Skip to content


Koteswar Vittal Kamath Vs. K. Rangappa Baliga and Co. - Court Judgment

LegalCrystal Citation
SubjectConstitution
CourtKerala High Court
Decided On
Case NumberA.S. No. 153 of 1959
Judge
Reported inAIR1964Ker92
ActsConstitution of India - Articles 246 and 304; Travancore-Cochin Public Safety Measures Act, 1950 - Sections 3, 73 and 73(2); Essential Supplies (Temporary Powers) Act, 1946
AppellantKoteswar Vittal Kamath
RespondentK. Rangappa Baliga and Co.
Appellant Advocate T.N. Subdara Iyer and; S. Ananthasubramnain, Advs.
Respondent Advocate A.S. Krishna Iyer, Adv.
DispositionAppeal dismissed
Cases Referred(Proprietary) Ltd. v. State of West Bengal
Excerpt:
.....of its entire content and make it nugatory. on this principle 'forward contracts' can come within what is called 'trade and commerce' though incidentally the regulation of forward contracts fall within the establishment of 'futures market'.as the state legislature could validly legislate on this subject they could as well pass a law repealing the provisions of the act. so the repeal effected by section 73 of act v of 1950 is perfectly legal......been complied with before enacting section 3 of act 5 of 1950 which admittedly was passed by the state legislature after the coming into force of the constitution.8. the travancore-cochin high. court had occasion to consider the validity of section 3 of act 5 of 1950 in the case l. george v. state of travancore-cochin, 1953 ker lt 735 : (air 1954 trav-co. 34). there is a full discussion of all the aspects of the question in that judgment and it is unnecessary to discuss the matter again in any great detail. sankaran, j., as he then was, stated:'the subjects of trade, commerce, or intercourse within the state dealt with under clause (b) of article 304 are the subjects coming under items 26 and 27 of the state list and in respect of which the legislature of the state has exclusive power.....
Judgment:

Govinda Menon, J.

1. The defendant in O. S. 12 of 1958 on the file of the Subordinate Judge, Cochin is the appellant. The suit was for recovery of damages for breach of contract in respect of goods purchased and not taken delivery of by the defendant.

2. The plaintiff's firm is doing business in Mattancherry in coconut oil both as merchants and commission agents. The defendant is a trader at Coondapoor, South Canara District. He is doing business in coconut oil through commission agents in Mattancherry. The terms of the agreement on the strength of which the plaintiff was transacting business with his customers like the defendant are set out in the plaint. The plaintiff alleged that all oil transactions entered into by commission agents at Mattancherry are governed by the trade usage known as Pakka Aadat system and the defendant was dealing with them under this system with the full knowledge of its incidents.

3. In the course of such dealings the defendant placed three orders, one for the purchase of 100 candies of coconut oil for one month's vaida (period) if the market rate was below Rs. 460/-; the second for the purchase of another 100 candies if the market rate was below Rs. 450/- and a third order was for the purchase of another 100 candiea if the market rate was below Es. 435/-. The plaintiff firm duly complied with the said orders and intimated the defendant by telegram and confirmed by letters that 100 candies of coconut oil has been purchased on 14-2-52 at Rs. 455/.- per candi; another 100 candies on 16-2-52 at Rs. 447-8-0 and the last 100 candies at Rs. 432-8-0 which were the ruling market rates on the said dates. The period fixed were one month and due dates for the performance of the said contracts were 15th, 17th and 19th of March 1952 respectively. On the due dates the defendant did not take delivery. The closing market rates on the due dates were Rs. 330, Rs. 335 and Rs. 352-8-0 respectively. The plaintiff has, therefore, claimed the difference in the two prices by way of damages. The usual commission and brokerage were also claimed.

4. The suit was resisted by the defendant on several grounds. He denied the existence of the trade usage known as the Pakka Aadat system and stated that the plaintiff was only an agent and the three orders referred to in the plaint were intended only as wagering contracts without an understanding to take or give delivery. It was contended that the plaintiff's firm was not ready and willing to perform their part of the contract while the defendant was always willing to take delivery. Finally it was contended that in any view the contracts were void and unenforceable since they fell within the prohibition contained in the Travancore-Cochin Vegetable Oils and Oilcakes (Forward Contract Prohibition) Order, 1950.

