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R.D. Aggarwala and anr. Vs. the Union of India and anr. - Court Judgment

LegalCrystal Citation
SubjectConstitution
CourtDelhi High Court
Decided On
Case NumberLetter Patent Appeal No. 17 of 1970
Judge
Reported inILR1974Delhi520
ActsIndustrial (Development & Regulation) Act, 1951 - Sections 18G; Constitution of India - Articles 14 and 19; General Clauses Act, 1897 - Sections 3(29); Cement Control Order, 1967
AppellantR.D. Aggarwala and anr.
RespondentThe Union of India and anr.
Advocates: S.C. Manchanda,; R. Dayal,; P.N. Chadha,;
Cases ReferredRustom Cavasjee Cooper v. Union of India
Excerpt:
(i) industries (development & regulation) act (1951) - section 18g--scope and extent of--power of government to regulate, supply and distribution of an article relatable to scheduled industry--when can be exercised--word 'appears'--meaning of--warrants an objective satisfaction by government before passing an order--extent to which the court can inquire into.;that section 18g(1) of the industries (development and regulation) act, 1951, enables the central government to provide, by a notified order, for regulating the supply and distribution of any article or class of articles relatable to any scheduled industry, if it appears to it to be necessary or expedient for securing the equitable distribution and availability at fair prices of such article or class of articles. the section.....t.v.r. tatachari, j. (1) these three letters patent appeals. nos. 17, 45, and 18 of 1970, can be disposed of by a common judgment. the appellants in letters patent appeal no. 17 of 1970 are (1) r. d. aggarwala and (2) dalmia dadri cement limited having its registered office at charkhi-dadri, district mohinder garh, haryana. the appellants in letters patent appeal no. 45 of 1970 are (1) dalmia cement (bharat) limited having its registered office at dalmia puram in the state of tamil nadu and its head office at new delhi, and (2) shri j. c. dawar. the appellants in letters patent appeal no. 18 of 1970 are musadi lal, smt. shanti devi, raghunath das and shiv shankar lal. the respondents in all the three appeals are (1) the union of india, through the secretary, ministry of industrial.....
Judgment:

T.V.R. Tatachari, J.

(1) These three letters Patent Appeals. Nos. 17, 45, and 18 of 1970, can be disposed of by a common judgment. The appellants in letters Patent Appeal No. 17 of 1970 are (1) R. D. Aggarwala and (2) Dalmia Dadri Cement Limited having its registered Office at Charkhi-Dadri, District Mohinder Garh, Haryana. The appellants in Letters Patent Appeal No. 45 of 1970 are (1) Dalmia Cement (Bharat) Limited having its Registered Office at Dalmia Puram in the State of Tamil Nadu and its Head Office at New Delhi, and (2) Shri J. C. Dawar. The appellants in letters Patent Appeal No. 18 of 1970 are Musadi Lal, Smt. Shanti Devi, Raghunath Das and Shiv Shankar Lal. The respondents in all the three appeals are (1) the Union of India, through the Secretary, Ministry of Industrial Development and Company Affairs, Department of Industrial Development and (2) the Cement Corporation of India Ltd. having its Registered Office at New Delhi. In Letters Patent Appeal No. 18 of 1970, however, there are two more respondents, namely (3) Dalmia Dadri Cement Limited, Charkhi-Dadri, and (4) Dadri Cement Co., Delhi. During the pendency of the appeals, a Joint Secretary in the Ministry of Industrial Development and Company Affairs (Department of Industrial Development), who was appointed as the Controller for the purposes of the Cement Control Order, 1967, in addition to his own duties as Joint Secretary, with effect from October 12, 1968, was added as respondent in all the three appeals.

(2) The appellants in the appeals. L.P.A. Nos. 17 and 45 of 1970 are producers of cement, while the appellants in the appeal, L.P.A. No. 18 of 1970, are consumers. The appeals have been filed against the judgment of a learned Judge of this Court (V. S. Deshpande, J.) dated December 5, 1969, in Civil Writ Petitions Nos. 220, 319 and 725 of 1968, by the three sets of appellants respectively, whereby the learned Judge rejected the contentions of the appellants impugning the validity of the Cement Control Order, 1967, issued in exercise of the power under Section 18G of the Industries (Development and Regulation) Act, 1951, and dismissed the writ petitions. Another set of consumers also filed Civil Writ Petition No. 726 of 1968 raising the same contentions, and that was also dismissed by the learned Judge by the same judgment. But, no appeal has been filed by the said set of consumers. We have thus only two appeals by the producers and one appeal by the consumers before us.

(3) After pronouncing the judgment on December 5, 1969, Deshpande, J. by a separate order of the same date, granted certificate under Article 132(1) of the Constitution of India that the cases involved a substantial question of law as to the interpretation of the Constitution. On the basis of the said certificates, he petitioners in the writ petitions filed appeals in the Supreme Court. On February 23, 1970, the Supreme Court cancelled the said certificates and left the parties free to file appeals in the High Court, if they so desired. 'Thereafter, the three aforesaid sets of appellants filed the present three appeals with applications for condensation of delay. The delay was condoned and the Letters Patent Appeals were admitted. It is thus, that the present appeals, L.P.As Nos. 17, 45 and 18 of 1970, have come before us for disposal.

