DR. INDRAMANI PYARELAL GUPTA versus W.R. NATHU AND OTHERS.

1 S.C.R . SUPR.EME UOL1RT REPORTS

l>R. INDRAMANI PYARELAL GTJP1

W.R. NATHU AND OTHERS. - (B. P. SINHA, c. J., K. SUBBA RAO, N. RAJ.A.GOP.A.LA AYYANG.A.R, J. R. MunHOLKAR and T. L. VENXA.T.A.RA.M.A. A!Y.A.R, JJ.}

Forward Oontracts-Regulation of-Bye-laws empowering cloaing out of hedge contracta--Validity of-If can operate retrospectively-East India Ootton As1ociation Bye-laws cl. 62.A-Forward Contracts (Regulation) Act, 1962 (LXXIV of 1962), ss. 4, 11 and 12.

The appellants were members of the East India Cotton Association which was an association recognised by the Cen• tral Government under the Forward Markets Regulation Act, 1952. Prim to December 1955, they had entered into "hedge contracts" in respect of cotton for settlements in February and May 1956 in accordance with the bye-laws of the Associa· tion. Towards tb.e end of 1955 it was apprehended that the forward market in cotton was heading for crisis aud the Central Government issued notifications directing the Asso-ciation to suspend business in hedge contracts for February and May 1956 deliveries for short periods this did not improve the situation. On January 21, 1956, the Central Govern· ment, acting under s. 12 of the Act, made new bye-law in substitution of bye-Jaw 52AA of the Association which em-powered the Forward Markets Commission, constituted under, the Act, to issue notification tlosing out all hedge contracts at rates fixed by the Commission. On January 24, 1956, the Commission issued notification closing out all hedge contracts including those subsisting on that date, and fixed the rates for the settlement of such contracts. The appellants contended that the amended bye.law 52AA was invalid as the power to close out hedge contracts could not be conferred upon the Commission and as the Association was in law incapable of conferring such power on the Commission or on any other body and that in any cases the bye-law could not operate retrospectively so as to affect existing contracts.

Held, (per Sinha, C. J., Ayyangar, Mudholkar and Aiyar, JJ. Subba Rao, J. contra), that the amended bye-law 52AA was not ultra virc1 the Central Government and validly empowered the Commission to close an hedge contracts in cotton including existing contracts. Clause (f) of 1, .f. of the Act provided that one of the functions of the Commission

~9G2 Dr. lnbom1r.i p_,..,1.1 Gupta v. W.R. N itllu

shall be to perform such other duties and exercise such other powers as may be assigned to the Commission "by or under the Act, as may be prescribed". There was no limitation upon the nature of the power that may be conferred under cl. (f) except that . it must be in relation to the regulation of forward trading in goods. It was not possible to place any limitation on this power by invoking the rule of •jU11dt.m v•neri• as there was no common positive thread running through els. (a) to (e) of s. 4. To judge whether legally rower could be rested in statutory body the proper rule o interpreta-tion was that unless the nature of the power was such as to be inconsistant with the purpose for which the body was created or unless the particular power was contra-indicated by any specific provisions of the Act, any power which fur· thered the provisions of the Act could be legally conferred. Judge by this test the power conferred by the bye-law could be validly vested in the Commission. The power was one 00 conferred ''under the Act• The words "under the Actsignified power conferred by laws made by subordinate Jaw-making authority which was empowered to do so by the Act. The impugned bye-law was clearly well within the bye-Jaw making power under ••· 11 and 12. The bye-law did not contravene article.• 64 of the Articles of Association of the Association as articles 64 applied only to the Board and placed no restrictions on the power of the Association.We•tern India Thtatro• Ltd. v. Municipal Oorporaticn o/ Poona, [1959] Supp. 2 S.C.R. 71, Huhli Electricity Oo. Ltd. v. Province of Bombay, 76 I.A. 57 and NarayanasUJamy Naidu v. Krish11aMu,thi, I.L.R. 1958 Mad. 513, referred to.

Further, upon proper construction ' of the amended bye-law it applied not only to contracts to be entered into in future but also to subsisting contracts. statute which could validly enact law with retrospective effect could in express terms v.alidly confer upon rule making authority power to make rule or frame bye-law haviQg retrospective operation. In the present case the power to make bye-laws so as to operate on subsisting constracts followed as neces-sary implication from the terms of s. I I. There was no contra indication in the other provisions of the Act.

Per Subba Rao,J.-Under s. 12 (I) of the Act the Central Governmei;it had no power to make bye-law with retrospective effect. The provision conferring rule making power must be strictly construed and unless it expressly con-ferred power to make bye-law with retrospective effect, it must be held that it was not conferred any such power. Evey if it was permissible to inter such power by nccessara

I • ' -·

1 S.C.R.

impl\cation, it could :r\ot be inferred in the present case. It co'uld not be said that i'mless retrospective operation was gi·tren . to the provisions of s. 12, the object of the legis-lature would be defeated or the purposes for which the power was conferred could not be fulfilled.

