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Gem Palace, Jaipur and ors. Vs. the Union of India (Uoi) and ors. - Court Judgment

LegalCrystal Citation
SubjectConstitution
CourtRajasthan High Court
Decided On
Case NumberCivil Writ No. 823 of 1968 (and other 149 writ petitions)
Judge
Reported inAIR1970Raj225; 1969()WLN540
ActsConstitution of India - Articles 14, 19(1) and 141; Gold (Control) Act, 1968 - Sections 5(1), 6(1), 16(1), 16(5), 16(7), 27(7), 27(8), 28 and 52
AppellantGem Palace, Jaipur and ors.
RespondentThe Union of India (Uoi) and ors.
Appellant Advocate A.K. Sen,; D.P. Gupta,; L.R. Bhansali,;
Respondent Advocate M.M. Vyas, Adv.
DispositionPetitions partly allowed
Cases ReferredState of Madras v. V. G. Row
Excerpt:
gold control act, 1968 - section 6(1)--objective guide lines not provided to expression 'public interest'--section 6(1) be struck down.;the authority conferred on the adminis rator under this section is very wide and the only guide line provided by the parliament is that while exercising this authority the administrator will make a demand for furnishing returns or/exempt one from not furnishing the same he will be guided by the consideration of public interest. the expression 'public interest' as the supreme court holds does not provide any objective standards or norm or guidance & therefore this provision gives unchanalised authority so as to create discrimination between persons and persons who are required to furnish returns in respect of providing details of the persons from whom.....orderv.p. tyagi, j.1. this is a group of 150 writ petitions whereby the petitioners have challenged the validity of sections 4, 5, 6, '8, 16, 18, 27, 28, 29, 30, 31, 32, 33, 34, 44, 47, 50, 52, 53, 67, 68, 71 to 77, 85 to 98, 100, 101, 103, 108, 110 and 118 of the gold (control) act, (no. 45 of 1968) (hereinafter referred to as the act) on the ground that they are violative of articles 14 and 19 of the constitution o india as these provisions put unreasonable restrictions on the freedom of trade of the petitioners.2. the petitioners are licensed dealers in gold under chapter 3 of part 12a of the defence of india rules, 1962, and were authorised thereunder to carry on their business as a dealer in gold. after the act came into force, the superintendent of excise in charge of the gold cell.....
Judgment:
ORDER

V.P. Tyagi, J.

1. This is a group of 150 Writ petitions whereby the petitioners have challenged the validity of Sections 4, 5, 6, '8, 16, 18, 27, 28, 29, 30, 31, 32, 33, 34, 44, 47, 50, 52, 53, 67, 68, 71 to 77, 85 to 98, 100, 101, 103, 108, 110 and 118 of the Gold (Control) Act, (No. 45 of 1968) (hereinafter referred to as the Act) on the ground that they are violative of Articles 14 and 19 of the Constitution o India as these provisions put unreasonable restrictions on the freedom of trade of the petitioners.

2. The petitioners are licensed dealers in gold under Chapter 3 of Part 12A of the Defence of India Rules, 1962, and were authorised thereunder to carry on their business as a dealer in gold. After the Act came into force, the Superintendent of Excise in charge of the Gold Cell for the places where the petitioners reside sent form Ex. 1 to file the returns under Section 16 (1) read with Section 16 (7) of the Act. Petitioners' allegation is that the respondent No. 4 has called upon the petitioners and other licensed gold dealers to file a declaration in accordance with form Ex. 1 and pressure has been brought on them through the Inspectors and other subordinate officers of the department to comply with the requirement of the Gold (Control) Act.

3. The Act and its different provisions were challenged before the Supreme Court in H. R. Banthia v. Union of India, (1969) 2 SCC 166 = (AIR 1970 SC 1453). That writ petition was disposed of by the Supreme Court during the pendency of these petitions and the Judgment of the Supreme Court covers various grounds preferred by the petitioners to challenge the aforesaid provisions of the Act. After the Judgment of the Supreme Court, the petitioners have confined their attack only to Sections 6 (1), 16 (5), 16 (7), 27 (7) (b), 27 (8), 28 and 52 of the Act. The challenge thrown to the other sections in the writ petitions was, however, not pressed by Mr. A. K. Sen who appeared on behalf of the petitioners.

4. The Supreme Court by the aforesaid Judgment has declared the following sections of the impugned Act as invalid: Sections 5 (2) (b) 27 (2) (d), 27 (6), 32, 46, 88 and 100. After this Judgment of the Supreme Court, the Parliament has amended the law and the Government in exercise of the powers under Section 114 of the Act have subsequently framed the rules. It is in the light of the amended Act and the rules that the arguments advanced by Mr. Sen shall be examined.

