions of the Association’s Articles of Association, the bye‑law exceeded the Association’s authority to frame such rules. The Court indicated that it would address these points in that order, noting that the first objection naturally concerned whether the bye‑law could be understood within the ambit of section 11 of the Act.

The Court observed that the contested bye‑law could be understood within the meaning of section 11 of the Act. Section 11(1) provides that any recognised association, after obtaining prior approval of the Central Government, may make bye‑laws for the regulation and control of forward contracts. The Court noted that there is no dispute that the impugned bye‑law was intended to regulate and control forward contracts, and because its language is broad, it clearly falls within the category of bye‑laws contemplated by section 11(1). For further illustration, the Court referred to bye‑law 52AA, which had been amended by the impugned bye‑law. Bye‑law 52AA vested the Textile Commissioner, with the concurrence of the Forward Markets Commission and after consultation with the Chairman of the Board, with authority to direct the enclosure of hedge contracts and to fix the rates at which such contracts could be closed out. The validity of that provision had not been challenged in the present proceedings. The appellant, Mr Pathak, admittedly argued that even the earlier bye‑law could be contested to support his claim that the amended bye‑law was ultra vires. The Court, however, pointed out that it has always been presumed that bye‑laws granting external authorities the power to interfere with forward dealing fall within the scope of the association’s power to make bye‑laws under section 11. Apart from this general provision, section 11(2) enumerates specific matters that may be covered, including fixing, altering or postponing settlement days; determining and declaring market rates such as opening, closing, highest and lowest rates for goods; regulating fluctuations in rates and prices; and addressing emergencies in trade, including the power to fix maximum prices. Since the power of the Central Government to make bye‑laws under section 12 is co‑extensive with that of the associations, reference to the latter was unnecessary. Before examining the detailed arguments, the Court found it useful to list some unchallenged bye‑laws of the Association that demonstrate how it operates in emergencies. For example, bye‑law 52, which remains in force, provides that if the Board, in its opinion, determines that an emergency has arisen or exists, it may, by a resolution passed by a specified majority and subsequently confirmed, prohibit trading in hedge contracts for any delivery or, alternatively, prohibit all trading in such contracts for a specified period.

In this case the Court reproduced the wording of Bye‑law 52A. The provision stated that if the Board, at a meeting specially called for that purpose, resolved that a state of emergency existed or was likely to arise such that, in the Board’s opinion, free trading in forward contracts would become extremely difficult, the Board was obliged to inform the Forward Markets Commission. Upon receiving an indication from the Forward Markets Commission that it agreed with the Board’s resolution, the Bye‑law declared that, notwithstanding any contrary provision in the Bye‑laws or in any forward contract governed by those Bye‑laws, certain actions would take effect. First, the Board, at another specially convened meeting, would fix a date for the measures contemplated, determine the settlement process for forward contracts, and designate a special Settlement Day. Second, every hedge contract entered into either between two members or between a member and a non‑member that remained outstanding on the date fixed under the first clause would be demand‑closed out at the rate appropriate to such contracts as determined under the settlement process fixed in the first clause. After this excerpt the judgment noted that the subsequent Bye‑law 52AAA followed. The Court observed that, apart from the amendment represented by this group of Bye‑laws that provided for emergencies under sub‑clause (o) of section 11(2), there was no dispute that an emergency had arisen in the forward market and that the impugned Bye‑law was framed to address that contingency. It was also not contested that the method employed by the impugned Bye‑law—namely, the closing out of existing contracts—was not the usual method ordinarily used for such purposes.

Continuing its analysis, the Court held that if the Bye‑law indeed constituted a provision for an emergency within section 11(2)(o), then all matters that could be incorporated in a Bye‑law of that nature would necessarily apply to the resolution of the emergency, and consequently the Court could not accept the submission of Mr Pathak that the Bye‑law was invalid. The Court compared the impugned Bye‑law 52AA with the earlier version it replaced and identified the principal distinction: the earlier arrangement vested the authority to halt forward trading, to close out contracts, and to fix the closure rate in the Textile Commissioner, who acted with the concurrence of the Forward Markets Commission. Under the amended Bye‑law 52AA, that power was vested directly in the Forward Markets Commission itself. The arguments presented to the Court focused not on the propriety of the measure but on the constitutional validity (vires) of a provision that placed the power to close out contracts, by means of a notification, in the Commission. The Court noted that, apart from a particular argument to be considered separately, it saw no reason why a power that could validly be conferred upon the Textile Commissioner or exercised by the Board of the Association under a Bye‑law made pursuant to section 11 could be beyond the authority to enact Bye‑laws under the same section. Accordingly, the Court found the impugned Bye‑law to be within the legislative competence granted by section 11 of the Act.

The Court observed that the mere fact that the authority empowered under the provision is the Forward Markets Commission does not render the by‑law invalid. It held that by‑law 52AA falls squarely within the power to make by‑laws conferred by section 11 of the Act, and therefore it is also within the authority granted by the association’s own governing documents.

It was then argued that the amended by‑law 52AA is void because it allegedly violates the Articles of Association of the Association by effecting an impermissible delegation of powers that originally belong to the Board of the Association under its Memorandum of Association. In support of this contention, counsel relied upon clause 64 of the Articles, contending that clause 64 delineates the limits within which the Board may delegate its powers. He asserted that assigning the power to act to the Forward Markets Commission is contrary to, and inconsistent with, the powers granted to the Association by that clause.

The Court noted that, if the counsel’s submission were accepted, the result would be that not only the amended by‑law 52AA but also the original version of the by‑law would be invalid. The counsel, however, maintained that he was not barred from raising this argument, even though it had not been presented before the lower court. The Court indicated that, because the issue was raised for the first time before it, the matter would be examined and a determination would be made.

After reviewing the argument, the Court concluded that the objection lacked merit. It reproduced the full text of clause 64, which provides: “The Board may delegate any of their powers, authorities and duties to committees consisting of such members or member, of their body or consisting of such other members or members Associate Members, Special Associate Members or Temporary Special Associate Members of the Association not being Directors, or partly of Directors and partly of such other members and/or Associate Members, Special Associate Members or Temporary Special Associate Members as the Directors may think fit. Any Committee so formed shall in the exercise of the powers so delegated conform to any regulation that may from time to time be imposed on it by the Directors.” The Court found that this clause permits the Board to delegate powers to committees, and it does not prohibit delegation of authority to an external body such as the Forward Markets Commission.

