Full Judgment Text
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CASE NO.:
Appeal (civil) 6453 of 2001
PETITIONER:
I.T.C. LIMITED
Vs.
RESPONDENT:
TCHOEMMAIGTRTIECEUL&TUORRASL. PRODUCE MARKET
DATE OF JUDGMENT: 24/01/2002
BENCH:
Y.K. Sabharwal
JUDGMENT:
[With Civil Appeal Nos.540/87, 541/87, 3872/90, 3024/88,3023/88, 1535/88, 1194/88, 1394/88,
1536/88, 1980/88,
1981/88, 3715/88, 2464/88, 6619/97, 2088-89/99, Civil
Appeal Nos......................../2002 (@SLP (C) Nos.892/85,
27568-27570/95) and Writ Petition (C) No.8614/82]
J U D G M E N T
Y.K. Sabharwal, J.
The issue in these matters is about the validity and applicability
of Bihar Agricultural Produce Markets Act, 1960 and the Karnataka
Agricultural Produce Marketing (Regulation) Act, 1966, to the extent
these State legislations deal with sale of tobacco in market areas with
particular reference to the levy thereupon of market fee, after
enactment of Tobacco Board Act, 1975 ? a parliamentary legislation.
The same is the issue in respect of similar State legislations passed
by State Legislatures of Uttar Pradesh and Madhya Pradesh. These
issues were subject matter of decision in ITC Ltd. & Ors. v. State of
Karnataka & Ors. [1985 Supp. SCC 476].
We are required to determine whether ITC’s case is correctly
decided or not. That is a decision rendered by a three Judge Bench.
The majority decided in favour of ITC. Later a Bench of two Judges
expressed tentative view that the decision in ITC’s case requires
reconsideration. Thus, these matters are before this Bench.
The arguments on behalf of the appellants contending that ITC
has been correctly decided have been led by Mr. Shanti Bhushan
followed and supported by other learned counsel appearing for Union
of India and the Tobacco Board. On behalf of the State of Bihar and
other parties contending that ITC has not been correctly decided, the
arguments were led by Mr R.K. Dwivedi followed and supported by
other learned counsel appearing for other States and Market
Committees.
The answer to the question ? Whether ITC is correctly decided
or not depends upon the scope of Entry 52 in Union List of the
Seventh Schedule of the Constitution of India with particular
reference to the meaning of the expression ‘Industries’ in the said
entry as also in Entry 24 of the State List of the Seventh Schedule of
the Constitution.
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In ITC’s case the majority held that the provisions of the
Karnataka Agricultural Produce Marketing (Regulation) Act, 1966 are
repugnant to the parliamentary legislation, the Tobacco Board Act,
1975 and, therefore, tobacco is liable to be removed from the
Schedule of that enactment. Expressing the minority view,
Sabyasachi Mukharji, J held that the State legislation and the
Tobacco Board Act, 1975 can co-exist.
The first question to be determined is can State legislations and
Tobacco Board Act co-exist in respect of sale of tobacco in the
market areas within the framework of Agricultural Produce Marketing
Acts - the State legislations under consideration? If our answer to
this question is that the two legislations can co-exist, in that event it
may not be necessary to go into the aspect of legislative competence.
If, however, our answer is that the State legislations and the
parliamentary legislation are incapable of reconciliation and the two
cannot co-exist, in that case, the next question that would require
determination will be about the validity of the State legislations.
In the proposed judgment, Hon’ble Mr.Justice Pattanaik has
come to the conclusion that the Agricultural Produce Markets Act and
the Tobacco Board Act are in direct collision with each other and
cannot be allowed to be operated simultaneously.
The State legislations and parliamentary legislations cannot co-
exist is apparent from various provisions of the two legislations. To
illustrate in this regard, reference may be made on one hand to
Section 4(2) of Bihar Act and similar provision in other State
legislations and on the other to the provisions of Section 13 of the
Tobacco Board Act in States wherein this section has been enforced
and also to Section 8(2)(cc). Reference can also be made to Rule 32
of the Tobacco Board Rules, 1976 framed in exercise of the powers
conferred by Section 32 of the Tobacco Board Act regarding
purchase of Virginia tobacco in comparison to Section 15 of Bihar Act
requiring the agricultural produce, which tobacco is, to be brought to
the market yard and sold by means of an auction or tender to the
highest bidder. The power of the Tobacco Board to purchase from
growers as provided in Rule 32 cannot co-exist with sale by auction
or tender. Even in regard the price and manner of payment, licencing
and auction procedure under two legislations and Rules made
thereunder show that they cannot co-exist. In this regard reference
can also be made to the Tobacco Board (Auction) Rules, 1984 and
Tobacco Board (Auction) Regulation, 1984. It is evident that the
compliance with the provisions of one would involve non-compliance
of the provisions of the other. The provisions of the two legislations
have been referred to in the judgment of Brother Pattanaik, J. I am in
respectful agreement with the opinion of Justice Pattanaik that the
two cannot operate and co-exist simultaneously. In this view, the
question about the legislative competence of the State Legislature will
have to be examined.
In ITC’s case, two learned judges have held the State
legislation to be invalid. The power of State Legislature per se to
legislate in respect of sale of tobacco in market areas and levy of
market fee, in view of Article 246(3) read with Entries 14, 28 and 66
of the State List, is not in dispute. The dispute has, however, arisen
as according to ITC, on declaration as contemplated by Entry 52 of
the Union List having been made by the Parliament in Section 2 of
the Tobacco Board Act, 1975, and as a result of various provisions in
that Act, the field of sale of tobacco which is said to be integral part of
tobacco industry has been transferred from Entry 24 of the State List
to Entry 52 of the Union List ? Entry 24 being subject to the
provisions of Entries 7 and 52 of the Union List. The contention is
that in this view, the State Legislature is deprived of competence to
legislate in the field of sale of tobacco in market area and levy market
fee. Under these circumstances, the competence of the State
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Legislature to legislate in regard to sale of tobacco would depend
upon the answer to the question whether under Entry 52 of the Union
List, the Parliament is competent or not to legislate in respect of sale
of raw tobacco. If the answer to the question is that the Parliament is
competent, in that eventuality, the State legislation will have to be
invalidated for want of legislative competence. The answer to the
question would, however, depend upon the scope of the expression
‘Industries’ as deployed in Entry 52 of the Union List and Entry 24 of
the State List. If we find that the expression ‘Industries’ is wide
enough to include the raw material of the industry and the Parliament
is, thus, competent to enact law under Entry 52 of the Union List, in
respect of raw material, the Parliament having supremacy as
provided in Article 246(1), the parliamentary legislation, namely, the
Tobacco Board Act would hold the field and the State legislation
invalidated. The dispute in this case is not about parliamentary
supremacy as none has doubted it in view of Article 246(1) of the
Constitution but is whether Parliament has competence at all to
legislate in respect of raw tobacco or it falls within the competence of
State. If we hold that while legislating in the field of industry as
provided in Entry 52 of the Union List, the Parliament is not
competent to legislate in respect of the field anterior to industry, i.e.
its raw material and can legislate only in respect of the process of
manufacture or production, in that eventuality, the State legislation
will have to be held to be constitutional, intra vires and applicable.
In the proposed judgment, Justice Pattanaik has held that the
word ‘industry’ in Entry 52 of the Union List cannot be given restricted
meaning so as to exclude from its purview the subject of legislation
coming within Entry 27 or Entry 14 of List II and, thus, the
parliamentary legislation, namely, the Tobacco Board Act, 1975 is
constitutionally valid and, consequently, the State legislations entitling
the Market Committee to levy fee for sale and purchase of raw
tobacco within the market area will not be operative so far as the
produce of tobacco is concerned and that the majority judgment in
the ITC’s case is correctly decided. I express my respectful dissent
with the view expressed by Justice Pattanaik on this aspect and thus
this separate judgment.
The Parliament and Assemblies draw power to legislate from
the provisions of the Constitution of India. We are concerned here
with Article 246. Article 246(1) of the Constitution provides that
notwithstanding anything in clauses (2) and (3), Parliament has
exclusive power to make laws with respect to any of the matters
enumerated in List I in the Seventh Schedule. The said List is
referred to in the Constitution as the ‘Union List’.
Entry 52 in the Union List is ‘Industries, the control of which by
the Union is declared by Parliament by law to be expedient in the
public interest’. In respect of field covered by this Entry, the
Parliament has enacted the Tobacco Board Act, 1975. Section 2 of
the Tobacco Board Act contains the declaration that it is expedient in
the public interest that the Union should take under its control the
Tobacco industry.
Article 246(2) provides that notwithstanding anything in clause
(3), Parliament and, subject to clause (1), the Legislature of any State
also, have power to make laws with respect to any of the matters
enumerated in List III in the Seventh Schedule. The said List is
referred to in the Constitution as the "Concurrent List".
Article 246(3) provides that subject to clauses (1) and (2), the
Legislature of any State has exclusive power to make laws for such
State or any part thereof with respect to any of the matters
enumerated in List II in the Seventh Schedule. The said List is
referred to in the Constitution as the "State List".
In exercise of power under Article 246(3), various State
Legislatures have enacted Agricultural Produce Marketing Acts for
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regulating sale and purchase of the agricultural produce and levying
market fee within the framework of those Acts which, inter alia, permit
levy and collection of market fee. The tobacco under the Acts in
question has been notified as an agricultural produce.
In ITC’s case, by majority, it was held that the Tobacco industry
having been taken over by the Central Government under Entry 52 of
the Union List by enactment of Tobacco Board Act, the State
Legislature ceases to have any jurisdiction to legislate for that field
and, therefore, the provisions of the Karnataka Agricultural Produce
and Marketing Act entitling the market committee to levy market fee
in respect of sale and purchase of Tobacco within the market area
collide with Tobacco Board Act. Thus, the State Act so far as it
relates to Tobacco was struck down. The minority view was that both
the State and the Central Act can operate in their respective fields
and there is no repugnancy if both the acts are considered in the light
of their respective true nature and character.
