PUNJAB TRADERS AND ORS. vs. STATE OF PUNJAB AND ORS.

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 1 of 6 PETITIONER: PUNJAB TRADERS AND ORS. Vs. RESPONDENT: STATE OF PUNJAB AND ORS. DATE OF JUDGMENT18/09/1990 BENCH: THOMMEN, T.K. (J) BENCH: THOMMEN, T.K. (J) SINGH, K.N. (J) KULDIP SINGH (J) CITATION: 1990 AIR 2300 1990 SCR Supl. (1) 499 1991 SCC (1) 86 1990 SCALE (2)603 ACT: East Punjab Molasses (Control) Act, 1948--Ss. 2(c) 2(f), 3, 3A, 4, 6. 8 & 13--Clarificatory amendment of by East Punjab Molasses (Control) Amendment Act, 1973--Constitution- al validity of. Constitution of India: Articles 304(b) proviso, 305 & 366(10)-East Punjab Molasses (Control) Act, 1948--Existing Law--Clarificatory amendment of by East Punjab Molasses (Control) Amendment Act, 1973--Previous sanction of Presi- dent-- Whether mandatory. HEADNOTE: The East Punjab Molasses Control (Amendment) Act, 1973 substituted the definition of "molasses" in section 2(c) of the East Punjab Molasses (Control) Act, 1948 to mean "the mother liquor produced in the final stage of manufacture of sugar or khandsari sugar". The unamended section 2(c) had hitherto referred only to sugar. Consequent changes were also made in other provisions of the Principal Act to give effect to the amendment. The appellants-dealers in khandsari molasses aggrieved by the expanded definition of molasses challenged the con- stitutionality of the Amendment Act, 1973 on the ground that it had imposed direct and immediate restrictions upon their trade and commerce unsupported by the previous sanction of the President of India in terms of Article 304(b) of the Constitution. The High Court dismissed the writ petition holding that the appellants were not shown to have been aggrieved solely by reason of the amendment on the view that their business had been in equal measure controlled by the Principal Act itself. In this appeal by special leave, the appellants reiter- ated their contentions advanced before the High Court. For the respondents it was contended that the provisions of the Amendment Act, 1973 were regulatory measures enacted to facilitate trade and therefore they did not come within the ban of the proviso to clause (b) of Article 304 to require the previous sanction of the President. 500 Dismissing the appeal, the Court, http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 2 of 6 HELD: 1. The main object of the Amendment Act, 1973 was to clarify that the Principal Act applies in equal measure to a khandsari unit as it does to any other sugar factory. It was always well understood in trade that khandsari sugar was also sugar and that any reference to sugar, in the absence of specific exclusion or qualification, was capable of equal application to sugar of all kinds including khand- sari. The Act did not become applicable to the appellants only as a result of the amendment. Even though persons who dealt with the statute may have understood its provisions in a restricted sense, such mistaken construction of the stat- ute did not bind the Court so as to prevent it from giving it its true construction. [316A-C] The Trustees of the Clyde Navigation v. Laird & Sons, 8 AC 658, 670 and National & Grindlays Bank Ltd. v. The Munic- ipal Corporalion of Greater Bombay, [1969] 1 SCC 541, re- ferred to. 2. The Principal Act being an "existing law" within the meaning of Article 366(10) read with Article 305 of the Constitution, and the provisions of the Amendment Act being clarificatory, the previous sanction of the President was not required. [316D-E] Syed Ahmad Aga v. Stale of Mysore, [1975] Suppl. SCR 473, referred to. JUDGMENT: CIVIL APPELLATE JURISDICTION: Civil Appeal No. 1372 of 1980. From the Judgment and Order dated the 19.5. 1980 of the Punjab and Haryana High Court in C.W.P. No. 1378 of 1973. G.L. Sanghi, Vivek Gambhir, Dhruv Mehta, S.K. Gambhir and Surender Karnail for the Appellants. C.M. Nayar for the Respondents. The Judgment of the Court was delivered by THOMMEN, J. This appeal by special leave arises from the Judgment of the Punjab & Haryana High Court in Civil Writ Petition No. 1378 of 1973. The appellants in the writ peti- tion challenged the constitutionality of the East Punjab Molasses (Control) Amendment 501 Act. 1973 (hereinafter referred to as the "Amendment Act, 1973") on the ground that the said amendment had not re- ceived the previous sanction of the President of India in terms of Article 304(b) of the Constitution. The High Court dismissed the writ petition holding that the appellants were not shown to have been aggrieved by the impugned amendment. The Amendment Act. 1973 amended the provisions of the East Punjab Molasses (Control) Act. 1948 (East Punjab Act No. 11 of 1948) (hereinafter referred to as the "Principal Act"). as it stood at the relevant time. The Principal Act had been earlier amended in 1950. 