5. The respondents have filed their detailed reply and have opposed tooth and nail the grounds that have been advanced by the petitioners to challenge the validity of the above-mentioned impugned sections.

6. Before examining the grounds advanced by learned counsel for the petitioners to challenge the validity of the impugned sections, it will be worthwhile to take note of the social and economic background in which the Gold (Control) Act, 1968, was enacted by the Parliament.

7. It is a matter of every day experience of the customs officials that in spite of the ban imposed on the import of gold, considerable quantities of contraband gold find their way into the country through illegal channels and therefore apart from taking anti-smuggling measures, the authorities had to introduce a detailed system of internal control so as to make the circulation of smuggled gold more difficult. It is estimated that due to the smuggling of gold the country loses in foreign exchange to the tune of Rupees one hundred crores per year in the post devaluation period. It was in this background that, the Parliament thought it necessary to reduce the internal demand for gold and erect barriers to the circulation ol smuggled gold within the country. It is in this light that the argument advanced by the petitioners of imposing unreasonable restrictions shall have to be judged and reasonableness or otherwise of the impugned provisions shall be seen while examining each and every provision impugned by these petitions.

8. In Collector of Customs v. Sampathu Chetty, AIR 1962 SC 316, this question did come up for the examination of the Supreme Court as to under what circumstances Section 178A of the Sea Customs Act was enacted and how the smuggling of the gold which was disturbing the economy of the country could be checked. In that connection, the observations of K. T. Desai J. in (1960) 62 Bom LR 1043, were reproduced by their Lordships of the Supreme Court with approval to show the circumstances then prevalent in the country regarding the menace of the smuggling of gold. It will be proper to reproduce the observations of Desai J, which are as follows:--

'It is common knowledge that India produces very little gold and that most of the gold available in India is imported gold. A statement has been put in by consent showing the official figures of India's imports and exports of gold from 1951 to 1956. It shows a net import in the Country, after deducting exports, of 353 crores and three lakhs worth of gold. Restrictions on the import of gold were for the first time introduced in India by Finance Department (Central Revenue) Notification No. 53, dated September 4, 1959. By that notification the Central Government in the exercise of the powers conferred by Section 19 of the Sea Customs Act prohibited the bringing or taking by sea or land into British India from any place other than Burma or out of British India to any place other than Burma gold coin, gold bullion or gold ingots, whether refined or not, except on the authority of a licence granted. in that behalf by the Reserve Bank .of India. . . Till April, 1, 1946, gold remained duty free. Thereafter duty was levied on the import of gold bullion, gold plate, gold manufactures etc. . . . . . Gold besides being a store of value, is an article of adornment and investment. It is capable of being split and there can be a fusion of diverse quantities of gold. It is easily changeable in form, size and shape. The gold available in the market hardly bears any identification mark. It is impossible for any person looking at gold to say whether duty has been paid thereon or not or whether it has been smuggled. It is precisely the difficulty experienced by the customs officers with the whole machinery of Government at their disposal in proving that the gold has been smuggled which is itself made a reason for throwing the burden upon the citizens to establish that the gold is not smuggled. . . . Gold as such has no earmark. It is impossible to identify gold in the possession of a person with the gold mentioned in the Bill of Entry of any importer of gold. . . Gold has been imported through centuries into the country and it is virtually impossible for a person to establish that any particular quantity of gold in his possession was the gold imported in the country at a particular time without resort to smuggling. The proof required presupposes the existence of gold in an identifiable form from the time of its import to the time of. its ultimate sale to the person from whose possession the same has been seized.'

These observations show that gold is a commodity which when smuggled in India is not easily to be identified whether particular gold was smuggled gold and therefore while framing Section 178A of fhe Sea Customs Act, the Legislature threw the burden on the person who was found in possession of the gold to prove that the gold was a genuine one.