The majority judgment in ITC’s case for the view that it took
principally relied upon the two Constitution Bench decisions of this
Court in State of Orissa v. M.A. Tulloch & Co. [(1964) 4 SCR 461]
and Baijnath Kadio v. State of Bihar & Ors. [(1969) 3 SCC 838].
Referring to these two decisions, the opinion expressed was that
these cases are direct authority on the question at issue, viz., if the
Central Act and the State Act collide, the inevitable consequence
would have to be that the Central Act will prevail over the State Act
and later will have to yield and that the provisions of the Karnataka
Agricultural Produce Marketing (Regulation) Act, 1966 are repugnant
to the Tobacco Board Act, 1975 and, therefore, tobacco is liable to be
removed from the schedule of the said Act.
The minority view, however, was that there is nothing in the
State Act or in the Rules which indicate that it is inconsistent with or
cannot be operated along with the marketing regulations and both the
Acts can operate in their respective fields and there is no repugnancy
if both the Acts are considered in the light of their true nature and
character.
In ITC’s case the challenge was to the constitutional validity of
the Karnataka Agricultural Produce Marketing (Regulation)
(Amendment) Act, 1980. By the amending Act, tobacco was
enumerated as an agricultural produce for the purposes of the
Karnataka Agricultural Produce Marketing (Regulation) Act, 1966.
The High Court was of the view that the Tobacco Board Act did not
cover the marketing of tobacco in its entirety but only covered a part
of the area of the topic of marketing of tobacco and that the two
legislations, namely, the Tobacco Board Act, 1975 and the Karnataka
Agricultural Produce Marketing (Regulation) Act, can co-exist and
operate cumulatively. The further view expressed by the High Court
was that any intention of the superior legislature to cover the whole
field to make a comprehensive law with regard to marketing of
tobacco was not manifest in the legislation.
The contention canvassed before this Court in ITC’s case was
that in view of the Central Act, the State Legislature was not
competent to bring into fold of the State Act, the tobacco, the matter
being covered by Entry 52 of the Union List of the Seventh Schedule
of the Constitution of India. The precise question in ITC’s case was
as to whether in respect of marketing of tobacco, the State
Government was entitled to legislate or whether in view of the fact
that there was a declaration under Entry 52 of the Union List, the
State Legislature had no competence to legislate on tobacco and as
such the impugned legislation was ultra vires.
In the minority opinion, Mukharji, J. noticed that the Karnataka
Agricultural Produce Marketing (Regulation) Act, 1966 deals with the
subject of market in Entry 28 read with Entry 66 of List II and that it
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had to be borne in mind that Entry 28 is not subject to withdrawal to
List I by Parliament. The State Act is not on a subject in List III nor is
the Central Act a law relating to any subject in List III. It was
concluded that, therefore, there cannot be any question of
repugnancy. The nature and character of the Acts, namely,
Karnataka Agricultural Produce Marketing (Regulation) Act, 1966 and
the Central Act was noticed and it was held that it is fully manifest
that both the Acts can operate in their respective fields. Further in the
minority opinion it was observed that while giving due weight to
Centre’s supremacy in the matter of legislation, the States’ legitimate
sphere of legislation should not be unnecessarily whittled down
because that would be unwarranted by the spirit and basic purpose of
the constitutional division of powers ? not merely allocation of power
by the Constitution but invasion by parliamentary legislations. While
it is true that in the spheres very carefully delineated the Parliament
has supremacy over State Legislatures, supremacy in the sense that
in those fields, parliamentary legislation would hold the field and not
the State legislation ? but to denude the State Legislature of its
power to legislate where the legislation in question in pith and
substance i.e. in its true nature and character, belongs to the State
field, one should be chary to denude the State of its powers to
legislate and mobilize resources ? because that would be
destructive of the spirit and purpose of India being a Union of States.
States must have power to raise and mobilize resources in their
exclusive fields. The Marketing Act is essentially an Act to regulate
the marketing of agricultural produce. Justice Mukharji said that "it
must, therefore, be held that the State Act should prevail. One
should avoid corroding the State’s ambit of powers of legislation
which will ultimately lead to erosion of India being a Union of States.".
The majority opinion was expressed by Justice S.Murtaza Fazal
Ali with whom Justice A. Varadarajan concurred. In the majority
opinion after noticing the crucial point for determination i.e. whether
the Karnataka State had any jurisdiction to encroach upon the limits
of Entry 52 of the Union List, relying inter alia upon the decisions in
the cases of Tulloch, Baijnath Kadio, it was concluded that once
the Centre takes over an industry under Entry 52 of List I of the
Seventh Schedule and passes an Act to regulate the legislation, the
State Legislature ceases to have any jurisdiction to legislate in that
field and if it does so, that legislation would be ultra vires the powers
of the State Legislature. It was further observed that acceptance of
the minority opinion would rob the Central Act of its entire content and
essential import by handing over the power of legislation to the State
Government which per se had been taken over by the Parliament
under Article 246 by enacting the Tobacco Board Act, 1975. In the
majority opinion reliance was placed on the following passage of
Baijnath Kadio’s case as extracted at page 174 as under:
"It is open to Parliament to declare that it is
expedient in the public interest that the
control should rest in Central Government.
To what extent such a declaration can go is
for Parliament to determine and this must be
commensurate with public interest. Once this
declaration is made and the extent laid down,
the subject of legislation to the extent laid
down becomes an exclusive subject for
legislation by Parliament. Any legislation by
the State after such declaration and trenching
upon the field disclosed in the declaration
must necessary be unconstitutional because
that field is abstracted from the legislative
competence of the State Legislature. This
proposition is also self-evident that no
attempt was rightly made to contradict it."
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The majority opinion has not noticed the Constitution Bench’s
decision in the case of Ch. Tika Ramji & Ors. etc. v. The State of
Uttar Pradesh & Ors.[(1956) SCR 393] and other decisions on the
scope of Entry 52 but relying upon M.A. Tulloch and Baijnath Kadio
held that when declaration under Entry 52 of List I in respect of public
interest is made and the extent laid down the subject of legislation to
the extent laid down becomes an exclusive subject of legislation by
the Parliament and any legislation by the State after such declaration
trenching upon the field disclosed in the declaration must necessarily
be unconstitutional because that field is abstracted from the
legislative competence of the State Legislature. Thus it was held that
the Government of Karnataka had no jurisdiction to levy any market
fee on tobacco because the State Act to that extent collides with the
Central Act of 1975.
The decisions in the cases of Baijnath Kadio and Tulloch
have also been relied upon by Mr.Shanti Bhushan. Reliance has also
been placed by learned counsel on The Hingir-Rampur Coal Co.
Ltd. & Ors. v. State of Orissa & Ors. [(1961) 2 SCR 537]. It was
contended by Mr.Shanti Bhushan that in law and in principle there
would be no difference in respect of a case dealing with the scope of
Entry 52 of the Union List or a case dealing with the scope of Entry
54 of that List. The submission of learned counsel is that for the
purpose of interpretation both these entries have been equated by
this Court and reliance in this regard is placed on Ishwari Khetan
Sugar Mills (P) Ltd. & Ors. v. State of Uttar Pradesh & Ors.
[(1980) 4 SCC 136].
On behalf of the State Governments and the Agricultural
Produce Marketing Committees strong reliance has been placed on
Tika Ramji’s case. What is the ratio of these decisions, we will now
examine.
Before considering the aforenoted decisions, it would be
appropriate to make it clear that in these matters it has to be kept in
view that this Court is not examining a case where the field of
legislation is on concurrent list to which Article 246(2) applies. This
Court is also not considering the case of an incidental trenching of
field by one or the other legislature. The Court is concerned with the
question of legislative competence. We are examining a case where
what has been questioned is the legality of legislation in respect of a
field on the State List to which Article 246(3) applies. The validity and
applicability of the State legislations in respect of a field of legislation
on State List has come under a cloud on account of a legislation
passed by the Parliament in respect of field of legislation under Entry
52 of the Union List, namely, the Tobacco Board Act, 1975. It is on
account of this legislation containing declaration as contemplated by
Entry 52 of the Union List that doubts have arisen about the validity
and applicability of State legislation about the sale of agricultural
produce of tobacco in market areas and levy thereupon of market fee
which aspects are on field of legislation on the State List (Entries 14,
27, 28 and 66). Entry 24 of the State List is subject to Entries 7 and
52 of List I. We are not concerned in these matter with Entry 7. The
question here is as to the effect of transfer of field of legislation under
Entry 24 of the State List to the Union List (Entry 52), on other fields
in the State List, namely, fields of legislation under Entries 14, 27, 28
and 66 and what in fact can be transferred.
Baijnath Kadio was a case which considered the validity of the
State legislation on the ground of being beyond the State legislative
power in view of the declaration by the Parliament in Mines and
Minerals (Regulation and Development) Act, 1957 as contemplated
by Entry 54 of List I of the Seventh Schedule to the Constitution.
Section 2 of the Central legislation declared that it is expedient in the
public interest that the Union should take under its control the
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Regulation of mines and the development of minerals to the extent
provided therein.
Entry 54 of the Union List speaks both of regulation of mines
and minerals development and Entry 23 of the State List is subject to
Entry 54. It was held that it was open to the Parliament to declare
that it is expedient in the public interest that the control should rest
with the Central Government. To what extent such a declaration can
go is for the Parliament to determine and this must be commensurate
with public interest. Once this declaration is made and that extent
laid down the subject of legislation to the extent laid down becomes
an exclusive subject for the legislation by the Parliament. Any
legislation by the State after such declaration trenching upon the field
disclosed in the declaration must necessarily be unconstitutional
because that field is abstracted from the legislative competence of
the State Legislature. For its view the Constitution Bench followed
earlier Constitution Bench decisions in the cases of Hingir and
Tulloch. These two cases also dealt with the scope of Entry 54 of
List I viz-a-viz Entry 23 of List II. The majority opinion in ITC as
already noticed, followed Baijnath Kadio and extracted in its
judgment the passage as aforesaid.
A significant aspect to take note of is that Tika Ramji’s case
has not been considered in Hingir’s case. The reason for it seems to
be that one set of cases consider the scope of Entry 54 viz-a-viz
Entry 23 and to that category belong the cases of Hingir, Tulloch
and Baijnath Kadio. The other set of cases consider the scope of
Entry 52 of Union List viz-a-viz Entry 24 of the State List and to that
category belong the cases of Tika Ramji and other cases following
Tika Ramji.