(4) The circumstances in which the writ petitions came to be filed may be stated first. We have been given a chronological list of events by the learned counsel for the appellants and the correctness of the same was not disputed by the learned counsel for the respondents. The said list is borne out by the report of the Tariff Commission, 1961, on the revision of fair prices payable to cement producers, a copy of which has been furnished to us.

(5) The history of the prices of cement since 1926 was set out in paragraphs 8.2.1 to 8.2.6 of the aforesaid report. From 1920 to July, 1942, the market price of cement was free. During the said period, the indigenous industry is stated to have been struggling for its existence against foreign competition, and its then seven constituent units formed themselves into an association called the Indian Cement Manufacturers' Association. The said Association used to fix and regulate the selling prices. From August 1942, to September, 1946, the Government imposed under the defense of India Rules control over production, prices, and distribution of cement, and 90 per cent of the country's production was taken up for defense purposes. As consumption on Government account decreased in later years, the Government, in consultation with the A.C.C. (Associated Cement Companies Limited) and the Dalmia Group of Factories, agreed to release the surplus cement for public consumption and the price of such supplies was fixed in March, 1944, at Rs. 70.00 per tonne f.o.r. (free on rail) destination. The price was being revised from time to time and varied between Rs. 70.00 and Rs. 60.00 per tonne during the period from March, 1944, to the end of 1946, From October, 1946, to the end of June, 1956, after the lapse of the defense of India Rules, the Government exercised an informal control by fixing prices from time to time by executive orders. During that period, in 1953, the Tariff Commission conducted, for the first time, an inquiry into the prices of cement and, on the basis of the recommendations of the Commission. the Government fixed revised prices of cement. The price structure recommended by the Commission followed the previous pattern and was a uniform f.o.r. destination price based on the A.C.C's. costs of production taking them as fairly representative for the industry.

(6) From July 1, 1956, the State Trading Corporation of India (S.T.C) took over the distribution of cement and, as a result, the f.o.r. destination prices which were in force previously underwent revision. Each producer was given a retention price for his cement on the basis of his ex-works cost, the uniform f.o.r. destination price being determined by the State Trading Corporation adding a pooled freight to the average of retention prices. In 1958, the Tariff Commission held a second inquiry into the prices of cement, and recommended individual ex-works prices for producers in accordance with the prevalent prices. The recommendation was accepted by the Government and the ex-works prices were revised from July 1, 1958. There was a further revision with effect from January 1, 1960. With effect from February 20, 1961, the equalised f.o.r. destination price was fixed for naked cement, and packing charge was notified separately every quarter and collected from consumers. By a resolution, dated October 20, 1960, the Government of India, being of the opinion that a comprehensive review of the cement industry taking into account all aspects of the industry, such as production, prices, distribution, development, etc. was necessary, requested the Tariff Commission to conduct a fresh inquiry. The Commission, on conclusion of its inquiry, submitted its report on August 26, 1961, which is the report which we have been referring to. The final fair ex-works selling prices of naked cement for 19 units in the industry were given in paragraph 14.2 of the report. The said prices varied from 67.50 to Rs. 103.00 per tonne. The Government considered the report, and passed a resolution on October 31, 1961 (vide Annexure R. 1 to the affidavit of Shri G. Ramanathan, Under Secretary to the Government of India. Department of Industrial Development, Internal Trade and Company Affairs, New Delhi, dated May 7, 1970, filed in opposition to the stay petition, C. M. No. 590 of 1970). In that resolution, the Government, while agreeing in general with the approach of the Tariff Commission in its report, did not feel the increase, in full, recommended by the Commission to be necessary, and fixed the uniform ex-works price of naked cement at Rs. 69.50 per tonne for the industry. The Government allowed an extra price for certain units. The other ancilary recommendations made by the Tariff Commission were just noted by the Government, and it was stated that appropriate action thereon would be taken in due course. The Government further stated in their resolution as under :-

'GOVERNMENTare of the considered view that the existing system of differential prices, based on individual costs, is not conductive to efficiency and greater production, and that there should be a uniform price for the industry, so that greater pressure is exercised on units having higher costs to find economies and there is a measure of reward for those units able to achieve economies.'

(7) On the same date, the Government of India made the Cement Control Order, 1961, in exercise of the powers conferred by Section 18G of the Industries (Development and Regulation) Act 1951 (65 of 1951), and in supersession of Cement Control Order, 1958. In the schedule to the Order were set out the prices per metric tonne at which each producer could sell cement free on rail ex-works. Out of the 21 factories mentioned in the Schedule, ex- factory price of Rs. 69.50 was fixed for twelve factories, Rs. 72.50 was fixed for five factories, Rs. 75.00 was fixed for three factories and Rs. 95.00 was fixed for one factory. Subsequently, the Government made an ad hoc increase of Rs. 2.75 per tonne on July 1, 1963, a further increase of Rs. 4.00 per tonne on July 1, 1965, and a still further increase of Rs. 13.00 per tonne on January 1, 1966. Thus, on January 1, 1966, the ex-factory prices ranged approximately between Rs. 90.50 and Rs. 115.00.

