Full Judgment Text
http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 1 of 6
PETITIONER:
DISTRICT COLLECTOR OF HYDERABAD & ORS.
Vs.
RESPONDENT:
M/S. IBRAHIM & CO. ETC.
DATE OF JUDGMENT:
05/02/1970
BENCH:
SHAH, J.C.
BENCH:
SHAH, J.C.
HIDAYATULLAH, M. (CJ)
HEGDE, K.S.
GROVER, A.N.
RAY, A.N.
DUA, I.D.
CITATION:
1970 AIR 1275 1970 SCR (3) 493
1970 SCC (1) 386
CITATOR INFO :
E 1973 SC 106 (25)
F 1975 SC1443 (6)
RF 1976 SC1207 (80,89,91,176,177,445,513,541)
RF 1977 SC1825 (12)
ACT:
Constitution of India, Arts. 301, 304, 305, 358 and 359-
Freedom of trade under Art. 301 if guaranteed to
individuals-If could be taken away by executive action.
Protection under Arts. 358 and 359 to orders passed by
Government Scope of.
HEADNOTE:
The Central Government promulgated the Sugar Control Order,
1963, under r. 125(2) of the Defence of India Rules, 1962.
The respondents, who were holders of licences under the
Andhra Pradesh Sugar Dealers Licensing Order, 1963, (issued
under the Essential Commodities Act, 1955) and who were
dealers in sugar in the cities of Hyderabad and ’
Secunderabad, were ’recognised dealers’ under the Sugar
Control Order. They were allocated quotas of sugar, but, in
1964, the State Government) ordered that the sugar allocated
to the two cities be given in its entirety to a Cooperative
Stores. The respondents were thus prevented by an executive
order from carrying on their business. They challenged the
order successfully in the High Court.
In appeal to this Court on the questions : (1) whether the
order was protected under Arts. 358 and 359, because the
President had declared a state of emergency; and (2) whether
the order was violative of Art. 301,
HELD : (1) (a) Under Art. 358 the respondents could not
challenge any executive action which, but for provisions
contained in Art. 19, the State was competent to take. But
in the present case, the executive order was not one which
the State was competent to make. Since the order of the
State Government has the effect of cancelling the licences
of the respondent, which could be done only after an enquiry
http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 2 of 6
according to the procedure prescribed in the Andhra Pradesh
Sugar Dealers Licensing Order, the executive order was
contrary to the statutory provisions contained in the Andhra
Pradesh Sugar Dealers Licensing Order and the Sugar Control
Order. Such executive action of the State, which is
otherwise invalid, is not immune from attack under Art. 358,
merely because a proclamation of emergency was in operation.
[502 A-D]
(a) In the present case, there was discrimination against
the respondents in that the impugned order conferred a
monopoly on the Cooperative Stores in disregard of the
subsisting right of the respondents. The order is not
protected under Art. 359, because only if it was shown to
have been made under the authority reserved by the Defence
of India Ordinance or the Rules made thereunder, that the
jurisdiction of the court to entertain a petition for
infringement of the guarantee under Art. 14 is excluded.
[502 E-G]
(2) The impugned order trenches Won the freedom of trade
and commerce guaranteed by Art. 301.
499
By this Article the freedom of trade, commerce and
intercourse throughout the territory of India is declared
free. Under it, a restriction upon the legislative power of
Parliament and State Legislature is imposed by the
Constitution. The guarantee of the freedom is not in the
abstract but to individuals. Within the limits of Arts. 304
and 305 there could be legislative restrictions upon the
individuals’ right to freedom of trade, but not, by
executive action. [503 D-F; 504 D-E]
Commonwealth of Australia v. Bank of New South Wales, L.R.
[1950] A.C. 235, referred to.
JUDGMENT:
CIVIL APPELLATE JURISDICTION : Civil Appeals Nos. 1285 to
1309 of 1966.
Appeals by special leave from the judgment and order dated
June 23, 1965 of the Andhra Pradesh High Court in Writ
Appeals Nos. 34 to 58 of 1965.
P. Ram Reddy and A. Y. Rangam, for the appellants (in all
the appeals).