Relying upon Ishwari Khetan’s case Mr.Shanti Bhushan
contends that Entry 52 has been equated with Entry 54 of the Union
List.
Both sides have relied upon the case of Ishwari Khetan. Let
us examine that case. In Ishwari Khetan’s case the contention
urged was that the Parliament has made the Industrial (Development
and Regulation) Act, 1951 (for short, ‘the IDR Act’) in Entry 52 List I
declaring control of sugar industry and that industry goes out of Entry
24 of List II and, therefore, State Legislature is denuded of legislative
powers in respect of sugar industry and impugned legislation was
with respect to acquisition of sugar undertaking in sugar industry.
The Attorney General had contended that the power to acquire
property was derived from Entry 42 of List III. Ishwari Khetan’s
case involved the determination or scope of Entry 52 of List I and
Entry 24 of List II only. The scope of these entries with respect to
Entries 26 and 27 of List II and Entry 33 of List III did not fall for
consideration. Further in paragraphs 7, 8 and 11 of Ishwari
Khetan’s case the Constitution Bench repeatedly pointed out that a
declaration in Entry 52 of List I denudes the power of State
Legislature to legislate under Entry 24 List II only. It was noticed that
the sugar was a declared industry. The question posed was that "is
it, however, correct to say that once a declaration is made as
envisaged by Entry 52 List I, that industry as a whole is taken out of
Entry 24 of List II"? The answer given by the Constitutional Bench
was that it is not correct to say that once a declaration is made in
respect of an industry that industry as a whole is taken out of Entry 24
List II. It was said that the industry as a legislative head is found itself
placed in Entry 24 of List II. The State Legislature can be denied
legislative power under Entry 24 to the extent Parliament makes
declaration under Entry 52 and by such declaration, Parliament
acquired power to legislate only in respect of those industries in
respect of which declaration is made and to that extent as manifested
by legislation incorporating the declaration and not more. The Bench
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further said that the legislative power of the State under Entry 24 List
II is eroded only to the extent the control is assumed by the Union
pursuant to the declaration and the State Legislature which is
otherwise competent to deal with industry under Entry 24 List II can
deal with that industry in exercise of other powers enabling it to
legislate under different heads set out in List II and List III and this
power cannot be denied to the State. The extent of parliamentary
legislation was seen only to determine how much is taken out from
Entry 24 List II and not for the purposes of laying down any principle
that the parliamentary legislation has to be seen to determine the
extent of control and the denudation of the power of the State
Legislature to the extent the control is laid down by the Parliament.
Further it was held that despite the parliamentary legislation the State
Legislature can deal with industry in exercise of other powers in
different entries in List II and List III and that power cannot be denied
to the State. In this case the Court was examining whether the law of
acquisition of sugar undertaking was referable to Entry 24 List II or
Entry 42 List III. It was concluded that the acquisition of the property
was referable to Entry 42 List III. The scope of the industry did not
fall for examination in Ishwari Khetan’s case. There is no
discussion on the interpretation of expression ‘industry’ and that
probably is the reason why Tika Ramji’s case has not been referred
to. The reliance on Baijnath Kadio’s case in Ishwari Khetan’s
case was to show the denudation of States’ power being limited to
the extent of control. While Baijnath Kadio’s case dealt with Entry
23 List II, Ishwari Khetan’s case dealt with Entry 24 List II. The
subject matter of the other entries was not in issue in this decision.
The structure in Entry 54 of List I was not equated with that of Entry
52 List I as contended by Mr.Shanti Bhushan. This decision does not
adopt the mines and minerals cases for the purposes of considering
the scope of Entry 52 of List I. In our view, the cases of mines and
minerals are not of much assistance while examining the scope of
Entry 52 of List I.
In State of A.P. & Ors. v. Mcdowell & Co. & Ors. [(1996) 3
SCC 709] also it was held that the ambit and scope of a
constitutional entry cannot be determined with reference to a
parliamentary enactment. If it is otherwise, it would result in the
Parliament enacting and/or amending an enactment thereby
controlling the ambit and scope of the constitutional provision. That
cannot be the law. The power to legislate with which we are
concerned is contained in Article 246. The fields are demarcated in
the various entries. On reading both, it has to be decided whether
the concerned legislature is competent to legislate when its validity is
questioned. The ambit and scope of an entry cannot be determined
with reference to a parliamentary enactment.
Tika Ramji’s case is required to be examined in some detail
since that has been a bone of serious and elaborate submissions. In
that case, the challenge by the Sugarcane growers hailing from
several villages of State of U.P. was to the validity of the UP
Sugarcane (Regulation of Supply and Purchase) Act, 1953 and
notifications issued thereunder. A short history of legislation enacted
by the Centre as well as the province of U.P. in regard to Sugar and
Sugarcane was noticed.
It was noticed that on 8th April, 1932, the Central Legislature
passed the Sugarcane Industry (Protection) Act, 1932. As a result of
this Act, there was a rapid rise in number of sugar factories as also a
large expansion in the cultivation of sugarcane. To regulate the price
at which sugarcane intended to be used in the manufacture of sugar
might be purchased by or for the factories, the Central Legislature
enacted on 1st May, 1934 the Sugarcane Act, 1934. The fixing of
minimum price for the purchase of sugarcane intended for use in any
factory in any controlled area was left to the Provincial Governments
which were empowered to make rules for the purpose of carrying into
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effect the objects of the Act including the organisation of growers of
sugarcane into Co-operative Societies for the sale of sugarcane to
factories.
With the coming into operation of the Government of India Act,
1935, there was distribution of legislative power between the
Dominion Legislature and the Provincial Legislatures and agriculture
(Entry No.20), trade and commerce within the Province (Entry No.27)
and production, supply and distribution of goods, development of
industries subject to the provision in List I with respect to
development of certain industries under Dominion control (Entry
No.29) were included in List II, namely, the Provincial Legislative List.
Entry No.34 in List I was "Development of industries where
development under Dominion control is declared to be in the public
interest".
The result of above distribution of legislative power was that the
entire subject matter of the Sugarcane Act, 1934 was left with the
Provincial legislative list. It was felt that this Act was not sufficiently
comprehensive for dealing with the problems of sugar industry.
Therefore, it was found necessary to replace it so as to provide for
better organisation of cane supplies to sugar factories. The U.P.
Legislature accordingly enacted on 10th February, 1938, the U.P.
Sugar Factories Control Act, 1938 to provide for licensing of the
sugar factories and for regulating the supply of sugarcane intended
for use in such factories and the price at which it may be purchased
and for other incidental matters and repealed the Sugarcane Act,
1934. The 1938 Act was to remain in force initially upto 30th June,
1947 but the period was extended to 30th June, 1950 and then to 30th
June, 1952.
On intervention of Second World War, a proclamation of
emergency was issued by the Governor General under Section 102
of the Government of India Act, 1935. The Dominion Legislature
acquired the power to make laws for the Provinces with respect to
any of the matters enumerated in the Provincial Legislative List. The
proclamation of emergency was to operate until revoked by a
subsequent proclamation and the laws made by the Dominion
Legislature were to have effect until the expiration of period of six
months after the proclamation had ceased to operate. The Defence
of India Act and the Rules made thereunder occupied the field. Sugar
was made a controlled commodity in the year 1942 and its production
and distribution as well as the fixation of sugar prices were regulated
by the Sugar Controller thereafter. The proclamation of emergency
was revoked on 1st April, 1946 and the laws made by the Dominion
Legislature in the field of the Provincial Legislative List were to cease
to have effect after 30th September, 1946. On 26th March, 1946, the
British Parliament enacted the India (Central Government and
Legislature) Act, 1946, Section 2(1)(a) whereof provided that
notwithstanding anything in the Government of India Act, 1935, the
Indian Legislature shall during the period mentioned in Section 4
thereof have powers to make laws with respect to the following
matters :
"(a) trade and commerce (whether or not
within a Province) in, and the production,
supply and distribution of, cotton and woolen
textiles, paper (including newsprint),
foodstuffs (including edible oil seeds and
oils), petroleum and petroleum products,
spare parts of mechanically propelled
vehicles, coal, iron, steel and mica; ..."
Acting under the power reserved to it under the aforesaid
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Section 2(1)(a), the Central Legislature enacted on 19th November,
1946, the Essential Supplies (Temporary Powers) Act, 1946 to
provide for the continuance during the limited period of powers to
control production, supply and distribution of, and trade and
commerce in, certain commodities. The Governor General issued a
Notification on 3rd March, 1947 the effect whereof was to continue the
Act till 31st March, 1948. On 18th July, 1947, however, Indian
Independence Act was passed under which the Governor General
passed an order which substituted the words "Dominion Legislature"
for "Both Houses of Parliament" in the proviso to Section 4 of India
(Central Government and Legislature) Act, 1946 and also introduced
a new Section 4(a) by way of adoption providing that the powers of
the Dominion Legislature shall be exercised by the Constituent
Assembly. By passing of the Resolution by the Constituent
Assembly, the life of the Act was extended and later on Constitution
coming into force, the Parliament was invested with power under
Article 369 for a period of five years to make laws with respect to the
following matters as if they were enumerated in the Concurrent List :
"‘(a) trade and commerce within a State in,
and the production, supply and distribution
of,....foodstuffs (including edible oil seeds and
oil),......’ The life of the Act was accordingly
extended from time to time upto 26th January,
1955 by Acts passed by Parliament."
Food crops under the aforesaid 1946 Act were defined as including
crops of sugarcane.
The Central Government in exercise of powers conferred upon
it by Section 3 of the 1946 Act, promulgated the Sugar and Gur
Control Order, 1950, inter alia, empowering it to prohibit or restrict the
export of sugarcane from any area; to direct that no gur or sugar shall
be manufactured from sugarcane except under and in accordance
with the conditions specified in the licence issued in this behalf.
There was also power to fix minimum price in exercise whereof the
Central Government from time to time issued notifications fixing the
minimum price to be paid by the producers of sugar for sugarcane
purchased by them.