(8) On August 26, 1965, the Prime Minister made an announcement in the Parliament that it had been decided in principle to decontrol cement except for the quantities required for the Government. For the purposes of implementation of the said announcement, the Cement Manufacturers' Association, Bombay, submitted on November 5, 1965, a Memorandum regarding the decontrol of cement (vide Annexure R-2 to the counter affidavit, dated April 8, 1968, filed on behalf of respondent 1). The said Annexure shows that after examining the said memorandum, and after discussions with the industry on November 12, 1965, the Government agreed to certain arrangements to be made by the Cement Manufacturers' Association. The Government agreed. inter alia, (a) that with effect from January 1, 1966, cement would be decontrolled, that the Government would revoke the cement Control Order, 1961, and also advise the State Governments to cancel their State Cement Control Orders, and that the powers delegated to the State Governments under the Industries (Development and Regulation) Act and the Essential Commodities Act would be withdrawn : (b) that with effect from January 1, 1966, there would be no legal authority to control the production, price and distribution of cement throughout India, that the State Trading Corporation of India would also go out of the picture and the Department of Industry would no longer be responsible for the distribution of cement to various Government consumers. State Governments, and other sponsoring authorities, and that each authority/consumer would, thereforee, have to contact the Cement Manufacturers' Association for guidance ; (c) that, however, to enable a smooth change over from a long period of control to a period of decontrol, and to ensure that prices do not shoot up immediately after decontrol the Cement Manufacturers' Association agreed to form their own Central Organisation called the 'Cement Manufacturers Sales Coordinating Organisation' with Headquarters in Bombay to take over the functions of the State Trading Corporation of India Limited so far as they relate to cement distribution; and (d) a quantity equivalent to 50 per cent of the total production of cement (all varieties of cement) by each unit would be reserved for supply to Government indentors under the rate contract as per allotment indicated by the Department of Industry. By a letter, dated December 16, 1965, the President of the Cement Manufacturers' Association replied to the Government of India appreciating and expressing gratitude for the Government's decision to implement the policy of decontrol, and informing the Government that under legal advice the Association decided that the producers Organisation would be known as the 'Cement Allocation and Co-ordinating Organisation ' (CACO). The president also made certain comments on the scheme of decontrol. But, it is not necessary to mention them in detail for the purposes of these appeals.

(9) Thus, cement was decontrolled with effect from January 1, 1966, and the statutory control on price and distribution gave place to a form of informal self regulating control by the industry itself through CACO.

(10) The above position continued till December 23, 1967, when the Government of India decided to introduce control again. In a letter, dated December 23, 1967 (Annexure R-9 to the counter affidavit, dated April 8, 1968), written by the Department of Industrial Development to the Managing Director, Cement Corporation of India Limited, it was stated that the distribution of cement in the country was at that time regulated by an organisation of the cement industry called the Caco, that the said organisation had been functioning since January 1, 1966, and had been asked by the Government to ensure proper distribution of cement in the country on the basis of a uniform f.o.r. destination price, that in view of certain defects and difficulties noticed in the working of the said organisation, the Government have decided that the said organisation should not be entrusted with the distribution of cement from January 1, 1968, onwards, that the functions performed by it should be taken over by a Government controlled agency, that the Ministry of Commerce had not agreed to the said work being entrusted to the State Trading Corporation, that it was, thereforee, decided by the Government that the work relating to the distribution of cement in the country should be taken over by the Cement Corporation of India with effect from January 1, 1968, and that Cement Control Order, 1967, would be issued so as to take effect from January 1, 1968. Accordingly, the Cement Control Order, 1967, was issued, and it came into force on January 1, 1968. Aggrieved by the provisions in the said Cement Control Order, 1967, the writ petitions which have given rise to the present Letters Patent Appeals were filed by the producers of cement and the consumers of cement.

(11) Mr. Manchanda. and Mr. Anil Kumar, learned counsel for the appellants-producers in L.P.A. Nos. 17 and 45 of 1970, respectively, contended firstly that the Cement Control Order, 1967, is ultra virus being beyond the power conferred by Sections 18G(1) and 25 of the Industries (Development and Regulation) Act, 1951, and based on extraneous considerations, and that the Government had not applied its mind to the question as to whether there was necessity or expediency-far making the Order. This contention was urged before the learned single Judge, but was rejected.

(12) In order to appreciate the contention, reference has to be made to the provisions in Sections 18G(1) and 25 of the aforesaid Act as well as the preamble to the Cement Control Order. 1967. Section 18G(l) of the Act reads as under:-

'18G. Power to control supply, distribution, price, etc. of certain articles

(1)The Central Government, so far as it appears to it to be necessary or expedient for securing the equitable distribution and availability at fair prices of any article or class of articles relatable to any scheduled industry may, notwithstanding anything contained in any other provision of this Act, by notified order, provide for regulating the supply and distribution thereof and trade and commerce therein.'

