RAGHUBAR DAYAL JAI PRAKASH versus THE UNION OF INDIA AND OTHERS

3 S.C.R. SUPREME OOURT REPORTS

RAGHUBAR DAYAL JAI PRAKASH "'!

THE UNION OF INDIA AND OTHERS

(P. B. GAJENDRAGADKAR, A. K. SARKAR, K. N. WANOHOO, K. C. DAs GUPTA and N. RAJAGOPALA AYYANGAR, JJ.)

Forward Contracts-Law to regulate such contracta-Ruog-nition of G!&Ociations-Constitutional validity of enactm~nt­Forward Contract• (Regulation) Act, 1952 (74 of 1952), sa.2(j), 5, 6, 10, 15, 16, 17, 20, 2I(e) & (f)-Con,,titution of India, Arl1 14, 19(1)(!), 19(1)(g), 19(5), 19(6).

Tradt"rs like the petitioner combined to,gether to form an association the objects of \Vhich were to regulate forward transactions in the sale and purchase of gur and other commo--~ dities entered into between the n1embers -of the association, as also to declare the rates at which the contracts vvere to be settled on the dates fixed for delivery. The petitioner had entered into forward contracts of purchase . of gur at certain rates and had also deposited as the buyer the amount as well a1 the special margin required to be deposited under the bye-laws of the association. Contracts entered into by him were outstand· ing on February 11, 1959, when on that date the Central Government isliued notification under s.15 of the Forward Contracts (Regulation) Act, 1952, under which every forward contract for the sale of purchase of any goods specified in the ~ notification which vvas entered into in the area specified therein otherwi5c than betv\.'een members of recognised association or through or with any such member, shall be illegal. The association in question of which the petitioner was me111ber, was not on the date of the notification dated February 11, 1959 recoKnised by the Central Governn1ent under s. 6 of the ~A.ct, as result of which the forwar.::1 contracts entered into by him ' became illrgal and void. The further consequence of the .).- notification was that under s. 16 the transactions entered into by the petitionrr and others situated similarly like him which remained to be performed after the said date were to be deemed to be clo~ed out on that date and the differences arising out of the contract \\'ere to be payable not at the rate originally stipulated by the contracting parties but at the rates specified in the notification. The petitioner challenged the validity of the provi•ions of the Act on the grounds inter alia (I) that ss. 5 and 6 relating to the recognition of associations by the ) Central Government and s. l 0 which enabled it to direct rules to be made and, in case the recognised as~ociation failed to

\;\ke li\Ction, to them•clve• make the rules, infringed the frecdolll

1961 Ra~huhar Daynl Jai Prakash v. Thi l:'niori of India

guaranteed by Art. 19(1)(c) of the Constitution of India, f' (2) thats. 15 infringed Arts. 14, 19(1)(f) and 19(l)(g), and (3) that s.16 in so far as it enabled the Government to fix the ratr:; at which thr. differences payable by or.e party to the other, without giving any indication of the principles underlying the fixation of the price, conferred an unguided power and offended Art. 14.

Held: (I) that ss. 5, 6 and 10 and other provisions in Ch. III of the Forwards Contracts (Regulation) Act, 1%2, proceeded on the basis that or_ganisations of tradesmen might be ~ntrusted with the task of regulating these tran'.liactions, so that while legitimate trade might be furthered the evil conse-quence< of undesirable speculation might be a\·oided, and they were enacted with the object of ensuring effective control over the mechanism of forward trading. 1\ccordingly, thi: provisions in Ch. III of the Act do not contravene Art. 19(1)'.r) of the Constitution.(2) that on proper comtruction of s.15 the recognition of an association under the provisions of the Act \vas not an e!~ential pre.requisite before notification could be issued under the section, and that the issue of such notification \\·as not an unreasonable restriction on the right of the petitioners to carry on business within the meaning of Art. I 9(G) of the Con~tinttion of In<lia.

(3) that the selection of the commodity for the regula-tion of forward trading in it or of prohibition of <uch trading could only be left to the Government and the purposes for \\·hich the pow("r 'vas to be used and the machinery created for the investigation furnished sufficient guidance; consequently, s.15 did not confer an unguided anci arbitrary po,,·er and did not infringe Art. 14.

(4) that the rc<trictions impo<ed by s.15 of the Act were reasonable within Art. 19(5) and (6) and did not contravene Art. 19(1)(£) and (g).

(5) that s.16 of the Act could noL be challenged as eith("r piece of exccssh·e delegation or offended Art. 14.

0HJGIXAL .TvRTSDICTIOX : Petitions Nos. to '.!G and 42 of Ul50 ..

Petitions under Art. 32 of the Con~titution of Inrli<i for the enforcement of fun<lamentnl rights.

Jf. K. Nmnbza.r, E. Udnyamthnmn, Rwnesh1cm Nath and S. S. Slmk/11, for the petitioners (In Petn. ~Oil. 22 and 23 of 50).

S. C. Chatterjee, R. C. G11pta, E. Udr,yurathnmn ancl S. S. Sh1tkfo, for the pctitionerB (In Petn. Nos. 24 and 25 of 50).

R. Udayamthna.m and S. S. Sh1ikla, for the petitioners (In Pctn. No. 26 of 50).

3 S.C.R. SUPREME COURT REPORTS 549

S. T. Desai and S. S. Sh,uklc!, for the peti-tioners (In Petn. No. 42 of 59).

G. ]{, Daphtary, Solicitor-General of I ndili, B. Sen, R. H. Dhebar and T . .irl. Sen, for the respondent No. 1 (In all the petitions). B. P. Jffa}ieshwari, for respondent No. 2 (In Petn. Nos. 22 and 25 of 1959) .

• G. C. "lfothur, for respondent No. 2 (In Pet11 Nos. 26 and 42of1959).

R. L. Agwwala and P. G. Agarwala, for the Intervcners.

1961. September 12. The Judgment of the Court was delivered by AYYANGAR, J.-These six petitions filed under Art. 32 of the Constitution raise for consideration three points: ( l) the constitutional validity of the operative provisions of the Forward Contracts (Regulation) Act (Act LXXIV of 1952) (to be referred to hereafter as the Act), (2) the validity of notification dated February 11, 1959, issued under s. 15 of the Act by which gur was brought within the purview of the enactment with immediate el'tect, and (3) the validity of another notification of the Central Government issued simultaneously fi:idng the price at which Forward Contracts subsisting on February 11, 1959, was directed to be settled. For the purpose of understand-ing the points raised and the effect of the impugned notifications on the rights of the petitioners it is sufficient to refer to the facts of Petition No. 23 of 1959 which is typical of the eases before us.

The petitioner-Raghubar Dayal Jai Prakash is firm carrying on the business of purchase and sale of gur and other. commodities inter alia at l\Ieerut. Traders like the petitioner had combined togNher to form company regi8tered under the Indian Companies Act under the name 'Kaisergunj Beopar Co. (P) Ltd'., Meerut. The function of this incorporated b~dy ~vas, inter alia, to regulate -- forward transact10ns m the sale and purchase of gur and other commodities entered into between the members of the Society, as also to dec]<J,re the rates at which the contracts were to be settled on the

Ra,ghubar DaJ'lrl Jai Prakash v, ·The Union of lniia

Ayyangar ].