Turning to the Association’s Memorandum of Association, the Court examined paragraph III, which sets out the objects for which the Association was established. Among those objects, clause (e) authorises the Association “to make from time to time by‑laws for—opening and closing of markets in cotton and the times during which they shall open or close; the making, performance and determination of the prohibition of specified classes of dealings and the time during which such prohibition shall operate; the provision for dealing with ‘Croners’ or ‘Bear Raids’ in any and every kind of cotton and cotton transactions so as to prevent or stop or mitigate undue speculation inimical to the trade as a whole; the course of business between Original Members between themselves or between any of them on the one hand, and their constituents on the other hand; the forms of contracts between them and their rights and liabilities to each other in respect of dealings in cotton.” The Court observed that the Memorandum expressly empowers the Association to formulate by‑laws covering the matters raised, and that the power to delegate certain functions is compatible with the authority granted under the Memorandum and the Articles. Consequently, the Court found no basis to declare by‑law 52AA invalid on the ground of an unlawful delegation of power.

The Court examined the provisions governing the making of bye‑laws in Articles 73 and 74 of the Association’s Articles of Association. Article 73 provides that, subject to any statutory provisions then in force, the Board may pass and give effect to bye‑laws it deems to be in the interest of, or conducive to, the objects of the Association. Article 74, on the other hand, expressly declares that notwithstanding the general powers to make bye‑laws conferred by the Memorandum of Association and by these Articles, the authority to make, alter, add to or rescind bye‑laws—including the power to do so with respect to any of the matters listed in the article—remains with the Association itself. Sub‑paragraph (7) of Article 74 repeats, inter alia, the contents of Paragraph III(e) of the Memorandum of Association, which authorises the Association to determine matters such as market opening and closing times, prohibition of certain classes of dealings, and the regulation of speculative practices.

Mr Pathak argued that, under Article 64, the power to make a bye‑law was vested solely in the Board, because Article 64 places a limitation on the Board’s powers. He contended that if the power to make bye‑laws were not confined to the Board, but could also be exercised by the Association, the limitation in Article 64 would be inapplicable and his argument would lose its force. The Court found that Article 73 makes clear that the Board’s authority to frame bye‑laws does not diminish the separate authority expressly conferred on the Association. Article 73 states that the Board’s powers “shall not derogate from the powers hereby conferred upon the Association,” which may also, for the same purpose and from time to time, pass and bring into effect new bye‑laws, rescind, alter or add to existing bye‑laws by a resolution passed at a General Meeting. Such resolution must be approved by at least a two‑thirds majority of the members present and voting, and the meeting must be preceded by a minimum fourteen‑day notice indicating the member’s intention to propose the making, alteration or addition of a bye‑law. Consequently, if the Association itself can enact bye‑laws, the limitation in Article 64 applies only to the Board and does not constrain the Association’s powers. The Court therefore rejected the contention that the impugned bye‑law contravened the Association’s rules on the basis of Article 64.

Mr Pathak further contended that the impugned bye‑law was invalid because it operated retrospectively. He presented this claim under two headings, the first of which relied on the principle that a legislative enactment is not to be construed as retrospective unless it contains express language or necessary intendment to that effect. The Court noted this argument but did not address it in this portion of the judgment, indicating that the construction of the bye‑law would be considered in subsequent discussion.

The argument presented by the petitioner was that a statutory enactment could not be regarded as retrospective unless it explicitly stated so or was necessarily intended to have that effect. Accordingly, the petitioner contended that the impugned bye‑law should be interpreted to apply only to hedge contracts entered into after the date on which the bye‑law became operative, and that, if that construction were correct, the notification issued by the Forward Markets Commission would have exceeded the authority granted to the Commission by the new bye‑law. The Court was wholly unable to accept this construction. The opening paragraph of the bye‑law, by its very wording, describes the consequences of a notification issued by the Forward Markets Commission. It provides that if the Chairman is notified that the continuation of trading in hedge contracts for any delivery, etc., is detrimental to the interests of the general public or to the larger interests of the economy of India, then, notwithstanding anything to the contrary contained in the bye‑laws of the Association or in any hedge contract, the provisions set out in the second paragraph shall apply. If one were to consider only the first paragraph, a limited argument might be made that existing contracts were to be excluded; however, the phrase “notwithstanding anything to the contrary contained in any hedge … contract” clearly works against such a contention.

The apparent ambiguity is resolved by the language of the second paragraph, which expressly refers to “every hedge contract” and “every on‑call contract” in so far as cotton is uncalled thereunder or the price has not been fixed thereunder. This wording leaves no doubt that contracts already in existence at the time of the notification were within the scope of the bye‑law and were intended to be affected. The Court noted that this intention is further reinforced by the references in part (2) to the provisions of old clauses (3), (4) and (6) of bye‑law 52A. Bye‑law 62A deals with situations where the Board of the Association resolves that a state of emergency exists or is likely to occur, making free trading in forward contracts difficult, and, upon obtaining concurrence of the Forward Markets Commission, the Board may, notwithstanding anything to the contrary contained in the existing bye‑laws, fix a date, settlement prices and a special settlement day for forward contracts. Clause (3) of bye‑law 52A provides that all differences arising out of every such contract between members shall be paid through the Clearing House on the settlement day fixed under clause (1)(c). Clause (4) states that all differences arising out of every such contract between a member and a non‑member shall become immediately due and payable. Clause (6) provides that in hedge and on‑call contracts entered into between a member and a non‑member, any margin received shall be adjusted and the whole or the balance thereof shall be immediately refundable. The Court therefore concluded that the machinery for resolving emergencies, as contemplated by bye‑law 52A, necessarily includes the suspension of forward business together with the closing out of existing hedge and on‑call contracts, and that the argument that the amended bye‑law should apply only to future contracts must be rejected.

