Skip to content


Prag Ice and Oil Mills and anr. Etc. Etc. Vs. Union of India (Uoi) - Court Judgment

LegalCrystal Citation
SubjectConsumer;Constitution
CourtSupreme Court of India
Decided On
Case NumberWrit Petn. Nos. 712, 715-739, 760-764, 765-770, 779-780, 781-784, 838-855, 861-873 and 874-892 of 19
Judge
Reported inAIR1978SC1296; 1978CriLJ1281a; (1978)3SCC459; [1978]3SCR293
ActsConstitution of India - Articles 14, 19(1), 31B and 302; Mustard Oil (Price Control) Order, 1977 - Sections 3; Essential Commodities Act, 1955 - Sections 3, 3(1), 3(2); Price Control Order; -
AppellantPrag Ice and Oil Mills and anr. Etc. Etc.
RespondentUnion of India (Uoi)
Appellant Advocate A.K. Sen, Adv. (in W. P. 712),; V.M. Tarkunde, Adv. (in W.P. 715 to 739),;
Respondent Advocate S.N. Kackar. Sol. Genl. (W.P. Nos. 712 and ; 838), ; R.P. Bhat
DispositionPetition dismissed
Cases ReferredLeo Nebbia v. People of
Excerpt:
- subordinate/delegated legislation:[d.k. jain & r.m. lodha, jj] banks -voluntary retirement scheme, 2000 (vrs 2000) - held, the amendment in regulation 28, as is reflected from communication dated 5.9.2000, was intended to cover employees who had rendered 15 years service but not completed 20 years service. it was not intended to cover optees who had already completed 20 years service as the provisions contained in regulation 29 met that contingency. even if it be assumed that by insertion of proviso in regulation 28 (in the year 2002 with retrospective effect from 1.9.2000), all classes of employees under vrs 2000 were intended to be covered, such amendment in regulation 28, needs to be harmonised with regulation 29, particularly regulation 29(5) which provides for addition of.....ordernew delhi, the 30th september, 1977. s. o. whereas the central government is of opinion that it is necessary and expedient so to do for securing equitable distribution and availability at fair prices, of mustard oil; now, therefore, in exercise of the powers conferred by section 3 of the essential commodities act, 1955 (10 of 1955), the central government hereby makes the following orders namely; 1. short title, extent and commencement. --(1) this order may be called the mustard oil (price control) order, 1977.(2) it extends to the whole of india.(3) it shall come into force at once.2. definition:--in this order, 'dealer' means a person engaged in the business of the purchase, sale or storage for sale of mustard oil.3. price at which a dealer may sell. no dealer shall, either by.....
Judgment:
ORDER

New Delhi, the 30th September, 1977. S. O. WHEREAS the Central Government is of opinion that it is necessary and expedient so to do for securing equitable distribution and availability at fair prices, of mustard oil;

NOW, THEREFORE, in exercise of the powers conferred by Section 3 of the Essential Commodities Act, 1955 (10 of 1955), the Central Government hereby makes the following orders namely;

1. Short title, extent and commencement. --(1) This order may be called the Mustard Oil (Price Control) Order, 1977.

(2) It extends to the whole of India.

(3) It shall come into force at once.

2. Definition:--In this Order, 'dealer' means a person engaged in the business of the purchase, sale or storage for sale of mustard oil.

3. Price at which a dealer may sell. No dealer shall, either by himself or by any person on his behalf, sell or offer to sell any mustard oil at a retail price exceeding Rupees 10/- per kilogram, exclusive of the cost of container but inclusive of taxes.

Sd/-

(T. Balakrishnan),

Joint Secretary to the Govt. of

India

(File No. 26 (16)/77-ECR)'

2. The Control Order was passed in exercise of the powers conferred upon the Central Government by Section 3 of the Essential Commodities Act, 1955 (hereinafter referred to as 'the Act'). This provision lays down :

'Section 3 (1) If the Central Government is of opinion that it is necessary or expedient so to do for maintaining or increasing supplies of any essential commodity or for securing their equitable distribution and availability at lair prices, or for securing any essential commodity for the defence of India or the efficient conduct of military operations is may, by order, provide for regulating or prohibiting the production, supply and distribution thereof and trade and commerce therein.

(2) Without prejudice to the generality of the powers conferred by Sub-section (1), an order made thereunder may provide.

(a) xxx xxx xxx (b) xxx xxx xxx(c) for controlling the price at which any essential commodity may be bought or sold;

(d) for regulating by licences, permits or otherwise the storage, transport, distribution, disposal, acquisition, use or consumption of, any essential commodity;

(e) for prohibiting the withholding from sale of any essential commodity ordinarily kept for sale;

(f) for requiring any person holding in stock, or engaged in the production, or in the business of buying or selling, of any essential commodity',

(a) to sell the whole or a specified part of the quantity held in stock or produced or received by him, or

(b) in the case of any such commodity which is likely to be produced or received by him, to sell the whole or a specified part of such commodity when produced or received by him, to the Central Government or a State Government or an officer or agent of such Government or to a Corporation owned or controlled by such Government or to such other person or class of persons and in such circumstances as may be specified in the matter.