Rathubm Dnyai Jai Pr•ka.Jh V. Tiu UniMi of India A)yan.~a1 ].

oliO SUPREME COURT REPORTS

dates fixed for deliverv. This incorporated f" company has Leen impleadccl as second respondent to the petition. This association or company, howe\'er, was not, on the date of the impugned notification, "recognised"' by the Central Government under the provisions of the Act to which we shall presently ad\'ert., in respect of de·dings in gur with which alone· thcso petitions arc oo!lccrned. The petitioner had entered into forward contracts of purchase of gur at crrtain rates and he had also deposited n.s the Luyor the amount as well as the specin.I margin required to be deposited under the Lyo-laws of this association. Contracts entered into by him wJ.iC'h were <'ntatanding on February II, 1959. were in rcln.tion to 29,600 maunds. While so, Government published notification under e. I ii of the Act on February 11, 1959, applying th" provisionR of that section to gur 118 result of which the forward contracts entered into in gur by the petitioner became illegal and void. The further l\'gal consequence o! the notification was that tho transactions entered into by the petitioner and othern situated similarly like him were to be docmcd to be elost'd out on February I I, I 95!l-tho dato of tho notification and tho differences arising out of the contract woro to be payable not at tho rat(\ origi1mlly stipulated by tho contracting parties but at the rates specified in tho notification. If the petitionn had to settle hia outstanding contracts at the rnte determined bv the Contra! Government ho would suffer loss of .,,;. Re. 48,000. Ho therefore challen11es in this petition the validity of the provisions of the Act which en-abled the notifications to be issued as also tho notifications themselves on ground• to th<l detail• of which we shall advert later. Before setting out thcso details, it would be eonvenient and tend to tho proµor appreciation of I the problems im·olverl, if we briefly indicate the · economic implications of forward trading in commodities, the nood for tho regulatio11 of such

irt.ding; as well as the history of the measures it.ken from time to time to exercise control on forward trading in gur prior to the issue of the impugned notifications in Febru!lry 19.39.

The expert committee to which the Bill which beet.me· the Act (Act 74 of 1952) was referred, explained in their report the function of forward tr&ding in these terms:

"Forwa.rd trading involves specula.tion &bout the future, but not all forms of forward trading could be considered as either unneces-Eary or undesirable for the efficient functioning of anything but the most primitive economy ... ............ To the extent to which forward trad-ing enableg producer•, manufacturers and traders to protect themselveR against the uncertainties of the future, and enables all th~ relevant f'tctors, whether actual or anticipated, local or international, to exercise their due influence on prices, it confers a. definite boon on the community, because, to that extent, it minimises the riFks of production and distribu-tion and makes for greater stability of prices and supplies. It thus plays useful role in modern business. At the same time, it must be admitted that this is an activity in which great many individuals with small means and inadequate knowledge of the market often participate, in the hope of quick or easy gains t.nd consequently, forward trading often assumes unhealthy dimensions, thereby increasing, instead of minimising, the risks of business. There are forms of forward trading for example, options, which facilitate participation by persons with small mean• and inadequate knowledge ............ It is, therefore, necessary to eliminate certain forms of forward trading, and permit others under carefully regulated conditions, in o.rder to ensure that, while producers, manufactwrera

Ra_;huhar Dayal ]tJi l'rak.ash v. The Union:oJ India AyJ""l" ].

J9{jJ Ra1luJJar Dayal Joi Pralc4.Jh v. Tiu Union of l ntlia

[1962] •

and traders will ha.,•c the facilities they need for the sa.tisfaetory condud of their business the wider intcreRts of t.hc community, and particularly, the interests of consumers, will be adequately safeguarded against any abuse of such facilities by 'Jthers.

The Essential Supplios (Temporary Powers) Act, I !J-Hl, docs not. empower the Central Govcmmcnt to regulate forward trad-ing in any commodity other than an 'essential commodity' within the meaning of that Act. Action may be needed not only for prohibiting forward trading in commodities in which it is still taking place, but also for reopening for-ward trading under regulated conditions and if circumstances are favourable to such course,

in commodities in which it is now prohibited.

The arrangements must be such as will enable speedy and effective action to ho taken in emergencies, and mnst at the same timo provide sufficient sa.foguards against arbitrary or ill-informed action."

It 1vas with these objects and with provisions

calculated to carry out these suggostions that tho Act was enacted. And now short resume of the history of tho provisions relating to forwa.rd trading in gur which preceded the impugnecl notifications:

After the end of the war, ban on forward tradinµ in gur was imposed by the Sugar & Cur (Future Trading) Prohibition Order, Hl51, issued under the E8Scntial Supplies (Temporary Powers) Act, 1!)46. This ban was however removed by notification dated January i, l!J;>4. The Forward Contracts (Regulation) Act, Hlii2, was nut applied to gur with the result that from January, 1951, all c011tracts in relation to gur remained free and out-side the regulatory provisions of the Act. The For-ward Markets Cmnmission took up the consideration of the question regarding the advisability of impos-ing regulations on forward trading in this

3B.C.R. ·SU.EREME,COURT ,REP.,QRTS

commodity. The Commission considered, first, the question whether gur wa~ suitable commodity for forward trading and whether there was a.ny need of bringing forward trading, which was still then free in that commodity, within the regulatory provisions of the Act. 'l heir conclusion was that gur was commodity in respect of which the production was large enough for not being cornered by any group of traders; and that the forces of supply and demand in respect of the commodity were uncertain ao as to require continuous assessment of their changing relationships through the medium of futures market. They also were of the opinion that the fluctuations in the price of gur were wide enough to a.ttract speculators and to ensure holders of ready stocks against risks arising from the fluctuations consequent upon speculation it was necessary to bring trade in the commodity within the scope of the Act. In these circumstances by their report which was submitted to the Government in May, 1957, they recommended (l} that Govern-ment might accord recognition to certa.in associa-tions after the necessary formalities had been completed, and ( i) to issue simultaneously notification under s. 15 of the Act illegalising for-ward trading in the commodity except through the associations or through the mem hers of such associations, as set out in ·S. 15 of the Act. The Government however by their resolution dated January 17, 1958, recorded:

"The main recommendations of the Commission arc that the regulatory provisions of the Forward Contracts (Regulation) Act, 1952, be applied to gur and that forward trad-ing be conducted through associatione to be recognized under the said Act.

The Government ofTndia have carefullv considered the recommendations made by the Commission .and have come to the conclusion that there is. no strong justification .or special

RaghubiJ.r ·v11yal Jai Prakash The Union ·'· of India Ayyangar J.

1161 Ra1_J.uha1 DtJ;al Jai fraktJJh Tlw Union •• •f India Ay;·cniar ].

need for the time bcin!( to bring gur under the purview of the Forward Contracta (Regulation) Act, 19.52."

Subsequently however by notifiPation daud February I 1, I !l5fl, the C<·ntral Governm~nt declared that s. 15 of the Act shall apply to the whole of the territories to which the Act exte1:ds. The circumstances which led to this thange in the view of Government is thus expressed in !!8. l 05 to l 97 of the Annual Report of the Forward l\farkets Commission for the year W59. ft is there statod:

") 95. The Commission in its Report on

the Recognition of Associations in respect of Forward Contracts in Gur submitted in llfay 1957 had recommended that Gur be brought under the regu!at0ry provisions of the For-ward Contract3 (Regulation} Act, W52, and that recognised futures markets be established at Hapur, Meerut, Agra, Muzalfarnagar and Delhi for the purpose. The Government of India, however, ?ecidcd not to bring gur under the purvicw of the Forward Contracts (Regulation) Act, Hl52 for the time being, a1 result, forward trading in gur, continued to be unregulated. The prico situation in gur markets at the end of 1958, however, took very serious turn on account of hectic specula-tive activity in these markets. For example, the gur prices, at Ha.pur, rose during tho three months from the middle of November to the middle of February 1959, by 37 per cent as oompe.rcd to the rise of 0.15 per cent in sugar -& controlled commodity-and 1.5 per cent in khe.ndsari, forward trading in which had been br.nncd.