The Court noted that clause 52A(6) of the bye‑law provides that in hedge and on‑call contracts entered into between a member and a non‑member, and in contracts to which clause 5 applies, any margin received must be adjusted and the whole amount or the balance, as the case may be, shall become immediately refundable. The Court explained that the complete mechanism for dealing with emergencies, as contemplated by bye‑law 52A, includes both the suspension of forward business and the closing out of forward contracts of hedge and on‑call types whose volume or nature gave rise to the emergency. This mechanism operates on the premise that the crisis cannot be addressed unless existing contracts are terminated and, metaphorically, a new chapter is begun. Accordingly, the Court held that the combined effect of bye‑laws 52AA and 52A rests on this principle, and therefore the contention that, when given a reasonable construction, the amended bye‑law should apply only to contracts to be entered into in the future and not to contracts already subsisting must be rejected.

Mr Pathak argued that, if the earlier argument were incorrect, the impugned bye‑law was nevertheless invalid and ultra vires of the Act because it purported to operate retrospectively, thereby affecting vested rights under contracts that were already in existence on the date the bye‑law came into force. He referred to a passage in the fifth edition of Craies’ Statute Law (page 366), which states: “Sometimes a statute, although not intended to be retrospective, will in fact have a retrospective operation. For instance if two persons enter into a contract, and afterwards a statute is passed which, as Cockburn, C.J., said in Duke of Devonshire v. Barrow, etc., Co. (1877) 2 Q.B.D. 286, 289, ‘engrafts an enactment upon existing contracts’ and thus operates so as to produce a result which is something quite different from the original intention of the contracting parties, such a statute has, in effect, a retrospective operation.” The Court observed that the bye‑law, insofar as it requires existing contracts to be closed out at a price not originally contracted for but fixed by law, is unquestionably retrospective.

Mr Pathak further submitted that while a legislature possessing plenary power may enact a law with retrospective effect, subordinate legislation—whether a rule, a bye‑law, or a notification—cannot be made to have such retrospective operation; otherwise it would be ultra vires and liable to be struck down. He relied on the decision of the Mysore High Court reported in AIR 1960 Mys 326 to support this position. The Court remarked that it was not necessary to canvass the correctness of that decision or the broad propositions it advanced, and affirmed that it is settled law that a subordinate legislative instrument may not validly operate retrospectively in the manner alleged.

It was held that a statute which validly possesses the authority to enact a law with retrospective effect may in clear terms also validly confer on a rule‑making body the power to issue a rule or to frame a bye‑law that operates retrospectively, and the Court noted that there was no indication that Mr. Pathak contested this principle. If that proposition were accepted, the same result would follow when the authority to make a rule or a bye‑law with “retrospective effect” for the purpose of affecting pending transactions is not expressed in explicit words but is instead implied by the necessary intendment of the parent Act. In the present matter, if the power to frame a bye‑law that would apply to contracts existing on the date the bye‑law was framed could be read as an essential implication of section 11, it would be unnecessary to address the broader issue of whether, and under what circumstances, subordinate legislation possessing retrospective effect could be validly made. Before advancing further, the Court found it necessary to consider a submission that, under the Act, there was in fact a contrary indication to the idea that any power to make a bye‑law affecting rights under existing contracts had been conferred. In that respect, Mr. Pathak directed the Court’s attention to sections 16, 17 and 19 of the Act, which the Act itself uses to make special provision for affecting such rights. Section 16(a) provides that every forward contract for the sale or purchase of any goods specified in a notification, entered into before the date of the notification and still to be performed after that date, and which does not conform to the provisions of section 15, shall be deemed to be closed out at a rate the Central Government may fix for that purpose. Section 17(3) states that where a notification has been issued under sub‑section (1), the provisions of section 16 shall, unless the notification says otherwise, apply to all forward contracts for the sale or purchase of any goods specified in the notification, entered into before the date of the notification and remaining to be performed after that date, in the same way as they apply to contracts covered by section 15. Section 19(2) declares that any option in goods entered into before the date on which this section comes into force and which remains to be performed, whether wholly or partly, after that date, shall to that extent become void. Relying on these provisions, the submission was that the Act had expressly provided for the retrospective operation of certain notifications so as to affect rights under contracts that were already in existence, and that in situations where no such specific provision existed, a bye‑law or a notification could not have that effect.

The Court rejected the contention that, because there was no explicit provision in the Act, a bye‑law or a notification could not be given retrospective effect. It observed that the very existence of provisions within the Act that permit the alteration of contracts already in existence shows that the legislature intended to allow such measures where a crisis in forward trading demanded decisive action. In the Court’s view, the closure of existing forward contracts was regarded as a necessary instrument for exercising control over the market and for enabling the restoration of normal, healthy trading conditions. Consequently, the Court examined sections 16, 17 and 19 and found that none of these sections indicated any restriction on the Association’s authority to enact a bye‑law that could operate retrospectively. The question, therefore, was whether the power to make such a bye‑law was conferred by section II itself. After considering the language of section II, the Court concluded that the power to frame an emergency bye‑law—such as bye‑law 52A—indeed includes the authority to affect contracts that were already subsisting, so as to resolve a crisis in the forward markets. The Court referred again to the terms of bye‑law 52A, which expressly state that in an emergency of the type described, it is not practicable to rescue the forward market without (a) terminating forward trading and (b) closing out the existing contracts in order to begin anew. Under section 11(2), the Association is empowered to make bye‑laws dealing with emergencies in trade, including the power to fix maximum and minimum prices, and this must be read together with clause (g), which authorises the regulation of the entering into, performance, rescission and termination of contracts.

The Court held that the language of section 11 plainly anticipates the making of a bye‑law that regulates the performance, rescission and termination of contracts, and that such regulation can only refer to rights under contracts that are subsisting at the time the bye‑law is enacted. Accordingly, the provision authorises a bye‑law to operate retrospectively insofar as it alters the rights of parties to existing contracts. The Court further emphasised that the central issue under section 11 of the Act is the power of the Association to frame a bye‑law; if the Association can validly enact such a bye‑law, then, under section 12, the Central Government would possess a similar power. No argument was presented to demonstrate that the Association lacked this authority. The Court also noted another perspective: the contracts entered into by the respondents were purported to be governed by the bye‑laws then in force, and any amendment to those bye‑laws would, by implication, be incorporated into the contracts themselves, thereby pre‑cluding a claim that a new bye‑law infringed any vested rights. Having already determined the validity of the bye‑law within the scope of sections II and 12, the Court found it unnecessary to pursue this additional line of reasoning further.

