R.R. Rastogi, J.
1. The petitioner, Messrs Sohan Lal, carries on the business of dealing in gold ornaments in the city of Deoria. He holds gold dealer's licence No. 195-Gold/63. For 1975 his application for renewal of the licence was presented in time. He was, however, served with a notice to show cause why his application for renewal should not be rejected in view of the fact that the transactions made by him in 1974 were below the limit prescribed under Rule 3 (ee) of the Gold Control (Licensing of Dealers) Rules, 1969 (hereinafter referred to as 'the Rules'). The petitioner submitted an explanation which was that he was not able to do his business properly in 1974 on account of drought. That explanation did not find favour with the Assistant Collector, Central Excise, Gorakhpur, respondent No. 2, who was the licensing authority and his application for renewal was rejected by an order dated 22-2-1975.
The petitioner preferred an appeal against that order which as well was dismissed by the Collector, Central Excise, Allahabad, respondent No. 3 by an order dated 28-1-1976. The petitioner seeks in this writ petition the quashing of these two orders and further challenges the constitutional validity of Rule 3 (ee) of the Rules. The validity of these Rules has been challenged from different angles, inter alia, as being violative of Arts. 19(1)(g) and 14 of the Constitution of India and as conferring an unguided power on the licensing authorities and further as not having been made for carrying out the purposes of the Gold Control Act, 1968 (hereinafter referred to as 'the Act').
2. On behalf of the petitioner these very contentions were elaborated and essentially reliance was placed on a decision of the Madras High Court rendered by a single Judge in B. Narasimhalu Chettiar v. Central Government (AIR 1976 Mad 224) wherein Rule 3 (ee) of the Rules was held to be ultra vires and violative of Article 19(1)(g) and 14 of the Constitution.
3. On a closer analysis of the relevant provisions of the Act and the Rules as they stand at present, in our opinion, the submissions made on behalf of the petitioner do not have much force. The Act has been enacted to provide, in the economic and financial interest of the community, for the control of production, manufacture, supply, distribution, use of, possession of, and business in, gold ornaments and articles of gold and for matters connected therewith or incidental thereto. In the instant case we are concerned with the case of a dealer which expression has been defined in Section 2 (h) of the Act to mean:--
'Any person who carries on directly or otherwise, the business of making, manufacturing, preparing, repairing polishing, buying, selling. supplying, distributing, melting. processing or converting gold, whether for cash or for deferred payment or for commission, remuneration or other valuable consideration and includes .....'
Persons who deal in gold and gold ornaments have been categorised in this Act under four heads. Refiners, dealers, goldsmiths and artisans. Detailed provisions have been made in regard to all categories. Chap. VI which contains Sections 17 to 26 makes provisions for refiners. Chap. VII which consists of Sections 27 to 38 deals with dealers. Chap. VIII consisting of Sections 39 to 43 with goldsmiths and Chapter IX having Ss, 44 to 49 with artisans. Section 27 provides for licensing of dealers. In order to appreciate the points raised in this writ petition it would be necessary to refer to the provisions contained in this section. Sub-section (1) states that save as otherwise provided in this Act, no person shall commence, or carry on, businessas a dealer unless he holds a valid licence issued in this behalf by the Administrator, Sub-section (2) says that a licence issued under this section shall be in such form as may be prescribed, shall be valid for such period as may be specified therein, may be renewed from time to time; and shall be subject to such conditions and restrictions as may be prescribed.
Sub-section (3) states that every licence issued under Part XII-A of the Defence of India Rules, 1962, or under the Gold (Control) Ordinance, 1968 shall continue to be in force until the expiry of the period of its validity or until the cancellation thereof under the Act. Sub-section (4) enables a person holding valid licence at the commencement of the Act to commence or to carry on business as a dealer and to obtain renewal of the licence. Sub-section (5) provides that a person who intends to commence, after the commencement of this Act, business as a dealer, shall make an application for a licence and should obtain one. Then comes Sub-section (6) which is as under:--
'(6) (a) No application for the issue of a licence to commence or carry on business as a dealer shall be granted unless the Administrator, having regard to such matters as may be prescribed in this behalf and after making such enquiry in respect of those matters as he may think fit, is satisfied that the licence should be issued
(b) No application for the renewal of a licence to carry on business as a dealer shall be rejected unless the holder of such licence has been given a reasonable opportunity of presenting his case and unless the Administrator is satisfied that:--
(i) the application for such renewal has been made after the expiry of the period specified therefor, or
(ii) any statement made by the applicant at the time of the issue or renewal of the licence was incorrect or false in material particulars; or
(iii) the applicant has contravened any term or condition of the licence or any provisions of this Act or any rule or order made thereunder or of any other law for the time being in force in so far as such law prohibits or restricts the bringing into or taking out of India of any goods (includingcoins, currency, whether Indian or foreign, and foreign exchange) or the dealing in such goods by way of acquisition or otherwise; or
(iv) the applicant does not fulfil the prescribed conditions.
