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The Chamber of Colours and Chemicals Ltd. Vs. the Forward Markets Commission and anr. - Court Judgment

LegalCrystal Citation
SubjectContract
CourtDelhi High Court
Decided On
Case NumberCivil Writ Appeal No. 663D of 1964
Judge
Reported inAIR1975Delhi96; ILR1975Delhi475
ActsForward Contracts Regulation Act, 1952 - Sections 14A
AppellantThe Chamber of Colours and Chemicals Ltd.
RespondentThe Forward Markets Commission and anr.
Advocates: D.D. Sharma and ; R.L. Tandon, Advs
Cases Referred and P. V. Sivarnjan v. Union of India
Excerpt:
forward contracts (regulation ) act, 1952 - sections 14a, 14b & 14c--rule 7a made there under prescribing forms e and f of registration certificates.; condition (ii) embodied in para 2 of the registration certificated requires that the registered association shall not conduct forward trading in any commodity other than those specified there under except with the previous approval of the forward markets commission. ; that the said condition is ultra virus section 14a, 14 b and 14c because :--; (a) the object of sections 14a, 14b and 14c was only to collect information with a view to extend the functional control (formerly confined to the recognised associations) to the unrecognised associations;; (b) even the act as a whole, muchless sections 14a, 14b and 14c thereof, did not.....v.s. deshpande, j. (1) the petitioners in this and the connected two writ petitions (civil writs 224-d of 1965 and 439-d of 1965) are associations registered under chapter iii-a of the forward contracts (regulation) act, 1952, (hereafter called 'the act' in short) and the rules framed under sections 28(1) and 28(2) thereof to carry on business relating to forward contracts. they have been affected by the following two acts, one of the central government (respondent 2) and the other of the forward markets commission (respondent) . firstly, under section 28(1) the central government may, by notification in the official gazette, make rules for the purpose of carrying into effect the objects of the act. under section 28(2)(cc) in particular and without prejudice to the generality of the.....
Judgment:

V.S. Deshpande, J.

(1) The petitioners in this and the connected two writ petitions (Civil Writs 224-D of 1965 and 439-D of 1965) are associations registered under Chapter III-A of the Forward Contracts (Regulation) Act, 1952, (hereafter called 'the Act' in short) and the Rules framed under sections 28(1) and 28(2) thereof to carry on business relating to forward contracts. They have been affected by the following two acts, one of the Central Government (Respondent 2) and the other of the Forward Markets Commission (Respondent) . Firstly, under section 28(1) the Central Government may, by notification in the Official Gazette, make rules for the purpose of carrying into effect the objects of the Act. Under section 28(2)(cc) In particular and without prejudice to the generality of the foregoing powers, such rules may proviso for the manner in which applications for certificates of re.gistration may be made under section 14A and the levy of fees in respect of such applications. In exercise of this power and a.pparently to carry out the purposes of Chapter III-A of the Act, the Central Government amended the Forward Markets (Regulation) Rules, 1954 by inserting therein rule 7-A which prescribed that. registration certiflcates to recognised and other associations concerned with regulation and control of forward contracts shall be in Forms E and F respectively. Paragraph 2 of these forms is as follows :

'THEregistration hereby granted is subject to the conditon (i) that the said association shall comply with such directions as may from time to time. be given the Forward Msrkets Commission and that the said association shall not conduct forward trading in any commodity other than those specified hereundar except with the previous approval of the Forward Markets Commission.'

(2) Registration certificates to the petitioners were issued in Form as the petitioners are associations which are not recognised under the provisions of the Act. The petitioners wanted to conduct forward trading in commodities other than those specified in their registration certificates. But the Forward Markets Commission (hereafter called 'the Commission') issued directions to the petitioners prohibiting them from doing so without obtaining the prior approval of the Commission in writing. The petitioners have, thereforee, filed these writ petitions against the Union of India and the Commission alleging that the second condition in the registration certificates barring the petitioners from conducting forward trading in any commodity not specified in the registration certificate was ultra virus of the Act inasmuch as it could not be said to carry out any of the purposes of Chapter III-A of the Act, For the same reason, the direction issued by the Commission to enforce the observance of the said condition was also ultra virus the Act.