5. The learned Subordinate Judge on a consideration of the evidence found that the custom of trade set up by the plaintiff is true, that the transactions were not wagering contracts, that the defendant had committed breach of contract and found that the claim made by the plaintiff was reasonable. On the question of legality of the contract it was found that the Vegetable Oils and Oilcakes (Forward Contracts Prohibition) Order promulgated under Section 3 of the Travancore-Cochin Public Safety Measures Act, 1950 (hereinafter referred to as Act 5 of 1950) was void and decreed the suit for Rs. 18750/- with interest and costs. The only point that was pressed in the appeal is about the correctness of the decision regarding the validity of the Travancore-Cochin Vegetable Oils and Oilcakes Order.

6. There is no dispute that at the time Act V of 1950 came into force there was prohibition against entering into forward contracts in coconut oil both under the Cochin law and later by the Travancore-Cochin law. In exercise of the powers conferred by Section 3 of the Cochin Essential. Articles (Control and Requisitioning) Powers Act -- Act VIII of 1122 -- as continued in force by the Travancore-Cochin Administration and Application of Laws Act, 1125 -- Act VI of 1125 --and Section 3 of the Public Safety Measures Ordinance V of 1125, the Government of Travancore-Cochin had on 8-3-1950 promulgated the Order called the Vegetable Oils and Oilcakes (Forward Contracts Prohibition) Order, 1950. Act V of 1950 came into force on 30-3-1950. As the preamble states it was an Act to consolidate and enact an uniform law throughout the State. By Section 73 of the Act all enactments mentioned in the second schedule which included the Travancore-Cochin Public Safety Measures Ordinance V of 1125 and the Cochin Essential Articles (Control and Requisitioning) Powers Act VIII of 1122 under which the Order in question was passed were repealed.

Sub-section (2) of Section 73 however provided that:.

'All orders made or deemed to be made under the enactments referred to in Sub-section (i), and in force immediately prior to the commencement of this Act shall continue in force and be deemed to have been made and shall have effect as if they have been made under this Act.' So under Section 73 (2) the Vegetable Oils and Oilcakes (Forward Contracts Prohibition) Order was continued in force and would be deemed to have been made under Section 3 of Act V of 1950.

7. It was argued by the learned counsel for the plaintiff-respondent that Section 3 of the Act is void and inoperative for lack of the presidential sanction insisted upon by the proviso to Article 304(b) of the Constitution. Article 304 occurs in Part XIII of the Constitution dealing with trade, commerce and intercourse within the territory of India. We will, therefore, look into the relevant provisions. Article 301 states that subject to the other provisions in Part XIII of the Constitution trade, commerce and intercourse throughout the territory of India shall be free. There are limitations imposed which are referred to in the other provisions contained in the Chapter. Article 302 empowers the Parliament to enact laws imposing such restrictions on the freedom of trade between one State and another within the Indian Union. Restrictions and general power of limitation (sic) have been imposed by Article 303 which states that notwithstanding anything in Article 302 neither the Parliament nor the Legislature of a State shall have power to make any law giving or authorising the giving of any preference to one State over another or making or authorising the making of any discrimination between one State and another by virtue of any entry relating to the trade and commerce in any of the lists in the seventh schedule.

Then comes Article 304 defining the powers of the legislature of a State to enact laws regulating trade, commerce and intercourse. Article 304 reads as follows:

'Notwithstanding anything in Article 301 or Article 303 the legislature of a State may by law -

(a) impose on goods imported from other States or the Union Territories any tax to which, similar goods manufactured or produced in that State are subject, so, however as not to discriminate between goods so imported and goods so manufactured or produced; and

(b) impose such reasonable restrictions on the freedom of trade, commerce or intercourse with or within that State as may be required in the public interest.

But the power conferred by Clause (b) on the legislature of a State is expressly made subject to a proviso which runs: 'Provided that no bill or amendment for the purpose of Clause (b) shall be introduced or moved in the legislature of a State without the previous sanction of the President.'