1957. 1964 and 1968. It was subsequently amended in 1976. The appellants have. however. challenged only the Amendment Act, 1973 and have significantly not challenged the earlier or subsequent amendments. Rejecting the appellants’ contentions. the High Court observed: .... We have very carefully gone through the petition and we have asked the learned counsel for the petitioners to point out any averment from the petition. to show that the petitioners were dealing with molasses which were not covered under the definition of molasses given in the unamended Act. but arc covered within the definition of molasses under the Amending Act. No such averment has been http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 3 of 6 made ..... The grievance of the petitioners that they have been made subject to the provisions of the Act in view of the Amending Act. thus does not stand substantiated from the averments made in the petition .. The appellants admitted before the High Court that, apart from the Principal Act, as enacted in 1948. being an ’existing law’. and therefore beyond challenge. none of its provisions could be regarded as an unreasonable restriction on the freedom of trade. commerce and intercourse. The appellants, however. contended that the impugned provisions inserted in 1973 were null and void for the reason that the restrictions so introduced had not received the previous sanction of the President. Section 2 of the Principal Act was amended in 1973 to define ’molasses’ as well as ’khandsari unit’. By this amendment, a new definition of ’molasses’ was substituted in the place of the original definition [See Clause (c)]. Clause (f) of Section 2 was added to define a ’khandsari unit’. 502 Section 3 of the Principal ’Act empowered the Controller to "direct the owner or occupier of a sugar factory or any other person" to furnish returns of the stock of molasses in his possession. This Section was amended in 1973 to bring a khandsari unit or distillery within the statutory ambit. Section 3(A) had been added in 1964. to empower the Control- ler to direct the owner or occupier of a sugar factory or distillery, or any other person permitted to store and preserve molasses, to construct tanks for the storage of molasses. This Section was amended in 1973 to bring a khand- sari unit within its ambit. Section 4 of the Principal Act says that no person shall, without a permit issued by the Controller, move molasses by road, rail, river or by any other means or sell or otherwise dispose of molasses to any person other than the Government or a person licensed by the Government in this regard. It also authorises the Controller to direct the owner or occupier of a sugar factory to supply molasses of specified quantity and quality to such persons as the Con- troller may direct. This section was amended in 1964 to provide that no person shall store or preserve molasses without the Controller’s permit. It was further amended in 1973 to bring a khandsari unit within the ambit of the controller’s power to direct supply of molasses. Section 5 of the Principal Act empowers the Government to regulate prices from time to time and prescribes the manner in which molasses has to be graded, marketed, packed or stored for sale. It was amended in 1976 in certain re- spects which are not material. Section 6 provides for the imposition of penalty in the event of contravention of any provision of the Act. The Section was substituted in 1964- for the original Section. It was amended in 1973 in certain respects. Section 7 of the Principal Act refers to liability for breaches by corporation or company. This Section has not undergone any change. Section 8 of the Principal Act provid- ed that no court should take cognizance of any offence punishable under the Act except on a report made by the Controller. This section was substituted in 1964- to provide for the exercise of supervision and control by the Control- ler over sugar factories through subordinates. It was amend- ed in 1973 by including a khandsari unit within its ambit. Section 9 of the Principal Act provided for power of entry and seizure. It was substituted in 1973 by a new section with certain changes which are immaterial. Section 10 of the