(3) The defense is contained in the counter-affidavit filed by the Secretary of the Commission. According to him, registration to an association may be either granted or refused by the Commission under section 14B. Further, the suitability of an association for registration can be assessed only with reference to the commodity in which the association is to conduct the forward trading and the particular type of forward contract traded in. In this context, the conditions of registration which the Central Government is authorised to impose under section 14A of the Act could include a condition restricting the registered associations to certain specified commodities in the conduct of forward trading. The impugned condition in Form F and the direction issued by the Commission to enforce it were. thereforee, intra vires.

(4) The question for consideration is whether it is a purpose of Chapter III-A of the Act containing section 14A, 14B and 14C to prohibit any registered association concerned with the regulation and control of business in forward contracts from conducting forward trading in any commodity whatever except a commodity or commodities which may be specified in the registration certificate to be issued by the Commission. The answer would depend on the construction of the relevant portions of sections 14A, 14B and 14C which make up Chapter III-A and which are noticed below:

'14-A.Certificate of registration to be obtained by all associations: (1) No association concerned with regulation and control of business relating to forward contracts shall, after the commencement of the Forward Contracts (Regulation) Amendment Act 1960 (hereinafter referred to as such commencement) carry on such business except under, and in accordance with, the conditions of a certificate of registration granted under this Act by the Commission.'

14-B.Grant or refusal of certificate of registration: On receipt of an application under section 14A the Commission, after making such inquiry as it considers necessary in this behalf, may by order in writing grant a certificate of registration or refuse to grant it: Provided that before refusing to grant such certificate, the association shall be given an opportunity of being heard in the matter.

(5) Section 14C applies section 8 (power of Central Government to call for periodical returns or direct inquiries to be made) and section 12B (power of Commission to suspend member of recognised association or to prohibit him from trading) to a registered association as they apply to a recognised association.

(6) Chapter III-A was inserted in the Act by an amendment made in 1960. The object of the amendment could be best found out by inquiring into the scheme of the relevant provisions of the Act and the precise manner in which this was being supplemented by the amendment.

(7) Scheme of the Act before the amendment: The Act seeks to regulate the business of forward contracts which may be analyzed into two elements, namely, (1) the commodities in respect of which the business is carried on, and (2) the associations which regulate such business carried on among themselves by their members. The nature of forward contracts is such that they can be entered into only by persons acting in association with each other and only when their actions are controlled by the association of which they are members. It cannot be carried on by individuals working independently on their own in isolation. The Act, thereforee, deals only with associations whose members carry on such business. The provisions of the Act which deal with the regulation of forward trading in certain specified commodities on the one hand and with the regulation of the constitution and functioning of associations whose members deal in forward contracts on the other hand may be analysed as below.

(8) Control of commodities'.

(1)Under section 15 forward trading was prohibited in goods or class of goods and in areas specified in the notification issued there under by the Central Government otherwise than between members of a recognised association. This prohibition, thereforee, acted only against unrecognised associations and in that sense was a partial prohibition.

(2)Under section 17 the Central Government may by notification prohibit forward trading in respect of any goods or class of goods to which the provisions of section 15 have not been made applicable. That is to say, a total prohibition of forward trading in certain commodities could be notified by the Government under section 17 in respect of goods in which forward trading only by unrecognised associations had not been prohibited under section 15. In respect of the goods so notified under section 17, the prohibition would be total because both the recognised and unrecognised associations would be prohibited from forward trading in such goods.

(3)The forward trading partially or totally prohibited under section 15 or 17 did not include non-transferable specific delivery contracts. Such forward contracts could be prohibited by the Central Government by notification under section 18(3) by applying all or any of the provisions of sections 15 and/or 17 to them. Persons contravening the above-mentioned prohibitions were liable to penalties specified in sections 20, 21 and 22 of the Act.