The Court observed that any new by‑law would have to be contemplated and provided for by the contract itself, and therefore it would be inaccurate to say that the new by‑law altered any rights that had already accrued under an existing contract. When the by‑laws were changed, those changes were incorporated into the contracts, leaving no room to argue that a vested right had been infringed. However, having already decided that the by‑law was valid because it fell within the powers conferred by sections 11 and 12, the Court saw no need to pursue this line of reasoning further or to base its decision on it. The remaining issue was the challenge to the notification on the ground that it had been issued in bad faith. The allegation of bad faith was that the impugned notification was released to prevent the Board of Directors of the Association from exercising their judgment, as they were required to do under the terms of the Consent Memo that was filed in the appeal from the judgment in C.S. 2 of 1956, which had been disposed of on 24 January 1957. In response to this allegation, the Chairman of the Forward Markets Commission filed an affidavit stating that, in the prevailing market conditions, the continuation of futures trading was detrimental to the interests of the trade. He further indicated that the Commission had reached a conclusion on this matter before by‑law 52‑AA was amended, and that the issue of closing out existing contracts had been under consideration by the Association’s Board since the beginning of January 1956. The amendment of by‑law 52‑AA was therefore intended to enable the Commission to take action to correct the situation, and the Commission acted immediately after the amended by‑law came into force by issuing the present notification. The affidavit also noted that the freedom given to the Association to consider the matter under the terms of the Compromise Memo had been taken into account before the notification was issued. The High Court judges accepted this explanation of the circumstances surrounding the issuance of the notification and concluded that the petition did not demonstrate any inference of bad faith. The Supreme Court agreed fully with the High Court’s assessment, finding that no personal motive or bad‑faith intent could be attributed to the members of the Commission. Consequently, the Court held that there was no basis for challenging the notification on the ground that it was not issued bona‑fide. Having addressed all the points raised by counsel for the appellants, the Court concluded that the appeal had no merit.

The judge expressed regret at being unable to agree with the judgment prepared by the fellow judge Rajagopala Ayyangar. Because the facts had already been fully set out in the earlier judgment, the judge did not repeat them except where necessary to understand the two points on which an opinion would be offered. The appellants were engaged in the cotton trade under the name and style of Indramani Pyarelal Gupta & Co. That firm was a member of the East India Cotton Association Limited, which qualified as a recognized association within the meaning of the Forward Contracts (Regulation) Act, 1952 (hereinafter “the Act”). The Association had been formed, inter alia, to promote and regulate cotton trade and to provide a cotton exchange and a clearing house. Under the Act the Central Government constituted the Association, and the respondent acted as its manager while respondents 2 and 3 were members of the Association. Before 21 January 1956, on behalf of themselves and their constituents, the appellants entered into hedge contracts for cotton deliveries scheduled for February 1956 and May 1956, settling those contracts with other members of the Association in accordance with its bye‑laws. At the time those contracts were executed, bye‑law 52‑AA provided that, irrespective of whether cotton prices were controlled under the Essential Commodities Act, 1955, if the Textile Commissioner, with the concurrence of the Forward Markets Commission and after consultation with the Chairman, considered that continued hedge trading would be detrimental to the larger interests of the Indian economy, the Commissioner could inform the Board, after which the Board would post a notice on the notice board. Upon posting such a notice, and notwithstanding any contrary provisions in the bye‑laws or in any hedge or on‑call contract, the following provisions would take effect: every hedge or on‑call contract in which the cotton remained uncalled, or for which the price had not yet been fixed, and which was outstanding between a member and another member or between a member and a non‑member, would be deemed closed out at a rate to be fixed by the Textile Commissioner, and the provisions of clauses (3), (4) and (6) of bye‑law 52‑A would apply as if they formed part of the new bye‑law. After affixing the notice, trading in hedge and on‑call contracts would be prohibited until the Textile Commissioner, again with the concurrence of the Forward Markets Commission and after consulting the Chairman, permitted its resumption.

On 21 January 1956, the Central Government, exercising the power conferred on it by section 12 of the Act, issued a notification that a new bye‑law 52‑AA would replace the earlier version of bye‑law 52‑AA. The substituted bye‑law read that, regardless of any price control under the Essential Commodities Act, 1955, if the Forward Markets Commission deemed that the continuation of trading in hedge contracts for any specified delivery would be detrimental to the interests of trade, the public, or the broader economy of India, and so notified the Chairman, then, notwithstanding any contrary provisions in the existing bye‑laws or in any hedge or on‑call contract made subject to those bye‑laws, the specified provisions would take effect. Specifically, every hedge or on‑call contract in which cotton remained uncalled and relating to the delivery(s) noted in clause (1), and which was outstanding between a member and another member or between a member and a non‑member, would be deemed closed out at a rate fixed by the Textile Commissioner, with the applicable clauses of the previous bye‑law deemed to form part of the new regulation. This governmental action thus altered the regulatory framework governing the appellants’ hedge contracts at the very time those contracts were being performed.

The Central Government, exercising the authority granted by section twelve of the Act, issued a notification on twenty‑first January 1956 that a new bye‑law numbered 52‑AA would replace the earlier bye‑law bearing the same number. The text of the new bye‑law comprised two principal clauses. Clause one stipulated that, irrespective of whether the prices for buying or selling cotton were at any time regulated under the Essential Commodities Act, 1955, the Forward Markets Commission could, if it considered that the continuation of trading in hedge contracts for any delivery or deliveries would be detrimental to the interests of trading, to the public, or to the broader economy of India, notify the Chairman of such a view. Upon such a notification, the bye‑law declared that, notwithstanding any contradictory provisions contained in the existing bye‑laws or in any hedge or on‑call contract made subject to those bye‑laws, the provisions set out in clause two would become effective. Clause two provided that every hedge contract and every on‑call contract, insofar as cotton remained uncalled under them and relating to the deliveries identified in clause one, and entered into between a member and a member or between a member and a non‑member, would be deemed to be closed out at a rate appropriate to each contract. The rate and the effective date were to be fixed by the Forward Markets Commission, and the provisions of clauses three, four and six of bye‑law 52‑A, insofar as they applied to hedge and on‑call contracts, would be treated as if they formed part of the new bye‑law.