Principal Act provided for the procedure of seizure. It was http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 4 of 6 substituted by a new section in 1973, but the changes are not material. Section 11 deals with the delegation of pow- ers. It has not undergone any change. Section 12 of the Principal Act deals with the power of the Govern- 503 ment to exempt any area or person from the provisions of the Act. This Section was amended in 1973 to empower the Govern- ment to exempt any kind of molasses from the provisions of the Act. Section 13 of the Principal Act deals with the rule making power of the Government. It was amended in 1973 to include khandsari unit or distillery within the scope of that Section. These are the changes made in the Principal Act. The substantial change introduced by the Amendment Act, 1973 is in the substituted definition of ’molasses’ so as to include within its meaning mother liquor produced in the final stage of manufacture of sugar or khandsari sugar. The appellants being dealers in khandsari molasses are stated to be aggrieved by the expanded definition of ’mo- lasses’. ’Molasses’ was defined under the unamended Section 2(c) of the Principal Act as follows: "2(c) ’Molasses’ means the heavy, dark coloured residual syrup drained away in the final stage of the manufacture of sugar by vacuum pans or in open pans in sugar factories either from sugarcane or by refining gur; when such syrup has a density of not less than 75 degrees brix and a for- mentable sugar content (expresent as reducing sugars) 19 per cent. ’ ’ This definition was substituted by the Amendment Act, 1973 as follows: "2(c) ’molasses’ means the mother liquor produced in the final stage of manufacture of sugar or khandsari sugar, by vacuum pans or in open pans, from sugarcane or gur, with or without the aid of power." The new definition of ’molasses’ under the amendment provi- sion specifically refers to khandsari sugar, apart from sugar, while the unamended section 2(c) referred only to sugar. Section 2(f), as introduced by the Amendment Act, 1973 defines ’khandsari unit’ as follows: "2(f) ’khandsari unit’ means any premises, including the land, godowns or out-houses appurtenant thereto, wherein, or in any part of which a manufacturing process con- 504 nected with the production of khandsari sugar from sugar- cane or gur in open pans is carried on with or without the aid of power." The ’occupier of a khandsari unit’ is defined as "a person who has control over the affairs of a khandsari unit". The definition of sugar factory’ has not undergone any change, and it reads as follows: "2(d) ’sugar factory’ means any premises, including the land, godowns or outhouses appurtenant thereto, whereon twenty or more workers are working, or were working on any day of the preceding twelve months, and in any part of which a manufacturing process connected with the production of sugar by means of vacuum pans or in open pans is being carried on or is ordinarily so carried on, with the aid of power." The main object of the Amendment Act, 1973 is to clarify that the Principal Act applies in equal measure to a khand- sari unit as it does to any other sugar factory. The contention is that the provisions of the Amendment Act, 1973. though not in themselves unreasonable restric- tions, nevertheless bring the appellants under greater statutory control, and are, therefore. invalid for want of http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 5 of 6 previous sanction of the President in terms of the proviso to Article 304(b). This challenge. as seen above, has been rejected by the High Court for the reason that the appel- lants’ business has been in equal measure controlled by the Principal Act itself. The appellants being dealers in mo- lasses. the new definition of the term "molasses", which includes "khandsari sugar", does not subject their business to any greater control. The appellants’ counsel. Mr. G.L. Sanghi contends that the provisions of the Amendment Act. 1973 impose direct and immediate restrictions upon the appellants’ trade. They are a burden on trade and they deter the appellants from trad- ing. They directly affect the freedom of trade and commerce. They are not merely regulatory for the purpose of facilitat- ing the free flow of trade and commerce. They are restric- tions hampering trade. They may be justifiable as reasonable restrictions, but being restrictions unsupported by previous sanction of the President, they are nevertheless invalid. Mr. C.M. Nayar, appearing for the