SECTION 25 deals with delegation of powers. Sub-section (1) of Section 25 reads as under :-

'25.Delegation of powers-

(1)The Central Government may, by notified order, direct that any power exercisable by it under this Act (other than the power given to it by Sections 16 and 18A) shall, in relation to such matters and subject to such conditions if any, as may be specified in the direction, be exercisable also by such officer or authority (including in the said expressions any Development Council, State Government or officer or authority subordinate to the Central Government) as may be specified in the direction.'

(13) It is in exercise of the power under the above provisions that the Cement Control Order, 1967, was made. Its preamble reads as under:- 'S.O.4590-IDRA/18G/67- Whereas it appears to the Central Government that for the purpose of securing the equitable distribution and availability at fair prices of cement, the supply and distribution of, and trade and commerce in, cement should be regulated;

(14) Now, thereforee, in exercise of the powers conferred by Section 18G and Section 25 of the Industries (Development and Regulation) Act, 1951 (65 of 1951), and all other powers enabling it in that behalf, the Central Government hereby makes the following order, namely -

(15) The appellants-producers alleged in their writ petitions that cement had been a controlled commodity over a long number of years until December, 1965, that in 1965 the first respondent reviewed the position of production of cement and distribution at fair price and came to the conclusion that control was no longer necessary, and that cement was, thereforee, decontrolled with effect from January 1, 1966. They averred that before the said decontrol there was shortage of cement generally in all parts of the country resulting in a lot of inconvenience to the consumers, that the production of cement in the country in the year 1965 was 10.58 million tonnes against its production capacity of 11.70 million tonnes, that the entire cement so produced was dispatched to the consumers, but still the demand of the public remained unsatisfied and that in the years 1966 and 1967, i.e. during the period of decontrol, the production capacity rose to 12.1 million tonnes and 12.5 million tonnes respectively, and the production of cement rose to 11.05 million tonnes in the year 1966 and) to 11.15 million tonnes in 1967. According to them, even after meeting the requirement of the Government and priority consumers in full, the industry was able to make larger supplies to the general public as compared to the previous years and there was still a small surplus of cement. They also averred that during the said years 1966 and 1967, cement was freely available to the consumers at the prices approved by the Government and there had been no complaint about any sort of mal-distribution, and that it was expected that the production capacity of cement during the year 1968 would be about 15 million tonnes which was likely to further increase to about 16.5 million tonnes in the year 1969, but the consumption was not likely to increase correspondingly. They filed a copy of a Note (Annexure D to Letters Patent Appeal No. 17 of 1970) which is stated to have been submitted by the Ministry of Industrial Development and Company Affairs to the Central Advisory Council of Industries which met in New Delhi on November 10, 1967. The Note reads as under:-

'THEdistribution arrangements after decontrol have been satisfactory as the total dispatches of cement during 1966-67 have increased over the figures of 1965-66 by about I million tonnes. The Caco has also ensured the supply of cement all over the country at a uniform price on the basis of past pattern of dispatches. No serious complaints of shortage have been received from any corner.'

(16) They submitted that Section 18G(1) required the Central Government to form an opinion on the basis offactual data before it that regulation of supply and distribution of any article relatable to any scheduled industry is necessary, and also to form an opinion in regard to the extent of the regulation, and that the Central Government was also required to be satisfied about the expediency of securing equitable distribution of cement and its availability at fair prices. It was asserted that it was clear from the position of cement during the years 1966 and 1967 that there was neither any such necessity nor expendiency for regulating the supply and distribution of cement in the year 1968, particularly when, as late as November 10, 1967, the Ministry of Industrial Development and Company Affairs unmistakably admitted in its Note that distribution arrangements after decontrol of cement had been satisfactory and the total despaches of cement during 1966-67 had increased over the dispatches of 1965-66 by about one million tonnes, while the prices of cement were uniform throughout the country. It was emphasised that the said Note clearly established that the Central Government have, in promulgating the Cement Control Order, 1967, acted on extraneous considerations and not on relevant considerations, and that there were thus no grounds at all which, could justify the imposition of any Control over cement. It was submitted that in the circumstances of the case no one could reasonably arrive at the opinion or satisfaction requisite under Section 18G(1) of the Act for introducing Control, and 'the Central Government did not honestly form its opinion, and that in forming it did not apply its mind to the relevant facts and thus acted with mala fides in law in Promulgating the impugned Cement Control Order, 1967.