On twenty‑four January 1956, acting under the powers conferred by the newly notified bye‑law, the Forward Markets Commission issued a notification that all contracts pertaining to the February 1956 and May 1956 settlements were to be closed out at the rates specified therein. The appellants subsequently filed a petition for a writ of mandamus in the High Court of Judicature at Bombay, seeking an order that the Commission withdraw or cancel the notification dated twenty‑four January 1956. The petition was dismissed at first instance by Justice Coyajee. The appellants appealed this dismissal, and the appeal was also dismissed by a division bench comprising Chief Justice Chagla and Justice Tendolkar. Consequently, the appellants brought the matter before this Court on appeal.

The Court indicated that it would limit its consideration to two specific questions, for determination of which would decide whether the appeal should be allowed, and no other issue would arise for adjudication. The first question was whether, under subsection one of section twelve of the Act, the Central Government possessed the power to make a bye‑law that would have retrospective effect. The second question concerned whether, under section four, clause f, of the Act, the Forward Markets Commission could exercise a power that had been assigned to it by a bye‑law made by the Government pursuant to section twelve. Before addressing the scope of the Central Government’s authority under subsection one of section twelve, the Court found it necessary to examine whether the new bye‑law notified on twenty‑first January 1956 operated retrospectively. It noted that there were material differences between the old bye‑law 52‑AA and the newly substituted version, differences that would be essential to the analysis of the retrospective nature of the new regulation.

Under the new bye‑law the Court observed that every hedge contract which was outstanding at the moment the bye‑law became effective was to be deemed closed out at rates that would be fixed by the Textile Commissioner. By contrast, the old bye‑law required the Textile Commissioner to form his opinion only after obtaining the concurrence of the Forward Markets Commission and after consulting the Chairman of the Board. The new bye‑law transferred the sole authority to form that opinion to the Forward Markets Commission, removing the involvement of the Textile Commissioner in that step. In the earlier regulation the opinion had to address whether hedge trading was likely to produce a result detrimental to the larger interests of the economy of India, whereas the later provision required the opinion to consider whether the continuation of trading in hedge contracts would be detrimental to the interests of trading, to the public interest, or to the larger interests of the economy of India. The old rule examined the question in relation to hedge trading per se; the revised rule examined the question in relation to the continuation of trading in hedge contracts for any delivery or deliveries. The opinion under the old bye‑law was communicated to the Board for action, while under the new bye‑law the opinion was to be notified to the Chairman. Under the previous bye‑law, trading in hedge and on‑call contracts could be resumed if the Textile Commissioner, with the concurrence of the Forward Markets Commission and after consultation with the Chairman, granted permission; the new bye‑law omitted any provision allowing such resumption.

The Court therefore concluded that the power to close out a contract under the new bye‑law differed from that under the old bye‑law with respect to the purpose of the closure, the authority empowered to issue the closure, and the consequences that followed. It was not correct to describe the changes as merely inconsequential; the new bye‑law altered an essential term of contracts that had been entered into before its commencement, namely the mode of performance, and thereby exhibited the characteristic of retroactivity. Referring to Craies on Statutes (5th Edition, p. 366), the Court noted that when a contract’s performance becomes impossible, the law treats the contract as frustrated by a supervening impossibility, and consequently the statute operates retrospectively. The same work, at p. 367, explained that this principle has been applied to contracts whose performance, as contemplated by the parties, becomes impossible because of a change in the law. Accordingly, the Court held that the bye‑law, insofar as it sought to affect the mode of performance of pre‑existing contracts, was certainly retrospective in operation. For the purposes of the present enquiry, the Court assumed that the bye‑law could not be interpreted as applying only to contracts entered into after its commencement.

The Court began by assuming for the purpose of the case that the bye‑law in question could not be interpreted so narrowly as to apply only to contracts that were concluded after the bye‑law had come into force. Accepting that assumption raised the further issue of whether the Central Government possessed the authority to enact a bye‑law under section 12(1) of the Act with retrospective effect. Section 12(1) of the Act provides that the Central Government may, either on receipt of a written request from the governing body of a recognised association or if it deems it expedient, make bye‑laws concerning any of the matters specified in section II or amend any bye‑laws previously made by that association under that section. Section 11, on the other hand, lists the matters in respect of which recognised associations are permitted to formulate bye‑laws for the regulation and control of forward contracts. The Court observed that neither section 12 nor section 11 expressly authorises the creation of a bye‑law that operates retrospectively. Consequently, both provisions could be fully given effect only if the power to make bye‑laws were understood to be limited to prospective operation—that is, to produce regulations that would not disturb any vested rights of parties to existing contracts.

Having framed the statutory context, the Court then examined whether the Central Government, to which the legislature had delegated the power to make bye‑laws, could exercise a power that was not expressly conferred upon it to give those bye‑laws retrospective effect. Counsel for the respondents argued that because the legislature itself could enact laws with retrospective operation, a delegated authority should be able to do the same. The Court rejected this contention, emphasizing the essential distinction between a legislature exercising constitutional powers and a body that has been entrusted by the legislature with the limited function of making subordinate legislation. Article 246 of the Constitution endows the legislature with a plenary law‑making power, subject only to constitutional limitations and the entries in the Seventh Schedule. In Union of India v. Madan Gopal Kabra, the Court held that the legislature may always legislate retrospectively unless there is a specific constitutional prohibition. However, the Court cautioned that this rule could not be automatically extended to the Central Government when it exercises delegated legislative authority, because the scope of its delegated power is not co‑extensive with the plenary power of Parliament. This distinction was underscored by the Allahabad High Court in Modi Food Products Ltd. v. Commission of Sales‑Tax, U.P., where the learned judges observed that “a legislature can certainly give retrospective effect to pieces of legislation passed by it but an executive Government exercising subordinate and delegated legislative powers cannot make legislation retrospective in effect unless that power is expressly conferred.” The Court further noted that similar reasoning had been applied in Strawboard Manufacturing Co. Ltd. v. Gutta Mill Workers, reinforcing the principle that retrospective operation requires explicit authority.

