K. Veeraswami, J.
1. These petitions have been heard together as they raise common points of law. The petitioner in each case is a dealer in purchase and sale of paddy in North Arcot District. By G.O.Ms. No. 766, Food and Agriculture, dated 9th March, 1964, which was duly notified in the Fort St. George Gazette, the State Government declared that the North Arcot District would be a notified area for the purposes of the Madras Agricultural Produce Markets Act (XXIII of 1959). There is no question that in making this notification the procedure prescribed therefor by the Act was duly followed. By Section 38 (1), the Madras Commercial Crops Markets Act, 1933 was repealed but by Sub-section (2), the market committee established for the notified area under the repealed Act and bolding office immediately before the date of the commencement of the Act is deemed to be a market committee established under the new Act for that area and all its members are deemed to be members appointed by the Government or elected under the new provisions. The sub-section further provided that any market established under the repealed Act should be deemed to be a market under the later Act. The market committee, which was functioning under the deeming provisions notified that paddy merchants on and from 1st April, 1964 should purchase their requirements of paddy only from regulated markets and announced the licence fee payable by wholesale dealers and retail dealers in paddy and the rate of cess that would be charged.
2. The petitioners contended that the Madras Agricultural Produce Markets Act, 1959, is invalid as no previous sanction had been obtained as required by the Proviso to Article 304 of the Constitution. They make a further point that, in any case, the market committee deemed to continue for the notified area has not been duly constituted in accordance with the provisions of the Act. We shall first deal with the second contention.
3. The history of marketing legislation in this State need not detain us except to state that the question was the subject-matter of several reports of committees appointed by the Government for the purposes, and the earliest legislation on this matter in the State of Madras was the Madras Commercial Crops Markets Act, 1933. Substantially all its provisions have been re-enacted with a few changes of which the main is that the Act, unlike before deals not with commercial crops as such but agricultural produce which by notification can be extended to cover any agricultural produce for the purpose of the Act. The Madras Agricultural Produce Markets Act (hereinafter called the Act) received the assent of the Governor on 24th December, 1959 was published in the Fort St. George Gazette, on 13th January, 1960 and came into force on 22nd October, 1962. The Act is intended to provide for better regulation of buying and selling of agricultural produce and establishment and proper administration of markets for agricultural produce in the State of Madras. It has a definition section and among others the term agricultural produce is defined as including anything produced in the course of agriculture and any other produce, whether processed or unprocessed, declared by the Government, by notification, to be an agricultural produce for the purpose of this Act; market means any market established under Sub-section (3) of Section 5 and the market committee is one which is established under Sub-section (1) or Sub-section (2) of Section 5. The phrase notified agricultural produce means any agricultural produce specified in the notification under Section 4. notified area is any area notified under Section 4 as altered by any notification under Section 7 and notified market area signifies any area notified Under Sub-section (4) of Section 5 as altered by any notification under Section 7. The intention of the Government to exercise control over the purchase and sale of any specified agricultural produce has to be declared by a notification which shall also call for objections or suggestions to be received within a stated period. After the expiry of the period and after considering such objections and suggestions as may be received, the Government by notification may declare the area specified therein or any portion thereof to be a notified area for the purposes of the Act in respect of any agricultural produce specified in the notification. Once a notified area comes into existence in that manner and in accordance with Sections 3 and 4, the Government is required under Section 5 to establish a market committee for every notified area. It is the duty of the market committee to enforce the provisions of the Act as well as the rules and by-laws made thereunder in such notified area. Special provisions have been made in respect of co-operative marketing society which we need not notice for the present purpose. Section 5 further requires any market committee to establish in the notified area such number of markets providing for such facilities as the Government may direct from time to time for the purchase and sale of the notified agricultural produce. After the establishment of a market by a market committee, the Government may by notification declare the area of the market and such area around the market as may by specified in the notification to be a notified market area for the purposes of the Act in respect of any notified agricultural produce. Section 6 provides for control of trading in agricultural produce in a notified area. Within a notified area, no person shall set up, establish or use or continue or allow to be continued any place for the purchase or sale, storage, weighment, pressing or processing of any notified agricultural produce, except under and in accordance with the conditions of a licence granted to him by the market committee. Power is given to the market committee to exempt from this restriction any person who carries on business for the purchase or sale of any notified agricultural produce in any quantity not exceeding that prescribed. There is also a similar power in the market committee to exempt any producer of an agricultural produce or a co-operative marketing society selling notified agricultural produce which has been produced by it from that restriction. Purchasers of agricultural produce in the notified area of notified agricultural produce for their own domestic consumption below a prescribed quantity are not affected by this restriction. Section 6 also contains provisions which specify the circumstances in which a licence may be refused to a person as well as provisions enabling the market committee in certain circumstances to cancel or suspend the licence after giving the licence-holder a reasonable opportunity of showing cause against such action. Power is given to the Government under Section 7 to alter notified area or notified market area from time to time by notification. Section 8 deals with constitution of market committees by election. Every market committee shall consist of members not exceeding eighteen of whom nine shall be elected by and from among the producers of the notified agricultural produce in the notified area, four by and from among the persons licenced under Sub-section (1) of Section 6 in the notified area in respect of the notified agricultural produce and one member is to be appointed by the Government who shall be a producer residing