(17) In the counter affidavit of Mr. G. Ramanathan, Under Secretary, Department of Industrial Development; dated April 8, 1968, filed on behalf of respondent I in Letters Patent Appeal No. 17 of 1970, the aforesaid allegations and averments were denied, and it was averred that during the period of informal control by the industry in 1965-67, the Governments purchases fell much below the anticipated level of 50 per cent and came down gradually to about 35 per cent due to the reduction in the Government's activities as a result of enforcement of economy measures, that the demand of the organized industry also fell because of the recession, and that those factors resulted in a larger quantity of cement becoming available to the public which contributed to the slight improvement in the supply position. The statistical report for the taionth of December, 1967, was annexed to the counter affidavit as Annexure R-4. It was. submitted that the improvement. during the said years was not attributable to decontrol or to a more efficient distribution by the industry, that, on the other hand, there were complaints from the Government of Punjab and Haryana about the shortage of cement in those States, that there was deterioration in the supply position during April-June, 1966, and the rainy season, that the demand in the non-Government Sector had increased considerably, and in the light of the improvement in the agricultural economy, demand of the rural section was also expected to be considerable, and that there was, thereforee, no basis for the assumption of the producers-petitioners that the demand for cement would not increase correspondingly with the production.

(18) As regards the necessity for making the Control Order, it was averred that the working of the informal control arrangement was reviewed by the Government towards the end of 1967 as the approval given was only up to the end of 1966-67, and that certain defects were noticed. The said defects were :-

(I)The industry did not accept the Government's suggestion that the saving on account of the non-payment of oil subsidy should be utilised for freight equalisation purposes. But, on the other hand, the industry wanted to utilise those savings for levelling up the retention prices at the highest level and make up the loss on increased freight by increasing the f.o.r. price. The relevant correspondence between the Government and the Cement Manufacturers Association was Annexed as R-8;

(II)The industry did not accept the Government's suggestion that the deterioration in the supply position during April-June, 1966, and the rainy season should be avoided by building up proper storage facilities near the consumption centres when production was good and wagons were available, on the plea of lack of finance;

(III)The industry ignored the directive of the Government to continue the system of three differential retention prices, and instead introduced a system of two prices without taking into account properly the resources available to them and without specific sanction of the Government in violation of the agreement between the Government and the industry at the time of the decontrol;

(IV)CACO, the organisation set up by the industry to enforce the informal control, developed internal dissensions and could not enforce effective control over the members and could not even prevent a member (Dalmia Dadri Cement Limited) from walking out of the organisation;

(V)The Unit, Dalmia Dadri Cement Limited, sent a notice to Caco staling that it ceased to be member of Caco from October 1, 1967. By virtue of the location of the factory of the said unit near the consunmption centres, the average freight incurred by the unit was less than the average freight provision in the f.o.r. destination price. The said unit misappropriated the entire freight provision paid by the buyer to which it was not entitled and did not credit to Caco what was due to it from October 1, 1966, onwards in violation of the agreement and contrary to the assurances given by the industry at the time of the decontrol. The unit did not thus show the intention to co-operate with Caco in spite of requests from the Government;

(VI)At the time of decontrol, the industry was asked to pay up a sum of Rs. 39.91 lakhs due to the State Trading Corporation to wipe off their deficit in the Cement Agency Account. In spite of repeated instructions, the same was not paid till after the introduction of the control from January 1, 1968.

(VII)The industry ignored the suggestion of the Government to try and export cement; and

(VIII)It came to the notice of the Government that the funds placed by Caco at the of its President, allegedly for the furtherance of the objective of the Association, were in fact spent on political donations.

(19) In support of the aforesaid averments, reliance was placed upon the correspondence filed as Annexure R-8 collectively.

(20) It was further averred in the counter affidavit that the Government also considered that a Central Organisation was necessary (a) to keep a continuous watch over the production to see that the production was not allowed to fall intentionally to create scarcity conditions; (b) to see that the expansion reserve account was utilised properly by placing orders for plant and machinery and the expansion of the capacity takes place as intended; (c) to build an export market for cement and (d) to ensure that remote areas not having cement factories continue to be supplied adequately. It was submitted that the Government, after a careful and impartial review of the arrangements and in the circumstances explained above, came to the conclusion that the private organisation (CACO) set up by the industry could be effective only if all the producers were united and accommodating and if the entire production of cement was taken over by them for distribution on a uniform f.o.r. price system, that as the Government observed that the organisation had lost its unity and could no longer distribute the entire production, it came to the conclusion that it would be desirable to substitute a Government controlled organisation to be in charge of distribution in the interests of equitable distribution of cement in the country, and that in those circumstances the Government's decision to re-introduce control from January 1, 1968, was neither based on extraneous considerations nor on insufficient grounds or mala fide in law. but purely due to the compulsion of the circumstances and to prevent misappropriations of the freight collections paid by the purchasers to which the producers were not entitled.

(21) In the rejoinders to the aforesaid counter affidavit, the producers either denied or merely averred that all the various reasons set out above were irrelevant to the present case and did not justify the promulgation of the impugned order. There was no attempt to rebut or disprove the correctness of the eight reasons and the other considerations which weighed with the Government in deciding to introduce control again from January I, 1968.