196. These developments neoeasitatcd

reconsideration ol tho earlier decision to keep the commodity out of tho purview of the Act and tho Government of India, on the advice of the Commission, applied aection 15 of tho

s.c.R. SUPREME COURT REPOR1;S

Forward Contracts (Regulation) Act, 195.2, to gur, all over the country on the 11th Feb1uary l!J59.

197. The application of section 15 of the Aot also necessitated fixation of the rate under section 16 at which all forward contracts out-standing as on that day, could be closed out. The Government of India, after taking into account all the relevant factors closed the out-'1tanding contracts at the average of the clos-ing rates during the preceding three months."

The notifications which brought this about read:

"In exercise of the powers conferred by cl&use (a) of section 16 of the said Act the average of the closing rates prevailing in the respective forward markets during the period of thrco months immediately preceding the date of this notification, as the rate at which any forward contract for the sale or purchase of gur entered into on or before the said date and remaining to be performed after the said date shall be deemed to be closed."

No associations had been granted recognition before the date of this notification dated February 11, 1959, but on the same date another notification was itsued by the Govern~ent reading:

"They have al8o decided that regulated futures markets in respect of gur should be established in due course &t Hapur, Meerut, Agra, Muzzafarnagar and Delhi, ·and that recognition should be granted under section 6 of the s11id Act.................. "

In accordance with what was stated here exi8ting associations in the places mentioned were irooorded recognition after an enquiry as to whether 'they conformed to the requirements of the Act. Like-wise other associations which were formed subse-quently were also recognised after similar enquiries. The petitivners before us are members of these

1961 Raghubar Dayal J ai Pr al.ash v. The Union of lndi~ -Ayyanza.r J.

lMI Rag~~·;no.>:nl Jai PraJ.:41.Ji v. TM li1:W11 of Indio AJ_J,;,;g;,7 J.

556 SUPREJl.lE C0URT REPORTS (1962)

associations- those in Petitions 22, 23 and 25 b<·ing mcmhern rcspt•ctively of tho three asHO<:iations named in the notification extrn<-tcd above and the pctiti"m·rs in Pctitio11s 24, 26 am! 42 of <1,suciations subsequently brought into cxi,tene"· The forma-lities preceding the recognition, however, took some little time and recognition to all thc8C associations wa.s granted iu June 105\l or then·abouts.

In oder to appreciate the submissions made to us, it is necessary tu set out briefly tho provi-. sions of tho Act whose validity is challcngod. Tho preamble to tho Act reads that it is an Act to pro-vide for tho n•gulation of certain mattPrS relating to forward contracts, the prohibition of options in goods and for other matters connected therewith. \Ve are not now concerned with the second part of the objeoti,·c, viz., the prohibition of options in goods, but only with those provisions which deal with the regulation of matters relating to forward contracts. Section 2 which contains the statutory definitions defines "an association" as "a body of individuals, whothPr ineorported or' not, constituted for tho purpose of regulating and controlling tho busiw,ss of tho sale or purchase of any goods" while sub-cl. (j) defines "<1 rocognised association" as meaning "an association which is for tho time being recognised by the Central Government un-der s. ()". Chapter II is entitled "The Forward Marketa Oo=ission" and makes provision, in tho two sections which constitut-0 the Chapter, first for the establishment and constitution of Forward Markets Commission which iti body of indepen-dent exports (s. 3), the other (s. 4) detailing tho functions of tho Commission which include the ta.ak of "advising tho Central .Government in res-pect of the .recognition -0f 8ll8ociations", And "in respect of any other matter arising out of the admi-ni~tration of tho Act", "to keep forward markets under observ<1tion" and inform Government of de-velopments taking place .in it and finally t-0 make rccvmmcndations with view to improving ·the organisation and working of forward markets.

SUPREME-COURT'REPOR'l'S

3 S.C.R.

. Chnpter III which is headed "Recognised asso-<'iations" contains some of the sections which vali-dity was challenged in th·e petitions before us. Ba-fore an association could be recognised, s. 5 requires the body to make an application to the Central Gov-ernment furnishing the details and partiCulars ~pecified in s. 5(2). The Government might make such enquiry as might be necessary and after ob-taining such further information as may be requi-red were empowered to grant recognition to asso-ciations under s.6 and such recognition was to spe-cify tho goods or classes of goods with respect to which forward contracts may be entered into bet-ween members of such associations or through or with any such member. Section 6(2) contaimi con-ditions which ought to be complied with by asso-ciations before recognition was granted amd 'provi-sion was made in s. 6(3) for the rules of the associ· ation not being amended except with the approval of the Central Government. Complementary to this was the provision contained in s. 10 which empo-wers the Central Government to direct rules to be made, with power in case the recognised association fails to take action to comply with the order of the Government, to themselves make the rules in the forms specified by that order. The recognition had to be published in the· Gazette of India and in the r ,fficial G:ozette of the State in which the principal office of the association is situated s.G (4). Sections 6 and 10 were the principal subject of at-tack among tho fasciculus of sections relating to "recognised associations" in Ch. III, but we shall revert to the grounds of att,-ick after setting out the other provisions of the Act whose validity was also the subject of challenge. They were ss.15 ·~nd 16 under which the notifications now impu· gned were made. They run in these terms :

"15. Forward contract8 in noti-Jied goods illegal or mid .in certain circumstances.

( 1) The Centra:l GovernmQnt may, by notification in the Official Gazette declare

R• ~hubar D{zy4f Jai Prakash v .. Thl Unior1 ~!India A_YyaltgaT J.

Jiil Ratf.uhar Dt1yal J gi Pralca.slt v. T_Ju Union of bub'a .4yy~«r ~'.

this section to apply to such goods or claM of goods and in such areas as may be speci. lied in the notification, and thereupon, subject to the provisions contained in section 18, every forward contract, for the sale or purchase of any goods specified in the notificl\. tion which is entered into the area specified therein otherwise than between mem-bers of recognised association or through or with

e.ny such member, shall be illegal.

(2) Any forward contract in goods en-

tered into pursuance of sub.section (I) which is in contrnvention of any of the bye.Jaws specified in this behalf under clause (a) of 111b-section (3) of section II shall be void:-

( i) &8 respects the rights of any

member of the recogniser! association who has entered into such contract in contravention of :my such bye-law, and &llO

(ii) && reBpcct1 the rights of any other person who has knowingly partici-pated in the transaction entailing such contravention.

(3) NQthing.in sub-section (2) shall affect

the right of any pors•m other th1m mcm bt'r of a. recognised association to enforce any euch contract or to recovl•r any sum uncfor or in respect of such contract :

Provided that such person hid no know-ledge that 1uch transaction was in contraven-tion of any of the bye-laws specified undn cl&use (a) or Hub-section (3) of section I I.

(4') No member of r1>cogniscd nss~cia.­

tion ghall, in respect or any goods specified in the notification under sub-section (!), enter into any contract on his own account with any perscn other than member of the recogniwed association, unless he had secured

3 S.C.R.

the consent or authority of such person arid discloses in the note, memorandum or agree-ment of sale or purchase that he has bought or sold the goods, as the case may be, in his own acceunt :

Provided that where the member has secured the consent or authority of such person otherwise than in writing he shall secure n written confirmation by such person of such consent or authority within three days from the date of such contract :

Provided further thflt in respect of ~ny outstanding contract entered into by member with person other than member of the recognised association. no consent or authority of such person shall be necessary for closing out in accordance with the bye. laws the outstanding contract, if the member discloses in the note, memorandum or agree-ment of sale or purchase in respect of such closing out that he has bought or sold the goods, as the case may be, on his own account.