respondents, on the other 505 hand. contends that the impugned provisions of the Amendment Act, 1973 are regulatory measures enacted to facilitate trade and they do not come within the ban of the proviso to clause (b) of Article 304. These provisions do not require the previous sanction of the President in terms of the proviso to Article 304(b). Counsel on both sides. in support of the respective contentions. refer to the principle stated by this Court in Ariabari Tea Co., Ltd. v. State of Assam & Ors., [1961] 1 SCR 809; The Automobile Transport (Rajasthan) Ltd. v. The State of Rajasthan & Ors., [1963] 1 SCR 491 and State 0f Bihar & Ors. v. Harihar Prasad Debuka & Ors.. [1989] 2 SCC 192 and other cases. [1967] (21 SCR 361; [1971] (11 SCC 59; [1986](1) SCR 939;[1989] (31 SCC 211;[1990] (31 SCC 87; [1957] SCR 721; [1970] (11 SCR 400; [1955] (11 SCR 380; [1954] (31 All E.R. 6(17; [1954] (51 SCR 873. 8811; [1975] Supp. SCR 473; [1983] (31 SCC 237 and [1969] (1) SCC 541. It is not and cannot be. disputed that if the impugned provisions are not merely regulatory with a view to facili- tating trade. but are in quality and substance restrictive. though reasonable as restrictions can be. and if they in effect constitute a hinderance or impediment to the free flow or movement of trade, they are unconstitutional in the absence of previous sanction of the President. The question, however is the Principal Act. being an "existing law" and, therefore, beyond challenge. do the impugned provisions. introduced in 1973. being additional provisions. enlarge in substance and quality the scope and ambit of the Principal Act. thereby impeding in greater measure the free flow or movement of trade so as to fall within the ban of the provi- so to clause (b) of Article 304? In other words. does the Amendment Act.1973. restrict the appellants’ business to a greater extent or is it merely clarificatory in so far as. at any rate. the appellants are concerned? The point then really is. has the amendment made the Act more stringent in so for as the appellants are concerned? If the answer is negative. as the High Court has held. the appellants are not aggrieved. and cannot therefore. success- fully challenge the Amendment Act. Referring to the principle of contemporanea exposition. Mr. Sanghi says that the Act. as it stood before the amend- ment. was not understood to apply to khandsari unit. and consequently to the business of the appellants. and it became applicable only as a result of the amendment. We do not agree that this submission is right. The High http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 6 of 6 506 Court has, on the basis of the pleadings and other evidence, and with reference to the relevant provisions, categorically held that the Act, as it originally stood, was applicable to the trade of the appellants, and the amendment in effect did not make any difference to them. The High Court has found that the appellants were not aggrieved solely by reason of the amendment, and the provisions, as they stood prior to the amendment, applied to them in equal measure. This apart, the amendment, in our view, was merely clarificatory, and it was always well understood in trade that khandsari sugar was also sugar, and that any reference to sugar, in the absence of specific exclusion or qualification, was capable of equal application to sugar of all kinds including khandsari. Even if it is true that persons who dealt with the statute under- stood its provisions in a restricted sense, such mistaken construction of the statute did not bind the Court, so as to prevent it from giving it its true construction. (see the observation of Lord Blackburn in The Trustees of the Clyde Navigation v. Laird & Sons, 8 AC 658, 670), as quoted in National & Grindlays Bank Ltd. v. The Municipal Corporation of Greater Bombay, [1969] 1 SCC 541. We are of the view that the reasoning of the High Court was correct. The Principal Act being an ’existing law’ within the meaning of Article 366(10) read with Article 305 of the Constitution, and the provisions of the Amendment Act, 1973 which are impugned in this appeal being clarifica- tory, the previous sanction of the President was not re- quired. See the principle stated in Syed Ahmad Aga v. State of Mysore, [1975] Suppl. SCR 473. We do not, however, ex- press any view as to whether the impugned Act is regulatory or restrictive, for that question, for the present purpose, is, in our opinion, academic. The appeal is dismissed with costs throughout. P.S.S. Appeal dismissed. 507