On 31st October, 1951, Parliament enacted the Industries
(Development and Regulation) Act, 1951 to provide for the
development and regulation of certain industries. By Section 2 of the
Act, it was declared that it was expedient in the public interest that the
Union should take in its control the industries specified in the First
Schedule. That Schedule included the industry engaged in the
manufacture or production of sugar.
The U.P. Legislature enacted the impugned Act. The object of
this enactment was stated to be as follows :
"With the promulgation of the Industries
(Development and Regulation)Act, 1951 with
effect from 8th May, 1952, the regulation of
the sugar industry has become exclusively a
Central subject. The State Governments are
now only concerned with the supply of
sugarcane to the sugar factories. The Bill is
being introduced in order to provide for a
rational distribution of sugarcane to factories,
for its development on organized scientific
lines to protect the interests of the cane
growers and of the industry and to put the
new Act permanently on the Statute Book."
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In exercise of the rule making power conferred by the impugned
Act, the U.P. Government made rules and also promulgated the U.P.
Sugarcane Supply and Purchase Order, 1954. All these related to
the supplies and purchase of sugarcane in U.P.
Challenging vires of the State Act one of the submissions made
in Tika Ramji’s case before the Constitution Bench was :
"(I) That the State of U.P. had no power to
enact the impugned Act as the Act is with
respect to the subject of industries the control
of which by the Union is declared by
Parliament by law to be expedient in the
public interest within the meaning of Entry 52
of List I and is, therefore, within the exclusive
province of Parliament. The impugned Act is,
therefore, ultra vires the powers of the State
Legislature and is a colourable exercise of
legislative power by the State."
It was urged that the word ‘industry’ was a word of very wide
import and included not only the process of manufacture or
production but also of things which were necessarily incidental to it,
viz., the raw materials for the industry as also the products of that
industry and would, therefore, include within its connotation the
production, the supply and distribution of raw materials for that
industry which meant sugarcane in relation to sugar industry and,
therefore, insofar as the impugned Act purported to legislate in regard
to sugarcane which was a necessary ingredient in the production of
sugar, it was a colourable exercise of legislative power by the State,
ostensibly operating in its own field within Entry 27 of List II but really
trespassing upon the field of Entry 52 of List I.
True, the challenge was to the vires of the State legislation and
not to the parliamentary legislation but at the same time the entire
basis of challenge was that in respect of the sugarcane, only
Parliament had the power to legislate on account of the field being
covered under Entry 52 of List I, the Sugar industry having been
included in that Entry and the connotation of industry being very wide
to include in it raw material, i.e., sugarcane as well. Thus, the
exclusive power of Parliament to legislate was urged as the main
ground to seek invalidation of the State legislation ? the field of
sugarcane not being available to the State Legislature to legislate.
In view of the controversy as aforesaid, the fact that the validity
of the parliamentary legislation was not in issue in Tika Ramji’s
case, does not in any manner, affect the ratio of that decision. The
point for determination in that case was substantially the same as in
the present case, namely, the scope of the expression ‘industries’ in
Entry 52 of List I and Entry 24 of List II. There also the point was to
adopt a narrow or wide interpretation of the expression ‘industry’.
Further, the fact that it was a case of a manufacturing industry under
IDR Act also does not affect the ratio of the case. The interpretation
placed in Tika Ramji’s case cannot be confined to industry falling
under IDR Act alone. There is neither any express or implied
indication in that decision to limit the interpretation nor there is any
valid reason to so limit it.
Like Tika Ramji’s case, in these matters, the challenge is to
the State legislations on the ground that in view of Entry 52 of List I,
on enactment of Tobacco Board Act, 1975, the State Legislature
loses competence to legislate in respect of sale of tobacco and,
therefore, the existing State legislations will have no applicability and,
thus, the legislations in respect of marketing under Entry 28 of List II
would have no applicability insofar as it concerns the agricultural
produce ‘tobacco’.
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The opposite contention is that under Entry 14 of the State List
the State is competent to legislate in respect of agricultural produce
and tobacco is an agricultural produce; setting up of markets in
respect of this produce under Entry 28 and levying thereupon the fee
under Entry 66 and subject to Entry 33 of List III production, supply
and distribution of goods (Entry 27) are all State subjects and that
under Entry 52 of List I, the Parliament’s competence is only to
legislate in respect of industry which would not include in its ambit the
raw material of the industry and that the process of sale of agricultural
produce of tobacco in markets and levying thereupon market fee can
never be part of industrial process which is only manufacture and
production. The contention of Mr.Dwivedi is that State’s activity in
question is not an industrial activity and, therefore, it is outside the
ambit of Entry 24 of State List and Entry 52 of the Union List.
In Tika Ramji’s case, the precise argument to challenge the
State enactment was that the expression ‘industries’ should be
construed as including not only the process of manufacture or
production but also activities antecedents thereto such as acquisition
of raw material and subsequent thereto such as disposal of the
finished products of that industry. It was urged in that case that the
process of acquiring raw materials was an integral part of the
industrial process and was, therefore, included in the connotation of
the word ‘industry’ and when the Central Legislature was invested
with the power to legislate in regard to sugar industry on account of
declaration as postulated by Entry 52 of List I, that legislative power
included also the power to legislate in regard to the raw material of
the sugar industry, that is sugarcane, and the production, supply and
distribution of sugarcane was, by reason of its being the necessary
ingredient in the process of manufacture or production of sugar,
within the legislative competence of the Central Legislature.
The petitioners in Tika Ramji’s case in support of the wide
construction to be placed upon the expression ‘industry’ also relied
upon various decisions interpreting the said term in relation to the
Industrial Disputes Act. Dealing with those cases in Tika Ramji’s
case this Court said:
"What we are concerned with here is not the
wide construction to be put on the term
‘industry’ as such but whether the raw
materials of an industry which form an
integral part of the process are within the
topic of ‘industry’ which forms the subject
matter of Item 52 of List I as ancillary or
subsidiary matters which can fairly or
reasonably be said to be comprehended in
that topic and whether the Central Legislature
while legislating upon sugar industry could,
acting within the sphere of Entry 52 of List I,
as well legislate upon sugarcane."
This Court said that if the legislation with regard to sugarcane
came within the exclusive province of the Central Legislature under
Entry 52 of List I, the enactment passed by the Provincial Legislature
would be ultra vires. It was said :
"If both the Central Legislature and the
Provincial Legislatures were entitled to
legislate in regard to this subject of
production, supply and distribution of
sugarcane, there would arise no question of
legislative competence of the Provincial
Legislature in the matter of having enacted
the impugned Act. The conflict, if any, arose
by reason of the interpretation which was
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sought to be put on the two Entries, Entry 52
of List I and Entry 27 of List II put in
juxtaposition with each other. It was
suggested that Item 52 of List I comprised not
only legislation in regard to sugar industry but
also in regard to sugarcane which was an
essential ingredient of the industrial process
of the manufacture or production of sugar
and was, therefore, ancillary to it and was
covered within the topic. If legislation with
regard to sugarcane thus came within the
exclusive province of the Central Legislature,
the Provincial Legislature was not entitled to
legislate upon the same by having resort to
Entry 27 of List II and the impugned Act."
Dealing with the argument of wide import of the expression
‘industries’ in Tika Ramji’s case it was held that ‘industry’ in its wide
sense of the term would be capable of comprising three different
aspects : (1) raw materials which are an integral part of the industrial
process, (2) the process of manufacture or production, and (3) the
distribution of the products of the industry. After noticing these
different aspects of the term ‘industry’, it was held that "the raw
materials would be goods which would be comprised in Entry 27 of
List II". In respect of the second category of process of manufacture
or production and the third aspect of distribution of the product of the
industry, the Court held :
"The process of manufacture or production
would be comprised in Entry 24 of List II
except where the industry was a controlled
industry when it would fall within Entry 52 of
List I and the products of the industry would
also be comprised in Entry 27 of List II except
where they were the products of the
controlled industries when they would fall
within Entry 33 of List III."
The Court further held that "In no event could the legislation in
regard to sugar and sugarcane be thus included within Entry 52 of
List I".
Thus, rejecting the contention that the expression ‘industries’ in
Entry 52 of List I is wide enough to take into its compass the power to
legislate in respect of raw material said to be an integral part of the
industrial process, the Court repelled the plea of the State Act being
ultra vires, the same being covered by the subject of sugar industry
control whereof have been declared by the Parliament by law to be
expedient in the public interest under the exclusive domain of
Parliament.
In The Calcutta Gas Company (Proprietary) Ltd. v. The
State of West Bengal & Ors. [1962 Suppl.(3) SCR 1], the challenge
was to the constitutional validity of the Oriental Gas Company Act,
1960. One of the ground of challenge was that the West Bengal
Legislature was not competent to make a law regulating the gas
industry in view of declaration as contemplated by Entry 52 of List I
having being made by the Parliament in IDR Act ? Entry 24 being
subject to the provisions of Entry 52 of List I. It was contended that
Entry 25 of List II (Gas & Gas Works) must be confined to matters
other than those covered by Entry 24 of the same List.
On the facts of the case and in view of the conclusions of the
Constitution Bench on other aspect, it was not considered necessary
to attempt to define the expression ‘industry’ precisely or the State
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exhaustively all its ingredients but following Tika Ramji’s case , it
was assumed that the expression ‘industry’ means only production or
manufacture. In Calcutta Gas, which considers Entry 52 of List I
and Entry 24 of List II, the Bench said that ordinarily ‘industry’ is in
the field of the State legislation and in all the entries it must be given
the same meaning and cited with approval Tika Ramji’s case in the
following words:
"In Ch.Tika Ramji v. State of Uttar Pradesh,
the expression ‘industries’ is defined to mean
the process of manufacture or production and
does not include the raw materials used in
the industry or the distribution of the products
of the industry. It was contended that the
word ‘industry’ was a word of wide import
and should be construed as including not
only the process of manufacture or
production but also activities antecedent
thereto such as acquisition of raw materials
and subsequent thereto such as disposal of
the finished products of that industry. But
that contention was not accepted."