(9) Control of associations: The only way in which the constitution and the functioning of the associations was regulated by the provisions for the grant of recognition to certain associations. An application had to be made for recognition under section 5 specifying the commodities in which the members of the association would be forward trading and giving other information. Recognition could be granted in respect of certain commodities under section 6 and could be withdrawn under section 7. A recognised association had to furnish to the Central Government periodical returns relating to its affairs or the affairs of its members as may be prescribed under section 8. The Government could also direct inquiries into the affairs of a recognised association or the affairs of any of its members there under. While the recognised association was given the privilege of making rules under section 9A and bye-laws under section 11, the Central Government had the power to direct what rules should tee made by the recognised association and to amend any rules made by such association under section 10. Under section 11, the bye- laws could be made by the association only with the previous approval of the Central Government and such approval could be given subject to certain conditions imposed by the Central Government. The recognition of an association could also be suspended by the Central Government under section 12B. The governing body of a recognised association could be superseded under section 13 and thebusiness of such recognised association could be suspended by the Central Government under section 14.

(10) Deficiencies in the unamended Act: While the control of certain commodities affected the unrecognised as well as the recognised (under sections 17 and 18) and the unrecognised (under section 15) associations, there was no general control against all associations as such not related to specified commodities. Functional control could be exercised only over the recognised associations. The unrecognised associations were not subjected to any functional control at all. It was necessary, thereforee, to amend the Act to impose control on the functioning of the unrecognised associations also. This could be done in one of two ways, namely, (a) by requiring every association to be recognised, or (b) by requiring every association to be registered under the Act. The latter course was preferred to the former for obvious reasons. The recognition of an association implied the conferring of responsibility on the said association and the privilege of making rules and bye-laws on it. Each association the members of which engaged in forward contracts could not be said to be worthy of such recognition. thereforee, the second course was adopted and Chapter III-A was added to the Act by the Amendment of 1960 making it compulsory for every association whether recognised or not to be registered under the Act. While the control over recognised association continued as before, new measures of control over the unrecognised association were introduced for the first time in Chapter III-A which was incidentally made applicable also to recognised associations. This was the reason why the registration of a recognised association was made a matter of course without any application for registration being required from it while the registration of an unrecognised association could be secured only by application which could be either granted or rejected.

(11) The above view as to why the amendment was made would be found to be in accordance with the statement of objects and reasons accompanying the Amending Bill of 1960 which, inter alia, stated as follows:

'PERSONSindulging in illegal forward trading cannot be prosecuted for want of adequate documentary evidence. Further persons found guilty of violation of the provisions of the Act often get away with a light punishment. Trading outside official hours in associations recognised for forward trading cannot be stopped under dsthe existing provisions of the Act. The onject of the Bill os tp re,pve these and other difficulties which have been experinced in kthe dwoeking of the Act and to enable the Central Government and Forward Markets Commission to exercise a stricter control over forward trading activities.'

More specigfically, the reason for inserting Chapter III-A was given as follows:

'ALLassociations arc required to get themselves registered with Forward Markets Commission. The registration of association will enable the Commission to have a census of all associations that arc now trading in transferable specific delivery contracts in free commodities as well as non-transferable specific delivery contracts in regulated or prohibited commodities, and to ascertain the extent to which such associations misuse the non-transferable specific delivery contracts for speculative purposes.'

(12) The Commission in the counter-affidavit have also indicated these lo be the reasons for the amendment.