9. In that connection their Lordships of the Supreme Court further discussed the menace of smuggling as follows:

'The deleterious effects of smuggling as pointed out in the extract from the Report, are real and it is not in dispute that the prevention and eradication of smuggling is a proper and legally attainable objective and that this is sought to be achieved by the relevant law. If, therefore, for the purpose of achieving the desired objective and to ensure that the intentions of Parliament shall not be defeated a law is enacted which operates somewhat harshly on a small section of the public, taken in conjunction with the position that without a law in that form and with that amplitude smuggling might not be possible of being effectively checked the question arises whether the law could be held to be violative of the freedom guaranteed by Article 19(1)(f) and (g) as imposing an unreasonable restraint. That the restrictions are in the 'interest of the general public' is beyond controversy. But is the social good to be achieved by the legislation so disproportionately small that on balance it could be said that it has proceeded beyond the limits of reasonableness? We would answer this in the negative. We would only add that there is authority for the position that 'acts innocent in themselves may be prohibited and the restrictions in that regard would be reasonable, if the same were necessary to secure the efficient enforcement of valid provisions. The inclusion of a reasonable margin to ensure effective enforcement will not stamp a law otherwise valid as within legislative competence with the character of unconstitutionality as being unreasonable. ..... Having given the matter our best attention we have arrived at the conclusion that the impugned legislation has not overstepped the limits set by the Constitution and in saying this we have adopted the test laid down in 1952 SCR 597 = (AIR 1952 SC 196).'

Patanjali Sastri C. J., in the State of Madras v. V. G. Row, 1952 SCR 597 = (AIR 1952 SC 196) also observed:-- .

'It is important in this context to bear in mind that the test of reasonableness wherever prescribed, should be applied to each individual statute impugned, and no abstract standard or general pattern of reasonableness can be laid down as applicable to all cases. The nature of the right alleged to have been infringed, the underlying purpose of the restrictions imposed, the extent and urgency of the evil sought to be remedied thereby, the disproportion of the imposition, the prevailing conditions at the time, should all enter into the judicial verdict.'

10. In order to judge the validity of the sections impugned by the petitioners in these petitions, this Court will have to keep in view the extent of the restrictions imposed by the impugned sections in the light of the urgency of the evil sought to be remedied by them.

11. The first section impugned is Section 6 (1) which empowers the Administrator to require any person who lends or advances money on the hypothecation, pledge, mortgage or charge of any article or ornament to file a return in such form and within such time as may be specified as to the receipt, delivery or sale of such article or ornament and as to the persons from whom, they were received or, as the ease may be, to whom they were delivered or sold.

12. According to Mr. Sen, this section confers a very wide and unrestricted power on the Administrator to require any person to file the return in case it was necessary in the public interest so to do. Mr. Sen submits that no guide-line has been provided by the Legislature to the Administrator to exercise the power under Section 6 (1) while asking a person who lends or advances money on the hypothecation, pledge, mortgage or charge of, any article or ornament to file a return. The contention of learned counsel for the petitioner is that the Section does provide that the Administrator may, if he is of opinion that it is necessary in the public interest so to do may require such a person to file his return but the expression 'public interest' according to Mr. Sen is a very vague expression and does not lay down any specific principles for the Administrator for the exercise of his powers under this Act,

13. Mr. Vyas appearing on behalf of the respondents, on the other hand, urged that when the expression 'public interest' is read in the context of Section 5, then the Administrator does find a guide-line provided by the Legislature because he has to take into consideration the 'public interest' which may not be inconsistent with the provisions of the Act. According to learned counsel, 'public interest' has got to be judged in the context of the object for which the Act has been enacted by the Parliament, and, therefore, the expression 'public interest' does provide a good guidance for the Administrator to exercise his power under Section 6 (1) of the Act; and there is no scope for the misuse of such a power because the Administrator shall require any person to file a return under this section only when in his opinion it was necessary in public interest.

14. Mr. Sen in this connection relied on the Judgment of the Supreme Court in (1969) 2 SCC 166 = (AIR 1970 SC 1453) (Supra) and submitted that Section 27 (6) (g) has been struck down by the Supreme Court on the ground that the expression 'public interest' does not provide any objective standards or norm or guidance. I may examine the provisions of Section 27 (6) which came up for the scrutiny before the Supreme Court.

15. Section 27 (6) deals with the issuance or renewal of the licence. It provides that the Administrator may after making inquiry, if any, as he may consider necessary by order in writing, either issue or renew the licence or reject the application for the same provided that no licence shall be issued or renewed under this section unless the Administrator, having regard to the following matters, is satisfied that the licence should be issued or renewed, namely,

(a) the number of dealers existing in the region in which the applicant intends to carry on business as a dealer,

(b) the anticipated demand, as estimated by him for ornaments in that region,

(c) the turnover of the applicant, if he had been carrying on business as a dealer prior to the commencement of Part XIIA or the Defence of India Rules, 1962, during the two years immediately preceding such commencement, or, in the case of an application for the renewal of a licence, the date of the application for such renewal,

(d) the previous experience, if any, of the applicant with regard to the making, manufacturing, preparing, repairing or polishing of, or dealing in, ornaments,

(e) the suitability of the applicant,

(f) the suitability of the premises wherethe applicant intends to carry on business asa dealer,

(g) the public interest and

(h) such other matters as may be prescribed.