It is contended by the respondent that the requirements of this proviso had not been complied with before enacting Section 3 of Act 5 of 1950 which admittedly was passed by the State Legislature after the coming into force of the Constitution.

8. The Travancore-Cochin High. Court had occasion to consider the validity of Section 3 of Act 5 of 1950 in the case L. George v. State of Travancore-Cochin, 1953 Ker LT 735 : (AIR 1954 Trav-Co. 34). There is a full discussion of all the aspects of the question in that judgment and it is unnecessary to discuss the matter again in any great detail. Sankaran, J., as he then was, stated:

'The subjects of trade, commerce, or intercourse within the State dealt with under Clause (b) of Article 304 are the subjects coming under items 26 and 27 of the State list and in respect of which the legislature of the State has exclusive power to make laws for the State. This exclusive power conferred by Clause (3) of Article 246 is not taken away by the proviso to Clause (b) of Article 304. This proviso has merely imposed a condition on the exercise of such exclusive powers by the State Legislature in the matter of enacting a law imposing reasonable restrictions on the freedom of trade, commerce or intercourse with or within the State as may be required in the public interest. Exclusive power is not the same as absolute power.' And their Lordships held that:

'The proviso to Clause (b) of Article 304 has only specified the manner in which the exclusive power of legislation conferred on the State legislature under Clause (3) of Article 246 in the matter of enacting the particular law as contemplated by these clauses, should be exercised. Article 304 merely supplements, qualifies and controls the power conferred by Clause (3) of Article 246. These two articles have to be read and construed together for the purpose of determining the validity of the impugned section of the Public Safety Measures Act.'

That case was followed by another Bench decision in State v. Philipose Phillip, 1953 Ker LT 863 : (AIR 1954 Trav-Co 257), where also the question was discussed and following the decision in 1953 Ker LT 735 : (AIR 1954 Trav-Co 34) (cited supra) it was held that Rule 3 of Act 5 of 1950 is void and inoperative for lack of Presidential sanction under the proviso to Article 304(b) of the Constitution and the notifications under the section are, therefore, void.

A later Full Bench, decision of the same High Court in Ulahannan Mathai v. State, (S) AIR 1955 Tzav-Co 82 has affirmed the correctness of these decisions. M.S. Menon, J., as he then was, stated:.

'There is nothing in the maxim 'reddendo aingula singulis' or the wording of Article 304 which really militates against giving the fullest effect to the intention of the Constituent Assembly and holding that no Bill of the type contemplated therein shall be introduced or moved in the legislature of a State without the previous sanction of the President and no such amendment shall also be moved without the previous sanction of the President. In other words, what the proviso was intended to mean and what it really means is that the prior presidential sanction is required in the words of Section 109, Government of India Act, 1935, 'to the introduction or passing of a bill or the moving of an amendment'. The contention that the proviso only meant that no bill 'shall be introduced'' or 'amendment moved'' in the legislature of a state without the previous sanction of the President and that as the introduction of the bill in this case was prior to the Constitution and no material amendment was made subsequent thereto no question of a presidential sanction arose for consideration cannot therefore be accepted.'

And it was held that Section 3 of the Act was ultra vires of the Constitution for lack of the presidential sanction prescribed by Article 304.

We are in respectful agreement with the view expressed in these decisions.

9. Learned counsel for the appellant strenuously contended that these decisions have not been correctly decided as the effect of Article 389 of the Constitution had been overlooked.

Article 389 is in the following terms:

'A bill which immediately before the commencement of this Constitution was pending in the Legislature of the Dominion of India or in the Legislature of any Province or Indian State may, subject to any provision to the contrary which may be included in rules made by Parliament or the legislature of the corresponding State under the Constitution, be continued in Parliament or the Legislature of the corresponding State, as the case may be, as if the proceedings taken with reference to the bill in the Legislature of the Dominion of India or in the Legislature of the Province or Indian State had been taken in Parliament or in the Legislature of the corresponding State.'