16. Consequences of not!fication under 3ection 15.-Where notification has been issued under section 15, then notwithstanding anything contained in any other law for the time being in force or in any custom, usage or practice of the trade or the terms of any contract or the bye-laws of any association concerned relating to any contract-

( a) every forward contract for the sale or purchase of any goods specified in the notification, entered into before the date of the notification and remain-ing to be performed after the mid date · and which is not in conformity with the provisions of section 15, shall be deemed to be closed out at such rate as the · Central Government may fix in this

Raghubar Dayal Jai Prakash v. The Union of Indi• Ayyangar ].

SUPRE\TE COURT REPORTS [1962)

behalf; and different rates may ·be fixed for different classes of such contracts ; (b) all differences 'arising. out of . any contract so deemed· to be closed out shall be payable on the basis of the rate fixed nnder clause (a) and the , seller shall not l:ie bound to give and tho buyer shall not be · bound to take delivery of the goods." · In cases where mere regulation of the trade was not considered sufficient Government were empowered to prohibit for\vard trading and s. 17 of ;the Act enacted. .. --

lf.a~h.ubar Dayal · Jai Prakash v. . Tht linion of~~~~'!____ .

.{vyangar J. -'.

. "17. Power to prohibit forward contracts in certain cases.-( 1) The Central Government may, by· notification in the Official Gazette, declare that no person shall, save with the permission of thci Central Government, enter into any. forward contract for the sale or purchase of any goods . or class of goods specified in the notificatfon.and to which the provisions of section· 15 have not .been wade applicable, expect' to the extent and in tho manner, if any, as may be specified in the notification.

(2) All forward contracts in contravaticn of tho provisions of sub-section (1) entered into after . the date of. publication of the notification thereunder shall be illegaL

(3) 'Where notification has been issued _under sub-section (1), the provisions of section 16 shall, in the absence of anything to the contrary in the notification, apply to all forward contracts for the Bale or purchase of any goods specified· in the notification entered into before the date of the notifica-tion· and remaining to be performed after the said. date as they apply ·to all forward contracts for the sale or purchase of any goods specified : in the notification under section 15."

3 S.C.R.

There a.re two more sections to which reference might be made and they are s. 20-which imposes penalties for contravention of certain pro· visions of Ch. IV-ands. 2l(e) & (f) which run in these terms :

they are s. 20-which

"21. Penalty for owning or keeping place used for entering into forward contract• in goods.-Any person who

(e) not being member of recognised association or his agent authorised as such under the rules or bye-laws of such associa.tion; canvasses, advertises or touts in any manner, either for himself or on behalf of any other person, for auy busi-ness connected with forward contractil in contravention of any of the provision• of this Act, or

(f) joins, gathers, or assists in gather-ing at any place, other than the place of business specified in the bye-laws of recognised asaociation, any pernon or persons for making hidH or offers or for entering into or making or performing, whether wholly or in part, any forward contracts in contravention of any of the provisions of this Act, or".

It would be noticed that the two latter are intended to carry out tho object nnrt purposes of the Act and make effective the powers vested under the other provisions to which refrrence has bet·n made.

We shall now proeeed to consider the ground8 of attack upon each of these provisions and examine the correctness of the contentions urged by learned Counsel :

Section.• 5, 6 and 10 :

It wa8 urged by Mr. Nambiar, and in this he was supported by the other learned Counsel appearing

Rathu.iar Dt'.l't1.[1 ]Jai Praka.·h v. The Union o} !11dia

Raghuimr J)aJ"Gl Jai p,aJ:.,uh v. Tht CJnio11 of India

in' the case, particularly by llfr. ·- S. T. Desai, ' that these sections infringod the freedom guarante-ed by sub· cl. ( c) of cl. (1) of Art. 19 of the Con-stitution. Sub-clauso (c) of cl. (1) of Art. 19 runs in these terms :

"!!). (I) All citizens shall have the rights-

rights-. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ............................ .

(c) to form associations or unions;"

The freedom, however, is subject to tho provisions of cl. ( 4) of Art. 19 reading :

"19. (4). Nothing in sub.clause (c) of the said ela.uso shall affect the operation of -'.; any existing law in so far as it imposes, or prevent the State from making any law imposing, in the interests of public order or morality, reasonahlo restrictions on tho exercise of the right conferred by the said sub·clause."

Briefly stated, the argument regarding these pro\·isions infringing the freedom to "form associ· ations" was as follows: Tho Constitution gull.ran-• toes to ey!'ry citizen the right to form an association. The only limitation which might legally be imposed on this right to form an usociation is that set out in cl. (4) of Art. 19, viz., bye-laws which phce restrictions based on public order or morality. \Vhere the object of the :issociation is lawful, the citizen, through that "-as.q"ciation, anrl the association itself are entitled, by virtue of the guarantocd right, to freedom from legi~lative interference in tho achievement of its object except on grounds germane to public order or morality. In other words, the freedom guaranteed should be read aa extending not meroly to tho formation of the association as such, but to the effective functioning of the association so as t to enable it to achieve its lawful objects. Unless eub·cl. (cl of cl. (1) of Art. 19 were so read the

3 S.C.R. SUPREi\fE COURT REPORTS

freedom guaranteed would be illusory and the .Court should, in construing freedom guaranteed to the citizen, so read it, as to give him an effective right which could be used for the purpose for which the Constitution.framers intended. The fort.her submission, which was in the nature of corollary from tho above was that the freedom gm1ranteed by sub-cl. (c} of cl. (1) of Art. 19 carried with it right in the association to determine its internal arrangements in the matter of selecting the personnel who shall manage it, the framing of the bye-laws and regula-tions which shall govern the relationship between the association and its members as also between its members without any interference by the State unless the law providing for such interference were grounded on morality or public order. In effect the submission was that the right guaranteed under sub-cl. (c) of cl. (1) of Art. 19 was not merely, as its text would indicate, the right to form an association but would incfode the functioning of the association without any restraints not _dictated by the need for preserving order or the interests of morality. On these premises it was urged that while the Constitution had guaranteed the freedom to form an association-including inter alia one for fostering or regulating forward trading, still the Central Government had taken upon them-selves the right to determine the rules and bye-laws under which the association could function and had, by the provisions in Ch. III of the Act, in every way interfered in the matter of internal ma.nagement 1md it was urged that this was violative of the right guaranteed by sub-cl. (o} of cl. ( 1) of Art. 19 since the restrictions in Ch. III _of the Act could not be held to have been dictated on grounds of public order or morality.

We consider this argument iH without force . . In the first place, the restriction imposed by s. 6 of the Act is for the purpose of recognition and no

Raghubar Day(ll Jai Prakarh v. The Union of India

Ay;•an:•r J.

__ 1961 ,

Raghubar Dayal Jai Prakash v. The Union of India A;v)'angar J.