in the notified area and on the recommendation of the Registrar. This member is intended to represent the co-operatives. In addition the Government may nominate to the committee not exceeding three members. The elective principle will be inapplicable to establishment of a first market committee for any notified area. The Government in such a case may appoint all the members to function for a period of one year. The elected members under Section 11 will hold office for a term of five years. We have already referred to Section 38 under which the market committee established under the old Act shall be deemed to continue as a market committee established under the new Act. The other provisions which immediately follow that relating to the constitution of market committees deal with officers, meetings, sub-committees, special committee and some of their powers. Section 18 relates to levy of cess by market committee and says that notwithstanding anything contained in the Madras General Sales Tax Act, 1959, the market committee shall levy a cess by way of sales tax on any notified agricultural produce bought or sold in the notified area at a rate not exceeding fifty naye paise for every hundred rupees of the aggregate amount for which the notified agricultural produce is bought or sold whether for cash or for deferred payment or other valuable consideration. Sub-section (1) of Section 18 has two explanations, the first of which says that for the purposes of this sub-section, all notified agricultural produce taken out or proposed to be taken out of a notified market area shall unless the contrary is proved, be presumed to be bought or sold within such area. Sub-section (2) says that the cess under Sub-section (1) has to be paid by the purchaser of the notified agricultural produce concerned and it is only where such purchaser cannot be identified the seller shall be liable to pay the cess. Under Section 20 a separate fund called the market committee fund is to be constituted to which all moneys received by a market committee shall be paid into and from which all expenditure incurred by the market committee under or for the purposes of the Act shall be defrayed. The purposes for which the fund may be expended are set out in Section 21 which includes acquisition of site or sites, for the market, maintenance and improvement of the market, construction and repair of the buildings which are necessary for the purposes of such market and for the health, conveniences and safety of the persons using it, provision and maintenance of standard weights and measures, pay, pension, leave allowances, gratuities, compassionate allowances, etc. of the officers and servants employed by the market committee, payment of interest on loans, collection and dissemination of information regarding all matters relating to statistics and marketing in respect of the notified agricultural produce, schemes for extensions or cultural improvement of the notified agricultural produce within the notified area including the grant of financial aid to schemes for such extension or improvement : within such area, schemes for grading of agricultural produce and also expenses of and incidental to elections. The rest of the provisions in the Act provide for borrowing power of the market committee and the powers of the Government to supersede such committee in any notified area. Under Section 25 any person who fraudulently evades payment of any fee, cess or other amount due from him under the Act or the rules or by-laws made under the Act or wilfully acts in contravention of any of the provisions of the Act commits an offence punishable with fine. The Act also provides for composition of offence. Section 29 vests in the Government rules making powers in general and specifies certain matters in respect of which the Government may make rules. A market committee under Section 30 is empowered to make by-laws for its notified area for the regulation of the business and the conditions of trading in that area. Any by-law so made may provide that any contravention thereof shall be punishable with fine which may extend to fifty rupees. Elaborate rules called the Madras Agricultural Produce Market : Rules, 1962, have been framed.
4. The argument for the petitioners is that having regard to the language of Section 5 (1) in the context of Sections 3 and 4 and the definitions of agricultural produce, market committee, notified agricultural produce, notified, area, notified market area, what is contemplated by the Act is establishment of a market committee for every notified area, that is to say, as a notified area for the purposes of the Act declared under Section 4. in respect of any agricultural produce specified in the notification under that section. There must be a separate market committee for each notified agricultural produce with reference to which a notified area is set up. If a notified area for the purpose of the Act is in respect of a notified agricultural produce specified in the notification, it follows, according to the argument, that when Section 5 (1) speaks of establishment of a market committee for every notified area it means establishment of a market committee for every notified area in respect of agricultural produce specified in the relative notification. The market committee which existed prior to the new Act and which is deemed to continue under Section 38 for the purpose of the Act having been established for commercial crops which did not include paddy in the North Arcot District has no power or jurisdiction to regulate purchase and sale of paddy. Though the North Arcot District has been notified as a notified area for the purpose of the Act in respect of paddy, no market committee has been established under the provisions of the Act in respect of the notified agricultural produce, namely, paddy. This argument would appear to have been addressed to Kailasam J., before whom these petitions were posted in the first instance but in a slightly different form. The learned Judge stated that the legality of the market committee constituted under the Madras Act (XX of 1933) to function as such under the Madras Agricultural Produce Markets Act was questioned by the petitioners, while for the Government it was contended that the old committee had been validly continued under Section 38 (2) of the Act and that it could effectively function and discharge the duties imposed by the existing Act, and expressed the view:
In my opinion Section 38 (2) cannot be read to enable the market committee under the repealed Act to continue as the market committee under Section 8 of Act (XXIII of 1959). A specific provision is made under Act (XXIII of 1959) for establishment of a market committee and for representation in it. The requirements of section, namely, giving representation to the producers and licensed persons in the notified area, cannot be fulfilled by continuing the market committee under Act XX of 1933. This question was raised before Srinivasan, J., in (M. S. Mahendra Kumar Ishwarlal & Co. v. The State of Madras and Anr. W.P. Nos. 1226, 1234 to 1240, 1447 and 1448 of 1963), The learned Judge was of the view that the old market committee continued by the saving provision of Act (XXIII of 1959) to exercise the functions of that market committee under Act (XXIII of 1959). With respect I am unable to concur with the learned Judge.