Explanation 1. -- An order made under this clause in relation to foodgrains, edible oilseeds or edible oils, may, having, regard to the estimated production, in the concerned area, of such foodgrains, edible oilseeds and edible oils, fix the quantity to be sold by the producers in such area and may also fix, or provide for the fixation of, such quantity on a graded basis, having regard to the aggregate of the area held by, or under the cultivation of, the producers.

Explanation 2. -- For the purpose of this clause, 'production' with its grammatical variations and cognate expressions includes manufacture of edible oils and sugar;'

We are not concerned here with other provisions of Section 3 (2).

3. Section 3 (3), which will be relevant for the purposes of interpretation, runs as follows:

'3 (3) Where any person sells any essential commodity in compliance with an order made with reference to Clause (f) of Sub-section (2), there shall be paid to him the price therefore as hereinafter provided:--

(a) Where the price can, consistently with the controlled price, if any, fixed under this section, be agreed upon, the agreed price;

(b) where no such agreement can be reached, the price calculated with reference to the controlled price, if any;

(c) Where neither Clause (a) nor Clause (b) applies, the price calculated at the market rate prevailing in the locality at the date of sale.'

Again, Sub-section (3-A) lays down:

'(3A) (i) If the Central Government is of opinion that it is necessary so to do for controlling the rise in prices, or preventing the hoarding, of any foodstuff in any locality, it may, by notification in the Official Gazette, direct that notwithstanding anything contained in Sub-section (3), the price at which the foodstuff shall be sold in the locality in compliance with an order made with reference to Clause (f) of Sub-section (2) shall be regulated in accordance with the provisions of this sub-section.

(ii) Any notification issued under this subsection shall remain in force for such period not exceeding three months as may be specified in the notification.

(iii) Where, after the issue of a notification under this sub-section, any person sells foodstuff of the kind specified therein and in the locality so specified, in compliance with an order made with reference to Clause (f) of Sub-section (2), there shall be paid to the seller as the price therefor--

(a) where the price can, consistently with the controlled price of the foodstuff, if any, fixed under this section, be agreed upon, the agreed price;

(b) where no such agreement can be reached, the price calculated with reference to the controlled price, if any;

(c) where neither Clause (a) nor Clause (b) applies, the price calculated with reference to the average market rate prevailing in the locality during the period of three months immediately preceding the date of the notification.

(iv) For the purpose of Sub-clause (c) of Clause (iii), the average market rate prevailing in the locality shall be determined by an officer authorised by the Central Government in this behalf, with reference to the prevailing market rates for which published figures are available in respect of that locality or of a neighbouring locality, and the average market rate so determined shall be final and shall not be called in question in any court.'

4. Additional Sub-sections (3B) and (3C) will also require consideration in order to arrive at the correct meaning of Section 3 (2). They read as follows:--

'(3B) Where any person is required, by an order made with reference to Clause (f) of Sub-section (2), to sell to the Central Government or a State Government or to an officer or agent of such Government or to a Corporation owned or controlled by such Government, any grade or variety of foodgrains, edible oilseeds or edible oils in relation to which no notification has been issued under Sub-section (3A), or such notification having been issued has ceased to be in force, there shall be paid to the person concerned notwithstanding anything to the contrary contained in Sub-section (3), an amount equal to the procurement price of such foodgrains, edible oilseeds or edible oils, as the case may be specified by the State Government, with the previous approval of the Central Government having regard to--

(a) the controlled price, if any, fixed under this section or by or under any other law for the time being in force for such grade or variety of foodgrains, edible oilseeds or edible oils;

(b) the general crop prospects;

(c) the need for making such grade or variety of foodgrains, edible oilseeds or edible oils available at reasonable prices to the consumers, particularly the vulnerable section of the consumers; and

(d) the recommendations, if any, of the agricultural prices commission with regard to the price of the concerned grade or variety of foodgrains, edible oilseeds or edible oils.

(3C) Where any producer is required by an order made with reference to Clause (f) of Sub-section (2) to sell any kind of sugar (whether to the Central Government or a State Government or to an officer or agent of such Government or to any other person or class of persons) and either no notification in respect of such sugar has been issued under Sub-section (3A) or any such notification, having been issued, has ceased to remain in force by efflux of time, then, notwithstanding anything contained in Sub-section (3), there shall be paid to that producer an amount therefore which shall be calculated with reference to' such price of sugar as the Central Government may, by Order, determine, having regard to--

(a) the minimum price, if any, fixed for sugarcane by the Central Government under this section;

(b) the manufacturing cost of sugar;

(c) the duty or tax, if any, paid or payable thereon; and

(d) the securing of a reasonable return on the capital employed in the business of manufacturing sugar, and different prices may be determined from time to time for different areas or for different factories or for different kinds of sugar.

Explanation :-- For the purposes of this sub-section, 'producer' means a person carrying on the business of manufacturing sugar.'