(13) Meaning of the provisions of Chapter III-A: The language of sections 14A and 14B is general. If widely construed it could mean that any conditions including the prohibition of forward trading in all commodities except those mentioned in the registration certificate may be imposed under section 14A and any application for registration may be rejected under section 14B. Such a wide construction cannot be convincing because of the following reasons. Firstly, the meaning of the amendment has to be understood in the context of the pre-existing Act, The amendment was not a fresh legislation on a clean slate. It was something which was added to the existing provisions of the Act. The legislature could not have intended to duplicate the existing provisions of the Act in Chapter III-A. It is only such regulation as was not available under the unamended Act that was secured by the amendment. The only lacuna in. the unamended Act was that the working of the unrecognised associations was not subject to the scrutiny and control of the Central Government, or the Commission in respect of their constitlution and functioning. This alone was secured by the amend- mant. As seen above, the regulation by the unamended Act was in two distinct spheres, namely, (1) that of commodities, and (2) that H.C.D./75-3. of associations. The powers of commodity control were adequate. The inadequacy existed only in the control of un-recognised associations. The reason for the amendment was, thereforee, to supply only this inadequacy. There was no reason for the duplication of the commodity control which was already adequate.

(14) Secondly, if the amendment is construed only to fill the lacuna in the control of the un-recognised associations, the purpose of the amendment would be fulfillled and the scheme of the Act as a whole would be completed. If, on the other hand, section 14A is construed to give to the Central Government a general power of prohibiting forward trading in all commodities except those authorised by the -Commission in the registration certificate issued to each association, the consequences of such interpretation on the preexisting provisions of commodity control, namely, sections 15, 17 and 18, would be to make those provisions redundant and even otiose. If the Commission were to have the power to prohibit each individual association totally from any forward trading in any commodity whatever except the one specified by the Commission in ihc registration certificate, any resort to the provisions of sections 15. 17 and 18 would almost become unnecessary. Neither the scheme of the unamended Act, nor the statement of objects and reasons accompanying the Amending Bill would show that the Legislature intended to make sections 15. 17 and 18 superfluous by the insertion

(15) Thirdly it is a will settled rule of construction of statute that genral words have to be understood in a restricted sense us may be nccessitated by the object of the amendment and the context which the amendment lias been made. For instance, in M. K. Raghunathan v Government of Madaras : [1955]2SCR374 J.. used the obtects and reasons appended to the Bill which became the amending Act 22 of 1936 for restricting the meaning of the general words 'any sale held' to mean only sales held throgh the intervention of the Court. He held. thereforee, that these vords did not apply to a sale effccted by a secured creditor outside the winding up and without the inter vatiom of the Court. Again in Income Tax Commissioner v. Sodra Devi, : [1957]32ITR615(SC) , the same learned Judge had to deal with section 16(3) of the income Tax Act, 1922 as introduced by amending Act Iv of 1937. In construing the words ''any individual' and 'such individual' occurring therein the learned Judge held that these general words indicated only ''males' as was evident from a consideration of the statement of objects and reasons appended to the Bill of the amends Act. It made clear that the evil which was sought to be remedied was the one resulting from the widespread practice of husbands entering into nominal partnerships with their wives, and fathers admitting their minor children to the benefits of the partnerships of which they were members. It was concluded, thereforee, that the only intention of the Legislature was to include the income derived by the wife or a minor child in the total income of the male assessed whether he is the husband or the father, as the case may be. The statement of objects and reasons appended to a Bill seeking the amendment of the Constitution was also utilised for 'the purpose of ascertaining the conditions prevailing at the time the Bill was introduced and the purpose for which the amendment was made' in Kochuni v. State of Madras. : [1960]3SCR887 . The statement of objects and reasons is of course not admissible to control the clear meaning of an enactment. But where two meanings are possible, the statement of objects and reasons is admissible to show which of the two meanings answers the need which called for the amendment The circumstances necessitating the amendment do not directly influence the construction of the words of the amendment but indirectly throw light on the subject-matter of the statute existing before the amendment and pin-point the mischief or evil intended to be remedied by the amendment.