564-SUPREME COURT REPORTS [1962]

association is compelled to apply to the Govern· ~ ment for recognitivn ~mder that Act. An applica-t~on for "t1w reCOg!J.ition of the· association for the purpose of functioning imdeF the enactment is a, voluntary act on the part of the association and if the. statute imposes conditions suoject to which alone rcicognition could be accorded or continued, it is little difficult to see how the freedom to -{ form the association is affected unless, of course, that freedom implies or involves guaranteed right to recognition afao, Could _it be contended that there iR right in the a~sociation guaranteed by the Constitution to obtain recognition? It was not disputed before us -that forward trading might sobrntimes assume undesirable forms and s· b.ecome akin to gambling which might have deleterious consequences on lawful trade and on the general public by caus"ing violent fluctuations in prices. It would folfow that the control of forwar<!- tradfog is legitimate subject of legisla-tive interforcnce and regulati.on And we might add 1 hat this "'a,s not disputed .before us. The manner in which this regulation is effected and the machinery employed for achieving it are r:: matters of legislll.tive policy which could be deter-mined 011ly by taking in to account tlre organisation of the market, the manner of trading ana other relevant factors. The impugned enactment in its Ch. III proceeds on the basis that organisations [-]of tradesmen might be entrusted with the task of . regulating tbese transactions, so that while legiti- -4' mate trade would be furthered, the evil consequ-1ences of undesirable· speculation might be avoided. It was, theri:fore, necessary that the instrument chosen should be subj9ct to control so as effectively to further tho policy of the scheme of regulation and that fo tlie ratio underlying the provisions in ls. 6 of the Act and those which follow it in Ch, III./,, In this connection it is necessary to add that the.c restrictions whiqh are impugned :ts unconstitutional ~re· imposed only on "recognised" aasooiatiQll.S, i' '

3 S.C.R. SUPREME OOURT REPORTS

Parliament could well have chosen to effect the regulation directly through an official agency instead of through th0 medium of vohmta1·y association. In such an event, neither the traders nor their associations could complain of any violation of the law. The mere fact therefore that Parliament choHe to utilise the machinery of voluntary trades associations for the purpose of enforcing regulatory control could not invalidate the provision of laws which are designed to ensure effective control over tho mechanism of forward trading.

So far we have dealt with the argument about eub-cl. ( c) of cl. ( 1) of Art. 19 in relation to the trades associations under the Act. As regards the wider question argued before us regarding the scope of sub-cl. (c) of cl. (1) of Art. 19, this Court has, in All India ft:ink Employees' Association v. National Industrial Tribunal ([1]), examined the ccntent of this "freedom of association" in the light of the other freedoms guaranteed by the other sub-clauses of cl. (1) of Art. 19, in which judgment has been rendered recently and it is therefore unnecessary to go over the ground again.

We have no hesitation in rejecting the argu-ment that the provisions in Ch. III of the impugned Act, and in particular those which we have set out above, infringe, in any manner, the freedom guaranteed by sub-cl. (c) of cl. (1) of Art. 19.

The next provision of the Act whose validity was challenged was s. 15 but before stating the grounds upon which this challenge was made it would be convenient to dispose of contention raised by Mr. Chatterjee-learned Counsel for the petitioners in Writ Petitions 24 and 25 turning on the construction of the section. His submission was thats. 15 proceeded on the basis of there bein[( "a recognised association" through which trading in the notified commodity could be conducted

(1)(1962] 3 S.C.R. 269,

R.aghubar Dayal ]ai Prakash v The Union of India A;:yangar J.

Ra1huhor Tlaya/ Jci Pr.;kash v. Tlv Union of India AXf""l"' J.

before the ban under a. 15( l) could be imposed. The (

argument was based upon the words "otherwiso than between members of recognised association or through or with any such member" occurring towards the last portion of s.15(1). It was urged that under the scheme of the Act the Central Government had first to recognise an association of traders in the commodity, fonvard trading in which waa to be regulated, and that it was only after the recognition of such an assoeialion under s. (j that they could under s. Hi( l) prohibit trading otherwise than through such an association or its members. It WB.11 pointed out that the expert commit.tee on gur had itself indicated that such procedure should be followed and that m the easo of cert.ain othor oommodities liko poppor and castorseed which were notified under s.15 the recognition of associations through which forward trading was permitted to be conducted either prec~docl or was RimuTtancous with the notification.

Learned Counsel is, no doubt, right in the

aubmission regarding the recommendation of the Forward Markets Commission in its report on gur, as also in the other instances rc·forn·d to by him, but the question still for consideration is w'hcthcr on proper construction of the relevant provisions of Ch. III read in conjunction with s. 15 the exis-tence of recognised association 1s lPgal pre-requisite for the issue of notification unrlor s.15(1). It need hardly be pointed out and it was not the argument of learned CounRel that s. Iii( l) in express terms posits the oxistenco of recognised association as condition precedent to the issue of notifica-tion under s. 15(1). But is such condition implicit from the section or does it necessarily flow from its terms ? The implication cannot obviously be raised by reference to the hardship which might .c.. otherwise be caused but must surely rost on more "' secure and legally satisfactory grounds.

3 0.C.R. SUPREME OOURT REPORTS 567

The Central Government has, no doubt, under s. 17, the power to prohibit all forward contracts in particular commodity, if the mere regulation of the transactions is considered not adequate to protect public interests, and learned Counsel is right in his submission that when notification is issued under s. 15(1 ), the Central Government are not exercising their power to lay complete ban, and that consequently the validity of notification intended merely to regulate cannot be upheld by reference to the power to prohibit. But the scheme of the Act in Ch. III envisages only the formation of voluntary associations and their seeking and being accorded recognition by the Government on fulfilment of the requisite conditions. In other words, the Act does not contemplate the Central Government itself setting up associations to dis-charge the function of "a recognised association" under the Act. There might, therefore, conceivably, be cases where the traders do not or refuse to orga· nise themselves into an association which could apply for and obtain recognition under Ch. III. It is manifest that the provisions of the Act cannot be defeated and the exercise of the regulatory power of Government nullified by traders in commodity not forming an association which could be recog-nised under Ch. III. Similarly the power conferred on Government bys. 15(1) of the Act, cannot be made dependent on such voluntary associations satisfying the requirements for recognition, such that if the associations refuse to do so the power does not emerge. No doubt, when there are associa-tions whose bye-laws and regulations conform to the requirements of the law the recognitions of such associations either before or simultaneously with the issue of notification under s. 15 wo'.lld enable the forward trading to be conducted without break. :But this is not the same thing as the submission that on proper construction of s. 15 the recogni-tion of an association for the purpose of forward

Rafhubar Dayal Jai Prakash v.

The Uni•n of India Ayyantar J,

ka.i:~ubar 1J1qcl Jai Pr.Jkasl1 v. -nu Uni-Jn of lr.dw A;y.mgar J.

trading in a. commorlity is an csscnfo1.l pre-requisite hcfure <l. notification under s. 15 could he issued.

It was m'xt contcn<lcd that c>vc>n if on proper con:itruction of H. I;; of the Act, the existence of re,·ognisecl asn<JCiation authoris!'<l to n·gulate dea-li11gH in particular eomrno<lit~· was not pre-requisite for the iss1w of notification under the Bectiou in respect of that commodity, still the issue uf th<· notification without an assoc·iatiun being recognisl'd was constitutionally im·alid as an un-reusu1mule restriction on thn right of the petitioners to trad(• and carry on business. \Ve are unable to uphold this argument either. The need for regulating forward trading could not be and was not disputed before us. '\\' o Rha II bo considering later the conten-tion that s. 15 of the Act is iti;clf invalid as viola-ting the freedom to trade guaranteed under Art. l!.l( I ){g). The very narrow question which is raised by the> poiut now under discussion is this : Assuming that forward trading requires regulation and that rc((u lat ion through recognised associations which am subject to control and guidance in their activitiei< by the lioverrum·nt is justified by the necessities of the Hituation and assuming also that it was not legally incumbent on Government to recognise an association for den.ling in commodity before for-ward trndin{! in s•1ch commodity could be brought within thl' scope of thn Act, woulcl the action taken uncln s. 15(1) in tho present case have to bo held invalid as not being reasonable restriction withiu cl. (ti) of Art. l!l ? In situations like those hero the reasu1mblem·ss of tho restriction has nccessarilv to l)(' tested by tho degree of urgency which rcquirc;l the i11tcrvt'11tion of Government. That would be larg..Jy 11. question of fact, and we have already extrncted paragraphs 195 to Hl7 of the Annual Report of tho Forward llfarkcts Commission for 1959 ill which the situation which necessitated the impugn· ed uotifications is dest'ribod. It is plain enough that enquiries which had to precede the recog11ition