(c) Every order granting or rejecting an application for the issue or renewal of a licence shall be made in writing.' (It is not necessary to refer to Sub-sections (6-A), (7) and (8) of this section).
Section 29 provides what a dealer may manufacture.
We have already referred to the definition of a dealer as given in Section 2 (h) of the Act and the very same activities are mentioned in this Section. It is, therefore, not necessary to reproduce it here.
4. Section 114 of the Act confers powers on the Central Government to make Rules. Sub-section (1) says that the Central Government may, by notification, make rules for carrying out the purposes of this Act, and Sub-section (2) says that in particular, and without prejudice to the foregoing powers, such rule may provide for all or any of the matters stated in Clauses (a) to (k) of this Sub-section Clause (k) confers power on the Central Government to make Rules for 'any other matter which is required to be, or may be prescribed.' The expression 'prescribed' has been defined in Section 2 (q) to mean 'Prescribed by Rules made under this Act.'
5. A resume of the above provisions would go to show that a dealer is under an obligation to obtain a licence under Section 27. The licence is to be issued in the form as may be prescribed. It shall be valid for such a period which may be specified therein. It may be renewed from time to time. Lastly it shall be subject to such restrictions and conditions as may be prescribed. As for the renewal of the licence the conditions are provided in Sub-section (6) and Sub-clause (iv) of Clause (b) thereof provides that in case the applicant does not fulfil the prescribed conditions, the application for renewal of licence shall be rejected. A dealer is of course to be given an opportunity of presenting his case and after hearing him the Administrator is to be satisfied on certain points specified in Clause (b). Further, the Central Government has been given powers to make Rules forcarrying out the purpose of this Act, Some of the purposes have been specified in Sub-section (2) and Clause (k) thereof which is in the nature of a residuary provision authorises the Central Government to make Rules for any other matter which is required to be or may be prescribed.
6. Now come the Rules. These rules make provisions for the issue of licence to dealers as also the renewal thereof. Rule 3 lays down 'conditions for renewal of a licence.' It reads as follows :--
'A dealer shall be qualified for the renewal of the licence held by him if he fulfils the following conditions, namely,
(a) that the application has been made in the prescribed form at least one month and not made more than 2 months before the expiry of the period of validity thereof;
(b) that the prescribed fees for the renewal of the licence have been duly deposited;
(c) that the premises where the applicant is carrying on business as a licensed dealer continues to be suitable and secure for the carrying on therein of such business;
(d) that no statement made by the applicant at the time of issue or renewal of the licence was incorrect or false in material particulars;
(e) that no condition of the licence has been contravened by the applicant;
(ee) that the applicant has been a wholesale dealer in standard gold bar, article or ornaments, or the turnover of the applicant with persons, other than licensed dealers, in the twelve months immediately preceding the dale of application for renewal of the licence was not too low.
Explanation I:-- For the purposes of this clause, turnover shall be deemed to be too low if it is on the average, not more than fifty grammes per month except where the applicant satisfies the Administrator that there are sufficient reasons for an average monthly turnover of lower than fifty grammes.'
Explanation II:-- For the purposes of these rules 'turnover' means:--
(a) sale of ornaments and articles;
(b) remaking of another person's ornaments and articles.'
(f) that the applicant has not contravened any provision of Gold (Control) Act, 1968, or any rule or order made thereunder or of Part XII-A of the Defence of India Rules, 1962 or of any other law for the time being in force in so far as such law prohibits, restricts or regulates the bringing into or taking out of India of any goods (including coins, currency, whether Indian or foreign and foreign exchange) or the dealing in such goods by way of acquisition or otherwise;
(ff) that the applicant has not been detained or ordered to be detained under the provisions of the Conservation of Foreign Exchange and Prevention of Smuggling Activities Act, 1974; that the applicant, if he was granted a licence under item (a) of the proviso to Clause (f) of Rule 2 has not committed any breach or failure in the performance of any part of the conditions specified in the Bond executed by him;
(h) that the authorisation issued to the applicant who has been granted a licence under Rule 2-A, to open a gold dealer's shop in the international transit lounge or hotel or other place, as the case may be, referred to in Rule 2-A, has not been withdrawn by the International Airports Authority of India constituted under Section 3 of the International Airports Authority Act, 1971 or the management of the hotel or the person in charge of such place, as the case may be;
(i) that the turnover of the applicant who has been granted a licence under Rule 2-A during the preceding twelve months was not less than one lakh rupees.'