The argument that was raised before the Supreme Court was that the conditions were laid down under Section 27 (6) (a) to (g) are vague and they impose unreasonable restrictions on the freedom of trade guaranteed under Article 19 of the Constitution. It is in this light of the objections that their Lordships of the Supreme Court discussed the various conditions given in Clauses (a) to (g) in Section 27 (6) of the Act. One of the conditions mentioned therein was that the Administrator shall consider the application for the grant of a licence or for the renewal thereof on the ground of 'public interest' also. Their Lordships observed:

'Similarly the expression 'suitability of the applicant' in Section 27 (6) (e) and 'public interest' in Section 27 (6) (g) do not provide any objective standard or norm or guidance.'

In this view of the State of Law, their Lordships struck down Section 27 (6) (g) as being violative of the constitutional provisions as the expression 'public interest' does not provide any objective standard for providing a guidance to the Administrator performing his duty under the provisions of Section 27 (6) for the grant or renewal of licence.

16. Mr. Sen submits that the reasoning on the basis of which their Lordships of the Supreme Court have struck down the provisions of Section 27 (6) (g) shall be equally applicable while judging the provisions of Section 6 (1). According to him, a very wide power has been given to the Administrator in the name of 'public interest' which can be misused by him as the Legislature did not provide any guidance to the Administrator as to how he shall judge the public interest in the matter of requiring any person, who lends or advances money on the hypothecation, pledge, mortgage or charge of any article or ornament, to file a return as to the receipt, delivery or sale of such articles or ornaments and as to the persons from whom they were received, or as the case may be, to whom they were delivered or sold.

17. It is further urged by the petitioners that Section 6 (1) confers wide powers, on the Administrator and in this sense also that the Administrator can demand from any person the returns about the persons from whom the article hypothecated, pledged, mortgaged or charged were received or to whom they were delivered or sold. In public interest he is also empowered to exempt some persons from furnishing these details. I do realise that the authority conferred on the Administrator under this section is very wide and the only guide-line provided by the Parliament is' that while exercising this authority the Administrator will make a demand for furnishing returns or exempt one from not furnishing the same he will be guided by the consideration of public interest. The expression 'public interest' as the Supreme Court holds does not provide any objective standards or norm or guidance and therefore this provision gives uncanalized authority so as to create discrimination between persons and persons who are required to Furnish returns in respect of providing details of the persons from whom the ornaments or articles were received or to whom they were sold. There is no guide line provided by the legislature as to what facts would go to constitute 'public interest' in such matters.

18. The reasoning given by their Lordships of the Supreme Court to strike down Section 27 (6) (g) is equally applicable for judging the validity of Section 6 (1) of the Act. In my opinion, the expression 'public interest' is quite vague and does not provide any objective standards to guide the Administrator as to in what cases a person may be asked to file a return and in what cases he may be allowed to go without filing such a return. I do not find any force in the argument of Mr. Vyas that the expression 'public interest' appearing in Section 6 (1) should be interpreted in the context of the provisions of Section 5 (1) which specifically lays down that the order shall be made not inconsistent with the provisions of the Act for carrying out the provisions of this Act. Mr. Vyas wants this Court to read the expression occurring in Section 5 (1) 'not inconsistent with the provisions of this Act' in Section 6 (1) while judging the scope of the expression 'public interest'. It is difficult for me to do so and to qualify the expression 'public intetrest' with the expression 'inconsistent with 'the provisions of this Act.'

19. For these reasons, I am of opinion that Section 6 (1) shall be struck down on the grounds on which their Lordships of the Supreme Court have declared the provisions of Section 27 (6) (g) as invalid.

20. The next provision which has been challenged by the petitioner is Section 16 (5). This section lays down that:

'No declaration referred to in Sub-section (1) or Sub-section (3) shall be required to be made,-- (a) in relation to articles, unless the total weight of articles owned, possessed, held or controlled by--

(i) a minor, who is not a member of a family, exceeds twenty grammes,

(ii) an individual (other than a minor), who is not a member of a family, exceeds fifty grammes,

(iii) a family, exceeds fifty grammes,

(iv) any person referred to in Clauses (b) to (f) and (h) to (m) of Sub-section (2), exceeds fifty grammes;

(b) in relation to any ornaments, or both articles and ornaments, where both articles and ornaments are owned, possessed, held or controlled, unless the total weight of such ornaments or both articles and ornaments, as the case may be, owned, possessed, held or controlled by--

(i) an individual who is not a member of a family, exceeds two thousand grammes,

(ii) a family, exceeds four thousand grammes .....'