Mr.Shanti Bhushan, however, contends that once field is
covered by Entry 52 by issue of requisite declaration and the
Parliament has actually covered the field by enacting a legislation,
with regard to that extent the industry including all facets of such an
industry ? whether it is the raw materials or the products of that
industry, the State Legislature will have no power to legislate. The
contention is that the expression ‘industries’ in Entry 52 of the Union
List comprises in it all its aspects commencing from procurement of
raw material and upto disposal of final product of that industry and not
only the process of manufacture or production. The submission of
learned counsel is that if the expression ‘industries’ in the entries
under consideration is not given such interpretation, it would denude
the Parliament of real object of control of such industry in public
interest which is of paramount importance. As against this, the
contention of the other side is that the acceptance of the viewpoint
propounded by Mr. Shanti Bhushan would mean denuding the State
Legislature the power to legislate in respect of fields covered under
various entries under the State List which are not made subject to
any other entry and that the acceptance of contention of Mr.Shanti
Bhushan would have the effect of rewriting the Constitution. I agree.
The intention of the Constitution makers was not to make Entries 14,
27, 28 and 66 subject to Entry 52 of the Union List. The acceptance
of viewpoint propounded by Mr.Shanti Bhushan will have that effect.
Therefore, the expression ‘industries’ cannot be interpreted in the
manner suggested.
True, the parliamentary legislation has supremacy as provided
under Article 246(1) and (2). This is of relevance when field of
legislation is on concurrent list. While maintaining parliamentary
supremacy, one cannot give go by to the federalism which has been
held to be a basic feature of the Constitution (See S.R. Bommai v.
Union of India [(1994) 3 SCC 1]).
The Constitution of India deserves to be interpreted, language
permitting, in a manner that it does not whittle down the powers of
State Legislature and preserves the federalism while also upholding
the central supremacy as contemplated by some of its articles.
In this background, let us also briefly notice the constitutional
history and structural inter-relationship in respect of relevant entries
as they existed in Government of India Act, 1935 and as they now
exist in the Seventh Schedule. Entries 27 and 29 on the State List in
the Government of India Act, 1935 were as under :
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"Item 27. Trade and commerce within the
province; markets and fairs; money lending
and money lenders.
Item 29. Production, supply and distribution
of goods; development of industries, subject
to the provisions in List I with respect to the
development of certain industries under
Federal control."
Now, in Seventh Schedule part of Entry 27 is in Entry 26 of the
State List; Markets and fairs is Entry 28 of List II; Money lending and
money lenders (Entry 30 List II); Production, supply and distribution of
goods subject to the provisions to Entry 33 of List III (Entry 27 List II);
Industries subject to the provisions of Entries 7 and 52 of List I (Entry
24, List II). It would, thus, be seen that under 1935 Act, both
production, supply and distribution of goods as well as development
of industries were subject to the provisions of List I as provided in
Entry 29. Our Constitution makers, however, bifurcated Entry 29 into
two parts. Industries were put in Entry 24 of List II subject to the
provisions of Entries 7 and 52 of List I. The production, supply and
distribution of goods was put in Entry 27 of List II and made subject to
Entry 33 of List III. The acceptance of the argument of Mr. Shanti
Bhushan would mean that no object was sought to be achieved by
such a bifurcation. It is clear that two entries have been separated.
One made subject to the provisions of Entry 33 of List III and the
other subject to the provisions of Entries 7 and 52 of List I.
Therefore, to interpret the expression ‘industry’ to include in it the
aspect of raw material would mean that by the same analogy the
subject matter of production, supply and distribution of goods should
also be included therein and in fact that was the argument of Mr.
Shanti Bhushan. Would the acceptance of that argument not negate
the will of the Constitution makers. I think it would. Therefore, the
argument cannot be accepted. The same argument would equally
apply to Entry 14 of List II in respect of agriculture which is not
subject to any List. It would so become if we accept the contention of
Mr. Shanti Bhushan. Further, earlier when the Parliament felt the
need to control raw material, it included "raw jute and raw cotton" in
Entry 33, List III by Constitution Third Amendment Act, 1954. Even
Article 369 indicates that agricultural raw material is in the State List
for it refers to raw cotton, cotton seed and edible oil seeds and seeks
to temporarily place it, by fiction, in the concurrent list to enable
Parliament to make laws. The expression ‘industries’ in Entry 24, List
II or Entry 52, List I, cannot be interpreted in a manner that would
make other entries of List II of the Seventh Schedule subject to Union
control, which in fact they are not. Wherever it was intended to be
made subject to such control, whether of List I or that of List III, it was
said so. A perusal of List II shows that whenever a particular entry
was intended to be made subject to an entry in List I or III, it has been
so stated specifically. Therefore, an interpretation which tends to
have the effect of making a particular entry subject to any other entry,
though not so stated in the entry, deserves to be avoided unless that
be the only possible interpretation. We do not think that such an
interpretation on the entries in question, namely, Entry 52 of the
Union List and Entry 24 of the State List deserves to be placed.
The principles of interpretation are well settled. There is no
doubt that the entries in the lists in the Seventh Schedule do not
provide competence or power to legislate on the legislature for which
the source of power is contained in Article 246 of the Constitution. In
deciding question of legislative competence, it has to be kept in view
that the Constitution is not required to be considered with a narrow or
pedantic approach. It is not to be construed as a mere law but as a
machinery by which laws are made. The interpretation should be
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broad and liberal. The entries only demarcate the legislative field of
respective legislature and do not confer legislative power as such and
if it is found that some of the entries overlap or in conflict with the
other, an attempt to reconcile such entries and bring about a
harmonious construction is the duty of the court. When, however,
reconciliation is not possible, as here, then the court will have to
examine the entries in relation to legislative power in the Constitution.
The subject matter of the issue here is about the interpretation
of Entry 52 in List I of the Seventh Schedule. It requires the
Parliament to make a declaration by law identifying an industry, the
control of which by the Union is expedient in the public interest.
Under the said entry only an ‘industry’ can be declared as an
industry, the control whereof by the Union is regarded as expedient in
public interest. It is, therefore, implicit that if an activity cannot be
regarded as industry, Entry 52 will have no applicability to that
activity. The question is about the concept of ‘industry’ in Entry 52 of
List I. As already stated, the entries in the Legislative List have to be
construed in the widest sense cannot be disputed but it has also to be
borne in mind that such construction should not make other entries
totally redundant. The meaning of the word ‘industry’ in various
dictionaries reliance on which was placed by Mr. Shanti Bhushan, is
not of any assistance while considering the constitutional meaning of
the said term. There may not be any embargo or limitation on the
power of the Parliament to enact the law in respect of activities other
than manufacturing activities but that power is non-existent in Entry
52 of List I. It may be elsewhere. Reference in this regard can be
made to Entry 33 of List III including in its ambit food stuff and certain
raw materials. Tobacco, however, is admittedly not a food stuff.
The validity of certain other acts such as the Cardomom Act,
1965, The Central Silk Board Act, 1958, The Coffee Act, 1942, The
Rubber Act, 1947, The Tea Act, 1953, The Coir Industry Act, 1953
and The Coconut Development Board Act, 1979 reference whereof
was made by Mr. Shanti Bhushan need not be examined for
purposes of considering the legislative competence of the impugned
State legislations. The legislative competence of Parliament to
legislate these statutes is not in issue before this Court and,
therefore, we do not think it necessary to examine the question of
legislative competence only from academic view point insofar as
these legislations are concerned. However, prima facie, there is no
substance in the apprehension expressed by Mr.Shanti Bhushan that
narrow approach of the concept of ‘industry’ would make these acts
beyond the legislative competence of the Parliament and make them
ultra vires. As, when and if these acts are challenged, the question of
legislative competence would be examined. Further, it may be noted
that two out of the aforesaid legislations, namely, the Coffee Act,
1942 and The Rubber Act, 1947 are pre-Constitution enactments
made under the Government of India Act, 1935 where the entries
were different. Item 29 of List II of the said Act has already been
reproduced above. In respect of the Coir Industry Act, on
examination of the provisions contained therein, it may be possible to
urge that the statute deals with the process of manufacturing and
does not seek to control plantation and preservation of the coconut
trees or the production of the coconut. The Central Silk Board Act
has been dealt with by this Court in the case of B. Vishwanathiah &
Co. & Ors. v. State of Karnataka & Ors. [(1991) 3 SCC 358] and I
fail to appreciate how upholding the validity of the Agricultural
Produce Marketing Acts would effect the validity of this enactment. In
respect of Cardomom Act, it appears that the said Act is being
applied for export purposes and it does not cover soil preparation of
seed-lings. Regarding Coconut Development Act, it does not
envisage setting up of auction platform and controlling marketing as
in the present case. That enactment primarily deals with the field
pertaining to recommendation for improving marketing, providing
financial assistance for adoption of modern technology and for
assisting growers to get incentive prices. This Court, however, need
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not examine in detail the aspect of legislative competence in regard
to these enactments since, as already said, that is not the matter in
issue here and it would suffice to indicate, as above, only the prima
facie view to dispel the apprehension expressed by Mr. Shanti
Bhushan.
Harakchand Ratanchand Banthia & Ors. v. Union of India &
Ors. [(1970) 1 SCR 479] has been strongly relied upon by Mr. Shanti
Bhushan to support the contention of wide interpretation of the
expression ‘industry’. The main question therein was about the
legislative competence of the Parliament to enact the Gold (Control)
Act, 1968. The said Act defines Gold to mean Gold, including its
alloy (whether virgine, melted or re-melted, wrought or unwrought), in
any shape or form, of a purity of not less than nine carats and
including primary gold, article and ornament [Section 2(j)]. Clause (r)
of Section 2 defines ‘primary gold’ to mean gold in any unfinished or
semi-finished form and includes ingots, bars, blocks, slabs, billets,
shots, pellets, rods, sheets, foils and wires. Challenging the
constitutional validity of the Gold (Control) Act, the contention urged
was that the goldsmiths was a handicraft requiring application of skill
and the art of making ornament was not an industry within the
meaning of Entry 52 of List I of the Seventh Schedule of the
Constitution. The Constitution Bench noticed the established
principles that the widest aptitude should be taken of all the entries
and the duty of the court to reconcile the entries and bring about a
harmonious construction in case some entries in different list or in the
same list may overlap or may appear to be in direct conflict with each
other. In the present case, however, there is no question of any
overlapping and in regard to conflict and harmonious construction, it
is Mr.Shanti Bhushan’s own submission that the two legislations to
the extent this Court is concerned, cannot co-exist.