7. In a way it would appear that in regard to dealers the provisions made in Chap. VI! read with those rules provide a self-contained code and unless the conditions laid down therein are satisfied no licence can be issued to a person intending to commence business as a dealer. The same Is the position in regard to renewal of licence. One of the conditions entitling a dealer to renewal of licence is that his turnover with persons other than the licensed dealers in 12 months immediately preceding the date of the application for renewal of licence should not have been too low.' What is too low a turnoverhas been explained in Explanation I. If the turnover on the average is less than 50 grammes per month, it would be treated as too low. There is a specific provision and it is that in case the turnover is less than 50 grammes, and for that sufficient reason to the satisfaction of the Administrator is given, then that defect cannot stand in the way of the renewal of the licence.
8. When B. Narasimhalu Chettiar's case (AIR 1976 Mad 224) (supra) on which reliance has been placed on behalf of the petitioner, came up for decision, in Clause (a) of Rule 3 of the Rules the words 'and not made more than two months' in between the words, 'one month' and 'before' were not there. These words were added by an amendment made in 1976. By the same amendment Explanation I to Rule 3 (ee) as well was amended. Before the amendment that Explanation read as under:--
'For the purpose of this clause, low turnover means a turnover which is on the average, not more than fifty grammes per months except where the applicant satisfied the Administrator that there are sufficient reasons for an average monthly turnover of lower than fifty grammes.'
In other words in the Explanation as it was before the aforesaid amendment only low turnover was explained while in the clause the condition for rejecting an application for renewal was the turnover being 'too low'. What could be 'too low' a turnover was not explained anywhere in this sub-rule. Now that explanation has been given and as to what turnover shall be deemed 'too low', has been provided for. Apart from this Explanation II had been added by the aforesaid amendment which has given an inclusive meaning of turnover, that is, sale of ornaments and articles and the making of another person's ornaments and articles.
9. There were two reasons given in B. Narasimhalu Chettiar's case for holding Rule 3 (ee) as ultra vires and offending against Arts. 19(1)(g) and 14 and they were; firstly:--
'There is absolutely no guideline whatever to the licensing authorities, to decide, what a turnover can be said to be 'too low'.'
'The turnover which is said to be too low is not to be calculated with reference to a standard or fixed or uniform period, but with reference to variable periods. I have already drawn attention to Rule 3 (a) of the Rules which provides that an application for renewal should be made at least one month before the expiry of the period of validity thereof. There is absolutely no provision whatever in the rules prescribing the earliest point of time at which application for renewal can be made. Theoretically speaking, there is nothing to prevent a person applying for renewal of his licence for the year 1973 even in Jan. 1972, since the rule only requires the minimum period that should elapse between the application for renewal and the expiry of the validity of, the current licence, Therefore, depending upon the particular point of time, at which an application is made, the rule will have to be applied differently to different individuals, because the 12 months period has to be calculated backwards from the date of the application for renewal. If the rule is in force, certainly it will be open to an applicant to choose the best of 12 months period and file his application for renewal with reference to such a turnover. Certainly that could not have been a satisfactory and fair method of dealing with the right of an individual to carry on his business, which is his fundamental right under Article 19(1)(g) of the Constitution of India.'
10. It would appear, therefore, that the two reasons were that there was absolutely no guideline whatever for the licensing authorities to determine what is said to be 'too low' a turnover and secondly there was no provision prescribing the earliest point of time at which an application for renewal could be made. We agree with the learned counsel for the respondents that these discrepancies have been removed by the amendments made in 1976. Under Rule 3 (a) the earliest point of time at which an application for renewal can be made has been provided for. Such an application is now required to be made at least one month and not more than 2 months beforp the expiry of the period of validity thereof. Suppose the period ofvalidity of a particular licence is (up to) 31st of Dec. 1978. An application for the renewal of such a licence in the prescribed form can be made in between 1st of Nov. 1978 and 31st of Dec. 1978. It cannot be made prior to 1st of November, 1978.