K. Rajendra Chaudhuri and K. R. Chaudhuri, for the respon-
dent (in C.A. No. 1304 of 1966).
The Judgment of the Court was delivered by
Shah, J. These appeals are filed with special leave against
the order of the High Court of Andhra Pradesh declaring
G.O.M. No. 2976 dated December 30, 1964 "null, void and
ultra vires".
The respondents are dealers in sugar and other commodities
and carry on their business in the cities -of Hyderabad and
Secunderabad. The State of Andhra Pradesh issued the Andhra
Pradesh Sugar Dealers Licensing Order, 1963, in exercise of
the power conferred by s. 3 of the Essential Commodities
Act, 1955. Under that order no person may carry on business
as a dealer except under and in accordance with the terms
and conditions of a licence issued by the specified
authority. Grant and renewal of licence could be refused
only on grounds reduced to writing and after giving
opportunity to the party to state his case. The respondents
were granted licences under the Andhra Pradesh, Sugar
Dealers Licensing Order, 1963. Shortly thereafter the
Central Government, in exercise of the power conferred under
sub-r. (2) of r. 125 of the Defence of India Rules, 1962,
http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 3 of 6
promulgated the Sugar Control Order, 1963. By that order a
recognized dealer was defined as a person carrying on the
business; of purchasing, selling ’or distributing sugar and
licensed under the order relating to the licensing of sugar
dealers for the time being in force in a State. The order
provided for placing restrictions on sale, or agreement to
sell or delivery by the producers, for controlling the
production, sale, grading, packing, making delivery,
distribution etc. of sugar
500
by the producers or recognised dealers, for regulating the
movement of sugar, for fixation of its prices, for allotment
of quotas, for delivery of such quotas and for other
incidental matters.
The respondents being holders of licences under the Andhra
Pradesh Sugar Dealers Licensing Order, 1963, were treated as
recognized dealers under the Sugar Control Order, 1963. The
State Government allocated quotas of sugar received from the
Central Government for distribution in different areas and
nominated licensees or dealers to take delivery of the
allotted quotas from the factories.
On December 30, 1964 the State Government ordered that the
sugar quota -allocated to "the twin cities of Hyderabad and
Secunderabad" be given in its entirety to the Greater
Hyderabad Consumers Central Co-operative Stores, Ltd.,
Hyderabad. On that account the respondents who held
licences under the Andhra Pradesh Sugar Licensing Order for
distribution of sugar and were also recognized dealers under
the Sugar Control Order, 1963, were by an executive fiat
prevented from carrving on their business in sugar.
The respondents moved petitions in the High Court of Andhra
Pradesh challenging the validity of the order. The State
resisted the petitions principally on the ground that the
order made by the State Government was in conformity with
the provisions of the Sugar Control Order and was issued in
pursuance of the policy laid down by the Central Government
to entrust the work of distribution of sugar exclusively to
cooperative societies and thereby to eliminate in the public
interest the agency of private dealers in lifting and
distributing sugar. It was urged that the respondents could
not seek any relief complaining of infraction of their
rights under Arts. 14 and 19 because the emergency declared
by the President in October 1962 had not been withdrawn.
The petitions Were heard by Gopalakrishnan Nair, J. The
learned Judge held that the executive order was not
supported either by the provisions of the Sugar Control
Order, 1963, issued by the Central Government, or by the
Andhra Pradesh Sugar Dealers Licensing Order, 1963, that the
step taken by the Government was not permitted by law; that
’as a result of the order of the Government the licences
held by the respondents were cancelled without following the
procedure laid down in cl. 7 of the Andhra Pradesh Sugar
Dealers Licensing Order; and that the provisions of the
order could not be circumvented by executive instructions
and since the order discriminated between the respondents
-and the Central Consumers Cooperative Stores in that it
conferred a monopoly in disregard of the subsisting rights
of the respondents and amounted to "hostile and invidious"
discrimination in the admi-
501
nistration of the Sugar Control Order. He further held that
since the Government had not taken action under the Defence
of India Rules or under any Control Order made under those
Rules, the respondents were not debarred under Arts. 358 &
359 of the Constitution from claiming protection against
http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 4 of 6
impairment of their rights by the order issued by the State.