(16) Fohrthly, even according to the counter-affidavit of the commission. the evil sought to be remedied by the amendment was the misuse of the non transferable specific delivery contracts which were permitted in certain commodities by using them as a garb for forward trading in prohibited commodities without actual delivery being infended in the settlement of such forward contracts. The achievement of this object has nothing to do with the total prohibition of forward trading in all commodties impored by the Central Government prescribing the Forms E and F of the registration certificate and giving the Commission the discretion to specify the commodities in which alone forward trading would be allowed. The misuse of the guise of the non-transferable specific delivery contracts could be made in respect of certain commodities either by all or only by certain associations. If it occurs in respect of a certain commodity by all associations, then forward trading in that commodity could be banned under section 17 and also under section 18. If the misuse is suspected only in respect of certain associations, then such associations can be suitably dealt with under provisions relating to recognised associations or under sections 8 and 12B which also apply to un-recognised registered associations. Even an un-recognised association is liable to penalties under sections 20(b), (d) or (e) or under sections 21(b), (c) and (e). The Commission has taken the plea that 'the suitability of an association for registration can be assessed only with reference to the commodity in which the association is to conduct forward trading and the particular type of forward contract traded in'. We do not see how this plea squares with the general defense in the counter-affidavit and the statement of objects and reasons explaining the scope of the amendment. It is submitted that the instrument of registration is intended to be used to prevent certain associations from trading in certain commodities by the Commission under this plea. If the trading in such commodities is already banned, then the exclusion of such commodities from the registration certificate is inevitable. For such a purpose it is not necessary for the Central Government to impose a total ban on forward trading in all commodities in the registration certificate and to give the Commission the discretion to allow it in certain commodities. It, on the other hand, there is no ban on the forward trading of such commodities, can the ban be introduced by the registration certificate being restricted only to certain commodities which even exclude forward trading in commodities on which there is no ban? This question has two aspects, namely, (a) whether such exclusion of forward trading in open commodities can be imposed by the Central Government in making a rule to effectuate the purpose of Chapter III-A and (b) whether this could be done by the Commission, in exercise of the power conferred on it by the said rule.

(A)If the Central Government had already been given the power to impose the various kinds of bans on forward trading of certain commodities under sections 15, 17 and 18, it would be highly improbable that such a power would be given to the Central Government again in the garb of the power to make rules to carry out the purposes of section 14A. Further, - such rule-making power would be so extensive as to go beyond all the powers conferred by sections 15, 17 and 18. The meaning of Chapter III-A is to be ascertained by reading sections 14A, 14B and 14C together. All that Chapter III-A does is to enable the Commission to have a census of all associations trading in transferable specific delivery contracts as well as non-transferable specific delivery contracts in regulated or prohibited commodities, and to require the registered associations to furnish information which would enable the Central Government or the Commission to exercise control over the functioning of such registered associations. It is from such information that the Central Government would know whether a registered association is indulging in any malpractices or not. The application of sections 8 and 12B and the penal provisions of sections 20 and 21 applicable to unrecognised associations are sufficient to enable the Central Government to check the malpractices and to punish a registered association. This could not be done before the amendment because there was no means for securing the information from which the malpractices of the un-recognised associations could be brought to light. The modest object of Chapter III-A is to obtain such information from the registered associations and this was in fact so stated in clear terms in the objects and reasons which have been set out earlier in this judgment. It is not necessary to imply any further powers in Chapter III-A because action on such information can be taken under sections 15, 17, 18, 20 and 21.

(B)If the Central Government itself does not have the power to impose condition No. (ii) of the registration certificate, it would follow that the Commission does not have the power to implement the said condition or to give any direction to implement the same.