The argument advanced by Mr. Sen is that 'article' has been defined in the Act as a thing other than ornament in a finished form, made of, manufactured from or containing, gold and includes--

(i) any gold coin,

(ii) broken piece of an article,

but does not include primary gold. According to this definition the contention of Mr. Sen is that we can conceive of an article in which the gold content may, be in a minute quantity but the weight of that article on account of the jewel or other materials studded therein may exceed 20 grammes or 50 grammes as the case may be, and, therefore, the persons who are possessing such articles weighing more than the specified quantity are required to make a declaration even though the gold content in that article may be negligible. According to Mr. Sen, this provision does not fulfil the purpose of the Act but puts an unreasonable restriction on the possession of the articles by the citizens of India. According to Mr. Sen, the paramount object of the Act is to keep control over the gold and not on other materials which are studded in the gold, and, therefore, this provision is unreasonable and violates the fundamental rights guaranteed under Article 19 of the Constitution.

21. As observed above, these restrictions will have to be judged by this Court on the principle of balancing of the need for individual liberty and the need for social control in order that the freedom guaranteed to the individual subserving the larger interests. In other words restrictions imposed shall be judged in the light of the magnitude of the evil which it purports to curb or eliminate. The main objective of the Act is to reduce the internal demand of the gold and to eradicate barriers to the circulation of the smuggled gold within the country. It is in this background of the main objective to be achieved by this Act that the restrictions which are alleged to have been imposed under the provisions of Section 16 (5) shall have to be judged.

22. Section 16 (5) simply requires the filing of a declaration. It does not put a restriction for possessing, holding or retaining its control on the articles whether such articles contain a small quantity of gold or they are made of pure gold. The persons owning, possessing, holding or controlling articles which weigh more than 20 grammes or 50 grammes as the case may be and held by a minor or by a family have to make a declaration under Section 16 (5) of the Act. This is not a restriction which in any way interferes with the rights of the persons to own, possess, hold or control the articles. The menace of smuggling the gold which has now become a danger to the country's economy has got to be controlled by the Parliament and if any inconvenience is caused to the persons owning, possessing, holding or controlling any articles containing gold by making a declaration, then this restriction cannot be said to be an unreasonable restriction.

23. Clause (b) of Section 16 (5) has been challenged on the ground that this provision of the law can act harshly against the members of the family Where one member of the family hides his ornaments and does not make the declaration thereof under the provisions of Clause (B) of Sub-section (5) of Section 16 and the manager of the family can be held responsible for the act of another member of the family. According to Mr. Sen, if a wife who constitutes a family with her husband under this clause does not disclose her ornaments to her husband and the husband does not declare in his return the ornaments of his wife possessed by her, then under the provisions, he is vicariously liable for making a wrong declaration. According to Mr. Sen, those very grounds on the basis of which their Lordships have struck down Section 88 are attracted to this Clause (b) of Sub-section (5) of Section 16 also.

24. Clause (b) requires that an individual has got to make a declaration if he owns, possesses, holds or controls the ornaments or articles or both weighing more than 2000 grammes and for a family this limit has been extended to 4000 grammes.

25. Section 16 (6) has defined the expression 'family' and it is laid down that:

'For the purposes of this section 'family' shall be deemed to consist of -- (i) the husband, wife and one or more minor children, or

(ii) any two or more of them, but shall not be deemed to include any other person.'

26. Mr. Vyas argued that the contention of Mr. Sen loses all force if it is examined in the light of Section 16 (1) which runs as follows:--

'Save as otherwise provided in this Chapter, every person who owns, or is in possession, custody or control of, any article or ornament' at the commencement of this Act, or acquires the ownership, possession, custody or control of any article or ornament thereafter shall make, within thirty days from such commencement or from such acquisition, as the case may be, or within such further period as the Administrator may, on sufficient cause being shown, allow a declaration in the prescribed form as to the quantity, description and other prescribed particulars of any article, or ornament, or both, owned, possessed, held or controlled by him.'

Mr. Vyas' main contention is that if the wife does not disclose her ornaments to her husband to be declared as family ornaments, then such ornaments shall be owned, possessed or held by the wife herself and if the weight of the ornaments possessed by the wife exceeds the weight prescribed for the purpose of making declaration, then it is her duty to make a declaration of those ornaments and if she fails to do so, the husband cannot be held liable for the same.