In appeal to a Division Bench of the High Court the grounds
on which the decision was recorded by Gopalakrishnan Nair,
J., were confirmed.
In these appeals counsel for the State of Andhra Pradesh has
not contended that the impugned order could be issued dither
under the Andhra Pradesh Sugar Dealers Licensing Order,
1963, or the Sugar Control Order, 1963, issued by the
Central Government. Indisputably it is an executive order
made by the State Government. The State Government it is
claimed acted in pursuance of the policy of the Central
Government to distribute sugar through cooperative
societies. But the order was still unauthorised. Under the
Essential Commodities Act, 1955, the State Government had
issued an order for distribution of sugar through licensed
dealers and the respondents had obtained licences in that
behalf. Their licences could only be cancelled after making
the enquiry according to the procedure prescribed by cl. 7
of the Sugar Dealers licensing Order. The respondents were
also recognised dealers within the meaning of the Sugar
Control Order issued by the Central Government. The rights
of the respondents could not be taken away by ’an executive
order in a manner plainly contrary to, the provisions of the
statutory orders.
It is true that under Art. 352 of the Constitution, the
President declared a state of emergency on October 26, 1962.
By Art- 358 while a proclamation of emergency is in
operation, nothing’ in Art. 19 shall restrict the power of
the State (as defined in Part 111) to make any law or to
take any executive action which the State would but for the
provisions contained in that Part ’be competent to make or
to take. By Art. 359 the President is authorised, where a
proclamation of emergency was in operation, to declare that
the right to move any court for the enforcement of such of
the rights conferred by Part III as may be mentioned shall
remain suspended for the period during which the
proclamation was in force or for such shorter period as may
be specified in the order.
On the issue of the proclamation of emergency the State is,
for the duration of the emergency, competent to enact
legislation, notwithstanding that it impairs the freedoms
guaranteed by Art. 19 of the Constitution. The State is
also competent to take executive action which the State
would, but for the provisions contained in Art. 19 of the
Constitution, be competent to take. The impugned order in
this case was issued while the proclamation of emergency
502
was in operation. The respondents could not challenge the
validity of any law enacted by the State Legislature so long
as the proclamation of emergency was in operation, on the
ground that it impaired the freedoms guaranteed by Art. 19.
They could not also challenge any executive action which,
but for the provisions contained in Art. 19, the State was
competent to take.
In the present case, the State did not enact any legislation
impairing the -fundamental right of the respondents to carry
on business which is guaranteed by Art. 19 (1) (g), they
proceeded to make an executive order. But the executive
order immune from attack is only that order which the State
was competent, but for the provisions contained in Art. 19,
to make. Executive action of the State Government which is
otherwise invalid is not immune from attack, merely because
a proclamation of emergency is in operation when it is
taken. Since the order of the State Government was plainly
contrary to the statutory provisions contained in the Andhra
http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 5 of 6
Pradesh Sugar Dealers Licensing Order and the Sugar Control
Order, it was not protected under Art. 358 of the
Constitution.
Nor had it the protection under Art. 359. On November 3,
1962 the President issued an order in exercise of the power
under Art. 359, that "the right of any person to move any
court for the enforcement of the rights conferred by
-article 14, article 21 and article 22 of the Constitution
shall remain suspended for the period during which the
Proclamation of Emergency issued under clause (1) of article
352 thereof on the 26th October, 1962, is in force, if such
person has been deprived of any such rights under the
Defence of India Ordinance, 1962 (4 of 1962) or any rule or
order made thereunder." Only if the impugned order was shown
to be made under the authority reserved by the Defence of
India Ordinance or rules made thereunder, the jurisdiction
of the Court to entertain a petition for impairment of the
guarantee under Art. 14 may be excluded. But the action was
not shown to be taken under the Defence of India Ordinance
or under the rule or order made thereunder.