In that view he directed the petitions to be posted before a division Bench for disposal. Before Srinivasan, J., the contention was that if the committee which had been constituted under the Madras Commercial Crops Markets Act in respect of groundnut was to continue to be the market committee under the 1959 Act, there could possibly be no representation of the notified agricultural produce, jaggery, upon such committee, that it should therefore, follow that if the market committee was to be representative as contemplated by Section 8 of the 1959 Act, the groundnut market committee, as it might be described, could not provide for such representation, and that, therefore, there should be a separate market committee for each notified agricultural produce. On this argument, the learned Judges' view was:
It seems to me that having regard to the functions with which the market committee is charged, this argument lacks substance. It is true that a market committee is established for every notified area. A notified area is no doubt linked with a particular agricultural produce. It does not immediately fellow that the same market committee cannot function for the purposes of the Act in respect of different notified products. In common practice, an area where a particular agricultural produce is produced is notified and within the same notified area there may be more than one agricultural produce the marketing of which requires to be regulated; in such a case, even though there may be more than one agricultural produce grown or produced in that area, the same market committee can exist and function in respect of the notified area. In so far as the representation on the market committee is concerned, the section itself contemplates that if more than one agricultural produce is to be controlled by the legislation in the notified area, then the producers and licensees of the notified agricultural produce shall be represented on the committee. It may be that the old market committee which shall continue by the saving provisions of the Act may have to be re-constituted in the light of the requirements of the new enactment; that is a matter of detail which does not affect the validity of the constitution of the market committee.
With respect of we are of opinion that the view taken by Srinivasan, J., as to the effect of Section 38 (2) even in the context of Section 8 is the correct one.
5. It is true that an area for the purposes of the Act is declared as a notified area with reference to a specified agricultural produce and that the Government shall establish a market committee for every notified area. But it does not follow that for every notified agricultural produce there must be a separate market committee to regulate its purchase or sale in the notified area. An area may be notified in respect of particular agricultural produce and the same area may again be notified in respect of several other agricultural produce. If there are several notified agricultural produce for each of which the notified area is the same, which is permissible under Sections 3 and 4, we do not see why the same market committee for the same notified area cannot function and have control in respect of every one of such notified agricultural produce. The question is one of power to declare a notified area and establish market committee in every such notified area and this power can well be exercised in such a manner that either there may be a separate notification declaring a notified area in respect of each agricultural produce and establishment of a market committee for such notified area or a comprehensive notification declaring a notified area in respect of more than one agricultural produce and establishing a market committee for such area with jurisdiction to regulate all the notified agricultural produce in that area. We are, therefore, wholly unable to accept the argument that under Section 5 there must be a market committee separately established for each agricultural produce.
6. Nor do we think that because the market committee continued by the deeming provision of Section 38 (2) of the Act is not representative unlike a market committee constituted under Section 8 of the Act, the old market committee deemed to continue cannot be either legal or effective for the purposes of the present Act. Section 38 contains both a repealing and saving provision. While repealing an Act it is within the power of the Legislature to say what shall continue notwithstanding the repeal. Sub-section (2) of Section 38 not only says that the market committee established under the repealed Act would be deemed to be established as market committee under the repealing Act for the said notified area but also provides that all members of the old market committee shall be deemed to be members appointed under the repealing Act. The sub-section also says that any market established under the old Act shall be deemed to be the market established under the new Act. The object of this provision is obvious, namely, where there is already a market committee functioning immediately before the commencement of the Act, there is no need to put it out of action at the commencement of the Act and have a market committee established under Section 8. Where there was no market committee in existence under the old Act for any area which is a notified one under the present Act, power is given to the Government in Section 8 itself to constitute the first market committee by appointment of its members for specific period, but where a market committee was functioning under the old Act, the intention is to deem it as established under the new Act for the relative notified area and thus avoid hiatus in administration, if the elective principle is to be resorted to, even at the commencement of the new Act. It may further be observed that the principle of election in Section 8 is subject to further limitation, namely, that the Government, if it considers it desirable, can extend the life of a market committee like the first market committee consisting entirely of members by appointment beyond the specified period of one year. Apart from Sub-section (2) of Section 38 being a saving provision in the context of the repeal of the earlier Act, the sub-section is practically a proviso in effect to Section 8. This is evident from the fact that the direction of Sub-section (2) of Section 38 is that the old market committee shall not only be taken to be a market committee established under the provisions of the new Act but also that its members are to be taken as appointed under the new Act, so that the sub-section clearly indicates that Section 8 will have no application to such a case governed by the sub-section. There is, therefore, nothing to invalidate the deeming provision and we are not persuaded that the market committee as continued in this case by Section 38 (2) is not effective or not properly constituted for the purposes of the 1959 Act.