5. It is necessary to keep other clauses of Section 3 also in one's mind to get a true picture of the statutory context of the power of price control. The drastic measures which the Central Government may adopt, extending to virtually taking over of management of appointing Authorised Controllers of particular undertakings, so as to carry out the objects stated in Section 3 (1) of the Act, and the mechanism of control visualised to ensure due and proper exercise of the statutory powers are also very significant. The provisions containing these, are:

'3 (4) If the Central Government is of opinion that it is necessary so to do for maintaining or increasing the production and supply of an essential commodity, it may, by order, authorise any person (hereinafter referred to as an authorized controller) to exercise, with respect to the whole or any part of any such undertaking engaged in the production and supply of the commodity as may be specified in the order such functions of control as may be provided therein and so long as such order is in force with respect to any undertaking or part thereof--

(a) the authorized controller shall exercise his functions in accordance with any instructions given to him by the Central Government, so, however, that he shall not have any power to give any direction inconsistent with the provisions of any enactment or any instrument determining the functions of the persons in charge of the management of the undertaking, except in so far as may be specifically provided by the order; and

(b) the undertaking or part shall be carried on in accordance with any directions given by the authorized controller under the provisions of the order, and any person having any functions of management in relation to the undertaking or part shall comply with any such directions.

3(5) An order made under this section shall,--

(a) in the case of an order of a general nature or affecting a class of persons, be notified in the Official Gazette; and

(b) in the case of an order directed to a specified individual be served on such individual--

(i) by delivering or tendering it to that individual, or

(ii) if it cannot be so delivered or tendered, by affixing it on the outer door or some other conspicuous part of the premises in which that individual lives, and a written report thereof shall be prepared and witnessed by two persons living in the neighbourhood.

3(6) Every order made under this section by the Central Government or by any officer or authority of the Central Government shall be laid before both Houses of Parliament, as soon as may be, after it, is made.'

6. It has also to be remembered that it the mechanism of price control of some essential commodities fails, there is under our Constitution, with its socialistic orientation and objectives, the provision in Article 19 (6) (ii) for 'the carrying on by the State, or by a corporation owned or controlled by the State, of any trade, business, industry or service, whether to the exclusion, complete or partial, of citizens or otherwise.'

7. The petitioners assail the control order on four grounds: firstly, that it violates the fundamental rights of the petitioners to property under Article 19 (1) (f) and to carry on their trade and business guaranteed by Article 19 (1) (g) of the Constitution; secondly, that the petitioners are denied the benefits of Article 14 of the Constitution; thirdly, that the order is hit by Article 301 of the Constitution; and, fourthly that the Central Order is outside the scope of Section 3 of the Act.

8. We need not consider Article 301 of the Constitution as the petitions do not, beyond citing the provision, set out any facts to show how this Article is involved. This Article is meant for protecting inter-State as well as intra-State 'freedom of trade, commerce, and intercourse.' But, Article 302 provides:

'Parliament may by law impose such restrictions on the freedom of trade, commerce or intercourse between one State and another or within any part of the territory of India as may be required in the public interest.'

9. Although, Article 302 does not speak of 'reasonable' restrictions, yet, it is evident that restrictions contemplated by it must bear a reasonable nexus with the need to serve 'public interest'. If the tests of Section 3 of the Act are satisfied by an Order, it could not fail to serve public interest. Hence, from this point of view also it is enough if we consider whether the Control Order falls within Section 3 of the Act. It was evidently for this reason that, beyond mentioning Article 301, counsel for the petitioners did not, quite rightly, advance much argument to show how Article 301 is involved here We will, therefore, not consider it any more here.

10. It was, however, vehemently urged on behalf of the petitioners that the Control Order is assailable for violating Articles 14 and 19 (1) (f) and (g) despite the fact that the Act itself was placed in 1976 in the 9th Schedule of the Constitution. The result of placing it there by a constitutional amendment is that Section 3 of the Act became free from any limitations based on the provisions of Part III of the Constitution. Article 31B, providing for a removal of the protection to fundamental rights given by Part III of our Constitution, lays down:

'31B. Validation of certain Acts and Regulations.-- Without prejudice to the generality of the provisions contained in Article 31-A none of the Acts and Regulations specified in the Ninth Schedule for any of the provisions thereof shall be deemed to be void, or ever to have become void, on the ground that such Act, Regulation or provision is inconsistent with, or takes away or abridges any of the rights conferred by, any provisions of this part, and notwithstanding any judgment, decree or order of any court or tribunal to the contrary, each of the said Acts and Regulations shall, subject to the power of any competent Legislature to repeal or amend it, continue in force.'

11. It is evident that Article 31B protects only Acts and Regulations specified in the Ninth Schedule from the vice of invalidity for inconsistency with provisions of Part III of the Constitution but not anything done or to be done in future under any of the provisions of any Act so specified, such as an order passed under Section 8 of the Act.