10. We have been referred to the decision in Bhairebendra Narayan v. State of Assam, (S) AIR 1956 SC 503. The question that arose for decision in that case was whether the Assam State Acquirition of Zamindaris Act 1951 was within the competence of the State legislature and whether they were (it was?) enacted according to law and whether the notification published under the Act is valid. On 11-8-1948 a bill called Assam State-Acquisition of Zamindaris Bill was published in the Assam Gazette. On 23-9-1948 the bill was introduced in the legislative assembly of Assam and was passed on 28-3-1949. The Governor of Assam, acting under Section 75, Government of India Act 1935 reserved the bill for the consideration of the Governor-General. In view of the then impending commencement of the Constitution the Governor-General on 25-1-1950 returned the bill to the Governor of Assam with the remarks that the bill be reserved for the consideration of the President. On 26-1-1950 the Constitution of India came into force. Two days later, on 28-1-50 the Governor of Assam, actually received back the bill and he reserved the; bill for the consideration of the President. In October 1950 the President returned the bill suggesting certain alterations and the bill together with the suggested Amendments were again placed before the legislative assembly. The assembly considered the suggested alterations and passed the bill suitably amended. The amended bill thereupon was again forwarded to the President and on 27-7-1951 it received the assent of the President and became Assam Act 18 of 1951 and was published in the gazette of 8th August, 1951.

The Act was impugned on the ground that the bill was introduced in the assembly without the sanction of the Governor which was required by Section 299(3) of the Government of India Act. It was contended that when the bill was placed before the Governor-General for his assent and when assent was not given, the assent must be deemed to have been withheld and therefore the bill was not 'pending' in the legislature at the date of the commencement of the Constitution. Their Lordships held that it cannot be said that the Assam. State Acquisition of Zamindaris Bill 1948 was introduced in the assembly without the sanction of the Governor and whether the bill was in the hands of the Governor or in the hands of the Governor-General or was in transit between the one and the other on either way, it must be taken to have been pending before the legislature. It was held that such being the position, under Article 389 read with the relevant provisions of the Government of India Act, the bill could properly be considered as pending and continued in the legislature of Assam after the commencement of the Constitution. The Supreme Court was not dealing with a case where previous sanction of the President was necessary to proceed with the bill. The only question was whether' the bill was pending or not so as to come within Article 389. The decision can have no application to a case where previous sanction of the President is necessary to continue the bill.

11. As stated already the proviso to Clause (b) of Article 304 states that no bill or amendment for the purposes of Clause (b) shall be introduced or moved in the legislature of a State without the previous sanction of the President. From the authorised reports of the proceedings of the legislative assembly of the State it is seen that the bill which finally emerged as Act V of 1950 was first introduced in the assembly on 13-12-49 and was referred to the select committee on 14-12-49. The bill as modified and redrafted by the select committee was presented before the assembly on 23-3-1950 and on the same day the minister in charge of the bill moved that the bill be taken into consideration. Thereupon the discussion on the bill proceeded and it was finally passed by the assembly on 29-3-1950. The bill received the assent of the Rajpramukh and the notification bringing into force the Act was published on 30-3-1950. The mere fact that the bill was originally introduced, on a date prior to the date of the Constitution, will not save Section 3 from the operation of the Proviso to Clause (b) of Article 304. It was only subsequent to the coming into force of the Constitution that the bill in its final form as redrafted by the select committee was 'introduced' and 'moved' in the State legislature. This question has in fact been considered in (S) AIR 1955 Trav-Co 82 (cited supra).

12. Even though under Clause (3) of Article 246 of the Constitution, the legislature of the State was competent to enact the impugned section, its validity would depend upon the further question whether or not any other Constitutional limitation has been transgressed in enacting the section. Clause (b) of Article 304 recognises the power of the State legislature to enact laws imposing reasonable restrictions on the freedom of trade, commerce and intercourse with or within the State as may be required in public interest, but the exercise of the power has been made subject to the condition of having obtained previous sanction of the President. Article 304 modifies and controls the power conferred by Clause (3) of Article 246. These two articles have to be read and construed together for the purpose of determining the validity of the impugned section of the Act. The proviso to Clause (b) of Article 304 expressly prohibits the introduction and the moving of a bill without previous sanction of the President. The direction is mandatory and contravention of the proviso is, therefore, fatal to the validity and the legality of the section. Section 3 of the Act has therefore to be declared illegal and void and it naturally follows that the orders issued in exercise of the powers derived from that section being devoid of legal sanction have also to be declared void.