Reliance has been placed by Mr.Shanti Bhushan on the
following passage from Banthia’s case:
"But we are satisfied in the present case that
the manufacture of gold ornaments by
goldsmiths in India is a ‘process of
systematic production’ for trade or
manufacture and so falls within the
connotation of the word ‘industry’ in the
appropriate legislative entries. It follows,
therefore, that in enacting the impugned Act
Parliament was validly exercising its
legislative power in respect of matters
covered by Entry 52 of List I and Entry 33 of
List III."
The contention of learned counsel is that in Harakchand
Ratanchand Banthia’s case, the process of systematic production
for trade or manufacture has been held to fall within the connotation
of the word ‘industry’ in the appropriate Legislative Entry and the
argument that if the word ‘industry’ is construed in the wide sense,
Entry 27 of List II will lose all meaning and content was rejected. The
submission is that the same approach deserves to be adopted in the
present case as well. The above approach was adopted after finding
the activity to be manufacture or production and, therefore, falling
within the connotation of ‘industry’. In Banthia’s case, the
Constitution Bench, in fact, cited with the approval Tika Ramji’s case
and referred thereto as under :
"In Tika Ramji v. State of Uttar Pradesh the
expression ‘industry’ was defined to mean
the process of manufacture or production and
did not include raw materials used in the
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industry or the distribution of the products of
the industry."
In Banthia’s case, the Court was considering the validity of the
Act, the object whereof was to control production, manufacture,
supply, distribution, use and possession of, and business in, gold,
ornaments and articles of gold and for matters connected therewith or
incidental thereto. There is no provision in the Gold (Control) Act,
1968 regulating the manner in which the primary gold would be
extracted from the earth. The Act does not concern itself with the
extraction of primary gold. The question therein was as to whether
the work of goldsmiths was a handicraft requiring application of skill
and whether the art of making gold ornaments was not an ‘industry’
within the meaning of Entry 52, List I. In that case, the question was
not whether dealing with the raw material of industry would come or
not, within the concept of ‘industry’. Further, the Court observed that
it is not necessary to attempt to define the expression ‘industry’
precisely or to state exhaustively all its different aspects. On the facts
of the case, the Constitution Bench held that the process or
systematic production of gold ornament by goldsmiths for trade or
manufacture falls within the connotation of the word ‘industry’ in the
appropriate Legislative Entry. The decision in Tika Ramji’s case
was not departed from. In fact it was referred to. An attempt to adopt
the definition of the word ‘industry’ in the Industrial Disputes Act was
repelled. The contention accepted was that the manufacture of gold
ornament was an ‘industry’ within the meaning of Entry 52, List I.
This decision is not of any assistance for determining whether sale of
tobacco process can come within the of the tobacco industry so as to
fall within the ambit of the word ‘industry’ in Entry 52 of List I and
Entry 24 of List II. The observation in Banthia’s case that Entry 27
of List II was a general entry was made in the context of manufacture
of gold ornaments by goldsmiths falling within the ambit of the word
‘industry’ as contained in Entry 24 of List II and Entry 52 of List I.
Banthia’s case does not express any opinion on the scope of the
word ‘industry’ in Entry 52 of List I and Tika Ramji’s case still holds
the field when it says that the expression ‘industry’ would mean the
process of manufacture or production and would not include any raw
material used in an industry or the distribution of the products of
industry.
Mr. Shanti Bhushan has also placed reliance on another
decision of the Constitution Bench in the case of Chaturbhai M.
Patel v. The Union of India & Ors. [(1960) 2 SCR 362], in
particular, to the observations made therein by Sir Maurice Gwyer,
Chief Justice in Subramanyan Chettiar v. Muthuswamy Goundan
[1940 FCR 188] which have been cited in Patel’s case. The said
observations read thus :
"It must inevitably happen from time to time
that legislation, though purporting to deal with
a subject in one list, touches also on a
subject in another list, and the different
provisions of the enactment may be so
closely intertwined that blind adherence to a
strictly verbal interpretation would result in a
large number of statutes being declared
invalid because the Legislature enacting
them may appear to have legislated in a
forbidden sphere."
Reliance was also placed on the observations of Justice
Hidayatullah in State of Rajasthan v. G. Chawla & Anr. [AIR 1959
SC 544] as cited with approval in the case of Chaturbhai M. Patel.
Those observations are :
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"It is equally well-settled that the power to
legislate on a topic of legislation carries with it
the power to legislate on an ancillary matter
which can be said to be reasonably included
in the power given."
We have no difficulty in accepting the aforesaid observations
made by Sir Maurice Gwyer, Chief Justice and Hidayatullah, J (as he
then was) but it has to be borne in mind that the question for
determination in Chaturbhai M. Patel’s case was regarding true
nature and character or the pith and substance of the impugned Act,
namely, Sections 6, 8, 9 and 10 of the Central Excuse and Salt Act,
1944 and Rules 140 to 148, 150, 171 to 181, 215 and 226 of the
Central Excise Rules, the constitutional validity whereof was under
challenge. The Constitution Bench was considering the
constitutional validity of a fiscal measure to levy and realise duty on
tobacco. The contention was that Sections 6 and 8 of the impugned
Act and rules made thereunder were beyond the legislative
competence of the Central Legislature under the Government of
India Act, 1935. The Court was examining the question whether the
impugned Act is a law with respect to matters enumerated in Item 45
of List I under the 1935 Act or to the matters enumerated in Items 27
and 29 of List II. Entries 27 and 29 have already been reproduced
above. They dealt with the power of the State to legislate in respect
of trade and commerce, markets and fairs, money lending and
money-lenders. Item 29 dealt with power to legislate in respect of
production, supply and distribution of goods, development of
industries, subject to the provisions in List I with respect to the
development of certain industries under the Federal control. The
question was whether the impugned Act in pith and substance relate
to duties of excise on tobacco as contained in Item 45 or it falls within
the boundaries of Items 27 and 29 of the Provincial List. Referring to
the decision of the Federal Court, it was held that in the interpretation
of the scope of these items, widest possible amplitude must be given
to the words used and each general word must be held to extend to
ancillary or subsidiary matters which can be fairly said to be
comprehended in it. On examination of the provisions of the Central
Excise Act, the Court came to the conclusion that various provisions
of the Act and the Rules were essentially connected with the levying
and collection of the excise duty and in its true nature and character
the Act remains one that falls under Item 45 of List I and the
incidental trenching upon the provisional field of Items 27 or 29 would
not affect the constitutionality because the extent of invasion of the
provisional field may be a circumstance to determine the true pith
and substance but once that question is determined, the Act would
fall on the side of central field and not that of the Provincial field. It is,
thus, evident that since in pith and substance the matter pertained to
excise duty, it fell under Item 45 of List I and the non-tax entries in
Item 27 or 29 could not be invoked. In the Constitution also, Entry 84
relates to duty of excise on tobacco and other goods manufactured
or produced in India.
Referring to the argument of the petitioner based on Rule 181
which dealt with revocation and suspension of licenses and
empowered the licencing department to revoke or suspend a licence
under certain circumstances and the argument that it was the field
under the province of the provincial legislature, the Court said that
this rule may have an indirect effect of depriving an owner of a
bonded warehouse from the privilege of keeping such a warehouse
but that does not mean that the object of the Act is not imposition,
collection or realization of duty of excise. The rule was held to be "a
mean of making the realization of duty effective and necessarily
incidental to effectual legislation for collection of duties". In the
present case, there is no question of any incidental trenching. It
cannot be said that the law relating to sale of tobacco in market area
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is incidental to law regarding tobacco as enacted by Tobacco Board
Act. The decision in Chaturbhai M. Patel’s case, in our opinion, has
no relevance for the present purpose and so also the decision in the
case of State Bank of India v. Yasangi Venkateswara Rao [(1999)
2 SCC 375]. The question squarely involved here is about the
interpretation of the expression ‘industry’ within the meaning of Entry
52 of List I and Entry 24 of List II.
In Ganga Sugar Corporation Ltd. v. State of U.P. & Ors.
[(1980) 1 SCC 223] the constitutional validity of U.P. Sugarcane
Purchase Act was challenged on the ground that it invades Entry 52
of List I with respect to sugar industry which is a controlled industry
under the IDR Act, 1951. The question raised therein was this : "Is
the legislation ultra vires because the State enters the forbidden
ground by enacting on controlled industry"? It was undisputed that
sugar industry was a controlled industry within the meaning of Entry
52 of List I of the Seventh Schedule and, therefore, the legislative
power of Parliament covered enactments with respect to industries
having regard to Article 246(1) of the Constitution. The Court said
that if the impugned Act invades Entry 52, it must be repulsed by the
Court. The Court, however, expressed surprise at the argument of
invalidity of the Act despite the decision of the Constitution Bench in
Tika Ramji’s case. The Court said that the Constitution Bench
decision must be accepted as final unless the subject be of such
fundamental importance to national life or the reasoning is so plainly
erroneous in the light of later thought that it is wiser to be ultimately
right rather than to be consistently wrong. It said that the
pronouncement by the Constitution Benches should not be treated so
cavalierly as to be revised frequently. Recalling the words of Chief
Justice Roberts of the U.S. Supreme Court in Smith v. Alwright
[(321 US 649 at 669] "that adjudications of the Court were rapidly
gravitating ‘into the same class as a restricted railroad ticket, good
for this day and train only’ ". That part of Tika Ramji’s case was
referred which dealt with the contention regarding the word ‘industry’
being of wide import and included not merely manufacture but also
the raw material for the industry and rejection of this contention.
Paragraphs 31, 31a and 32 deal with Tika Ramji’s case and
rejection of the argument as to whether raw material of an industry
which form an integral part of the process are within the topic of
‘industry’ which forms the subject matter of Item 52 of List I. The
Bench said :
"The edifice of exclusive parliamentary
jurisdiction so built stood on shifting sands.