In the Union case a question was presented concerning the authority of the Governor of Uttar Pradesh, who had referred an industrial dispute to a person nominated by him and had directed that the award be submitted no later than a specified date. The issue was whether the Governor could, after the fact, extend the deadline for the making of the award so that an award rendered after the prescribed date could be validated. The argument in support of such an extension relied upon section 21 of the Uttar Pradesh General Clauses Act, 1904. The contention was that the power of amendment and modification granted to the State Government by that provision might be exercised with retrospective effect, thereby allowing the deadline to be altered retroactively.

The Court rejected this contention. Justice Das, who at that time sat as a judge of the High Court, observed that although the order dated 26 April 1950 did not expressly purport to modify the earlier order of 18 February 1950, the statute did not contain any explicit provision permitting the amendment power to operate retrospectively. Consequently, an order of amendment or modification issued under section 21 could not, by virtue of that section, have retrospective effect. The Court therefore held that the decision constituted authority for the principle that, unless a statute expressly confers on the Government the power to make an order with retrospective effect, the Government cannot exercise such a power.

The Mysore High Court, in a detailed judgment in India Sugar and Refineries Ltd. v. State of Mysore, addressed a similar problem that now required consideration. In that case the Government issued three notifications dated 9 April 1956, 15 October 1957 and 13 February 1958, purportedly acting under section 14(1) of the Madras Sugar Factories Control Act, 1949. The notifications imposed a cess on sugarcane brought to and crushed in the petitioner’s factory for the crushing seasons 1955‑56, 1956‑57 and 1957‑58 respectively. The question raised was whether, under section 14(1), the Government possessed the authority to issue notifications that imposed a cess on sugarcane processed during periods that preceded the dates of the notifications themselves.

Chief Justice Das Gupta, delivering the judgment of the division bench, held that the Government could not exercise such retrospective power. The learned Advocate General, appearing for the State, put forward an argument similar to that now raised before this Court. He contended that when the Legislature confers upon the Government the power to make rules, and the enabling provision does not expressly forbid the making of rules with retrospective operation, the Government may, in the exercise of that power, enact rules that operate retrospectively.

The Chief Justice, delivering the division‑bench judgment, rejected that line of argument. At page 332 of the report he stated that a different principle applies when an executive Government is exercising subordinate and delegated legislative powers. In such cases, unless the Legislature has expressly conferred on the Government the authority to act retrospectively, the Government is prohibited from acting with retrospective effect. This reasoning reaffirmed the earlier position that retrospective legislative action by the executive requires a clear statutory grant.

With respect, the speaker fully concurred with the observations previously recorded. The identical issue resurfaced before the Kerala High Court in the matter of C. W. Motor Service (P) Ltd. v. State of Kerala, and the Court arrived at the same conclusion. In that case, the Regional Transport Authority situated in Kozhikode issued a stage‑carriage permit to the third respondent for a proposed Ghat route, as reported in A. 1. R. (195) Ker. 347, 348. The validity of the permit was contested on the ground that, at the time the order was made, no properly constituted Regional Transport Authority existed for the district in question. The opposing party argued that the defect was remedied by a later notification issued by the Government, which ordered that the Road Transport Authority continue in force from the date of expiration of the earlier authority’s term until its successor was appointed. The High Court held that the notification, which operated retrospectively, was invalid. In reaching this determination, Justice Varadaraja lyengar observed that the rule is well‑settled: even when the executive Government acts as a delegate of a legislative authority, it lacks any plenary power to provide for retrospective effect unless such power is expressly conferred by the parent enactment. The House of Lords, in Howell v. Folmouth Boat Construction Co. Ltd. (1951) A. C. 837, expressed a comparable view and warned of the dangers inherent in granting such authority to a delegated body. In that case, a licence was granted retrospectively to cover work already performed under an oral sanction, and the Lords remarked that it would be a dangerous power to place in the hands of Ministers and their subordinate officials to allow them, whenever they possessed licensing authority, to issue licences ex post facto; a statutory licensing power should not be interpreted as permitting the authorisation or ratification of past actions unless the special terms of the statute clearly support such a construction. Although that authority was exercising a statutory power to issue a licence, the same principle must govern a by‑law created by an authority acting under statutory delegation. The Constitution aspires to establish a welfare State, which entails the delegation of subordinate legislative powers to government agencies that affect every facet of human activity. Regulatory processes have become an ubiquitous element of daily life, and in a welfare State it is perhaps inevitable because Parliament cannot foresee every possible contingency. Nevertheless, there is no effective mechanism to control rule‑making powers or to prevent their misuse through authoritarian channels. If the power to make delegated legislation were automatically accompanied by the ability to enact rules or by‑laws with retrospective effect, such power could become an instrument of oppression. In these circumstances, the Court emphasized the need for strict limitation on such delegated authority.

In this case the Court reiterated that a statutory provision which grants a power must be interpreted narrowly, and that unless a law expressly authorises a rule‑making body to enact a rule or bye‑law with retrospective effect, it must be concluded that such a power has not been conferred. The Court observed that a strict construction of the provision could, on occasion, impede a competent authority from issuing a rule in an emergency even where the circumstances appear to justify a retroactive rule. The Court explained that the appropriate response to this apparent difficulty is simple: if the Legislature foresees emergencies that would require a rule or bye‑law to operate retrospectively, it must state that intention expressly in the enabling legislation. The Court further noted that it is sometimes suggested that the Government can be trusted to issue such rules only when appropriate, but the Court declined to recognise any implied powers that are capable of giving rise to mischief on the basis of such assumptions. Moreover, the Court held that the reach of a rule cannot be linked to the rank or status of the official who holds the rule‑making authority. In the public interest, the least the Court can do is to read any provision that confers a rule‑making power narrowly and to limit its effect to what is clearly expressed in the text. Applying this rule of strict construction, the Court held that section 12(1) of the Act does not give the Central Government the authority to make a bye‑law that operates retrospectively, and consequently the bye‑law issued on 21 January 1956, insofar as it attempts to have retrospective effect, is invalid. The Court then considered whether a power could be inferred by “necessary implication”. It explained that the term “necessary implication” in statutory construction means an implication that is absolutely essential and unavoidable; in other words, a court may infer such an implication only if, without it, the provisions of the section could not be given their full effect as worded. The Court examined section 12 of the Act, which permits the Central Government, either upon receiving a written request from the governing body of a recognised association or if it deems it expedient, to make bye‑laws covering any of the matters specified in section 11 or to amend any bye‑law made by that association under the same section. Section 11, in turn, allows a recognised association, subject to prior approval of the Central Government, to make bye‑laws for the regulation and control of forward contracts, and under sub‑section (2) the association may legislate on any of the matters listed therein. A review of those matters shows that all such bye‑laws could be drafted without requiring any retrospective operation under section 12. The Court noted that it has been suggested that clause 11(o) indicates that a bye‑law contemplated by that sub‑clause must necessarily operate retrospectively, and it quoted the wording of that clause: “the emergencies in trade which may arise and”.