12. If Section 3 of the Act, which was held in Hari Shankar Bagla v. State of Madhya Pradesh to pass the tests of validity imposed by Articles 14 and 19 (1) (f) and (g), read with Article 19 (5) and (6), a Control Order passed under Section 3 would also be required to pass these tests as its scope could not be wider than that of the provision which authorises its promulgation. A delegated or derivative power could not rise higher or travel beyond the source of that power from which it derives its authority and force. If Bagla's case (supra) is good law (no party has questioned its correctness) Articles 14 and 19 (1) (f) and (g) could be deemed to be, if one may so put it, 'written into' Section 3 of the Act itself. They would control the scope of orders which could be passed under it. That is. undoubtedly, the way in which guarantees of fundamental rights could and should function if the Act containing Section 3 itself had not been placed in the Ninth Schedule so as to take away the guarantees of fundamental rights from the substance of it.

13. The question of interpretation before us is: What is the effect of putting the Act in the Ninth Schedule upon Control Orders passed under Section 3 of the Act? The answer to this question must necessarily depend upon the effect of such a change of the legal position upon the provisions of Section 3 itself which authorise control orders passed under it. If the effect was to widen the orbit of Section 3 of the Act Or to remove the limitations put by Articles 14 and 19 upon the exercise of powers under it, the logical and natural result would be to enlarge also the scope or sweep of the Orders passed under it. But, if it has no such effect upon Section 3 of the Act itself. Orders passed under it would continue to be subject to provisions of Section 3 of the Act as controlled by Articles 14 and 19 of our Constitution so that they will have to satisfy what may be described as a 'dual test': firstly, that of provisions of Section 3 of the Act itself; and, secondly, that of provisions of Chap. III of the Constitution containing fundamental rights.

14. Learned Counsel for the petitioners suggested that the placing of the Act in the Ninth Schedule protected only the grant of powers under Section 3 of the Act but not their exercise. Article 31B, no doubt, speaks of 'specified' Acts and Regulations. But, it makes no distinction whatsoever between any grants of powers and their exercise. Powers are granted or conferred so as to be exercised and not to be kept in cold storage for purposes of some kind of display only as though they were exhibits in a show case not meant for actual use. The whole object of a protection conferred upon powers meant for actual use is to protect their use against attacks upon their validity based upon provisions of Part III. If this be the correct position, it would, quite naturally and logically, follow that their use is what is really protected.

15. In practice, it is the exercise of power which is generally assailed and not the mere conferment of it which raises the somewhat different question of legislative competence. Indeed, the Ninth Schedule does not provide any protection at all against attacks based upon either the vice of excessive delegation or want of legislative competence defects which could be said to vitiate the grant of powers despite their place in the Ninth Schedule. But, questions of conflict with fundamental rights and of transgression of legitimate or reasonable limits upon their exercise arise when citizens complain of unreasonable impediments to the exercise of their fundamental rights. The distinction between protection to a mere grant of powers and to their exercise, therefore, seems specious in the context of the protection. It cannot explain why, if Section 3 is protected by the Ninth Schedule, the exercise of power granted by it, which manifests itself in control orders, is not protected. It would be so protected, if at all, not because the Orders to be made in future, as such, are protected, but because the power actually conferred and found in existence in Section 3 is protected. The protection is given to a power which is specified and in existence which has to be used for certain purposes and not to what may be specified in future.

16. If orders passed under Section 3 of the Act also get a protection it would be what may be described as a 'derivative' protection so long as the Orders are covered by Section 3 of the Act. It is available only so long as and because the source of their authority -- Section 3 of the Act -- is protect ed by the Ninth Schedule. Orders purporting to be made under Section 3 of the Act must, how ever, satisfy the tests found in Section 3 itself in every case. They can never escape the basic tests whether Section 3, the source of their authority, is protected by the Ninth Schedule or not. The further tests imported by Articles 14 and 19 of the Constitution into Section 3 could be applied to these orders only so long as these added tests are attached to or can be read into Section 3 of the Act, but not after they have been deliberately delinked or removed from Section 3, if one may so describe the effect of the inclusion of the Act in the Ninth Schedule.

17. The Solicitor-General contended that Section 3 of the Act constituted what he described as 'skeleton' legislation, over which the exercise of powers given by Section 3 built, so to say, a body of 'flesh and blood'. The term 'skeleton' legislation is used sometimes for denoting the broad outlines of a particular scheme found in an Act of which details are to be filled in later by administrative orders of experts. It is doubtful whether the Essential Commodities Act, 1955, could be spoken of as a piece of 'skeleton' legislation. Section 3, Sub-section (1) of the Act provides for delegation of powers to the Central Government in order that it may carry out certain purposes by framing appropriate schemes and evolving policies which may meet the purposes of the Act. These schemes and policies to serve the stated purposes may differ as regards the nature of means adopted and even in the particular objectives sought at particular times to accord with changing circumstances.