7. The constitutional ground of attack on the validity of the Act is that anything which impedes, limits or circumscribes in any way the freedom of trade, commerce and intercourse, be it in respect of place, time, territory, or movement is a restriction on the freedom and that although such a restriction may be reasonable and in public interest, it can be valid only if the Proviso to Article 304 has been complied with. The argument proceeds that the provisions of the 1959 Act which require a licence to set up a place within a notified area for the purchase or sale of notified produce and certain other specified purposes connected therewith and also require the notified produce to be taken to the market within the notified area for purchase or sale, storage, weighment, pressing or processing thereof and thus restrict the movement of the notified agricultural produce within the said area and authorise levy and collection of cess by way of sales tax on any notified agricultural produce bought or sold in the notified market area, are restrictions on the freedom to carry on trade guaranteed by Article 19 (1) (g) as well as the declaration under Article 301 of the Constitution that trade and commerce throughout the territory of India shall be free and that even if a law imposing such a restriction is saved by Article 19 (6) on the ground that the restriction is a reasonable restriction and in the interest of the general public, the law may nevertheless be invalid for non-compliance with the Proviso to Article. 304 On the other hand, it is contended for the State that the Act is merely regulatory the object of legislation being to facilitate trade in the notified agricultural produce within the notified area and is, therefore, not hit by Article 301.
8. The controversy raised before us has not been the subject-matter of any direct decision brought to our notice and is not, in our opinion, free from difficulty. There are a few cases in which the validity of marketing legislation vis-a-vis Articles 19 (1) (g) and 19 (6) was canvassed and decided but not with reference to Article 301 and 304. Kutti Keya v. State of Madras (1954) 1 M.L.J. 117, in which a division Bench of this Court was concerned with the validity of the Madras Commercial Crops Markets Act, 1933, held that the Act did undoubtedly restrict the freedom of a person to trade as and where he willed--indeed it was enacted for the very purpose of controlling business in commercial crops but these restrictions were reasonable and in public interest. In coming to that conclusion, the Court touched on the need for such a legislation, made a survey of the marketing legislation and pointed out that its object was to protect the producers of commercial crops from being exploited by middlemen and profiteers and to enable them to secure a fair return for their produce. An argument based on Articles 301 and 304 (b) was also considered but was disposed of on the view that as the Act impugned before it was an existing law within the meaning of Article 305, its validity was not affected by Article 301. While considering the question, however, reference was made to certain Australian decisions rendered on Section 92 of the Australian Constitution and the view was expressed that the section hit only laws which prohibited or hampered inter-State trade and not those which merely regulated it. The division Bench was apparently inclined to the view that the trade within the State protected by Article 301 and 304 (b) would be not intra-State trade pure and simple but inter-State trade in its flow in the State. In passing we may mention that it has since been held authoritatively by the Supreme Court in Atiabari Tea Co., Ltd. v. State of Assam : 1SCR809 , and Automobile Transport Ltd. v. State of Rajasthan : 1SCR491 , 1424, that in view of the expression throughout the territory of India in Article 301, it provides not only for freedom of inter-State trade but also intra-State trade, commerce and intercourse. The judgment of this Court in Kutti Keya v. State of Madras (1954) 1 M.L.J. 117, that the 1933 Act did not offend Article 19 (1) (g) as restrictions imposed by it were reasonable and in public interest was affirmed by the Supreme Court in Arunachala Nadar v. State of Madras : AIR1959SC300 . In Mohammed Hussain v. State of Bombay : 2SCR659 , the constitutional challenge to the validity of the Bombay Agricultural Produce Markets Act, 1933, was confined to Article 19 (1) (g) which was repelled by the Supreme Court applying Arunachala Nadar v. State of Madras : AIR1959SC300 . Gujarat Agricultural Produce Markets Act, 1964, was held not to offend Article 19(1) (g) in Jan Mohammad v. State of Gujarat : 1SCR505 . There again no contention was based on Part XIII of the Constitution. Thakur Prasad v. State of Bihar : AIR1965Pat267 , found that the Bihar Agricultural Produce Markets Act, 1960 had been enacted after duly obtaining the sanction of the President for the Bill before its introduction in the State Legislature and did not have to consider whether the legislation fell with in the ambit of Part XIII. Likewise the question was not debated in Bhikam Chand v. The State I.L.R. (1965) Raj. 897, as it turned out that for the Rajasthan Agricultural Produce Markets Act, 1961, the assent of the President was obtained under Article 255 of the Constitution.
9. The question we are, therefore, called upon to decide is whether the 1959 Act is hit by Article 3 04 (b) and is invalid for failure to obtain the sanction of the President under the Proviso to that Article. The answer to the question will depend on whether the Act imposed restrictions on the freedom of trade, commerce and intercourse with or within the State of Madras. Learned Counsel for one of the petitioners argues that Kutti Keya v. State of Madras (1954) 1 M.L.J. 117, having for the purpose of Article 19 (1) (g) and (6) held that the Madras Commercial Crops Markets Act, 1933, imposed restrictions on freedom of trade but they were reasonable restrictions and in public interest and the 1959 Act which repealed it, being in pari materia with it, the position is no different for the purpose of Article 304 and that being the case, the 1959 Act should fail because, in fact, the requisite sanction of the President was not obtained for the introduction of its Bill. He says that the restrictions on the freedom of trade in Part XIII should be understood as having the same meaning and content for the purpose of both Articles 19 (1) (g) and 301, as they overlap and practically cover the same field of liberty.