27. According to Mr. Vyas, an individual member constituting a family can also own, possess, hold or control ornaments irrespective of the fact that the family possesses certain quantity of ornaments or articles or both as family property. I agree with this contention of Vyas. In such cases, the responsibility of declaring such ornaments and articles which are exclusively possessed, owned, held or controlled by an individual member of a family shall be that of the individual member and if he or she hides the ornaments possessed, owned, held or controlled by him/ her, then it is he or she who shall be liable for not making declaration. The Karta or the Manager of the family in such cases cannot be held vicariously liable for the fault of the individual member on whom the responsibility squarely falls to make declaration under Section 16 (1) of the Act. In such circumstances, the question of vicarious liability would not arise. I think that the apprehension expressed by Mr. Sen is more imaginary than real. If a wife hides certain ornaments which belong to her from being declared as family ornaments, then the responsibility would clearly lie on her for not making a declaration thereof by her in case the weight of the ornaments owned, possessed or held by her exceeds the prescribed limit. I do not think that Clause (b) of Section 16 (5) suffers from any infirmity as pointed out by Mr. Sen.

28. The next provision challenged is Subsection (7) of Section 16. From the judgment of the Supreme Court in H. R. Banthia's case, (1969) 2 SCC 166 = (AIR 1970 SC 1453) (supra), it appears that this provision of the law was challenged before the Supreme Court but. the Supreme Court did not decide this objection. The contention of Mr. Vyas is that the petitioner cannot now challenge this provision as it shall be deemed that this provision has been held to be valid by the Supreme Court, I am not impressed by this argument of Mr. Vyas that even though the Supreme Court has not decided anything about the validity of this provision, should be deemed to have been declared as a valid piece of legislation because this was once challenged before the Supreme Court. In the absence of any Judgment from the Supreme Court, it is open to the petitioner to throw a challenge on its validity before this Court.

29. The main ground on the basis of which Sub-section (7) of Section 16 has been challenged is that by this provision every licensed dealer or refiner is required to make a declaration about the gold owned, possessed, held or controlled by him in any capacity other than the capacity of the licensed dealer or refiner irrespective of its quantity. A licensed dealer or a refiner cannot take advantage of the exception incorporated in Sub-section (5) of Section 16. The argument of Mr. Sen is that this provision of the Act discriminates between the dealer or refiner and the persons who. own, possess, or hold less than 2000 grammes and are immune from making a declaration under Sub-section (5), and therefore is hit by Article 14 of the Constitution.

30. Mr. Sen's contention is that by enacting this provision of law, the licensed dealers or refiners are discriminated from non-dealers because the licensed dealers or refiners shall be required to declare the ornaments or articles owned, possessed, held or controlled by them or their families even if the gold did not exceed the limit prescribed by these subsections. It may be mentioned here that, dealers or refiners have been treated as a different class in this Act and it cannot be said with any justification that such a classification is not warranted by circumstances in which this Act has been enacted by Parliament. In order to keep an effective control over the dealings in gold by the dealers or refiners, it was found necessary by Parliament that the dealers or refiners should declare the entire quantity of gold which they themselves own, possess, hold or control in the capacity of dealers as well as in the individual capacity or in the capacity of the member of the family owning, holding, possessing or controlling gold. By making this provision, the Parliament has eliminated to a great extent the possibility of playing foul with the law in the event they are caught to possess gold beyond the quantity which has been declared by them. In my opinion, this provision does not in any manner create any discrimination because dealers or refiners have been treated as a class different from the non-dealers. I, therefore, do not find any reason to strike down this provision of the Act as contravening Article 14 of the Constitution.

31. The next provision of the Act attacked by the petitioners is Section 27 (7) (b). This section lays down that a licensed dealer shall not carry on business as such dealer in any premises other than the premises specified in his licence. The argument advanced on behalf of the petitioners is that this restriction is an arbitrary, unjust and unreasonable as it would have the effect of complete ruination of the business of the petitioners. Mr. Sen, during the course of his address stated that in cities like Jaipur and Agra, the dealers are required to take away their articles or ornaments to show to their customers who come from foreign countries and stay in the hotels of the towns. He also submitted that the dealers have to display their ornaments to attract sale at the aerodrome and other such places which are frequently visited by these foreigners. Mr. Vyas appearing on behalf of the respondents on the other hand urged that if it is necessary for some dealers to take their ornaments for the purpose of showing them to the customers in hotels, they can get such place or places included in the licence for the purpose and by doing so this provision of the law would not in any manner hamper the business of the dealer. Clause (a) of Subsection (7) of Section 27 provides:

'The Administrator shall specify, in each licence granted to a dealer, the premises in which such dealer shall carry on business and no other person shall carry on business as a dealer in the said premises.'