18. Orders passed under Section 3 of the Act, in pursuance of such schemes or policies, do not become parts of the Act for the purposes of the Ninth Schedule of the Constitution. On the strength of the views expressed by this Court in Godavari Sugar Mills Ltd. v. S.B. Kamble, with which we respectfully agree, the most one can say is that orders passed under the Act, before its inclusion in the Ninth Schedule, could also be said to be protected directly by the Ninth Schedule it mentioned there. But, there could be no independent and direct protection of this Schedule conferred upon orders passed under the Act before us just as none could be given to either the amendments of an Act or to regulations passed under the Act which were considered in Godavari Sugar Mills case (supra).

18A. As already indicated above, the impugned control order is assailed mainly or) the ground that it violates Articles 14 and 19 (1) (f) and (g) of the Constitution. It is alleged that the manufacturers of oil having invested a great deal of capital in mustard oil manufacturing industry and having purchased oil seeds at higher rates than those which have entered into the calculation of the Government in fixing the price of mustard oil for the consumer cannot be made to sell oil, into which mustard seed is converted, at prices below those at which they could themselves produce oil. It is submitted that to require them to do so amounts to confiscation of property contrary to law as well as a restriction upon the right guaranteed by Article 19 (1) (g) of the Constitution upon them to carry on an industry or business free from unreasonable restrictions. Valid restrictions, it is submitted, can only be reasonable and in the interests of the general public. It was suggested that the protection of Article 31 (1) against deprivation of property contrary to law was also involved here. The main question to be decided, therefore, is whether Part III of the Constitution is available at all to test the validity of the impugned control order.

19. In Latafat Ali Khan v. State of U. P., a Constitution Bench of this Court decided such a question quite rightly in our opinion as follows (at p. 720) (of Supp SCR):

'It seems to us that if a statutory rule is within the powers conferred by a section of a statute protected by Article 31B, it is difficult to say that the rule must further be scrutinised under Articles 14, 19 etc. Rule 4 (4) seems to us to be a rule which does not go beyond the powers conferred under Section 6 (xvii), read with Section 44 of the Act. At any rate, Section 6 (xvii) and Rule 4 (4) are part of a scheme of land reform in U. P. and would be protected from attack under Article 31A of the Constitution.'

In that case, the rule made under the provisions of the Imposition of Ceiling on Land Holdings Act, 1960 of U. P. was under attack The section under which the rule was made enjoyed the protection of both Articles 31A and 31B of the Constitution. Hence, it was held that the rule was not to be questioned if it fell within the empowering provision of the Act. The position before us is very similar. The control order passed under Section 3 of the provisions of the Act before us, included in the Ninth schedule, is assailed on the ground that, although Section 3 of the Act may be protected by the 9th Schedule of the Act, yet, an order passed under this provision is not| so protected. Although, we agree that the impugned order is not protected for this reason, yet, if the section under which it was passed is protected from any attack based, on the provisions of Part III of the Constitution, the only question which survives is whether the control order is covered by the protected empowering provision. If it falls outside the empowering provision it would be invalid in any case. If it falls within the empowering provision but could be found to be struck by the provisions of Article 19 (1) (f) and (g) of the Constitution, an attack on the control order, by reason of Article 19 (1) (f) or (g), would be really one against the empowering provision itself which is protected. The control order, therefore, enjoys what may be called a derivative protection. All that has to be shown by the Central Government is that it falls within the empowering provision. No further test, based on fundamental rights in Chapter III of the Constitution, can be applied to it in such a case.

20. All the tests of validity of the impugned price control or fixation order are, therefore, to be found in Section 3 of the Act. Section 3 makes necessity or expediency of a control order for the purpose of maintaining or increasing supplies of an Essential Commodity or for securing its equitable distribution at fair prices the criteria of validity. It is evident that an assessment of either the expediency or necessity of a measure, in the light of all the facts and circumstances which have a bearing on the subjects of price fixation, is essentially a subjective matter. It is true that objective criteria may enter into determinations of particular selling prices of each kilogram of mustard oil at various times. But, there is no obligation here to fix the price in such a way as to ensure reasonable profits to the producer or manufacturer. It has also to be remembered that the object is to secure equitable distribution and availability at fair prices so that it is the interest of the consumer and not of the producer which is the determining factor in applying any objective tests at any particular time. Hence, the most important objective fact in fixing the price of mustard oil, which is consumed generally by large masses of people of limited means, is the paying capacity of the average purchaser or consumer.

21. Statistics of rise in prices of mustard oil throughout the country indicated a very sharp rise during the period preceding the control order. It was no longer available at a reasonable price to the average consumer. It is difficult to understand how the average consumer could buy mustard oil at more than Rs. 10/- for each kilogram of mustard oil unless his purchasing capacity was increased by pumping money into his pocket artificially. This would necessarily imply a general rise in wages of the working classes and salaries of middle classes which do not share the profits of an inflationary economy. In other words, a fixation of price above Rs. 10/- per kg. of mustard oil could have contributed to push the country down the slippery slope of inflation towards economic crises and disaster.