(22) Section 18G(1) of the Industries (Development and Regulation) Act, 1951, enables the Central Government to provide, by a notified order, for regulating the supply and distribution of any article or class of articles relatable to any scheduled industry, if it appears to it to be necessary or expedient for securing the equitable distribution and availability at fair prices of such article or class of articles. The section prescribes that before the Government exercises the power under Section 18G(1), it must appear to it that the said exercise is necessary or expedient for securing an equitable distribution and availability at fair prices of such article or class of articles. The learned Solicitor-General, Shri Lal Narain Sinha, suggested that the word 'appears' in Section 18G(1) indicates the subjective satisfaction of the Government. We do not think so. The exercise of the power under Section 18G(1) is restrictive of freedom of trade, and the legislature, in the absence of any indication to that effect, cannot be assumed to have intended to leave the matter to the subjective satisfaction of the Government. In the context, the word 'appears' in Section 18G(1) suggests an objective process and not a subjective process. In other words, the Government has to consider the existing circumstances or state of affairs objectively, and come to a conclusion that it is necessary or expedient for exercising the said power. When the exercise of the power has been challenged in a court of law, the Government has to show that such circumstances did exist, and that on a .consideration of those circumstances the Government considered it necessary and expedient to exercise the power. Obviously, the circumstances have to be relevant to the object sought to be achieved. However, the Court is concerned only with the existence of such relevant circumstances. It is not concerned with nor can it go into the sufficiency of the said circumstances or the propriety of the exercise of the power. The scrutiny by the Court has thus only a limited scope. In this connection, reference may usefully be made to the observations of the Supreme Court in Rampur Distillery Company Ltd. v. Company Law Board and another : [1970]2SCR177 . In that case, the Supreme Court considered the nature of the satisfaction contemplated by Section 326 of the Companies Act, 1956, and made the following observations :-

'THEsatisfaction contemplated by S. 326 must, thereforee, be the result of an objective appraisal of the relevant materials. The reason is clear. By Section 326 several restrictions upon the power of the Companies and individuals to carry on business are imposed in the interest of the shareholders, the creditors, and in the larger interests of die public...... .........Exercise of the power conferred upon the Central Government is restrictive of valuable rights of the Company and of the proposed managing agent, and severally restricts the liberty of contract...............The satisfaction of the Government which is determinative is satisfaction as to existence of certain objective facts...............The courts however are not concerned with the sufficiency of the grounds on which the satisfaction is reached. What is relevant is the satisfaction of the Central Government about the existence of the conditions in els. (a), (b) & (c) of sub-s. (2) of S. 326. The enquiry before the Court, thereforee, is whether the Central Government was satisfied as to the existence of the conditions. The existence of the satisfaction cannot be challenged except probably on the ground that the authority acted mala fide. But, if in reaching its satisfaction the Central Government misapprehends the nature of the conditions or proceeds upon irrelevant materials, or ignores relevant materials, the jurisdiction of the Courts to examine the satisfaction is not excluded. The power, in our judgment, is a quasi-judicial power and not administrative : it necessarily implies a duty arising from the nature of the act empowered to be done, the object for which it is to be done, the conditions in which it is to be done. and its repercussion upon the power of the Company, the shareholders, the creditors, and the general public for whose benefit the power is to be exercised.'

(23) In the present case, we have referred to the various circumstances on a consideration of which the Government considered it necessary or expedient to exercise the power under Section 18G(1). Nothing has been brought to our notice by the learned counsel for the appellants to show that the said circumstances were non-existent. Nor can those circumstances be said to be irrelevant to the purpose sought 40 be achieved by the Control Order, namely, equitable distribution of cement and its availability at fair prices. It is true that it was stated in the Note of the Ministry of Industrial Development, dated November 10, 1967 (Annexure D to the rejoinder to the Civil Writ Petition No. 220 of 1968), that the distribution arrangements after decontrol have been satisfactory as the total dispatch of cement during 1966-67 had increased over the figures of 1965-66 by about 1 million tonnes, that the Caco had also ensured the supply of cement all over the country at a uniform price on the basis of past pattern of dispatches, and that no serious complaints of shortage had been received from any cornor. But, according to the counter affidavit of the Government there were various other circumstances, which have already been set out above, on the basis of which it appeared to the Government that it was necessary or expedient to exercise the power under section 18G(1) to regulate the supply and distribution of cement and trade and commerce therein in order to secure equitable distribution and its availability at fair prices. The circumstances were that the Government noticed certain defects in the working of the Caco during the period of decontrol. The defects were the following. The industry did not accept the suggestion of the Government that the saving on account of the non-payment of oil subsidy should be used for freight equalisation, and also the suggestion of the Government that deterioration of supply should be avoided by building up proper storage facilities. The industry also ignored the direction of the Government to continue the system of three different prices and instead introduced a system of two prices. Internal dissensions developed in CACO. The Dalmia Dadri Cement Limited (petitioner in Civil Writ petition No. 220 of 1968), appropriated the difference between the average freight provided in the f.o.r. destination price and the average freight actually incurred by it, and did not credit to the Caco what was due to it from October 1, 1966. The industry also ignored the suggestion of the Government to improve exports of cement. Funds placed by the Caco at the disposal, of its President were spent on political donations. As already stated, it is not for this court to consider the propriety of the exercise of the power or the sufficiency of the aforesaid circumstances. There is no reason to disbelieve the avermeats in the counter affidavit about the existence of the aforesaid circumstances or defects, and they cannot be said to be irrelevant .to the purpose sought to be achieved. There is nothing on the record to show that the Government did not apply its mind and consider the aforesaid circumstances before making the Control Order. The learned counsel for the. producers submitted as regards the first circumstances that Annexure R.8 shows that the appellants in L.P.A. 17 of 1970 had in fact agreed to the oil subsidy. On the other hand, the said Annexure shows that the said appellants and the industry in general did not give a clear assent to adjust oil subsidy towards freight equalisation. In the matter of taking a decision as to the desirability of re-introducing control, what was said or done by one or two individual producers is not the deciding factor. The material factor is what the industry in general through its representative Association had said or done. In the circumstances it has to be held, agreeing with the view taken by the learned single Judge, that it is not possible to say that it was not necessary or expedient for the Government to have issued the Cement Control Order, 1967, under Section 18G(1). The contention of the learned counsel on behalf of the producers cannot, thereforee, be accepted.