Further, the powers conferred on the Commission under the impugned bye-law could not be performed by the Commis-sion under cl. (f) of s. 4. Clauses (a) to (e) of s. 4 showed that the functions of the Commission were wholly supervisory and advisory in nature; the functions described in cl. (f) were analogous to these and could only be supervisory or advisory. The Commission had no administrative functions or powers of management or powers of interference in the il).ternal management of registered association which were vested in the Association. The power conferred upon the Commission was not conferred "under the Act". The words did not include rule or bye-law, and applied only to an assignment made in the exercise of an express power conferred under the Act. The Central Government had no power under s. 12 to make bye-law assigning any functioa to the Commission.

Union of India v. Madan Gopal Kahra (1954) S.C.R. 541, Modi Food Products Lt<i. v. Commissioner of Sales Tax, U .P., A.LR. 1956 All. 35, Strawboar<i Manufacturing Oo. Lt<i. v. Gupta Mill Workers' Union, (1953) S.C.R. 439, India Sugar & Rejineriu Lt<l. v. State of Mysore, A.I.R. 1960 Mys. 326, O.W. Motor Service tP) Lt<l. v. State of Kerala, A.LR. 19)9 Kcrala 347, Howell v. Falmouth Boat Construction Co. Lt<l. (1951) A.O. 837; The Western India TheatreJ Ltd. v. Municipal Corporation onhe Oity of Poona, (1959) Supp. 2 S.C.R. 71 and Hubli Electricity Oo. Ltd. v. Province of BomfJay ( 1948) 76 I.A. 5 7, referred to.

CrvIL APPELLATH JuRISDIOTION: Civil Appeal

No.109of1957.

Appeal by special leave from the judgment

and order dated March l, 1956, of the Bombay High Court in Appeal No. 20 of 1956.

G. 8. Pathak, K. H. Bhabha, H. M. Vakeel and

I. N. Shroff, for the appellants.

0. K. Daphtary, 8olic£tor General of India,,

B. K. [(hanna and P. D. Menon, for tho respondonts.

1962 Dr. l ~dram11ni Py4relal Ouph W.R. "· JV1J1hu

1?8B Jlr, Jnirtm•n• /'µ111•1 0.:1 .. •• W.ft. N•thu

0. K. Daphtary, Solicitor General of India,

S. N. Andley, Rameshwar Nath and P. L. Vohra, for the Interveners.

196l. April 11. The Judgm<>nt of Sinha

C. J., Ayyangar, Mudholkar and Aiyar, JJ., "ll'as delivered by Ayyangar, J., Subha Rao, .J. deli'f'ered. separate judgment.

AYYANGAR, J.-This is an appeal by epecial

leave from the judgment of Division Bench of the Bombay High Court affirming the judgment of learned Single Judge whereby petition filed under Article 226 of the constitution by the appellants was dismisaed. By their petition, the appellants challenged the validity of notification issued by Forward Markets Commission statutory body created by the Forward Markets Regulation Act 1952 (LXXIV of 1952) (hereinafter referred to aa the Act) to the authorities of the East India Cotton Association, Bombay (which will be referred to as the Association) intimating to them that the contin-uation of trading in certain types of forward con-tracts in cotton including that known as "hedge contracts" was "detrimental to the interest of the trade and the public interest and to the larger interests of the economy of India" and directed these contracts to be olo~ed out, to be settled at prices fixed in the notification.

It is necessary tn set out briefly certain facts

in order to appreciate the points raised by the appeal. The East India Uotton Association is an "association" which has been recognised by the Central Government under s. 6 of the Act. The three appellants are members of the Association carrying on business in partnership. The appell-ants had, prior to December 1955, entered into •·hedges contracts" in respect with other membora of the Asimciation for settlements in February and May l!)(i(j. There was no dispute that these

l S.C.R. SUPREME COURT REPL>RTS

contracts were in accordance with the bye-laws of

the Association as they stood at the date when the contracts were entered into. The terms and conditions of forward contracts in cotton including "hedO'e contracts", a.nd the mannEir of their imple-ment~tion, were governed by the provisions contai-ned in certain bye-laws of the Association and of these that relevant to the consideration of the matters in this appeal was bye-law 52AA which on the date when the appellantis entered into their contracts ran aR follows:-

"52-A.A. ( l l whether or not the prices at

which the cotton may be bought or sold are at any time controlled under the provisions of the Essential Commodities Act, 1955, if the Textile Commissioner with the concurrence of the Forward Markets Commission and after consultation with the Chairman (of the Board), be of opinion that the continuation of hedge trading i8 likely to result in sit~ation deterimental to the larger interests of t.he economy of India and so informs the Board, the Board shall forthwith cause ~ notice to be posted on the Notice Boa.rd to that effect and on the posting of such notice and notwithstanding anything to be contrary contained in these bye-laws or in any hedge or on call contract made subject to these Bye-laws, the following provisions shall take effect.