SuPREME COURT REPORTS

of associations under Ch. III do take some time, and in fact in the present case the rec0gnitions were accorded in June 1950, and if emergent action was required to control situation which thrna-tened to worsen rapidly, we do not c0nsider that the action of the Government in stepping in even before the recognition of as8ocia.tions eould in the circumstances be characterised as unreasonable. After all, it is question of balancing ic.dividtial rights and the profits which coald be reaped by individuals under an existing state of the hw against the public benefit a.rising from the exercising of control, a.nd if Government considered that the latter would be best served by immediate action under valid provision of the law, an-1 the circum-stances reasonablj warranted that opinion, we hold that in the absence of my proof of mala fides, and there is none here, the action of the Government cannot be held to violate the constitutional limits set by cl. (6) of Art. 19.

We shall now proceed to consider the challenge to the constitutional validity of s. 15 itself. Tha attack was based on the section infringing Arts.14,19(l)(f) and 19(l)(g)ofthcConstitution and in respect of the last two as not being protected by els. (5) and (6) of Art. 19.

In regard to Art. 14; the argument was that e. 15 conferred an unguided and arbitrary power upon the Central Government to choose any com-modity it liked and bring the Act into operation in respect of the commodity chosen, at any time it pleased by notification, the effect of thA notification being vitally to affect the interests of traders bv rendering illegal contract which was perfectly legal when it was entered into. We consider that there is no substance in this submission: We hav«ii already extracted relevant portions from the report of the expert committee on the bill which became the Act dealing with the economic implications of forwu.rd trading and for the necessity for regulating

1961 Raghubar Dayal .. 1 J ai Prakash ' v. The Union of [1,J:a Ayyanza' }.

IHI

R•.f!nJba~ Dayal Jai Prnkaslr v.

Tiu linion •f /,zl/ia AyyMt•r ].

such contracts in particular goods. It is not for· ward trading in every commodity that requires regulation under the Act. The suitability of commodity for forward trading depends on factors which are far from static and similarly the need for bringing forward trading within the regulatory pro-dsions of the Act depends on factors which a.re subject to variation over periods of time. Besides, tho nature of the commodity, tho size of its produc· tion, the scale of tho demand for it in relation to the supply and the domand itself being not quanti-tatively fixed but changing so as to require conti-nuo<IS assessment through the medium of futures market are all elements that necessitate regulation and these are variable. We have not attempted to be oxhaustive in wiming tho several factors but these are some of the characteristics which call for and make possible, effective regulation. It would therefore, follow that the commodities which would satisfy these tests or requirements can only be ascer· taincd from time to time after enquiry and investi· gation. They cannot obviously be specified in statute. It is because of these considerations and the need for expert opinion and guidance on the m1itt-0r that the Act has, by its Ch. II., provided for the constitution of Forward Markets Commis-sion on whom has been laid tho duty of advising Government on the situation 118 it exists from time to time and· make recommendations in that regard. In our opinion, the selection of the commodity for the regulation of forward trading in it or of prohi-bition of such trading can only be left to tho Gov-ernment and the purposes for wbich the power is to be used and the machinery created for tho inves-tigation furnish sufficient guidance as to preclude any challenge on tho ground of violation of Art. 14. What we have ju3t now said as regards the selection of the commodity would suffice to answer the argument regarding the selection of tho time at which the notification under s. 15 (l} might t:ake nlace.

3 S.C.R.

We need only repeat what we have pointed out earlier that though the Forward Markets Com-mission in its report of may, 1957, rect•mmende<l that gur might be brought within the scope of the re,iulatory provisions of. tho Act with immediate eft'ect, the Government did not accept that recom-mendation and it was only when Government consi-dered that situation developed rendering the price-situation in the gur forward market very criti-cal and that speculative activity in the commodity indulged in by powerful operators had raised prices to an unreasonable figure that Government interve-ned by the notification now impugned.The next submission of Mr. Nambiar was that s. 15 was constitutionally invalid as violating the freedoms guaranteed by sub-cls. (f) and (g) of cl. ( 1) of Art. 19. As regards sub-cl. (f) of cl. (1) of Art. 19. it was urged that the right to the benefits arising under contract which was lawful when entered into was in the nature of property and that s. 15, by empowering notification to be issued which rendered such contract illegal was an unreasonabte restriction on the right to the holding or enjoyment of that property. It was further urged that whether or not the right to the benefit of contract was property within Art. 19( 1 )( f) it was right intimately bound up with the right to carry on trade or business within sub-cl. (g) of cl. (1) of Art. 19 and it was broadly contended that &ny retrospective. invalidation of that contract would not be reasonable · res_triction within cl. (6) of Art. 19.

In view of the nature of these submissions the challenge under both sub-cl. (f) & (g) might be. con-sidered .together. Before we do so, however, we might dispose of subsidiary argument based on the words we are italicising in s. 15 ( 1) "and thereupon ...... every . fol'ward contract, for the aale or purchase of any goods specified in the notification which is entered into in the area

RoghuliaY: Dayal J ai Pr.skas.~ v. The Union of /ndi«_ A/Y~t•rJ,

1961 Rajoi,ubar Dayal a1 PraJ.ash v. Tlr# Unfon of India AJJanto.r J1

572 SUPREME COURT REPOHTS

sp<>cifkd therein ............ etc." It was urged that by r<'ason of lh<'se \\'ords the Govc1 nmrnt was empow-ered to issue notifiration whiC'h would have effect in relation to contracts which were entered into aft.er t_hat ~a.fr, and that tho impugned notificati~ which mvahdated contracts tnter~d into eal'lier sub-sisting on the date of tho notification was therefore ultrn vires. Wo cornidcr this submission as with-out force. The expression "is entered into" is at the worst ambiguous and is capablo of meaning either only tho8c rntcrtd into after the date of the notifi-cation, or as meaning "is or has been entered into" i. e., ir.eluding cr.ntract which having been entered into before is subsisting on that date. But that it is used in the latter sense is made clear bv the terms of s. Hi( a) "every fo1ward contract for. the sale or purchase of any goods specified in tho notification, cntcrrd into before the date of the notification and remaining to be performed after the said elate ...... " Sections 15 and 16 have to be read togcthor as be-ing intimately connected, the later provision set-ting out the consequences of tho action taken under the earlier and so read, we consider that there is no scopo for the argument addressed to us.