10. The real question, in our opinion, is as to the scope and ambit of the freedom declared by Article 301 and whether any restriction, whatever its nature and incidence, is forbidden by that Article except to the extent saved or excepted by the .succeeding Articles in Part XIII. We do not think that a mere comparative examination of Articles 301 and 19 (1) (g) will serve the purpose of solving the problem we have to answer. Article 310 says that trade, commence and intercourse throughout the territory of India shall be free. But this declaration will operate subject to the other provisions of Part XIII, namely, Articles 302 to 305 and 307. The freedom under Article 301 being a fetter on the legislative powers of both the Parliament and the State Legislature, the rest of the Articles in Part XIII lift the fetter to the extent specified and in stated circumstances, subject however, to certain conditions and exceptions. If and to the extent public interest requires, Parliament may impose restrictions on the freedom; and likewise the State Legislature too may impose restrictions on the freedom of trade, commence or intercourse with or within the State, provided the restrictions are reasonable and such as are required in public interest and further the Bill relating to the matter is introduced with the previous sanction of the President. But this power of the Parliament to impose restrictions will not avail to make a law which prefers or authorises preference of one State to another or which discriminates or authorises discrimination between one State and another. This restriction also applies to the State Legislature. But such preference or discrimination will be unobjectionable in parliamentary legislation if it is necessary and is so declared to be for the purpose of dealing with a situation arising from scarcity of goods in any part of the territory of India. The State Legislature is also forbidden from imposing any discriminatory tax on goods imported from other States. The law existing and in operation before the commencement of the Constitution (Fourth Amendment) Act, 1955, subject to certain qualifications are, however, saved from the scope of Articles 301 and 303. That in broad outline is the subject of Part XIII. It is well known that the Articles in that Part have been phrased in the light of the experience gained of the cognate provisions in some of the federal Constitutions of the world, especially the commerce clause in the Constitution of the United States, Section 92 of the Australian Constitution, Section 121 of the British North America Act and in the background of the problems relating to trade, commerce and intercourse in the then British India, Princely States and post-independent merger period that confronted the framers of the Constitution. In framing Part XIII they kept in view the economic unity of India as a whole and at the same time the inter-State needs, exigencies and necessities in the context of a developing economy and in their inter-relation with the unity of India in the field of trade, commerce and intercourse. In addition to these considerations, in interpreting the scope of the freedom, the related restrictions or exceptions would have to be borne in mind, that freedom in organised society governed and regulated by law and order is not absolute freedom which will mean anarchy and confusion, but a relative concept which, by very nature of things, implies mutual alignment and adjustment of conflicting, unequal or even parallel interests, rights and liabilities in order to facilitate, promote and subserve the good of the individual as well as of the community.
11. It has accordingly been held by a majorily judgment of the Supreme Court in Atiabari Tea Co., Ltd. v. State of Assam : 1SCR809 , that while Article 301 imposed a constitutional limitation on the legislative power of Parliament and the Legislatures of the States and applied not only to intra-State trade, commerce and intercourse, but also intra-State trade, commerce and intercourse the intention of Part XIII of the Constitution was to safeguard the principle of the economic unity of the country and the content of freedom, provided for by Article 301 was larger than the freedom contemplated by Section 297 of the Government of India Act, 1935 and whatever else it might or might not include, it included movement of trade which was of the very essence of all trade and was its integral part. The majority further held, and it is very important in the present context, that restrictions, freedom from which was guaranteed by Article 301, would be such restrictions as directly and immediately restrict or impede the very flow of movement of trade and.in determining the limits of the width and amplitude of the freedom guaranteed by Article 301, rational and workable test to apply would be : Does the impugned restriction operate directly or immediately on trade or its movement?
The correctness of this view was considered by a larger Bench of the Supreme Court in Automobile Transport Ltd. v. State of Rajasthan : 1SCR491 , 1424. The majority held:
We have, therefore, come to the conclusion that neither the widest interpretation nor the narrow interpretations canvassed before us are acceptable. The interpretation which was accepted by the majority in the Atiabari Tea case : 1SCR809 , is correct, but subject to this clarification. Regulatory measure or measures imposing compensatory taxes for the use of trading facilities do not come within the purview of the restrictions contemplated by Article 301 and such measures need not comply with the requirements of the Proviso to Article 304 (b) of the Constitution.
Reference in the first sentence of the excerpt from the judgment of Das, J. is to the two other views expressed by the minority including the then learned Chief Justice, in Atiabari Tea Co. Ltd. v. State of Assam : 1SCR809 Das, J., referred to the fact that the language employed in Article 301 ran unqualified and after stating that the Court should nevertheless, bearing in mind the fact that the provision had to be applied in the working of an orderly society, add certain qualifications subject to which alone that freedom might be exercised, a point of view to be found in the dissenting opinion of Fullagar, J., in Mc. Carter v. Brodie (1950) 30 C.L.R. 432, which was accepted by the Privy Council in Hughes and Vale Proprietary Ltd. v. State of New South Wales' (1955) A.C. 241, and observed that if the word Free in Article 301 meant freedom to do whatever one wants to do then chaos might be the result. The learned Judge concluded (at page 1420):
The collection of a toll or a tax for the use of a road or for the use of a bridge or for the use of an aerodrome is no barrier or burden or deterrent to traders, who, in their absence, may have to take a longer or less convenient or more expensive route. Such compensatory taxes are no hindrance to anybody's freedom so long as they remain reasonable; but they could of course, be converted into a hindrance to the freedom of trade. If the authorities concerned really wanted to hamper anybody's trade they could easily raise the amount of tax or toll to an amount which would be prohibitive or deterrent or create other impediments which instead of facilitating trade and commerce would hamper them. It is here that the contrast, between 'freedom' (Article 301) and 'restrictions' (Articles 302 and 304) clearly appears; that which in reality facilitates trade and commerce is not a restriction, and that which in reality hampers or burdens trade and commerce is a restriction. It is the reality or substance of the matter that has to be determined. It is not possible apriori to draw a dividing line between that which would really be a charge for a facility provided and that which would really be a deterrent to a trade, but the distinction, if it has to be drawn is real and clear. For the tax to become a prohibited tax it has to be a direct tax the effect of which is to hinder the movement part of trade. So long as a tax remains compensatory or regulatory it cannot operate as a hindrance.