22. Price control and planning may have been forced upon all nations of the world due to the needs and exigencies of modern 'total' warfare. But, as has been observed, the problems of the aftermath or of the peace and reconstruction, which follow (according to some they 'break out') are no less demanding. In addition, it is common knowledge that the population explosion, unemployment, and rising prices in our country, due to the inflationary spiral, pose problems with no less grave implications for the whole country than a war. It would be no exaggeration to say that the fate of every government depends ultimately upon a satisfactory solution of these problems, and, particularly, on its capacity to check rise in prices of essential commodities.

23. We have listened to long arguments directed at showing us that producers and sellers of oil in various parts of the country will suffer so that they would give up producing or dealing in mustard oil. It was urged that this would, quite naturally, have its repercussions on consumers for whom mustard oil will become even more scarce than ever ultimately. We do not think that it is the function of this Court or of any Court to sit in judgment over such matters of economic policy as must necessarily be left to the Govt. of the day to decide. Many of them, as a. measure of price fixation must necessarily be, are matters of prediction of ultimate results on which even experts can seriously err and doubtless differ. Courts can certainly not be expected to decide them without even the aid of experts.

24. It is impossible for any Court to take evidence from all over the country to deter mine whether particular concerns or parties which have come up before this Court could or could not reasonably produce mustard oil at a cost which could make it reasonable for them to sell it at Rs. 10/- per kg. Learned Counsel before us have tried to perform this impossible task. We think that it should not even have been attempted in a case of this kind because the price at which mustard oil was sold commonly in the market not very long ago and the price which prevailed at the time when the control order of 30th September, 1977, was passed are matters of common knowledge. All that the Govt. need have done was to take a policy decision based on what could reasonably be the paying capacity of the average buyer of mustard oil and the likely effects of the intended price fixation. It seems to us to have done that. It is true that sufficient material, from these points of view, was not placed before us 'by the Union of India. Nevertheless, the matter is so obvious and glaring that we do not think that detailed statistics are needed. We deliberately do not go into the great mass of materials which have been sought to be placed before us from the point of view of present cost of producing mustard oil and the fixation of a reasonable price based on a determination of that. The more essential questions to answer, from the point of view of provisions of Section 3 of the Act were : Can the mass of ordinary consumers pay more than Rs. 10/- per kg Even if the price of mustard oil is fixed at less than the cost price to the producers, is it not necessary to take such a measure in order to break the vicious inflationary spiral and bring down prices The last question could only be answered by waiting and watching the ultimate effects of a particular price fixation on prices of mustard seed and cost of production of mustard oil ultimately. If the object of price fixation suggested by this question is very necessary to take into account, from the point of view of availability of mustard oil at fair prices to consumers, as we think it is, the actual cost of production to the purchasers could certainly not be the sole or the decisive factor. It could only be one out of a number of relevant facts and circum stances.

25. The net result of the mass of statistics placed before us on behalf of the petitioners is that the price fixed should have been about Rs. 3/- per kg. more, that is to say, about Rs. 13/- per kg. Even if we accept this to be a correct estimate for normal times, when fair and reasonable profits to the producers could be an important consideration, we think that a price fixed at Rs. 10/-per kg., as a part of an attempt to break the vicious inflationary circle, is not at all an unreasonable step.

26. Students and observers of economic systems tell us that inflation is no problem in socialist countries because the whole economy is so completely controlled that there is no question of a rise in prices. Under our what is known as a 'mixed economy' planning and price fixation are part of that social control which becomes inevitable under certain conditions. Indeed, it seems often quite unavoidable under any system which adopts socialistic measures to achieve the common good. The argument on behalf of the Union is that the result of this fixation, even below cost price, will necessarily produce desired effects upon the free sector in which price of mustard seed is still not controlled. The control imposed will make it impossible for producers to offer excessive prices for mustard oil seed demanded by the growers. Hence, it was argued that the cost of production was bound to come down in course of time if petitioners could only wait a little. Fixation at even uneconomic selling price implied temporary loss to the producers, so as to serve their own ultimate interests and those of general welfare. Such sacrifices ought, it was suggested, to be readily borne by producers of mustard oil in a system like ours. If they were not able to bear them, they could close down their factories. They could not claim a right to carry on business or manufacture on their own terms. Such is not the right granted even by Article 19 (1) (g) of the Constitution. However, as we have already indicated, it seems that the Act was put in the Ninth Schedule to prevent the invocation of Articles 14, 19 and 31 for obstructing measures so necessary as price fixation of essential commodities is for promoting the objectives of a socialist welfare economy. This, in our opinion, would be a sufficient answer to all the arguments which had been put forward at considerable length before us on the unconstitutionality of fixing the price of mustard oil below what is claimed to be the cost price,

27. It may be mentioned, en passant, that even during the interval between the passing of our order dismissing Writ Petitions for the enforcement of fundamental rights protected by Part III of the Constitution and the delivery of these reasons, so beneficial was the effect of the order of 30th September, 1977, that price of mustard oil has fallen in the neighbourhood of Rs. 7/- per kg. Apparently, this is enough to cover reasonable profits of producers as well as middlemen. We are informed that the impugned Control Order has itself been withdrawn by the Central Government. We can take judicial notice of these facts which illustrate the extreme inadvisability of any interference by any court with measures of economic control and planning directed at maximising general welfare. It is not the function of the Courts to obstruct or defeat such beneficial measures devised by the Govt. of the day. Courts cannot pass judgments on the wisdom of such actions, unless actions taken are so completely unreasonable that no law can be cited to sanction them.