The language of Clause (a) shows that the Administrator can, if desired by the dealer, specify more than one premises for carrying on the business of a dealer and in tbe event if it is necessary for the dealer to take the ornaments or articles for exhibition to the customers in hotels, the premises of the hotels can also be specified in his licence if an approach is made to the Administrator for including such premises for carrying on the business. In my opinion, the restriction imposed in Section 27 (7) (b) of the Act is reasonable to have an effective control over tbe business in gold and it does not in any manner prohibit the business of the dealer nor does it in any manner put an unreasonable restriction in carrying on of the business of a licensed dealer,

32. The next provision of the Act challenged by the petitioner is Section 27 (8) of the Act. Under this provision of the law, the licensed dealer is required to ensure that every artisan or other person employed by him complies, in the course of such employment, with the provisions of this Act or any rule or order made thereunder and of any other law relating to gold or foreign exchange for the time being in force. The contention of the petitioner is that the licensed dealer cannot be made responsible for the act of his employees and if any artisan or any other person employed by the dealer wilfully disobeys the provisions of the law, then the dealer cannot be held personally responsible and should not be punished. In this connection, reliance has oeen placed by Mr. Sen on the reasoning given by the Supreme Court for striking down Section 88 of the Act, which has the effect of making persons liable for the act of others.

33. In H. R. Banthia's case, (1969) 2 SCC 166 = (AIR 1970 SG 1453) while dealing with the challenge thrown to Section 88 of the Act, their Lordships of the Supreme Court have held that so far as the section extends the scope of the vicarious liability of the dealer and makes him responsible for the contravention of any provision of the Act or Rule or Order by any person employed by him before he was employed, the dealer cannot be made responsible vicariously for such past misconduct and to that extent the Section 88 is invalid. The rational basis in law for the imposition of vicarious liability as pointed out by the Supreme Court is that the person made responsible may prevent commission of the crime and may help to bring the actual offender to book. It may perhaps be said that if the dealer had been more alert to see that the law was observed, the sin might not have been committed. Their Lordships in this connection observed as follows:--

'It is evident that the dealer cannot reasonably be made liable for any past misconduct of his employee though the dealer can be made liable for any act done by his employee in the course of the employment and whom he can reasonably be expected to influence or control.'

The present section simply requires the dealer to ensure that every artisan or other person employed by him complies in the course of such employment with the provisions of the Act or any rule or order made thereunder. This restriction imposed by Subsection (8) of Section 27 cannot be said in the context of those circumstances in which this Act has been made, unreasonable, because in the words of the learned Judges of the Supreme Court, 'the dealer can be made liable for any act done by the employee in the course of the employment and whom he can reasonably be expected to influence or control'. In my opinion, Section 27 (8) cannot be declared invalid for the reasons for which Section 88 is struck down.

34. The next Section is 28 which has been impugned by the petitioner. Section 28 reads as follows:--

'28. No licensed dealer shall, unless authorised by the Administrator so to do--

(a) carry on business as a money-lender or banker on the security of any article, or ornaments or both.

(b) permit any other person to carry on money-lending, banking or any other business,

in the same premises in which he carries on business as such dealer.'

35. This provision of the law carries in ft a prohibition for a licensed dealer to do the business of a money-lender or banker on the security of the article or ornament or both in the same premises in which he carries on business as such dealer.

36. According to the petitioners this provision constitutes an unreasonable restriction on the petitioners' fundamental right to carry on their trade or business and it has no connection or nexus whatsoever with the object sought to be achieved by this Act According to Mr. Sen, in several cases, the dealer may have to act as a banker or a lender of money in respect of unpaid price of gold and articles in connection with the exigencies of business in cases in which the purchaser may not have ready cash for payment of the articles or ornaments. In his opinion, the provisions of Section 28 are uncalled for.

37. As regards the provisions of Clause (b) of this section, it is submitted by Mr. Sen that the restrictions put by this clause of not permitting anybody to carry on tha business on the same premises where the licensed dealer is carrying on his business as a dealer has no justification. According to the petitioners, in the majority of towns in the State of Rajasthan there is derth of accommodation and if such a restriction is allowed to be continued, then there may be possibility that even the relations of a dealer may not for want of accommodation, start a new business because the dealer will not be in a position to permit the sharing of the accommodation with his relations.

38. The respondents have not given detailed replies to these objections of the petitioners. However, it was urged by Mr. Vyas that this provision has been introduced by Parliament in order to avoid the contingencies where the dealer may take resort to justify his illegal possession or actions by taking a plea, that the articles or ornaments found in the premises beyond the limits of the declarations made by the dealer belong to a person who is carrying on money-lending business on the security of articles or ornaments or both in the same premises.