The Court examined the provision that empowered the authorities “to exercise powers in such emergencies including the power to fix maximum and minimum prices.” The learned Solicitor General argued that a situation could arise in which, because of the determined action of a “bear” or a “bull,” market rates might rise far beyond a reasonable level or fall sharply below a certain point, thereby creating an emergency. In such an emergency, the Court said, it would be necessary for the relevant authorities to intervene and to close out the contracts that were affected. The Solicitor General further submitted that, unless a bye‑law were made retrospective, the authorities would be unable to meet the emergency, and consequently the power to make a bye‑law for an emergency contemplated in section 11(o) of the Act must inevitably include the power to make that bye‑law retrospective. The Court identified a fallacy in this line of reasoning. It observed that, for the Government to be given a power to make a bye‑law with retrospective effect, such a power must be absolutely necessary and unavoidable in order to give effect to the matter mentioned in sub‑clause (o) of section 11 or any other clause of sub‑section (2) of section 11. The Court explained that a bye‑law could readily be framed to address the emergency envisioned by the Solicitor General, or any other emergency covered by the same clause, with only prospective operation. Therefore, the Court concluded that it could not be said that the legislative purpose would be defeated, or that the objectives of the power would remain unfulfilled, unless the provisions of section 12 were given retrospective effect. Accordingly, the Court held that section 12(1) of the Act did not, by necessary implication, confer any power on the Central Government to make bye‑laws retrospective.

The second issue presented before the Court concerned the interpretation of section 4 of the Act. Section 4 sets out the functions of the Forward Markets Commission and reads as follows: (a) to advise the Central Government on the recognition of any association, on the withdrawal of such recognition, or on any other matter arising out of the administration of the Act; (b) to keep forward markets under observation and to take such action as it may consider necessary in the exercise of the powers assigned to it by or under the Act; (c) to collect and, whenever it deems necessary, publish information concerning the trading conditions of goods to which any provision of the Act applies, including data on supply, demand and prices, and to submit periodic reports to the Central Government on the operation of the Act and on the functioning of forward markets relating to those goods; (d) to make general recommendations aimed at improving the organisation and operation of forward markets; (e) to undertake inspection of the accounts and other documents of any recognised or registered association, or of any member of such an association, whenever it considers it necessary; and (f) to perform such other duties and to exercise such other powers as may be assigned to the Commission by or under the Act, or as may be required.

Two questions arise from the provision that authorises the Commission to perform such other duties and to exercise such other powers as may be prescribed. The first question is whether the duties imposed and the powers conferred on the Commission under clause (f) of section 4 should be read ejusdem generis with those imposed or conferred under clauses (a) to (e). The second question is whether the powers that are assigned to the Commission by or under a bye‑law may be exercised by the Commission under clause (f). To answer the first question it is necessary to understand the constitution of the Commission and its role in the scheme of control created by the Act. Under article 2(b) the term “Commission” denotes the Forward Markets Commission that is established under section 3. Section 3 empowers the Central Government to establish a Commission called the Forward Markets Commission for the purpose of exercising such functions and discharging such duties as may be assigned to the Commission by or under this Act. Clauses (a) to (e) of section 4 make clear that the functions of the Commission are purely supervisory and advisory. The Commission is required to keep the forward markets under observation, to collect and publish information relating to supply, demand and prices, to inspect the accounts and other documents of any recognised or registered association or any of its members, and to make recommendations to the Central Government on matters mentioned in that section. Section 8(2)(c) further allows the Central Government to direct the Commission to inspect the accounts and other documents of any recognised association or its members and to submit a report on the same to the Central Government. Consequently it is evident that the Commission does not possess administrative powers, managerial authority, or any power to interfere in the internal management of the registered associations. By contrast, section 11 and the bye‑laws framed thereunder, although not discussed in detail here, vest the regulation and control of the business of forward contracts and related activities entirely in the Association. The doctrine of ejusdem generis is well settled; it means “of the same kind” and represents a specific application of the broader maxim noscuntur a sociis, which holds that general words accompanied by specific words take their meaning from the specific words and are limited to a sense analogous to the specific class. For the doctrine of ejusdem generis to apply, there must be a distinct genus or category, meaning that the specific words preceding the general word must belong to the same class. The maxim noscuntur a sociis, however, enjoys a wider application. In the earlier decision of The Western India The acres Ltd. v. Municipal Corporation of the City of Poona, although the court did not expressly label the doctrines, it was dealing with the two doctrines and observed that although the rule of construction based on the principle of ejusdem generis could not be invoked because the items listed did not strictly belong to the same genus, they nevertheless indicated the kind and nature of the tax that municipalities were authorized to impose.

In the case before the Court, the learned counsel argued that clauses (a) to (f) of section 4 did not belong to the same class, but nevertheless they suggested that the functions described in those clauses were supervisory and advisory in nature and therefore they were analogous enough to give colour to each other. The argument further claimed that clause (f) dealt with duties and powers, whereas clauses (a) to (e) dealt only with functions, and consequently clause (f) should be regarded as covering a completely different subject‑matter. The Court could not accept this contention. It observed that the heading of section 4 was “Function of the Commission” and that the provision opened with the words “The functions of the Commission shall be” followed by a list of functions in clauses (a) to (f). This showed plainly that the duties and powers mentioned in clause (f) were also functions. Moreover, a power and a duty are two aspects of the same concept. Although clauses (a) to (e) appear on their face to impose only duties, a closer examination revealed that those duties could not be performed without the corresponding powers needed to discharge them. Accordingly, the Court held that the duties and powers that might be assigned to the Commission under clause (f) could only be supervisory or advisory functions that were distinct from, but analogous to, those set out in clauses (a) to (e). The Court further noted that the power granted to the Commission by a bye‑law made by the Government to close and terminate contracts was neither advisory nor supervisory, and therefore the Commission could not lawfully exercise that power.