12. Subba Rao, J. as he then was, concurring with Das, J. took substantially the same view and observed (at page 1430);:
The word ' freedom ' is not capable of precise definition, but it can be stated what would infringe or detract from the said freedom. Before a particular law can be said to infringe the said freedom, it must be ascertained whether the impugned provision operates as a restriction impeding the free movement of trade or only as a regulation facilitating the same. Restrictions obstruct the freedom, whereas regulations promote it. Police regulations, though they may superficially appear to restrict the freedom of movement, in fact provide the necessary conditions for the free movement. Regulations such as provision for lighting, speed, good condition of vehicles, timings, rule of the road and similar others, really facilitate the freedom of movement rather than retard it. So too, licensing system with compensatory fees would not be restrictions but regulatory provisions;, for without it, the necessary lines of communication such as roads, waterways and airways, cannot effectively be maintained and the freedom declared may in practice turn out to be an empty one....It is for the Court in a given case to decide whether a provision purporting to regulate trade is in fact a restriction on freedom.
The further observations as to what was meant by Restrictions in Article 302 are (at page 1433):
But the more difficult question is, what does the word ' restrictions ' mean in Article 302? The dictionary meaning of the word ' restrict' is 'to confine, bound, limit.' Therefore any limitations placed upon the freedom is a restriction on that freedom. But the limitation must be real, direct and immediate, but not fanciful, indirect or remote....Of all the doctrines evolved in my view, the doctrine of ' direct and immediate effect' on the freedom would be a reasonable solvent to the difficult situation that might arise under our Constitution. If a law, whatever may have been its source, directly and immediately affects the free movement of trade, it would be restriction on the said freedom. But a law which may have only indirect and remote repercussions on the said freedom cannot be considered to be a restriction on it.
13. Subba Rao, J., as he then was summed up his views in the following words (at page 1436):
The foregoing discussions may be summarised in the following propositions : (1) Article 301 declares a right of free movement of trade without any obstructions by way of barriers, inter-State or intra-State or other impediments operating as such barriers. (2) The said freedom is not impeded, but on the other hand, promoted by regulations creating conditions for the free movement of trade, such as, police regulations, provision for services, maintenance of roads, provision for aerodromes, wharfs, etc. with or without compensation. (3) Parliament may by law impose restrictions on such freedom in the public interest and the said law can be made by virtue of any entry with respect whereof Parliament has power to make a law. (4) The State also, in exercise of its legislative power, may impose similar restrictions, subject to the two conditions laid down in Article 304 (b) and subject to the Proviso mentioned therein. (5) Neither Parliament nor the State Legislature can make a law giving preference to one State over another or making discrimination between one State and another, by virtue of any entry in the Lists, infringing the said freedom. (6) This ban is lifted in the case of Parliament for the purpose of dealing with situations arising out of scarcity of goods in any part of the territory of India and also in the case of a State under Article 304 (h), subject to the conditions mentioned therein. And (7) the State can impose a non-discriminatory tax on goods imported from other States or the Union territory to which similar goods manufactured or produced in the State are subject.
14. It is thus well established that regulatory provisions which do not directly or immediately impede or burden the free movement of trade, commerce and intercourse but provide or intend to provide facilities for trade, commerce and intercourse are not restrictions within the meaning of Part XIII and are compatible with the freedom of trade declared by Article 301. Atiabari Tea Co., Ltd. v. State of Assam : 1SCR809 , and Automobile Transport Ltd. v. State of Rajasthan : 1SCR491 , are both cases of imposition of tax. The first was concerned with the Assam Taxation (on Goods carried by Roads or Inland Waterways) Act, 1954,, which was successfully attacked on the ground that it violated Article 301 and was not saved by Article 304 (b). The Act imposed a tax on specified goods transported by road or inland waterways in the State of Assam. The majority in that case held that the Act put a direct restriction on the freedom of trade and, since in doing so, had not complied with the provisions of Article 304 (b), it must be declared to be void. In the second case the Rajasthan Motor Vehicles Taxation Act, 1951, was impugned as violating Article 301. But the majority did not accept the contention on the view that the Act was merely a regulatory measure imposing compensatory taxes for the use of trading facilities. The scope of Article 301 was again in the light of the earlier decisions referred to in Khyerbari Tea Co. v. State of Assam : 5SCR975 , where the Assam Taxation (On goods carried by Roads or Inland Waterways) Act as amended after Atiabari Tea Co. Ltd. v. State of Assam : 1SCR809 , was attacked on various grounds but without success.