Now to revert to tho discussion , of the attack on the prnvisions based on voilation of Art. 19(1) (f) & (g), the question is whether tho giving of retrospective effect to an enact-ment dealing with contracts so as to modify the terms of or even put an end to sub3isting cont· ract is per se unreasonable so as to amount to 11 violation of the guarantee under sub.els. (f) & (g) assuming learned Counsel is right in contending that 11 right to the benefit of contr'1ct is in the nature of right to property-an assumption 11s regards the correctneEs of which we say nothing. In support of bis submission learned Counsel relied on the obsorvations in the judgment of this Court

'"'' 3 S.C.R. SUPREME COURT REPORTS 573

in Stat~ of West Bengal v. Subodlt Gopal Bose and Ors., ([1 ]) where it was observed that the fact that the statute was being given retrospective operation may properly be taken into consideration in deter-mining the reasonableness of the restriction impo· sed-an observation which was cited in the decision of this Court in Express Newspapers Private. Ltd. v. Union of India ('). The decisions referred to and others to like effect.are authorities merely for the position that the retrospective effect of statute would be an element to be taken into account for determining the . reasonableness of. the restriction. imposed . but these observations do not carry lear-ned Counsel to the full extent needed to sustain the proposition he seeks to establish~ viz., that the retrospective invalidation of. contract ·is not permissible restriction that could be imposed by cl. (6) of Art. 19. . · ·

Raghuhar Day:.zf Jai Prakash. -v. The Union of India

Learned Counsel referred us to some decisions of the Supreme Court of the United States but to these we do not consider it necessary to advert. Article I, 8!)ction'l0 (1), of the American Constitu-tion lays ban on the enactment by· the States of inter alia "any ex· post-facto Iri.w or bw im·pairinl! · the obligation of contracts, or grant any title of nobility". Our Constitution-makers while: making provision against "ex.post-facto laws".in;Art. 20(1) and "against titles" in Art .. .18(1), studiously refrained from including a· guarantee regarding the· imp'lirment of obligations of contracts. There is . therefore no scope for the argument thn,t law which affects or varies rights under contract is for that reason constitutionally invalid as., an unreasonable restriction on the · right either to property or to carry on trade or business. It may be pointed out that even in the United States the recent decisions have mado such inroads upon that doctrine that it had been .stated by-Prof. Corwin that "The protection afforded by this clause does (I) f195~J S.C.R. 5871 626 .. (2) r1959J S.C.R. 12, .139,

·--- ----'-~ . ·-- . - ~-"----

. .19d~

Rq!a.btu. D"J'G/ J a(Prkruh v. TJu ll•i4n..of b1dia )'.?«JilGT. J .

574 g{jpREl\IE COURT REPORTS

Cl9'62J

not today go much, if at all, boyond that afforded by Section I of the Fourteenth Amendmont (against d(•privation of life, liberty or property without due process of Jaw)". The learned an0ther proce<:iding to quote from the decision in Atlantic Coast Line Co. v. Goldsboro(') continues:

'·In the words of the Court: 'It is settled that noither the contract clnusc nor the due process clause has the effect of overriding the power of the S~te to ostablieh all regulations that n.re reai;onably necessary to securo the health, safety, good order, comfort, or general welfare of thu community'-in short, its police power. And what is 'reasonably neces-sary' for these purposes is today question ultimately for the Supreme Court.; and the present disposition <•f the Court is to put the bunion of proof upon any person who chal-lenges State action as not 'rt>asonably necrssarv,. adding: ·

"Till after the Civil W11r th•) principal source from which cases stemmed challenging the validity of State legislation, the 'obliga. tion of contracts' clause is today of negligiblo importanc~, :ind migl!t well be stricken fmm the Constitution. For most practical purposes, in faot, it has b(•cn."

(Vidc Constitution and what it means

today, I 2th Edn., p. 84). If th11t is the position in Americ.i where tho Constitution contains guarantee aµ-ainst tho impairment of obligations arising from contracts, the pr1sition under our Constitution must fortiori he so. Atfocting subsisti1~ contract by modifying its t,.rms cannot ipso jure be treated as outside the pcrmi~siblc limits bid by cl. {5) or (6) of Art. ll.J. The "reasonableness'' of the provisions 0f statute are not to be judged by priori standards unrelated to the facts and circumstances(I) (1941l 232U.S.548; SSL. Ed. 721.

:f's.C.R. SUPREME eotJRT REPORTS 57i

of situation which occasioned the · legislation. ·In an oft-quoted passa,ge Patanjali Sastri, C. J., observed in State of Madras v. V. G. Row('):

"It is important in this context to bear in mind that the test of reasonableness, wherever prescribed, should be applied to each individual statute impugned, and no abstract standard, or general pattern of reasonableness can be laid down as applicable to all cases. The nature of the right alleged to have been infringed, the underlying purpose of the restrictions imposed, tl>e extent and urgency of the evil sought to be rern·3died thereby, the disproportion of the imposition, the prevailing conditions at the time, should all enter into the judicial verdict." It cannot be therefore predicated cff-hand &!l'i as matter of law that every restriction which operates with retrospective effect and affects rights obtained under the pre-existing law, is unconstitu-tional as obnoxious to the freedom guaranteed by sub·cls. (f} or (g) of cl. (1) of Ait. ID. It might, in particular cases, even be necessary to completely efface sub3isting contract but in the present case that is not what was done bilt only to vary its terms so that it would bo settled out at the prices determined v the other notification. Learned Counsel cha\ t"enged the validity of the provision for price-fix.ition under s. 16 and of the actual prices determined under the notification issued under s. 16, but these we shall consider later. We hold that s. 15 is n,mstit11tionally valid. It is only necessary t,o adll that it is manifest that the restriction on trading is in the interest of the general public since the public have vital interest in the availability of an essential commodity like gnr at reasonable and relatively stable prices and the only question for determination for the

(l) [1952] S.C. R. 597, 507.

Rathubar D•µl Jai Praka1h v. The Union of lniill AyyatJ{Of J,

l c~hubnr DaJr·l .Tai Prcl:uh v.

11.t l 'nio1: oj lflfi·,,

application of els. (5) or (6) of Art. 19 would be the reason'tblcness of th<> measures contemplated by the law. Tqking into account the machinery crratl·d in Ch. II of the Act in the way of an l'xpert body to furnish Government with advice 011 such oomplex problem am! the functions of the committee, \Ve arc clearly of the viC'w that the rcst.rictions imposed by s. Hi of the Act arc rrasonable and pasg tbe tests for valid law under dH. (.'i) and (6) of Art. 19.

Learned Counsel's next submission related to tl.e v<i.li<lity of H, JG whi{'h rleals with the con-acqu<'nees of notification. These consequ('nces ar" three : (I) All forward contracts subsisting on the lhtc of the notification unrler s. 15 11ot entered into J,y or through recognize<! associatio11 are deenwd to bP closed out, (2) The rates at which tho euntracts have to he settled arc thosn to be fixed by the Central Governnwnt, and ( :: ) In rpspPct of the forward contracts so closed out thn buyer is not entilkd to ask for delivery of t}ie goods and similarly the selll'r is not entit1"d to inRist on delivery being taktll1. In couside1 ing the ,-alidity of s. l:i and the arguments addrcBscd to us in that behalf wo have alre·uly comidernd the 0fir,;t consequence, viz., subsisting fonrnrd contracts bning deemed to be closed on the day of the notifi~,'1.tion. LParne<l Counsel do<'S not impugn the \•nlidity of the pro\·ision in cl. (h) of s. 16 under which tho obligation to demand delivery or insist on delivery being taken is Jl"Ovided agninst. Tho attack on s. 16 was confin()d to the vnlidity of veAling power in the Central Government to fix the rates at whil'h the differ()nCPS pnyahlc by one pnrty to the othc-r should be determined on tho clnsin~ out of the contrnct by operation of thB notification. It was urged that tho provision <'ntrusting the Govornment with power to fix the prioos without Rpccifying tho basis th?rofor vestod in them an arbitrary power to fix any prioe that they liked, that the 1tatute had not given any imlicatiol}

of the .principles underlying the fixation of the price, with the result .th:i.t the· relevant· portion ·of s. "16. was either ~piece of ex:cessive ·delegation · or· offended Art. 14 by conferring an unguided power in Government. . . · .