28. If the impugned order of 30th September, 1977, falls within this provision, as we think it does, no question of violating a fundamental right could arise. If an impugned order were to fall outside Section 3 of the Act, no question of applying any test of reasonableness contemplated by Article 19 (6) need arise because it would then be a purely illegal restriction upon the right conferred by Article 19 (1) (g) which would fail for lack of authority of any law to support it.

29. We have also heard considerable argument on principles of fair fixation of price which, it was submitted, must take into account the cost of production as well as a reasonable amount of profit to the manufacturer and the middleman. As indicated above, such principles apply only in those cases where there is an obligation upon the price fixing authority to take certain matters into account which have a bearing on cost of production and are designed to secure fair share of profits to the producers. Section 3 of the Act set out above, as already indicated, has very different purposes in view. It may be that the cost of production and reasonable amount of profits to the manufacturers have an indirect bearing on matters set out in Section 3 (1) of the Act. But, in cases where the effects of a policy or a measure adopted in achieving purposes set out in Section 3 (1) are matters of guess work, after experimentation, the actual consequences can be indicated with a fair amount of certainty only by giving some time for a policy to work and reveal its results. Presence of such features in a case cannot invalidate price fixation of which the direct objects are set out in Section 3 (1) of the Act.

30. Mr. Kacker, learned Solicitor General has rightly drawn our attention to a distinction between merely regulatory orders and those of price fixation or price control under Section 3 (2) (c) of the Act. A price fixation to meet the general purposes set out in Section 3 (1) of the Act, aimed at reversing the vicious inflationary spiral of rising prices, may appear arbitrary or unreasonable judged by standards applicable to price fixation aimed at giving reasonable profits to producers which is not the object of Section 3 (1) of the Act. The whole evidence of the petitioners is misdirected inasmuch as it proceeds on the assumption that what could be no more than a relevant consideration is the whole and sole object of Section 3 (1) of the Act. About other matters there is practically no evidence so that we are left in the region of guesswork.

31. No case has been cited before us to show that an Order meant to serve a purpose the execution of which may, as indicated above, require fixation of price even below cost price for the time being, is outside Section 3 (1) of the Act. It was rightly urged on behalf of the Union that the Control order is a temporary and experimental device for achieving a particular purpose, covered by Section 3 (1) of the Act at a particular time, in a particular state of affairs. It was submitted that, after the purpose is achieved, the order could be and will be withdrawn by the Govt. of India. As already stated above, that order has been withdrawn because the purpose has been achieved. Even it that purpose had not been achieved, the order could be withdrawn if it became evident to the Government that such control would not achieve the desired object. It is extremely hazardous for Courts to enter the sphere of experimentation in matters of economic policy which must be left to the Government of the day.

32. It will be seen from the provisions of Section 3 (3) of the Act that price fixation on certain given principles is enjoined only when there is an order under Section 2 (f) of the Act compelling the sale of a whole stock or a specified part of it to the Central or a State Government of to authorities or persons as directed by them. Again, Section 3 (a) (iii) provides a machinery for price fixation in special cases. Similar is the position with orders under Sub-sections (3B) and (3C). The whole machinery of control of supplies with a view to their equitable distribution and securing their availability at fair prices, it will be seen, is much more comprehensive than the machinery for price fixation in special cases on given principles.

33. The cases cited before us on price control relate to the sphere in which the criteria for fixation of prices were indicated either by a statutory provision or by orders made thereunder. In Panipat Cooperative Sugar Mills v. Union of India, this Court said (at p. 538 of AIR):

'Two principal questions arise in these appeals : (1) what is the true interpretation of Section 3 (3-C) and (2) whether the price of Rs. 124.63 was in accordance with the provisions of Section 3 (3-C).'

Thug, statutory principles for price fixation were under consideration there. Again, in Shree Meenakshi Mills Ltd. v. Union of India, there were directions given under the Cotton Textiles Control Orders prescribing sales through certain channels. The principles on which the sale prices of textiles were to be fixed, in accordance with relevant rules, were explained by this Court.

34. In Meenakshi Mills' case (supra), Ray, C. J., disapproved of the decision of this Court in Premier Automobiles Ltd. v. Union of India in the following words : (at p. 380).

'The Premier Automobiles (supra) decision does not consider that the concept of fair prices varies with circumstances in which and the purposes for which the price control is sought to be imposed. This decision because of the special agreement there does not consider that the fixation of fair price with a view to holding the price line may be stultified by allowing periodic increase in price.'