(17) Fifthly, the meaning of the provisions of Chapter III-A has to be understood in their bearing on each other and in the light of the other provisions of the Act. Under sub-section (2) of section 14A, the application form to be filled in for seeking registration may require the association to state the commodities in which its members carry on business of forward trading. The reason is not to give the power of commodity control to the Government or the Commission but because associations specialise in forward contract business in certain commodities. The very object of Chapter III-A is to collect all necessary information from each applicant for registration and the commodities in which the applicant's members deal is a part of such information. It is only in this restricted context that the plea of the Commission that 'the suitability of an association for registration can be assessed only with reference to the commodities in which the association is to conduct forward trading and the particular type of forward contract traded in' can be understood. This only means that the registration would be refused if there is a total ban on the commodities specified in the application for registration in respect of all forward trading and would be given only with reservation if there is a partial ban. But such total or partial ban has to exist already. It cannot be imposed by any rule or direction made or issued under section 14A or section 14B and that too in respect of an individual applicant. Similarly, the information regarding commodities is needed for taking action under section 8 or section 12B which have been made applicable to registered associations by section 14C. The word 'conditions' in section 14A does not mean 'any conditions'. It means only such conditions as subserve the purpose of Chapter III-A, i.e., to elicit information only and not to take action which is already provided for by sections 15, 17 and 18. There is a difference between the powers exercisable by the Central Government under sections 15, 17 and 18 on the one hand, i.e., commodities control, and the powers exercisable under Chapter III-A on the other hand, i.e., functional control of associations. The former cannot be exercised under the latter. For, the former are applicable generally to all recognised or un-recognised associations in respect of specified commodities or transactions while the latter apply only to the individual applicant for registration. It may be that in making the amendments of the Forward Contracts (Regulation) Rules, 1954 after the amendment of the Act in 1960 the Government thought that registration was similar to recognition and, thereforee, the registration may be restricted to specified commodities in the same way that the recognition could be restricted to specified commodities. But the analogy between the two is deceptive in this respect. While section 6 specifically authorises the Government to restrict recognition to specified commodities, no such authority is given to the Government by section 14A. What is absent in Chapter III-A cannot be created by making rules there under. On the contrary the difference between section 6 and Chapter III-A must be given effect to in carrying out the different objects of the two in rule-making. Rule 7-A and the Forms E and F cannot be supported by looking to section 6 which deals only with recognition and not with registration. Sections 6, 15, 17 and 18 are thus contra-indications that the power of commodity control could not be exercised by the Central Government under Chapter III-A. Further, even the Central Government cannot exercise powers given to it by sections 6, 15, 17 and 18 by making rules under section 14A. If so, a fortiori the Central Government cannot confer power of implementing such rules on the commission. The exercise of such a power is thus incompatible with the nature of the Commission.