The semantic sweep of Entry 52 did not
come in the way of the State legislature
making laws on subjects within its sphere and
not directly going to the heart of the industry
itself."
The submission of Mr. Shanti Bhushan, who appeared in
Ganga Sugar Corporation’s case also, to reconsider Tika Ramji’s
case was rejected. The Court said:
"Tika Ramji notwithstanding, the contention
was advanced by Shri Shanti Bhushan that
‘industry’ was a pervasive expression,
ambient enough to embrace raw materials
used for the industry and so, sugar industry,
as a topic of legislation, vested in Parliament
exclusive power to legislate on sugar-cane
supplies to sugar factories, and, pursuing this
expansionist logic, any taxation on supplies
of cane to mills would be legislation on sugar
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industry. Ergo the Purchase Tax Act was a
usurpation by the U.P. legislature breaching
the dykes of Article 246(1) read with Entry 52
of List I. He expanded on the theme by
urging that any legislation which affected the
sugar industry by taxing its raw materials was
one with respect to that industry. The Tika
Ramji ratio is diametrically opposed to this
reasoning and a ruling which has stood the
field so long has been followed by another
Constitution Bench as late as 1973 in the
Kannan Devan Hills Co. v. State of Kerala
[(1973) 1 SCR 356] and its force of logic has
our deferential assent and cannot be brushed
aside by a mere appeal for reconsideration.
Shri Shanti Bhushan candidly conceded that
if Tika Ramji were good law, his submission
was still-born. We agree."
The Court further held that :
" ‘Industry’ as a legislative topic is of large
and liberal import; true. But what peripherally
affects cannot be confused with what goes to
the heart. An acquisition of land for sugar
mills or of sugar mills may affect the industry
but is not an action in the legislative field
forbidden for the States (See the Kannan
Devan Hills Produce Company Ltd. case).
Sales Tax on raw materials going to a factory
may affect the costing process of the
manufacture but is not legislation on
industrial process or allied matters affect
topics reserved for Parliament a situation of
reductio ad absurdem may be reached."
(emphasis supplied is ours)
The effect of acceptance of the submission of Mr. Shanti
Bhushan may also denude the State of its power to legislate even in
respect of sales tax on tobacco. Such a contention was specifically
rejected in Ganga Sugar Corporation’s case.
In The Kannan Devan Hills Produce v. The State of Kerala
& Anr. [(1972) 2 SCC 218] challenge was laid to the constitutional
validity of Kannan Devan Hills (Resumption of Lands) Act, 1971 for
want of legislative competence of the State. The contention urged
was that Sections 4 and 5 of the impugned Act are a law with respect
to Entry 52 of List I of the Seventh Schedule as these provisions
regulate the carrying on of tea industry, within the competence of the
Parliament, by controlling the land for tea plantation. It was urged
that if the effect of legislation is to control the working of the tea
plantation, the legislation must be regarded as legislation with
respect to Entry 52 List I. Tika Ramji’s case was cited with
approval. Repelling the contention, it was held that the State had
legislative competence to legislate on Entry 18, List II and Entry 42,
List III and this power cannot be denied on the ground that it has
some effect on industry controlled under Entry 52, List I. The
Constitution Bench further said that if a State Act, otherwise valid,
has effect on a matter in List I, it does not cease to be a legislation
with respect to an Entry in List II or List III. It said that effect is not
the same thing as subject matter. The object of Sections 4 and 5
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seems to be to enable the State to acquire all lands which do not fall
within the categories (a), (b) and (c) of Section 4(1). These
provisions are really incidental to the exercise of the power of
acquisition. The State cannot be denied the power to ascertain what
land should be acquired by it in the public interest.
In B. Viswanathiah & Co. & Ors. v. State of Karnataka &
Ors. [(1991) 3 SCC 358] the challenge was to the validity of the
provisions of Mysore Silkworm Seed and Cocoon (Regulation of
Production, Suply and Distribution) Act, 1959 (Act 5 of 1960). The
contention urged on behalf of the petitioners in that case was that
any legislation in respect of silk industry can be enacted only by the
Parliament and the State Legislature is incompetent to legislate on
the matter because Section 2 of the Central Silk Board Act enacted a
declaration in terms of Entry 52, List I. The effect of it was to remove
the silk industry from the purview of the State Legislature powers
thus, rendering the State Legislature incompetent to legislate on that
topic. The High Court repelled the challenge relying upon the
decision of this Court in Tika Ramji, Ganga Sugar Corporation
Ltd., Harakchand Ratanchand Banthia and Kannan Devan Hills
Produce Company’s cases. After noticing that the High Court on
the basis of series of decisions of this Court regarding scope of Entry
52 of List I in the Seventh Schedule of the Constitution had repelled
the challenge, this Court expressed full agreement with the views of
the High Court. It was held that the control of industry vested in
Parliament was restricted to the aspect of production and
manufacture of silk yarn or silk. It did not obviously take in the earlier
stage of industry, namely, the supply of raw materials. For instance,
even in regard to the silk industry, the reeling, production,
development and distribution of silkworm seeds and cocoons was
regulated by the State Act. These items can be perhaps legitimately
described as raw materials of the silk industry. The control being
vested in Parliament under Entry 52 of silk industry did not affect the
control over these raw materials. It was held that the control, supply
and distribution of the goods produced by the industry was the third
aspect of industry which falls outside the purview of the control
postulated under Entry 52. In other words, though the production
and manufacture of raw silk cannot be legislated upon by the State
Legislature in view of the provisions of the Central Act and the
declaration in Section 2 thereof, that declaration does not in any way
limit the powers of the State Legislature to legislate in respect of
goods produced by the silk industry. This Court said that "To
interpret Entry 52 otherwise would render Entry 33 in List III of the
Seventh Schedule to the Constitution otiose and meaningless". The
same would be the position in the present case.
The acceptance of the argument of Mr. Shanti Bhushan would
make various Entries in the State List otiose and meaningless and
subject to Entry 52 of List I despite the fact that the entries are not so
worded.
In Indian Aluminium Company Ltd. & Anr. v. Karnataka
Electricity Board & Ors. [(1992) 3 SCC 580] challenging the
amending Act by the State, the contention urged before the High
Court was that :
"Aluminium industry is scheduled industry
under the control of the Government of India
as declared by Industries Development and
Regulation Act and hence falls under Entry
52 of List I of VIIth Schedule of the
Constitution. Therefore, the policy of
Government of India amounts to direction
issued to the State Government which they
are bound to obey. Consequently the
agreement of 1976 is an agreement
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protected by a law coming under Entry 52 of
List I, terms of which cannot be varied by a
law enacted by a State by virtue of the power
conferred by the Concurrent List (List III of
VIIth Schedule). The amending Act should
be construed in such a way as not to impinge
on or detract from the law, statutory order or
constitutional direction of the Central
Government, otherwise the said amending
Act will lack legislative competence."
The High Court relying upon the decision in Tika Ramji’s case,
where the concept of industry as a topic of legislation was explained,
repelled the aforesaid contention. The decision and reasoning given
by the High Court upholding the vires of the amending Act relating to
the concept of industry as explained in Tika Ramji’s case were
upheld by this Court.
In M/s. Shriram Industrial Enterprises Ltd. v. The Union of
India & Ors. [AIR 1996 All. 135] a Full Bench of Allahabad High
Court examined the validity of U.P. Sheera Niyantran Adhiniyam,
1964 (U.P. Act No. XXIV of 1964) on the question of the competence
of the State Legislature. Its validity had been challenged by the
Sugar Industry. It was urged that by virtue of Section 18G of the IDR
Act, the State Legislature stood denuded of power to legislate
regulating supply, distribution and supplies of molasses a product
of sugar industry and was consequently incompetent to enact
Sections 7, 8 and 10 of the aforesaid State Act. The Full Bench
tracing the history of legislation leading to framing of the Constitution
held that if the argument about denuding of power of State
Legislature is accepted, most of the entries in Lists II and III would be
meaningless. Once the Parliament makes a declaration under Entry
52 of List I, for instance, Entries 20, 21, 22, 23 and 24 would be
redundant. The High Court said that neither it was the intention of the
framers of the Constitution nor the said contention is born out from
the perusal of Entry 52 and the other Entries of Lists II and III of the
Seventh Schedule. Noticing various decisions of this Court, the High
Court concluded as under:
"Applying the principles propounded by the
apex Court in the cases mentioned above, it
is apparent that the State Legislature is
competent to make law in respect of the
subject industries under Entry 24 of the List II
subject to Entries 7 and 52 of List I of the
Seventh Schedule and is further competent
to enact law on the subject "trade and
commerce within the State and Production,
supply and distribution of goods," under Entry
26 and Entry 27 of List II subject to Entry 33
of List III of Seventh Schedule of the
Constitution. But on declaration under Entry
52 of List I by Parliament in respect of the
industries the control of which by the Union is
by law held to be expedient in the public
interest, three consequences flow. Firstly, on
declaration by Parliament in respect of
controlled industries the power of State
Legislature to legislate under Entry 24 of List
II shifts to Entry 52 of List I to the extent of
control provided in the Act. The second
result which follows upon declaration is that
the power to enact law by State Legislature
under Entry 26 and Entry 27 of the List II of
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Seventh Schedule becomes part of Entry 33
of List III which is a concurrent list. Third
consequence that follows on declaration is
that the products of the controlled industries
would fell within Entry 33 of List III.
The controversy before me, if examined
seeing the constitutional debate, history of
legislation, structure and design of the
relevant entries and also keeping in view the
basic structure of the Constitution, the only
irresistible conclusion is that Section 18G of
the IDR Act is referable to Entry 33 of List III
of the Seventh Schedule. Since the power to
enact in respect of production, supply and
distribution of the products of the controlled
industries being a concurrent subject, the
U.P. Legislature is competent to enact the
Adhiniyam of 1964."