39. In the earlier part of this Judgment, I have discussed the conditions prevailing in the country which necessitated to enact such a stringent law in order to avoid the smuggling of gold in the country which is tilting the economy of the country. In these circumstances, Parliament has considered all possibilities and circumstances which may come for the rescue of the licensed dealers to avoid the operation of the law by taking plea of one kind or the other. This is one of the instances where the Parliament has in its wisdom imposed restrictions which may appear to be harsh but in order to have an effective control on the movement of gold and gold business, it was found necessary to put such restrictions. In these circumstances, these restrictions cannot be said to be unreasonable.

40. It may be possible that because of Clause (b) of Section 28 the father may not allow his son to carry on his business of money-lending or banking in the same premises occupied by his father where he carries on the business of a licensed dealer. But such cases are very rare and, as pointed out by Mr. Vyas, no petitioner in the group of these petitions has made such a complaint that such a difficulty was ever experienced by any one of them. Mr. Vyas contends that the jurisdiction of this Court under Article 226 of the Constitution cannot be invoked in abstract circumstances, and this is one of the circumstances in which the grievance has been lodged by the petitioners without experiencing any difficulty of this kind. For this reason, I find it difficult to strike down the provisions of Section 28.

41. Another provision that has come under challenge is Section 52 of the Act. This section lays down that:

'Where any firm has been licensed under this Act to carry on business as a dealer or refiner such licence shall, notwithstanding anything contained in this Act, become invalid on and from the date on which there is change in the partnership of such firm, unless such change in the partnership has been approved by the Administrator.'

The grounds of challenge are that the section does not lay down any guidance to the Administrator for exercising his authority under this provision of the law, and secondly the automatic cancellation of a licence of a firm carrying on business as a dealer or a refiner when there is a change fa the partnership of such a firm puts a restriction on the business of the firm which is unreasonable and sometimes it can play havoc with the business.

42. Mr. Vyas, appearing on behalf of the respondents, on the other hand, contended that a firm is not a legal entity and, therefore, any change in the partnership of the firm brings about the dissolution of the firm and as such the licence automatically comes to an end. He also contended that it is possible that with the change in the partnership some such partner may be introduced in the firm who may be an undesirable person and who may not be trusted by the Administrator to cany on the business of a licensed dealer, and therefore, it is necessary that with every change in the partnership, the Administrator should know the change in the constitution of the firm and then review whether the continuance of the licence should be allowed with the change in the constitution of the firm or not.

43. I find force in what Mr. Vyas submits. With the change in the partners the constitution of the partnership firm is also altered and this change may some time Forfeit the confidence of the Administrator which he used to repose in the firm to carry on the business of a dealer, and it may be that with the change in the constitution of the firm, the Administrator may not consider such a change any longer fit to carry on the business of a dealer or a refiner. If this provision had not been made by the Parliament, then necessity would not have arisen for the firm to intimate to the Administrator the change in the partnership of a firm. At the time when the licence is given to a dealer or a refiner, the Administrator is expected to look into the status and the other antecedents of the partners who are carrying on the business of the firm and if they could evoke confidence of the Administrator, it is only then that the firm gets a licence as a dealer or a refiner. It is, therefore, necessary that with every change in the constitution of the partnership the Administrator should know as to whether still he considers that firm to act as a dealer or a refiner. This is possible only when the firm approaches afresh after its reconstitution to the Administrator for the grant of a licence. In these circumstances, this provision of law is justified.

44. It may be noted that the grant of a licence after the change in the partnership has come to the notice of the Administrator is like a renewal of a licence, and, therefore, all those provisions which relate to the renewals and are contained in Section 27 (6) of the Act must guide the Administrator while exercising his power under Section 52 of the Act.

45. Section 27 (6) as re-enacted by the Parliament after it was struck down by the Supreme Court lays down certain principles for the guidance of the Administrator for the renewal of the licence. These principles shall act as a guide to the Administrator while dealing with the firm whose constitution has been changed due to the change in the partnership, and, therefore, it is difficult to say that the administrator has been conferred with arbitrary powers in approving the change in the partnership and allowing the licence tp continue in the firm's name. In my opinion, this argument of Mr. Sen has now no force that the provisions of Section 52 are hit because the Administrator has been invested with arbitrary powers in the matters of approval of the change in partnership of the firms.

46. No other provision of law has been challenged by Mr. Sen except those which have been dealt with above, though in the petitions, various other provisions were specifically mentioned to be invalid.

47. For the reasons mentioned above these applications are partly allowed. Section 6 (1) of the Act is declared invalid. Rest of the sections, as observed above, are not hit by any provisions of the Constitution, and, therefore, they are declared as valid. As regards the challenge thrown by the petitioners to other provisions of law except Section 6 (1), their applications are dismissed. Parties are left to bear their own costs.


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