(18) Lastly, if the construction of the language of Chapter III-A is not restricted to the purpose of that Chapter, namely, collecting the necessary information from the applicants for registration with a view to regulate the activities of the registered associations and the word 'conditions' in section 14A is construed to include the second condition in Forms E and F of the Registration certificate, the effect will be to give the Central Government and the Commission such extensive powers of regulating forward trading by individual associations as are not conferred on them either by Chapter III-A or by any other provision of the Act. In the exercise of the power to issue registration certificates only for specified commodities and imposing a complete ban on forward trading in all other commodities, the Central Government and the Commission are virtually exercising the power to license each forward trading association in respect of such commodities as they may choose. The conditions to be imposed under section 14A can relate to collection of information which is the only guideline indicating the nature of the conditions. The power to ban forward trading in all commodities and allow them only in specified commodities is not the subject-matter of Chapter III-A. The exercise of such a power by the Government and the Commission is not, thereforee, guided by any provisions either in Chapter III-A or elsewhere in the Act. For, under sections 15, 17 and 18 by making rules under section 14A. the Central Government has to issue notifications of general application. It has no power to prohibit each individual association totally from all forward trading and to allow it to trade only in certain specified commodities without issuing notifications under sections 15, 17 and 18 by making rules under section 14A. and by giving such power to the Commission. Such individual control of an association is quite different from the general commodity control exercised under sections 15, 17 and 18 by making rules under section 14A. . It is only when a person or a body is authorised to issue licenses for trading in particular commodities that individual control over the applicants may be exercised by such a person or body. When the power to issue licenses was not guided by the provisions of the U.P. Coal Control Order, 1953, the delegation of such power was held to be unconstitutional in Messrs, Dwarka Prasad Laxmi Narain v. State of U. P. : [1954]1SCR803 Even the licensing power there was restricted to only one commodity, namely, coal. In the present case condition No. (ii) of Forms E and F would give such a licensing power to the Government and the Commission in respect of numberless commodities which may run into hundreds. Such a licensing power is unheard of in any statute which has been or could be framed in conformity with the Constitution. In Harishankar Bagla v. State of Madhya Pradesh, : 1954CriLJ1322 , guidelines could be found in the statutory provisions concerned because the contril was restricted to one commodity, namely, textiles. One cannot imagine how the Government or the Commission could find any guidance anywhere in the Act to decide that one registered association should be allowed to trade in one commodity or commodities and another association in some different commodities. How can they go on varying the commodities for forward trading by different associations and on what grounds? One can understand that the information supplied by the association may be such that the Government is not satisfied about its worthiness to be registered but cannot understand how the Government can decide that one association is worthy to be registered for one cornmodity and another association for another commodity and that none of them are worthy of being registered in respect of all other commodities. If both the associations are worthy of being registered, then the commodities in which their members should be allowed to do forward trading would be decided by notifications issued under sections 15, 17 and 18 by making rules under section 14A. by the Central Government and not by the decision of the Government and the Commission under section 14A in the garb of framing the second condition of the registration certificates and in specifying the commodities while issuing such certificates. Such action would be exposed to the objection of being completely arbitrary and such individual control of associations would also be an unreasonable restriction on forward trading. If section 14A is construed to enable the Government to frame a rule containing the second condition of the registration certificates and the Commission to implement it, then the rule-making and the implementation would both violate Articles 14 and 19(1)(g) of the Constitution.

(19) In this context, we may mention that the largest number of commodities are presently controlled under the Essential Commodities Act, 1955. This is because the said Act deals with the subject- matter of trade and commerce in and the production, supply and distribution of numerous commodities (vide Entry 33 of the Concurrent List of the Seventh Schedule of the Constitution). Even under that Act the Central Government has to issue an, order relating to the control of a commodity entrusting such control to the authority specified in the order. Each such order relates to a specified commodity. Even under that Act, no omnibus order has been issued prohibiting trading in all commodities and empowering a single authority to examine the application of each individual licensee and restricting the grant of license only to specified commodities. If such a drastic prohibition and control could not be thought of under an enactment which was intended to control the trading of each individual in a specified commodity, a fortiori Parliament could not have intended to do so under the Forward Contracts (Regulation) Act which is enacted under Entry 48 of the Union List with an object mainly to regulate forward contracts as a method of trading and not of prohibiting totally forward contracts in all commodities and permitting forward trading to different associations in different commodities at the discretion of a single authority. Between the two possible constructions of Chapter III-A, namely, (1) restricted to the purposes of Chapter III-A and (2) unrestricted by any purpose either of Chapter III-A or of the Act, the former is preferable because it would save section 14A from being unconstitutional.

(20) The conclusion that the second condition of the registration certificate is ultra virus section 14A is supported by the reasoning of the previous decisions in The Bullion and Agricultural Produce Exchange Ltd. v. Forward Markets Commission, 1966 All Law Jou 449 (R. S. Pathak, J.), and Union of India v. M/s. Rajdham Grains and Jaggery Exchange Ltd., : AIR1973Delhi1 (T. V. R. Tatachari, J. as his Lordship then was and Jagjit Singh, J.). In Union of India v. The Bullion and Agricultural Produce Exchange Ltd., : AIR1973All205 , the decision of R. S. Pathak, J. in 1966 Allahabad Law Journal 449 was set aside in appeal by Satish Chandra and N. D. Ojha, JJ. who differed from the Division Bench of this Court in their conclusion as to the validity of the impugned conditions. It is this difference which is to be considered by this Full Bench.