It was also observed there :

'In Premier Automobiles case (supra) this Court said that the concept of fair price fixed under Section 18-G takes in all the elements to make it fair for the consumer leaving a reasonable margin of profit to the manufacturer without which no one will engage in any manufacturing activity. These observations were made on the basis of the agreement of the parties there that irrespective of technical or legal points the Court should base its judgment on examination of correct and rational principles and should direct deviation from the report of the Commission of inquiry appointed by it with the concurrence of the parties only when it is shown that there has been a departure from the established principles or the conclusions of the commission are shown to be demonstrably wrong or erroneous.'

In other words, that judgment was not to provide a precedent for anything similar to be done by Courts in other cases.

35. In Saraswati Industrial Syndicate Ltd. v. Union of India the cases mentioned above were discussed by this Court in the context of Sugar Control Order, 1966, where Clause (7) laid down certain matters to be considered in determining fair price. It was held there : (at p. 464).

'Price fixation is more in the nature of a legislative measure even though it may be based upon objective criteria found in a report or other material. It could not, therefore, give rise to a complaint that a rule of natural justice has not been followed in fixing the price. Nevertheless, the criterion adopted must be reasonable.

The guiding factors laid down in Clause (7) of the Sugar Control Order, 1966, were held to afford only indicia to help the Government in fixing prices on the lines indicated in the Control Order.

36. We think that unless, by the terms of a particular statute, or order, price fixation is made a quasi-judicial function for specified purposes or cases, it is really legislative in character in the type of control order which is now before us because it satisfies the tests of legislation. A legislative measure does not concern itself with the facts of an individual case. It is meant to lay down a general rule applicable to all persons or objects or transactions of a particular kind or class. In the case before us, the Control Order applies to sales of mustard oil anywhere in India by any dealer. Its validity does not depend on the observance of any procedure to be complied with or particular types of evidence to be taken on any specified matters as conditions precedent to its validity. The test of validity is constituted by the nexus shewn between the order passed and the purposes for which it can be passed, or, in other words by reasonableness judged by possible or probable consequences.

37. It is true that even executive or legislative action must be confined to the limits within which it can operate. It must fall reasonably within the scope of the powers conferred. The scope of the powers conferred depends upon the terms of the empowering provision. As we have already mentioned, the empowering provision in the instant case is widely worded. The validity of Section 3 has not been challenged before us. As indicated above, it could not be challenged by reason of Article 31-B after its inclusion in the 9th Schedule of the Constitution. The result necessarily is that, in a case in which the Central Government is the judge of expediency and necessity to the extent that even the protection of guaranteed fundamental rights cannot stand in the way of its view or opinion of such necessity and expediency, a challenge on the grounds on which it was attempted before us could not succeed.

38. We may also mention that the view we have taken of the dominant purpose of Section 3 (1) of the Act is in accordance with the following elucidation of its purpose in Meenakshi Mills case (supra):

'The question of fair price to the consumer with reference to the dominant object and purpose of the legislation claiming equitable distribution and availability at fair price is completely lost sight of if profit and the producer's return are kept in the forefront. The maintenance or increase of supplies of the commodity or the equitable distribution and availability at fair prices are the fundamental purposes' of the Act.'

39. We do not think that we need deal with American cases on price fixation such as Leo Nebbia v. People of the State of New York, (1933) 291 US 502 : 78 L Ed 940 where the guarantee of due process against capricious action was involved. In this country, such guarantees in regard to rights of property or to carry on industry or trade or business could only arise by reason of Articles 14 and 19 of the Constitution which are excluded here because of the protection conferred upon Section 3 of the Act by the 9th Schedule of the Constitution. I may, however, mention that in Permian Basin Area Rate Cases, (1968) 20 L Ed 312 where the majority of learned judges of the U. S. Supreme Court laid down, inter alia, with regard to price fixation by a body of experts of Federal Power Commission required to proceed quasi-judicially, that in order to 'over-turn the Commission's judgment' the petitioners must 'undertake the heavy burden of making a convincing showing that it is invalid, because it is unjust and unreasonable in its consequences'. That was a case in which a Commission was charged with a duty to fix rates in accordance with certain principle after taking evidence and hearing parties affected. Nevertheless, the duty of the petitioners was held to extend to demonstrating the unreasonableness and injustice of the consequences. A fortiori, patent injustice and unreasonable injury to the interests of consumers must be shewn if a measure of price control, in the nature of either legislative or purely administrative action, is assailed. So long as the action taken is not so patently unjust and unreasonable as to lead to the irresistible conclusion that it could not fall within Section 3 (1) of the Act it cannot be set aside or declared invalid. The test has to be that of consequences on objects sought by Section 3 (1) of the Act. Judged by this test we think that the Order of 30th September, 1977, fell within the purview of Section 3 of the Act and it has served its purposes.

40. For reasons given above, the order of dismissal of Writ Petitions already passed by us on 23rd November, 1977 is, in our opinion, fully justified.


Save Judgments// Add Notes // Store Search Result sets // Organizer Client Files //