(24) The second contention of the learned counsel for the producers was that the material clauses of the Cement Control Order, 1967, are ultra virus Article 14 and 19(l)(f) and (g) of the Constitution. The Cement Control Order contains 14 clauses. Broadly stated, clause 1 sets out the short title, extent and commencement Of the Order, and Clause 2 contains definitions of the words 'cement' 'Controller' and 'producer'. Clauses 3 to 6 deal with control of distribution. Clause 7 deals with retention prices. Clauses 8,9, 11 and 14 deal with fixation of uniform prices. Clause 10 deals with wholesale and retail prices, clause 12 deals with power to vary the prices and to alter the schedule, and clause 13 deals with delegation of powers. It is convenient to deal with the challenge against the clauses as grouped above Serialtum.

(25) Clauses 3 to 6, as stated earlier, deal with control of distribution and read as under :-

'3.Power to prohibit removal.-No producer shall remove or permit the removal of any cement, whether sold or unsold, from the precincts of his factory or from any other part of his premises to any place outside the precincts of such factory or premises except with the previous permission in writing of the Central Government.

4.Power to direct sale or transport.-The Central Government may, by order, require any producer to sell cement to such person or class of persons or to transfer cement to such destinations by such modes of transport, and on such terms and conditions, as may be specified in the Order.

5.Power to direct disposal of stock.---The Central Government may, with a view to securing proper distribution of cement, issue such orders, general or special, as may be necessary, to any producers as to the disposal of his stock.

6.Maintenance and production of accounts, etc.-(1) Every producer shall keep such books, accounts and records, relating to the production, sale and transport of cement as the Central Government may require.

(2)Every producer and every person employed by him in connection with the production, sale and transport of cement shall, on being required so to do by the Central Government, and within such period as may be allowed in this behalf-

(A)produce such books, accounts, records or other documents, and (b) furnish such returns and other information relating to the business as may be specified by the 'Central Government.'

(26) As regards clause 3, the learned counsel for the producers contained (a) that the provision prohibiting the removal of the cement by the producer from his factory or premises except with the permission in writing Of the Central Government exceeds the power conferred under section 18G of the Act as it is worded in absolute terms and the Controller is not. bound to issue order for removal of the cement, nor can he be compelled to issue appropriate order for removal of cement, and (b) that since the provision in the clause does not fix any limit of time for issuing an order for removal of cement, any delay in issuing the order might result in the cement getting spoiled and the producer might be forced to stop the production of cement for want of sufficient storage space and undergo serious loss, and that since such an uncanalised power has been given, the provision offends Article 14 of the Constitution. There is no force in either of the contentions. The provision in clause 3 docs not offend Section 18G as clause (b) of sub-section (2) of Section 18G specifically empowers the Central Government to regulate distribution, transport, disposal, etc. by a notified order. As regards the plea that the Central Government is not bound, nor can he be compelled to grant permission for removal and that there might be delay, it is just an apprehension without any basis. As averred in paragraph 23 (a) of the counter affidavit of Shri G. Ramanathan, dated April, 8, 1968, in Civil Writ Petition No. 220 of 1968, the Control Order was issued primarily to ensure the proper and continuous supply of cement and make it available for purchase by consumers. It is averred in the counter affidavit that 'in fact the movement of cement is planned in advance for each quarter on the basis of information collected regarding production of individual units and the areas where cement is required', and that 'the control order has been issued primarily to rationalise movement, ......and to avoid the development of surplus conditions near the producing centres and scarcity conditions near the remote consumption points in the deficit areas'. This is indeed implicit in the Preamble to the Control Order in which it is clearly stated that the Control Order* was made for 'securing' the equitable 'distribution' and 'availability' at fair prices of cement, and for regulation of 'supply' and 'distribution' of cement. The said intention and the purpose of the Control Order is, in our opinion, sufficient guide line in 'acting under the provision in clause 3, and it cannot be said that an unguided or uncanalised power has been conferred there under. As such, the provision cannot be said to offend Article 14 of the Constitution. Further, if the Central Government does not grant permission or delays the same without any valid reason, the same would be a ground for questioning the action of the Central Government, but does not render the provision in the Control Order itself invalid. The challenge against clause 3 has, thereforee, to beheld to be untenable.