(21) The Division Bench of the Allahabad High Court was of the view that the previous decisions concentrated their attention on section 14A but did not notice some other provisions of the Act which could justify the imposition of the impugned condition in the registration certificates. The learned Judges relied on section 3 and clause (f) of section 4 of the Act which enabled the Central Govermnent to confer on the Commission powers by making rules. There were only two limits to the conferring of such powers, namely, (1) a contra indication in the Act itself, and the incompatibility of the nature of the power with the purpose of the Commission (vide I. P. Gupta v. W. R. Natu, : [1963]1SCR721 ). The learned Judges were of the view that the impugned rule conferring the impugned power on the Commission could be upheld in view of section 4(f). With respect, the Central Government could confer only such powers under section 4(f) on the Commission as the Government itself had under the Act. As already stated above, the power of deciding in respect of each individual association as to in what commodities its members should be allowed to trade is not possessed by the Government itself under the Act. No question, thereforee, could arise of the Government conferring such a power on the Commission.

(22) Secondly, the learned Judges of the Allahabad High Court held that section 14A did not contra-indicate the conferment of such a power by the Government on the Commission. Again, with respect, we would point out that rule 7-A and the Forms E and F of the registration certificate were made only to carry out the purposes of Chapter III-A. Since such individual control of associations in respect of commodities was not a purpose of Chapter III-A, the contraindication is plain and the framing of the impugned rule and the condition is ruled out thereby.

(23) Thirdly, it was said that the concept of 'carrying on' business could not be divorced from the commodities in which the business was carried on. This is why the notifications issued under sections 15, 17 and 18 had to relate to certain commodities. This having been done. the control of the carrying on of business relating to commodities was secured by the provisions. Chapter III-A only provided for the census or enumeration of the registered associations and the securing of information relating to them which would help the Central Government or the Commission to prevent indulging in malpracties by any of them. Restricting an association and its members to forward trading in certain specified commodities is not a method of preventing maipracuces in Sorward trading in commodities which were excluded from their registration certilficates. At the time of the registiration it could not be said that after registration the association would indulge in malpractices in forward trading in a particular commodity in future. Similarly, at the time of the reeistration of an un-recognised association the Government could not. know that the said association had indulged in malpractices in respect of a particular commodity as the Government had no method of obtaining any information about an. un-rccognised association prior to the amendment of the Act made in 1960. The exclusion of commodities from the registration certificates of such associations could not, thereforee, be justified by the past history of the associations. From the statement of objects and reasons of the amending Bill as also from the picas in defense, it appears that the malpractices are indulged in certain types of forward contracts in respect of certain commodities and by certain associations. The first two could be prohibited by notifications under sections 18, 15 and 17. The associations could be dealt with under sections 20 and 21. They could not be dealt with either under section 14A or under any other provision of the Act in the manner prescribed by rule 7-A and the impugned condition.

(24) Lastly, reference was made to the decisions of the Supreme Court in Harishankar Babla v. State of Madhya Pradesh, already referred to above, and P. V. Sivarnjan v. Union of India, : AIR1959SC556 . Both these decisions were concerned with the regulation of single commodities. None of them has any bearing on the regulation attempted by the impugned condition which forbids forward trading in all commodities and permits only in certain commodities which may be chosen by the Commission from hundreds of commodities. On a careful consideration, thereforee, we are unable to agree with the decision of the Division Bench of the Allahabad High Court.

(25) For the reasons stated above the writ petitions are allowed and Condition No. (ii) in paragraph 2 of Form F of the registration certificate (that the said assocation shall not conduct forward trading in any commodity other than those specified there under except with the previous approval of the Forward Markets Commission) made under rule 7-A of the Forward Contracts (Regulation) Rules, 1954 is quashed along with the directions issued by the Commission to the petitioners not to regulate the business of forward trading of its members in commodities other than those specified in their registration certificates. In the circumstances, we order the parties to bear their own costs.


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