The structure and scope of Entry 54 of the Union List and Entry
23 of the State List and their inter-relationship is substantially
different from the scope and structure of Entry 24 of the State List
and Entry 52 of the Union List. The Entry relating to of mines and
minerals has in it both the industry of mines and its product minerals
and, therefore, on a declaration both mines and minerals get
embedded in Entry 54 of the Union List. Therefore, it has been
consistently held by this Court, that by declaration under Entry 54,
the Parliament evinces an intention to occupy the whole field.
In my view the Full Bench rightly held that the cases relating to
mines and minerals relied upon in support of the challenge to the
State legislation were of no assistance. The Full Bench decision was
approved by this Court in SIEL Ltd. & Ors. v. Union of India & Ors.
[(1998) 7 SCC 26].
In Belsund Sugar Co. Ltd. v. State of Bihar & Ors. [(1999) 9
SCC 620], the Constitution Bench examined the question regarding
the legality of levy of market fee under the provisions of Bihar
Agricultural Produce Markets Act, 1960 pertaining to various
commodities including sugarcane, sugar and molasses, wheat and
tea. The Court first dealt with the transaction of purchase of
sugarcane by the sugar factories functioning in the market areas
falling within the jurisdiction of respective market committees
constituted under the Market Act. It noticed that the Market Act had
been enacted by the Bihar Legislature as per the legislative power
vested in it by Entries 26, 27 and 28 of List II of the Seventh
Schedule of the Constitution. The Court, however, noticed that the
Market Act dealt with supply and distribution of the goods as well as
the trade and commerce therein as it seeks to regulate the sale and
purchase of agricultural produce to be carried on in the specified
markets under the Act. To that extent, the Court said, the provisions
of Entry 33 of List III override the legislative powers of the State
Legislature in connection with legislations dealing with trade and
commerce in, and the production, supply and distribution of goods.
Thus, to the extent to which the Market Act seeks to regulate the
transactions of sale and purchase of sugarcane and sugar which are
foodstuffs and trade and commerce therein, the Constitution Bench
said that it has to be held that the Market Act being enacted under
the topics of legislative powers under Entries 26, 27 and 28 of List II
will be subject to any other legislation under Entry 33 of the
Concurrent List. The contention of Mr. Dwivedi being that as
admittedly the tobacco is not foodstuff and does not fall under Entry
33 of List III, like the amendment to the Constitution made in 1953,
the Parliament by further amendment of the Constitution can, if so
advised, place tobacco raw material of the industry - in Entry 33 of
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List III and, thus, confer on itself the competence to legislate in
respect to tobacco, need not be examined by this Court as being
unnecessary. We may, however, note that the Constitution Bench,
after noticing various provisions of the Act and the Rules, came to
the conclusion that the need for regulating the purchase, sales,
storage and processing of sugarcane, being an agricultural produce,
is completely met by the comprehensive machinery provided by the
Sugarcane Act enacted by the same very legislature which enacted
the general Act being the Market Act.
In Belsund Sugar Co. Ltd. one of the contentions urged was
that under the IDR Act, in public interest, Union of India had taken
over the control of the wheat industry as specified in the First
Schedule to the Act and consequently any transaction of purchase
and sale of the product of that industry cannot be regulated by the
State Act. The Constitution Bench noticed that the Parliament in
exercise of its legislative power under Entry 52 of List I of the
Seventh Schedule had enacted the IDR Act and flour industry is
listed as one of the scheduled industries under the caption "Food-
processing Industries". The Bench said that the production of wheat
as a raw material or its sale is not covered by the said Act and,
consequently, so far as wheat as ‘agricultural produce’ is concerned,
it is outside the sweep of the IDR Act. The question still remained
whether the sale of flour or any other product out of wheat can be
said to be covered by the sweep of the IDR Act. It was noticed that
the Central Government had not promulgated any statutory order
under Section 18G covering the field. The Court rejected the
contention that mere existence of a statutory provision in the Act
enabling the Central Government to issue such order would be
sufficient to occupy the field contemplated by the provision. While
examining the decision in Hingir-Rampur Coal Company’s case on
which reliance was placed by the appellants, the Constitution Bench
held that it has to be kept in view that any legislation in exercise of
legislative power under Entry 54 of List I would enable the Parliament
to regulate mines and the minerals development by taking them
under the control of the Union in public interest. Thus, all aspects of
the mining industry would be covered by the general sweep of such a
declaration. But it was noticed that the IDR Act was enacted under
Entry 52. It was held that the scheme of Entry 54 of the Union List
read with Entry 23 of the State List was entirely different from the
scheme of Entry 52 of List I read with Entry 24 of List II with which
the Court was concerned in that case. On conjoint reading of these
two entries, the ratio of the decision in Hingir-Rampur Coal
Company’s case, it was held, cannot be effectively pressed into
service.
As already noticed, the majority decision in ITC case for the
view it took had placed reliance on Baijnath Kadio which followed
Hingir-Rampur Coal Company’s case.
Further in Belsund Sugar Company, the Constitution Bench
cited with approval the decision in SEIL case and reiterated that
merely because industry is controlled by a declaration under Section
2 of the IDR Act enacted by Entry 52 of the Union List, the State
Legislature would not be denied of its power to regulate the products
of such an industry by exercise of its legislative power under the
State List. It would be useful to extract para 119 of Belsund Sugar
Company’s case as under :
"However, so far as the IDR Act is
concerned, it is enacted under Entry 52 of the
First Schedule which deals with industries in
general. Simultaneously in the State List
itself there is Entry 24 which deals with
industries subject to the provisions of Entries
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7 and 52 of List I. Consequently, the
products of such controlled industries would
necessarily not be governed by the sweep of
the general legislation pertaining to such
industries as per Entry 52 of the Union List.
The aforesaid Constitution Bench judgment
was not concerned with any State legislation
enacted under Entry 24. On the contrary, it
dealt with legislation of the Union Parliament
under Entry 54 of the Union List read with
Entry 23 of the State List. The scheme of the
aforesaid legislative entries is entirely
different from the scheme of Entry 52 of List I
read with Entry 24 of List II with which we are
concerned. On a conjoint reading of the
aforesaid two entries, therefore, the ratio of
the decision of the Constitution Bench in the
aforesaid case cannot be effectively pressed
into service by Shri Ranjit Kumar for
supporting his contention. In this contention,
we may usefully refer to a decision of this
Court in SIEL Ltd. where one of us, Sujata V.
Manohar J. was a member. It has rightly
distinguished the ratio of the Constitution
Bench decision in the case of Hingir Rampur
Coal co. Ltd. and taken the view that merely
because an industry is controlled by a
declaration under Section 2 of the IDR Act
enacted by Entry 52 of the Union List, the
State Legislature would not be denied of its
powers to regulate the products of such an
industry by exercise of its legislative powers
under Entry 24 of the State List. In that case
the question was whether the U.P. Sheera
Niyantran Adhiniyam, 1964 could be said to
be repugnant to the Molasses (Control) Order
issued by the Central Government under
Section 18-G of the IDR Act imposing
restrictions on the sale of molasses and fixing
the maximum price of molasses. Answering
the question in the negative, it was held that
the term ‘industry’ in Entry 24 would not take
within its ambit trade and commerce or
production, supply and distribution of goods
which are within the province of Entries 26
and 27 of List II. Similarly, Entry 52 in List I
which deals with industry also would not
cover trade and commerce in, or production,
supply and distribution of, the products of
those industries which fall under Entry 52 of
List I. For the industries falling in Entry 52 of
List I, these subjects are carved out and
expressly put in Entry 33 of List III. It was
also held that since the Molasses (Control)
Order of 1961 passed by the Central
Government in exercise of powers conferred
by Section 18-G was not extended at any
point of time to the State of U.P. or the State
of Bihar, the question of repugnancy between
the Molasses Control Order, 1961 and the
U.P. Sheera Niyantran Adhiniyam, 1964 does
not arise. Consequently, it must be held that
in the absence of a statutory order
promulgated under Section 18-G of the IDR
Act, it cannot be said that the field for
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regulation of sale and purchase of products
of the flour industry like atta, maida, suji,
bran, etc. would remain outside the domain of
the State Legislature."
(emphasis supplied is ours)
The principles aforesaid would equally apply to Entries 14 27,
28 and 66 of List II. It may further be noticed that in para 170 of
Belsund Sugar Company’s case, the Constitution Bench reiterates
the view expressed in Tika Ramji’s case as also in SIEL’s case
affirming Full Bench of the Allahabad High Court in M/s. Shriram
Industrial Enterprises (supra).
In view of the above, I see no compelling reason either on
account of any binding precedent in the form of a earlier Constitution
Bench judgment, history and background of the framing of the
Constitution or the words used in various Entries or the language of
any Article in the Constitution of India, to take a view which will result
in denuding the power of State Legislatures to legislate not in respect
of field of legislation under Entry 24 but field of legislation covered by
other entries on State List on making of declaration under Entry 52 of
the Union List. The Constitution Bench judgment in the case of Tika
Ramji and other decisions following it confine the field of legislation of
industries to ‘the process of manufacture or production’ and not to
‘raw materials’ which may be integral part of industrial process or to
the ‘distribution of the product of the industry’.
In view of the aforesaid, I conclude as under :
1. The State legislations and the Tobacco Board Act, 1975 to the
extent of sale of tobacco in market area cannot co-exist.
2. The State Legislatures are competent to enact legislations
providing for sale of agricultural produce of tobacco in market
area and for levy and collection of market fee on that produce.
3. The Parliament is not competent to pass legislation in respect
of goods enumerated in aforesaid conclusion No.2 while
legislating in the field of legislation covered by Entry 52 of the
Union List under which the Parliament can legislate only in
respect of industries, namely, ‘the process of manufacture or
production’ as held in Tika Ramji’s case. The activity
regarding sale of raw tobacco as provided in the Tobacco
Board Act cannot be regarded as ‘industry’.
4. ITC’s case [1985 Supp. SCC 476] is not correctly decided.
Leave in special leave petitions granted. For the aforesaid
reasons, the State legislations are held to be valid pieces of
legislation. The appeals and the writ petition are disposed of
accordingly. Parties to bear their own costs.
..........................................J.
[Y.K. Sabharwal]
January 24, 2002
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