Again it may be pointed out that under Art. 301 the freedom
of trade, commerce and intercourse throughout the territory
of India is declared free. -That freedom is declared in the
widest terms and applies to all forms of trade, commerce and
intercourse. But it is subject to certain restrictions (if
which Arts. 304 and 305 are relevant. It is provided by
Art. 304 :
"Notwithstanding anything in article 301 or article 303, the
Legislature of ’a State may by law-
(a)......................................
....................................
503
(b) impose such reasonable restrictions on the freedom of
trade, commerce or intercourse with or within that State as
may be required in the public interest
Provided that no Bill or amendment for the purposes of
clause (b) shall be introduced or moved in the Legislature
of a State without the previous sanction of the President."
It is also provided by Art. 305 that the existing law or
laws which may be made by the State providing for State
monopolies, i.e. relating to any matter as is referred to in
sub-cl. (ii) of cl. (6) of Art. 19, are outside the
guarantee of Art. 301. In the present case the State had
not assumed a monopoly to deal in sugar. It had granted
monopoly to a Central Consumers Cooperative Stores which was
not a corporation owned or controlled by the State within
the meaning of Art. 19 (6) (ii). The order was challenged
on the ground that it trenches upon the freedom of trade and
commerce guaranteed by Art. 301 of the Constitution. By
Art. 304 even by legislature restrictions on the freedom of
trade, commerce and intercourse with or within the State may
only be imposed, if such restrictions are reasonable and are
required in the public interest and the Bill or amendment is
introduced or moved in the Legislature of a State with the
previous sanction of the President. Obviously the guarantee
under Art. 301 cannot be taken away by executive action.
The guarantee under Art. 301 which imposes a restriction
upon legislative power of the Parliament or the State
Legislature and the declaration of freedom is not merely an
abstract declaration. There is no reason to think that
while placing a restriction upon legislative power the
Constitution guaranteed freedom in the abstract and not of
the individuals. Article 301 of the Constitution is
borrowed almost verbatim from s. 92 of the Commonwealth of
Australia Constitution Act 63 and 64 Vict. c. 12 of 1.900.
http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 6 of 6
In dealing with the contention that no individual right was
guaranteed by s. 92 of the Commonwealth of Australia
Constitution Act the Judicial Committee in Commonwealth of
Australia v. Bank of New South Wales(1) observed at p. 305
"The necessary implications of these decisions (James v.
Cowan-(1932) A.C. 542-and James v. The Commonwealth of
Australia-(1936) A.C. 578) are important. First may be
mentioned an argument strenuously maintained on this appeal
that s. 92 of the Constitution does not guarantee the
freedom of individuals. Yet James was an individual and
James vindicated his, ’freedom in hard won fights.
(1) L.R. 1950 A. C. 235-
504
Clearly there is here a misconception. It is true as has
been said more than once in the High Court, that s. 92 does
not create any new juristic rights but it does give the
citizen of State or Commonwealth, as the case may be, the
right to ignore, and, if necessary, to call on the judicial
power to help him to resist, legislative or executive action
which offends against the section. And this is just what
James successfully did."
Our Constituent Assembly borrowed the concept of freedom of
trade, commerce and intercourse from the Australian
Constitution. It is true that the limitations upon the
amplitude of the guarantee are not expressed in s. 92 of the
Australian Constitution, as are to be found in our
Constitution. Again, there is no guarantee in the
Australian Constitution of a fundamental right to carry on
trade. But this departure from the scheme of the Australian
Constitution does not alter the true character of the
guarantee and it cannot be inferred that the Constitution
imposed restrictions upon legislative, power, but denied to
the individuals affected by unauthorised assumption of
executive power the right to challenge the exercise of that
power. A vital constitutional provision cannot be so con-
strued as to make a mockery of the declared guarantee and
the constitutional restrictions on the power of the
legislature. If the power of the State Legislature is
restricted in the manner provided by Art. 301, but within
limits provided by Arts. 303 to 305, it would be impossible
to hold that the State by executive order can do something
which it is incompetent to do by legislation.
In any view of the case, these -appeals must fail and are
dismissed. Only one respondent has appeared in this case,
but even he has not filed a statement of the case. In the
circumstances, there will be no order as to costs.
V.P.S. Appeals dismissed.
505