13. This does not mean that Section 73 of Act 5 of 1950 is invalid. The condition precedent of President's previous sanction is attached only to legislation which imposes retriction on freedom of trade, commerce or intercourse. Repealing is not imposing restrictions and so the proviso to Article 304 does not affect the validity of the repeal under Section 73 of the Act if the repeal is otherwise valid. To see whether repeal is otherwise valid, what is to be looked into is whether the State legislature is competent to pass this legislation, because repealing is also a legislation.

It was argued by the appellant's learned counsel that entry No. 48 in list No. 1, 'Stock Exchange and Futures Markets' is the entry regulating the power of the legislature in respect of Forward Contracts and not entry No. 26 or 27 in list No. 2 of the State list. Entry No. 26 is trade and commerce within the State subject to the provisions of entry 33 in list No. 3 and No. 27 is production, supply and distribution of goods subject to the provisions of entry 33 of list 3. Entry No. 48 deals with, so far as the relevant subject is concerned, 'Futures Markets' i.e., establishment of futures markets.

Learned counsel for the appellant has drawn our attention to the decision in Raymon and Co. (India) Private Ltd. v. Waverley Jute Mills Co., Ltd., AIR 1959 Cal 89. In that case the validity of the Central Act -- the Forward Contracts (Regulation) Act (Act 74 of 1952) -- was challenged on the ground that the Act was beyond the legislative competence of the Parliament' as it deals with and purports to regulate trade and commerce which are within the exclusive jurisdiction of the State legislature. On a scrutiny of the Act Lahiri, J., observed:

'To my mind, the pith and substance of the Act is to regulate 'futures market', which comes under the express powers of the Indian Parliament being entry No. 48 of list 1 of the seventh schedule of the Constitution and though it incidentally affects 'trade and commerce within the State', or 'supply and distribution of goods' which are entries Nos. 26 and 27 of the State list, that is not sufficient to invalidate the Act.'

14. Another decision which may also be considered is the case in Raghubar Dayal v. Union of India, AIR 1962 SC 263. There also the constitutional validity of the operative portions of the Forward Contracts (Regulation) Act 74 of 1952 and the notification passed thereunder came up for consideration. On a scrutiny of the provisions of the Act, it would be seen that the Act was intended for the establishment of 'futures market' in specified places with reference to specified commodities and permits the entering into forward contracts under the control of the Forward Markets Commission through association recognised by the Central Government on the recommendations of the Forward Markets Commission. It is true that entering into Forward Contracts in specified commodities and specified areas is also prohibited. The contention that was raised was that it was not within the competence of the central legislature to pass the Act but would come within the State legislature. Their Lordships held that the main purpose 'pith and substance' of the Act was to establish futures market though the Act contained provisions in Section 18 (2) prohibiting the entering into forward contracts, but that was confined to areas and commodities not covered by Section 15 which is the main provision in the Act.

It, therefore, appears that the entry relating to the 'futures market' is principally concerned with the establishment of futures market and the entering into forward contracts of futures market and forward contracts as such come more pertinently within the expression 'trade and commerce' in entry No. 26 in the State list.

15. Another case which may usefully be referred to is the case in Calcutta Gas Co., (Proprietary) Ltd. v. State of West Bengal, AIR 1962 SC 1044. Their Lordships of the Supreme Court have laid down certain rules of interpretation in the matter of construing the entries in the different lists. The question that came up for considerationin that case was as to the validity of the Oriental Gas Company Act 1960 -- West Bengal Act XV of 1960. The contention was that the Parliament alone had the power to make the concerned law as it comes under entry No. 52, 'Industries' the control of which by the Union is declared by Parliament by law to be expedient in the public interest. The State contended that the subject really comes under entry Nos. 24 and 25 of the State list. Entry No. 24 is 'industries subject to the provisions of entries 7 and 52 of list 1' and entry No. 125 is gas and gas-works. Discussing the relativeentries Subba Eao, J., stated:

'The power to legislate is given to the appropriate legislature by Article 246 of the Constitution. The entries in the three lists are only legislative heads or fields of legislation, they demarcate the area over which the appropriate legislatures can operate. It is also settled that widest amplitude should be given to the language of the entries. Eat some of the entries in the different lists or in the same list may overlap and sometimes may also appear to be in direct conflict with each other. ..... Itmay, therefore, be taken as well settled rule of construction that every attempt should be made to harmonize the apparently conflicting entries not only of different lists but also of the same list and to reject that construction which will rob one of the entries of its entire content and make it nugatory.''

It was held that the impugned Act was within the legislative competence of the West Bengal Legislature and was, therefore, validly made. On this principle 'Forward Contracts' can come within what is called 'trade and commerce' though incidentally the regulation of forward contracts fall within the establishment of 'futures market'. As the State legislature could validly legislate on this subject they could as well pass a law repealing the provisions of the Act. So the repeal effected by Section 73 of Act V of 1950 is perfectly legal. If this position is accepted then it follows that there is no law after 30-3-1950 in the Travancore-Cochin State prohibiting the making of Forward Contracts in coconut oil.

16. The further question that would arise isas to what is the effect of Sub-section (2) of Section 73 of Act 5 of 1950. That sub-section pays that all orders made and notifications published and In force immediately prior to the commencement of Act V of 1950 shall continue to be in force and shall be deemed to have been made and shall have effect as if they have been made under this Act. But if Section 3 is void, notifications which are deemed to have been passed by virtue of the powers conferred under that section have also to be declared as invalid. Therefore, we have to hold that the Vegetable Oils and Oilcakes (Forward Contract Prohibition) Order, 1050 is void and inoperative.

17. Another argument of the learned counsel for the appellant may now be considered. It is stated that Act 24 of 1946 of the Indian Legislature which was made applicable to Part B States by Act 52 of 1950 passed on 17-8-1050 provides that on that date the law existing in the several States shall govern the formation of forward contracts in those states and that thereafter the orders and notifications which may be framed under the provisions of Act 24 of 1946 will be the orders and notifications that will be applicable. There is no case that till 1952 March any such notifications were passed by the Central legislature or the State legislature in pursuance of Act24 of 1946.

The first time the Central Government issued notification under Act 24 of 1946 is in May, 1952-- Vide the Gazette of India (Extraordinary) Part II Section 3, New Delhi, Tuesday, May, 20, 1952 Ministry of Commerce and Industry Notifications-- In exercise of the powers conferred by Section 3 of the Essential Supplies (Temporary Powers) Act, 1046 the Central Government made certain Amendments. According to this the specified date with regard to Part B State was fixed as 22nd May, 1952. On the same date in pursuance of Clause 4 of the Vegetable Oils and Oilcakes (Forward Contracts Prohibition) Order 1944 the Central Government directed that in respect of the forward contracts outstanding in any Part B State at the close of business on 22nd May, 1952, for all oils mentioned in the first column of the schedule thereto annexed, the rates will be market rates applicable to the contracts at the close of the business on 22nd May, 1952.

This notification was cancelled on 29th September, 1952. It reads:

'In exercise of the powers conferred by Section 3 of the Essential Supplies (TemporaryPowers) Act, 1946 the Central Government hereby'directs that the following amendment shall bemade in the Vegetable Oils and Oilcakes (ForwardContracts Prohibition) Order, 1944, in so far as itrelated to coconut oil namely -- ,

In Sub-clause (2) of Clause 1 of the said order, the words 'except the state of Travancore-Cochin' shall be inserted at the end.'

So the plaint contracts are not hit by either the Vegetable Oils and Oilcakes (Forward Contract Prohibition) Order, 1950 or by the Central Act -- Act XXIV of 1946.

For the reasons stated above, the decision ofthe lower Court is correct and has only to be confirmed. The appeal fails and is dismissed withcosts.


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