It cannot be said, therefore, that the Rule can be applied differently to different individuals and an applicant can choose the best of 12 months period. The 12 months period for which his turnover is to be taken for the purposes of finding out the monthly average turnover would be 12 months prior to 1st of November at the utmost. Similarly about the second discrepancy. Explanation I, as it now stands, takes care of it. What is too low a turnover has been explained. If on the average the turnover was not more than 50 grammes per month, that would be regarded as too low a turnover. Further it has been clarified that turnover does not alone mean sale of ornaments and articles. It also includes making of another person's ornaments and articles It would appear, therefore, that the two reasons which induced the Madras High Court (AIR 1976 Mad 224) to hold Rule 3 (ee) as ultra vires do not now exist and because of the same the rule as it now stands cannot be held to be violative of Articles 14 and 19(1)(g) of the Constitution.
II. On behalf of the petitioner our attention was also invited to some other observations made in that judgment and they are that on behalf of the Central Government in that case it could not be explained as to what exactly was the need for imposing a turnover criterion for the purposes of renewing a licence. In our opinion the purpose for imposing the turnover criterion can be spelt out. Under Section 32 a licensed dealer can at a time have in his possession primary gold not exceeding 400 grammes if he does not employ any artisan and varying from 500 grammes to 2,000 grammes in case he employs certain number of artisans. Let us take the case of a licensed dealer who does not employ any artisan. He can have in his possession at any time primary gold not exceeding 400 grammes, the source of which cannot be enquired by the authorities concerned.
If there be no turnover criterion, such a licensed dealer can continue to have in his possession 400 grammes of primary gold at any one time. He can obtain possession of such gold by means which cannot be enquired into and he can easily transact business in the nature of sale of such gold without showing the same in his books. That would encourage black market sales and defeat the very purpose of the Act. It is, therefore, necessary that a icensed dealer should show the turnover made by him. Such turnover as noted above, includes not only sales of ornaments and articles but also the making of another person's ornaments and articles. To expect a turnover of 50 grammes per month cannot be regarded as unreasonable or arbitrary by any standard of ' business dealings. If a person is not able to effect this much turnover, one fails to understand the purposes of maintaining the establishment. To our mind, therefore, it cannot be said that there is no need for imposing a turnover criterion for the purposes of renewing a licence.
12. It was also submitted on behalf of the petitioner that Rule 3 (ee) in effect narrows down the scope of Section 29. We entirely agree that under rule making powers only such rules can be made which carry out the purposes of the Act. Rules can be made to supplement and not supplant a provision of the Act. Sub-section (1) of Section 114, as noted above, authorises the Central Government to make rules for carrying out the purposes of the Act and in Sub-section (2) in particular and without prejudice to the foregoing powers some of the matters have been specified. Clause (k) is in the nature of a residuary matter which says that rules can be made for any other matter which is required to be or may be prescribed.
Section 27 (2) (d) provides that a licence can be issued subject to conditions and restrictions as may be prescribed and Sub-section (6) (d) (iv) says that in case the prescribed conditions are not fulfilled the application for renewal shall be rejected. In other words, the conditions and restrictions for issuing a licence as also for renewing the same have to be prescribed.
In prescribing the conditions and restrictions in the rules it cannot be said that the Central Government exceeded its power or that the rules so made in any way narrow down the provisions contained in the main sections or in any way they are not for carrying out the purposes of the Act.
13. In our opinion, Rule 3 (ee) cannot be said to be ultra vires and it does not offend Arts. 19(1)(g) and 14 of the Constitution of India.
14. On the merits of the impugned order passed by the Assistant Collector it was urged by counsel for the petitioner that it was invalid as it did not contain any reason for disbelieving the petitioner's explanation that the turnover was low due to drought and further that in place of taking into consideration the turnover of the last twelve months the Assistant Collector also took into consideration the turnover of the previous year. According to counsel for the petitioner the turnover of the previous year was irrelevant and since the impugned order was passed on the irrelevant material it was vitiated in law. We find no substance in this submission either. In our opinion both the aforesaid criticisms of the impugned order are based on a misconception of the said order. The turnover of the previous year has not been made the basis of the order. It has been referred to in order to point out that the explanation of the petitioner for the low turnover was a lame excuse and was not acceptable.
It has not been the case of the petitioner that there was drought in the previous year also. The fact that the turnover of the petitioner was quite low even during the previous year when there was no drought and that in spite of a warning being given in this behalf while renewing the licence for the year 1974 the petitioner was unable to bring up the turnover to the minimum requirement of Rule 3 (ee) was highlighted by the Assistant Collector to demonstrate the hollowness of the petitioner's explanation and was apparently mentioned in the order to provide the reason for disbelieving the said explanation. It is, as such, not right to say that the impugned order does not give any reason fordisbelieving the petitioner's explanation or that it is based on any irrelevant material. That being so the impugned orders do not suffer from any infirmity.
15. In the result the writ petition fails and is dismissed. There will be order as to costs.