The second issue before the Court concerned the proper construction of clause (f) of section 4, which reads: “to perform such duties and exercise such other powers as may be assigned to the Commission by or under this Act, or as may be prescribed.” The Court identified the crucial words as “by or under this Act, or as may be prescribed.” Section 2(h) of the Act defined “Prescribed” as “prescribed by rules made under this Act,” while section 2(k) defined “rules” to include, with reference to the general rules governing the constitution and management of an association, the memorandum and articles of association of an incorporated association. Reading clause (f) together with the definition of “Prescribed,” the Court concluded that the clause allowed the Commission to perform functions assigned to it either by the Act itself or by rules made under the Act, or to perform functions that might be prescribed by those rules. The explicit reference to “rules made under the Act” demonstrated that the phrase “under the Act” was intended to exclude a rule that was created in the exercise of a power conferred by the Act. This interpretation prevented the inclusion of a bye‑law within the scope of “under the Act,” thereby limiting the Commission’s authority to the functions expressly authorized by the Act or its prescribed rules.

The Court observed that if the expression “under the Act” included a rule, then the term “Prescribed” would become unnecessary. It said that such lack of precision in drafting could not be blamed on the Legislature except for compelling reasons. The Court reasoned that if a rule were not captured by the phrase “Under the Act”, it would be unreasonable to assume that a bye‑law would be covered. To do so would mean that the Legislature had given a rule a higher status than a bye‑law, while simultaneously treating the bye‑law as a provision of the Act, which the Court held could not be intended. The Court noted another possible explanation that the word “Prescribed” might have been used out of excessive caution or by mistake. It added that if excessive caution were required to mention rules separately, then even greater caution would have been needed to refer to a bye‑law separately. The Court explained that a court normally tries to give effect to every word used by the Legislature unless doing so is impossible. It found that there was no impossibility in interpreting the provision, and that the Legislature had a clear reason for excluding bye‑laws from clause (f) of section 4.

The Court described that subordinate or delegated legislation appears in two principal categories: statutory rules and bye‑laws or regulations made either by local‑government authorities or by persons, societies, or corporations. It observed that the Act itself recognised this distinction and consequently authorised both the making of rules and the making of bye‑laws. A comparison of sections 11 and 12, which empower the Central Government and recognised associations to make bye‑laws, with section 28, which empowers the Central Government to make rules, showed that the former are intended to manage the affairs of an association and to give effect to the objects of the Act, whereas the latter serve a different purpose. The Court held that this distinction must be kept in mind while deciding the issue presented in the present case. It considered it unreasonable to presume that a private association, even though registered under the Act, could confer powers on a statutory authority under the Act. Accordingly, the Court concluded that under section 4(f) the Legislature deliberately omitted any reference to a bye‑law because assigning a function to the Commission under a bye‑law would be incongruous. The Court therefore interpreted the phrase “by or under this Act, or as may be prescribed” to mean that words “by this Act” refer to powers given directly by the provisions of the Act, words “under this Act” refer to assignments made by exercising an express power conferred by the Act, and words “may be prescribed” refer to assignments made in accordance with rules made under the Act.

The Court explained that the phrase should be understood as referring to the exercise of a power that is conferred under a rule, and that this interpretation gives a natural meaning to the plain words used in the section while avoiding any stretching of the statutory language to preserve an illegal bye‑law. In support of this approach the Court referred to two decisions that had been cited at the Bar. The first decision was the judgment of the Judicial Committee in Hubli Electricity Company Ltd. v. Province of Bombay. In that case the Court considered section 3(2)(f) of the Indian Electricity Act (No TX of 1910), which provided that the Schedule was deemed to be incorporated with, and to form part of, every licence granted under that Part. Section 4(1)(a) of the same Act gave the Provincial Government the power to revoke a licence if, in its opinion, the public interest so required, including where the licencee, in the Government’s view, made wilful and unreasonably prolonged default in doing anything required of him by or under the Act. Sub‑clause (6) of the Schedule imposed certain conditions on the licencee. The Government revoked a licence on the ground that the licencee had failed to comply with the conditions laid down in Schedule VI, which were deemed to be incorporated in the licence by virtue of section 3(2). Accordingly the licencee had not performed the act required of him within the meaning of section 4. The Privy Council held that the performance of the conditions of the Schedule was clearly required to be made under the Act. The Court noted, however, that this decision did not materially assist the present case because the question of a bye‑law did not arise in that context. The second decision referred to was the Madras High Court’s judgment in Narayanaswamy v. Krishnamurthi. In that case the issue was whether regulations framed by the Life Insurance Corporation under the powers vested in it by Act 31 of 1956, which prohibited employees from standing for election, fell within the meaning of the words “under any law” in Article 191(1)(e) of the Constitution. The High Court held that the regulations were law made under the Act of Parliament, basing its conclusion on the principle that a rule made in pursuance of delegated power possesses the same validity and characteristic as a law made directly by Parliament. The Court observed, however, that the words to be construed in that decision were different and broader than the words to be interpreted in the present case, and that the principle applied there was of a general nature and did not aid in construing the specific words of clause (f) of section 4. Accordingly, after considering these authorities, the Court held that the Government had no power under section 12 of the Act to

The Court determined that the statutory provision, section twelve of the governing Act, did not empower the Government to create a bye‑law that would assign any function to the Forward Markets Commission. Consequently, the Court concluded that the notification issued on 24 January 1956 by the Forward Markets Commission was beyond the legal authority of the Commission and therefore illegal. Because the notification was illegal, the appellants were deemed to have a right to obtain a writ of mandamus directing the Commission to perform its legally mandated duties as prayed for in their petition. In view of this reasoning, the Court held that the appeal seeking the issuance of the writ should be allowed and that the costs of the proceedings ought to be awarded to the successful parties. Accordingly, the order of the Court initially stated that the appeal was allowed and that the costs would be assessed against the respondents. However, upon consideration of the majority judgment, the final order recorded that the appeal was dismissed and that the costs of the suit were to be borne by the appellants. The juxtaposition of these two statements reflects the procedural development where the Court first allowed the appeal with costs and later, after the majority judgment, dismissed the appeal and ordered the costs against the appellants.