15. As already seen, the distinction between a restriction and a regulation is fine but real, though the dividing line is not capable in the nature of things of a comprehensive and satisfactory definition. The test, broadly speaking, is whether the impugned provisions lay a direct and immediate burden on the movement of trade, commerce and intercourse or are intrinsically beneficial to and provide, in the ultimate analysis, facilities for better conduct of trade, commerce and intercourse. Observed Das, J., in Automobile Transport Ltd. v. State of Rajasthan : 1SCR491
It seems to us that a working test for deciding whether a tax is compensatory or not is to enquire whether the trades people are having the use of certain facilities for the better conduct of their business and paying not patently much more than what is required for providing the facilities.
16. No doubt this observation was made in the light of the compensatory tax levied by the Act then in question, but it contains, in our opinion, the principle or test of a regulatory legislation. If an Act is not intended as a tax measure to raise money for running the Government, nor is it intended to restrict the movement of free trade, commerce and intercourse, or in any other way place burdens or limitations on trade or free flow of trade, commerce and intercourse, but the Act is essentially designed to protect certain transactions in certain specified commodities in order to benefit their producers and in doing so, regulates purchase and sale of such goods by providing for a licensing system, market and other facilities in specified area in order that the evils of trade through middlemen may be eliminated for the benefit of the community, such an Act will be clearly regulatory in character and in no way inconsistent with the freedom declared by Article 301. That being the case, there will be no occasion to invoke the saving provisions in Part XIII to sustain an enactment of that kind.
17. We have already set out the salient provisions of the Act under attack before us. The object of this enactment is to secure the best price to the producers of notified agricultural produce in notified areas. This object is achieved by regulating trade in agricultural produce in such areas by the requirement as to licence and providing special market and other facilities for proper and better marketing of notified agricultural produce, like storage, weighment, pressing or processing including schemes for grading of such produce. Within the notified area, no one can set up, establish or use any place for the purchase of sale, storage, Weighment, pressing or processing of any notified agricultural produce except under and in accordance with the conditions of a licence granted to him by the market committee. A market committee is established to carry out the purposes of the Act which would bring into existence markets within the notified area with necessary facilities, and to defray the expenses, the Act authorises the committee to levy a cess by way of sales tax on any notified produce bought or sold in the notified market area at a rate not exceeding a specified rate. The cess collected is to be kept as a specified rate called the market committee fund from which expenses incidental to regulation of buying and selling of agricultural produce, proper establishment of markets for such produce, establishment and maintenance charges, etc., are to be defrayed. It has been contended before us that the provision for licence places a restriction on the freedom of trade in the notified area, and as such, unless it is saved by Article 304 (b) and read with its Proviso, it is invalid as violating Article 301. We are unable to accept this view. It is true that prima facie the provision requiring licence appears to be prohibitory in form as it says that no place shall be used within the notified area for purchase or sale of notified agricultural produce except and in accordance with the conditions of the licence granted to him by the market committee. But the intention and effect of this provision is not to place restraint on trade directly or immediately. The prohibition is not against any person at all purchasing or selling or carrying on business in the notified agricultural produce in the notified area; the requirement is only, to put it in a positive form, that the purchase or sale, storage, weighment, pressing or processing of any notified agricultural produce should be at the place provided therefor and in accordance with the conditions of a licence. The space ear-marked for the purpose will be an established market in the notified are.. for the particular notified agricultural produce with all facilities of storage, weighment, pressing or processing thereof and other marketing facilities designed to get the best return for the producer. No one, and least of all the middleman, is prevented by the licensing provision from plying his trade; but the aim is to bring the seller and the purchaser on equal basis to ensure a fair bargain and proper price for the produce. The various reports on the matter show that the producer or others carrying on transactions in a particular produce have lacked facilities for storage, weighment, pressing or processing and obtaining the best price. It is not unoften that the agriculturists have been too much dependent upon certain dealers who give credit to them and purchase agricultural produce from them at a bargain which is not always to the best advantage of the agriculturists. The necessity to put an end to this kind of evil cannot be gainsaid. The concept of freedom does not mean, in an organised society governed by law and regulation, that any person can under its umbrage seek protection and cover to continue to carrying on certain Undesirable trade practices and exploitation which affect the agricultural's and the general economy so far as it concerns the particular notified agricultural produce. Can any one say that, in such circumstances he has freedom of trade declared by Article 301 in his favour and he is, therefore, at liberty to pay his trade as he likes however detrimental it might be to the public good? The answer should obviously be in the negative and this is on the ground that the law may permit reasonable restraint on the freedom. As we said, the concept of freedom itself is a qualified and a relative one and can never be understood in the absolute sense, so long as people choose to live as an organised society. For instance, a citizen is guaranteed the freedom of movement, but in exercise of it, he cannot claim to collide against another citizen, for, the latter may legitimately say that the former's, freedom ends where his nose begins. Further, it should be seen hat producers of agricultural produce can legitimately seek proper and better marketing facilitie and adequate returns. One method of giving effect to that object is to regulate the markets for such produce by the system of licensing. The purpose in that case is not to put a restraint upon trade in any manner but to regulate it in order to ensure such facilities. There may be a variety of licensing systems some of which may directly be designed to impede, burden or restrain movement of trade. But we do not think hat the 1959 Act falls within that category. The two Provisos to Section 6 (1) provide that the market committee may exempt from the provisions of the licensing provision any person who carries on the business of purchasing or selling any notified agricultural produce in any quantity not exceeding that prescribed, and that a producer selling his notified agricultural produce which he has grown, reared or produced or a co-operative marketing society selling notified agricultural produce which has been grown, reared or produced by any of us members is not affected by the provision of licensing. This again shows that the object of the licensing system is to benefit such producers and the co-operative societies and exempt small traders from the purview of the Act.