. · ·Before .dealing with .the -constit~tionalobjec·:

tion which was sought to .. be supported by constrast-ing these provisions with analogous Indian legislation wherein the price payable was ·fixed 'by the .Act itself to which we shall advert little later, it' might ·be usefoll to narrate ·the circumstances in which the price at which the closing out was to be· .settled was fixed by the Central Government 'in the impu~ed no.tification. Tho circum~tances _are-.thus described m the counter-affidavit ·filed on .behalf of the State · to these petitions : ·On July 17, 1958, the Government of India issued notification under s. I 7 of the Act banning forward ·contracts of minor foodgrains and similar notification followed on the next day'banning forward contracts in Khand-sari sugar; The closur·e of these markets increased the speculative activity in the ·forward ·market in gur. .The price situation in respect 'of gur be-came critical in the. last .week of December 1958 when bull operators acting in concert started to- . rig up the prices. Contracts were ·entered. into at ... · these excessive prices in the belief that ·even if • Government intervened and· took drastic . steps .of dosing out the contracts by notification•under .s. 15, the benefits of the l_iigh •prices ·on :t1ie out-.standing contracts would, in-.accordance-With:·past practice, be available ·to the bull· operators. ·-On review .<if the situation cxsisting as aforesaid, the · Government found that at ·:Hapur ·which was -a representatiVe market, tho rate for gur futures prices rose from ·Rs. IL98 per maund on ·January: 17, 1958, to Rs.16.27 per ·maund on February II; '19G9, and the :Government considered that ·these . . forward prices were exerting very unhealthy .!J:lflu.enoe 0!1 the SpOt:prices oftl!e ·CO!llIBOdity. Iv. . . '. ·-. . ·~ -'" -··---, ~-',;

. \ -, '

SUPREME OOUR'I'- ;REPORTS . · · (1962J

11- Jai [.;""~" ]i~I FraltUia [D.,,oi ]• · [· ][~s: ]ned , not1ficat1on . the. [·in ].. [:tiies~ ][~i~cnmst~n~~s ]p~1ce a~ [t~~~: ]._ which [in ]the [the ]. .forward [iinpug-]. - , .:'T • i::.ontract should be closed out~ was fixed at the . TM 1!~"':, of lniic. -average of the closirig". "rates . prevailing' . .iri'""the :4;:;;;;-J~· , forward markets during the period of three months . immediately preceding the date . of the notification. -The qu'estioll . now for consideration is .. wb,e~ ther on the scheme of the Act read in conjunction with the p01icy iinderlying it and the purposes for which.it is.enacted there could be .found guidanc~ as to .the principles on ,which the price . of. settling put could be fixed by the Government ? - I~ : this · connection we might usefully refer ti:i the provisions of the Essential Commodities Act; 1955; under which Government. is. vested with ··power. to determine the prices at which essential commodities ·may -be bought or sold. Under s. 3(2) of the Essential Com-modities Act 1955, the Central Government IS em· . powered by order made under the Act to provide : for controlling tJ:ie price at ·which. any essential commodity. be. bought and sold. The confrol_under -.that enactment, as the one now under. considera.- . tion, is to be exercised for ensuring that the ·price · fixed shall ,be reasonable having. regard to the·. cost of production and the general. level· of prices· ·prevailing of other Hke commodities which are the subject of legitimate and proper trade. In the very nature _of things it is not possiblefor the legisb-. ture to determine beforehand the· price at ·which commodity may be sold or at which contracts in relation_ thereto might be entered into. The. pdce · must be dependent upon factors varying from time to time and cannot, th_erefore;be always proper ~ub­ject of legislative determination. Any. fixation_~£ prices either by naming figrire or -by reference to the market price ruling on partic'ular date, must.be ,.·productive of_ hardship ,both by reason -__of being "mechanical and therefore . ctit cif _tune with the varying .factors _whirh might:. obtain_ from ·time to '. time, as also . ' of" . beiiig liable - . to Dianipulatfoil -

~ s:c.tt.

by uns<irupulous traders as in the situation described by the 'Government in regard to gur futures in the passage just now extracted.

Nor is it any defect in the Act that it does not in so many terms lay down the principles for the fixation of the price. In view of what we have stated earlier, the only guidance which the Parliament could have given was to direct that the price fixed be reasonable taking into acoount the relevant factors we have enumerated earlier, and this we consider is implicit in the provision in s. 16 of the Act as much as in s. 3 of the Essential Commodities Act.

No doubt, learned Counsel pointed out the provision~ cqntained in tho West Bengal Raw Jute Act (Act XXV of 1948), the Jute Goods Act V of 1950 and the Bombay Forward Markets Contracts Act (Act LXIV of 19i5), in which in respect of clos-ing out of contracts which were illegalised on the coming . into force of the enactment, the price at which the contracts co11ld be settled was fixed as the spot-price of the closing day. In normal' circum-stances that might have been fair rule to adopt, but from these precedents no rule of law c~n be derived that fixation of price on any other basis is either improper, unjust or unconstitutional. It is patent that if prices are artificially rigged up and inflated as rosult of excessive speculation and unhealthy trade practices, the spot-price prevailing on the closing day would not represent the reasona-ble price at which contract should be closed out. And this was precisely the case of the respondent-State as the reasons which compelled it to depart from the principle of fixation on the basis of the spot·price on the closing day. We see, therefore, no sufficient ground for holding that the power con-ferred on tbe Central Government to fix the price at which contracts could be closed out is either legislatively incompetent or constitutionally invalid. What we stated earlier should suffice to show that ~qe actual price at which tlfe CO!) tracts were re~uired

...;., 1961 __ Raglwbar Dqj>IJJ Jai P~akaah v, The Union of lndi'a -·-· A;yanzar J.

Rag/wbar D<11•l Jai l'Jaush v. TM Union of lndi4 AYJOlllar J.

IHI

to be settled ont fixed in the impugned notification •. ~ conformed to the requirement of reasonalifoness in ~rt. liJ (6) and that undel'lying the relevant provi-&1ons of tho statute, -

Tho petitions fail and aro dismissed with costs -on<' •mt of hearing-fees.

Petitions diamissea.

TORI SINGH

THE STATE OF UTTAR PRADESH

(K. ~- WA:>CHoo, K. C. DAS GUPTA and J. C.SUAJI, JJ.)

Crim;naT Tril71-~k,fch Map-Marks placed on ba.ti8 of ,.1a1,,,,,,,,1.t nf ,,.,'fnol!'"P.' to ~ulJ-lMpr:c'1Jr-Adm1'ssibility of rod, o{Crim1°nal Proc<-l1m, 1898. (I' of 1898), •· 162.

Jfurdtr-SmfnC'--Son killing at in•ligation of fatht.r ,C:en!enr.e'oj flPOth, if inappropna/t.

The d•c•a•ed was i:oini:r to his field and passed by ph•form on which T and his fathrr were sittinl!'., T carrying pi<tol with him. A• he passed bv the platform instiir.ited T to shoot the derease~ dnwn and T shot him. T and were trie<l for the murder and were convicted on the ba.<is of the tcstimonv of eye witnesses and the dying d•claration of the deceas•d. was 'entenced to imprisonm•nt for· life and T wa< sentenced to death. The app•llant contended that if the dcreased was at the spot marked by the Sub-Inspector on the ~ketch map he coulrl not have received the injuries ac; stated by the eye witn"'5es. It was further urged that the sentence of T should be rrduced to imprisonment for life as he had ,acted under the influence of his father.

llel.cl, that, the mark! made on the sketch map by the Suh-Inspector on the b.sis of statements made by witnesses to him were inadmi<sible unJer s. 162 Code of Criminal Pro-cedure and the appellant could not use them to found any ar~umcnt as to the improbability of the deceased being hit in the manner stated by the witncues if he was standing at the ~ sp<>t marked on the •ketch map.