(27) As regards clause 4, the learned counsel for the producers contended that under this clause the Central Government has been empowered to require a producer to sell cement to any person or class of persons or to transport cement to such destinations by such modes of transport as may be specified by it, and that no guide lines have been laid down and the power is an uncancalised one. There is no force in the contention. Section 18G(1) under which the Control Order has been made refers to regulation of supply and equitable distribution as the object of making the Control Order. The preamble to the Control Order also states the same object. It is implicit in that object that the supply or equitable distribution is intended for persons or class of persons who are in need of cement, or for areas which are deficit in cement and need the same. 'This, in our opinion, serves as a clear and sufficient guide line in passing orders under clause 4. The learned counsel also contended that the clause empowers the Government to prescribe the mode of transport, and the same goes beyond the scope of the provision in Section 18G(2)(d). It is true that Section 18G(2)(d) refers only to sale to such person or class of persons and in such circumstances as may be specified, and does not refer specifically to transport. But, the said person , class of persons may be at a place which is distant from the factory of the producer. Section 18G(1) specifies the object of malring a Control Order as, inter alia, securing availability of 'the controlled article (cement in the present case) at fair prices. It is quite conceivable that for making cement available at a fair price at any specified area where the person or class of persons are, it may be necessary to prescribe the mode of transport instead of leaving it to the producer in order to keep the price at a fair level. The power to prescribe the mode. of transport thus seems to be auxiliary to the power envisaged by Section 18G(2)(1)(d).

(28) The learned counsel sought to urge that the power under clause 4 to prescribe the mode of transport is an unreasonable restriction on the fundamental right of freedom of trade and is thus vocative of Article 19(1)(f) and (g) to the Constitution. The learned Solicitor-General did not raise the objection that Article 19 cannot be invoked by reason of the declaration of emergency which is still in force in view of the decision of the Supreme Court in Rustom Cavasjee Cooper v. Union of India, : [1970]3SCR530 . The learned single Judge pointed out that the producers, petitioners in the writ Petitions, being companies registered under the Companies Act, are not citizens and are not, thereforee, entitled to the enforcement of the fundamental rights guaranteed by Article 19(1)(f) and (g), and that it is doubtful if the shareholdres who have joined as petitioners could claim to enforce the aforesaid fundamental rights when the cement was produced not by the shareholders but by the companies. Even otherwise, in the- view taken by us above that the power to prescribe the mode of transport is auxiliary to the power envisaged by Section 18G(2)(d), the said auxiliary power to achieve the object of securing availability of cement at a fair price has to be held to be a reasonable restriction on the fundamental rights guaranteed by Article 19(1)(f) and (g).

(29) It follows from the above discussion that the challenge against clause 4 also cannot be accepted.

(30) No argument challenging clauses 5 and 6 was addressed before us by the learned counsel.

(31) The next clause challenged by the learned counsel for the producers is clause 7. It reads as under :-

'7.Retention Prices.-The ex-factory prices admissible to the producer for the different varities of cement shall be as specified in the schedule.'

(32) The schedule contains a list of all the. 25 cement manufacturers that existed in 1967-68 in the various States of India. It shows the prices of cement per tonne ex-factory payable to each manufacturer. The ex-factory prices range between Rs. 90.50 and Rs. 129.75 and in some cases different prices for the same factory on different slabs of production have been shown. In the case of the appellants in L.P.A. Nos 17 and 18 of 1970, the ex-factory price has been fixed as Rs. 90.50 per tonne, while they were getting Rs. 96.00 in 1966 and 1967 as fixed by Caco since January 1, 1966.

(33) It is common ground that the scheme of the order is that the ex-factory prices are the amounts that can be retained by the producers. and that is why the clause has been given the heading 'retention 'prices'. One of the contention of the appellants is as to whether sach fixation of retention prices is valid. It is convenient to consider this amount in dealing with the fixation of f.o.r. price under clause 8. For the present, we shall consider the other contentions urged regarding clause 7 referring to the prices in the schedule as ex-factory prices.

(34) It cannot be disputed that fixation of ex-factory price was not by itself invalid. In M/s. Diwan Sugar and General Mills (Private) Ltd. and others v. The Union of India, : AIR1959SC626 , the Supreme Court, while dealing with the Sugar Control Order, 1955, observed that it is well known that there are three kinds of prices prevalent in the market for a commodity like sugar, namely, ex-factory price, wholesale price, and retail price, and held that clause (c) of Section 3(2) of the aforesaid Sugar Control Order which provided for fixation of price at which any essential commodity may be bought or sold was very general in terms, and that the control provided under .the said clause was, thereforee, control at any of the three stages mentioned above.


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