18. But it is said that Section 6 (1) provides for an unguided discretion in the matter of grant or refusal of licence and that the discretion might be used in such a manner as to impede or restrain trade. We do not think that that is a proper construction to be placed on Section 6 (1). The object of the Act is to be found in the Preamble, namely, better regulation of buying and selling of agricultural produce and the establishment and proper administration of markets for agricultural produce. This and the provisions of the Act as a whole will be a guide in the matter of granting licence. Further where a discretionary power is vested in a public authority, it is invariably meant for exercise in favour of individuals who seek licence and the licence can be denied only for proper reasons. This question was touched upon from the standpoint of Article 19 (1) (g) and (6) in Kutti Keya v. State of Madras (1954) 1 M.L.J. 117, and the Court observed:
Section 5 (4) (a) (Act XX of 1933), does confer on the Collector an unlimited and uncontrolled discretion to grant or refuse licences as he might choose and a provision which makes the exercise of a fundamental right dependent on the absolute discretion of administrative authorities must be held to be unconstitutional. The learned Advocate-General did not dispute the correctness of this position; he merely stated that as a fact there had not even been a single instance of refusal to grant a licence. It may be conceded that the intention of the Legislature was that all persons who apply for licence should get them and that none should be refused though being a pre-Constitution enactment, the language is undoubtedly wide. As it stands, the section must be held to be void in so far as it confers on the Collector an authority to refuse a licence at his will. This conclusion however does not entail the consequence of the entire licensing regulation becoming void, because its only result is that all applicants are entitled to obtain licences provided they pay the prescribed fee and comply with the other conditions.
19. Section 5 (4) of the 1933 Act is in pari materia with Section 6 (1) of the 1959 Act and those observations, with equal force, will apply to the latter provisions. That means, subject to the provisions of Sub-section (3) of Section 6,' every person who applies for a licence under Section 6 (1) will be entitled to it. Sub-section (3) specifies certain cases of persons to whom licence should be declined or the circumstances in which a licence granted may be cancelled. In our opinion, it cannot be said that because of the provisions in Sub-section (3) of Section 6, the licensing system provided by Section 6 (1) is invalid as placing a restraint on freedom of trade. Nor can we find that the levy of cess by the market committee under Section 18 is intended or acts as a direct or immediate restraint on trade in the notified agricultural produce. The fee is levied for the purpose of meeting the expenses in operating the regulatory provisions of the Act. As already mentioned, the fees collected come into a separate fund from which all expenses are met. The fee was viewed under the 1933 Act as a tax by the division Bench in Kutti Keya v. State of Madras (1954) 1 M.L.J. 117 . This was apparently for the reason that the fund could be applied for the maintenance and improvement of the market, acquisition of sites for the market, the construction and repair of buildings, payment of pensions, interest on loans, the collection and dissemination of information regarding all matters relating to statistics and marketing in respect of the notified agricultural produce and schemes for grading of agricultural produce and expenses of and incidental to elections to the market committee. But it may be seen that all these factors for which Section 18 provides that the fund may be applied to, are necessary and form part of the service rendered in marketing the notified agricultural produce. In that sense and having regard to the later decisions of the Supreme Court, the proper view to take may be that what is provided for under Section 18 is only a fee. Kutti Keya v. State of Madras (1954) 1 M.L.J. 117, itself did not declare Section 11 of 1933 Act (levy of fees by market committees) to be unconstitutional as it considered that it was not necessary to decide the question. But even as a sales tax, and we do not regard it as such under Section 18 of the 1959 Act, we do not see why the Legislature is not competent to authorise its levy for purposes of that Act.
20. We are, therefore, of opinion that the Madras Act (XXIII of 1959). is regulatory in substance and character and does not violate Article 301 of the Constitution. There is, therefore, no need to resort to Article 304 (b) to save the Act.
21. One other contention for the petitioner is that Explanation (1) to Section 19 (1) is unconstitutional. We have already noticed that Sub-section (1) provides for authority to the market committee to levy a cess by way of sales tax on the purchase or sale of any notified agricultural produce in the notified market. Explanation (1) says that for the purposes of Sub-section (1) all notified agricultural produce taken out or proposed to be taken out of a notified market area shall, unless the contrary is proved, be presumed to be bought or sold within such area. The contention is that as a result of the Explanation what are not sales are deemed to be sales and an impost is levied on them and the power of the Legislature being only to impose a tax on actual purchases or sales and not deemed sales which are not sales of goods in the strict sense of the law, the Explanation should be struck down. The Explanation is only a rule of evidence. We do not think that there is any substance in this contention. Its effect is not to impose or authorise imposition of a fee in the nature of sales tax on deemed purchase or sale of notified agricultural produce. The presumption is intended to make Sub-section (1) as effective as possible and to avoid possibility of evasion. The presumption is rebuttable, and the person concerned can always show that the notified agricultural produce taken out or proposed to be taken out of a notified market area is not the subject-matter of any purchase or sale within the notified area.
22. The petitions fail and they are dismissed, but with no costs.