(2) Every hedge contract and every on

call contract in so far as the cotton is uncalled thereunder or "in so far as the price bas not been fixed thereunder entered into between member and member or between member and non-member then outstanding shall be deemed closed out at such rate, appropriate ~? s1:1ch contr~c~ as shall be fixed by the Iext1le Comm1ss10ner and the provisions

Dr. lnd1•m•ni ,.y•rel.t Gu! tc v. W.R. N•ll'u

JOit .Dt. lnlramani P,.,,1al Gupta •• W.R. N<tAu ..A.J:J•nt•t J.

of Clauses ( 3), (4) and (6) of Bye-laws 52A in so far as they apply to hedge and on call contracts, shall apply as if they formed part of this Bye-law. After the affixation of the said Notice on the Notice Board trading in hedge and on call contracts shall be prohibit-ed until the Textile Commissioner with the concurrence of the Forward Markets Commis-sion and after consultation with the Chairman, permits resumption".

Towards the end of 1955 the Chairman of the

.Association appears to have apprehended that the Forward Market in cotton was heading for crisis which was in part due to the transacting of unbridl-ed option business, which though prohibited by the Act and also by the bye-laws of the Association was nevertheless indulged in on large scale. The chairman brought this situation to the notice of the members of the Board of the Association at meeting held on December 16, 1955, and suggested that they should give serious thought to this vital problem. It may be mentioned that the govern-ment also were anxiously considering the steps to be taken to solve or avert the crisiBI The action which the government took in this matter iA reflect-ad in notification issued by them on December 23, 1955, by which in exercise of the powers conferred on them bys. 14;of the Act they directed the Asso-ciation to suspend its business in Indian cotton hedge contracts for delivery in February 1956 and May 1956 for period of 7 days with effect from the date of the notification. The situation did not apparently improve as result of this temporary suspension so that before the expiry of the work fortnight, action under the same provision was again taken). under notification dated December :10. 1955, by which the period of 7 days was exten-ded by further period of 7 days i. e. till 6. 1. 56' meeting of the Board of .Association was held on

1 S.C.R. SUPREME COURT REPORTS

January 6, 1956, i. e., the day on which the suspen-sion of forward business expired 'when the following resolution wa.s unanimously passed :-

"In view of the suspension of forward

trading by government the Boa.rd hereby / resolves under bye-law 52 th!Lt an emergency ha.a a.risen or exists and prohibits until further notice, subject to the concurrence of the For-ward Markets Commission as from Saturday, the 7th January, 1956, trading in hedge cont-racts for February and May 1956, deliveries above maximum rate of Rs. 700/- per candy".

Thereupon suit (numbered as suit 2/1956) was

filed by member of the AssoC'iation as repr~sen­ting himself and all other _members, on the original side of the High Court, Bombay against the Associa-tion and its Board, challenging the validity of the notification of Government suspending forward trading, as also of the resolution of the Board, just now extracted. An application for the grant of interim stay was made for restraining the Board from giving effect to its resolution but this was refused by the learned trial Judge and an appeal was filed against the refusal.

While things were in this state the Central

Government, in exercise of the powers conferred on them by s. 12 of the Act, made new bye-law which was published in Gazette of· India Extra-ordinary dated January 21, 1956, jn substitution of bye Jaw 52 AA set out earlier. The n~w bye-law ran:-

"52 AA (1)

Whether or not prices at

which cotton may be bought or sold are at any time controlled under the provisions of the EQs mtial Commodities Act, 1955 if the Forward Markets Commission is of the ~pinion

Dr, fnd•11m1J11i Pyar.Za( Gu;&• v. W.R. Nathu .Ayyangar J.

IHI --'Dr. lnt/raaai ,.,.,!./ c.,, •• •• w.a. N1111ru

that continuation or trading in hedge oontrao· ts for any delivery or deliveries is detrimental to the interest of the trading or the public interest or to the larger interests of the econo-my of India and so notifies the Chairman, then notwithstanding anything to the contrary contained in these bye-laws or in any hedge or on call contract made subject to these bye· laws the following provisiona shall take effect.

(2) Every hedge contract and every on

call contract in so far as the cotton is uncalled thereunder or in so far as the price has not been fixed thereunder and relating to the delivery or deliveries notified under clause (1) entered into between member and member or between member and non-member then outstanding shall be dermed closed out at such rate appropriate to such contract and with effect from such date a<1 shall be fixed by the Forward Markets Commission and the provisions or clauses (3 ), (4) and (6) of Bye-laws 52-A in so far as they apply to hedge and on call contracts shall apply as if they formed pa.rt of this Bye-law".

This bye law was oommunioated to the Board

of the Association on Ja.nul\ry 23, 1956.

We might here state that the validity of this

new bye-law has been impugned on various grounds and the alleged invalidity of this bye-law serves as the ma.in foundlltion for cha.llene:ing the validity of the notification of the Forward Markets Cvmmission issued under the powers conferred by it.

On January 24, 1956, the appeal from the

order refusing the interim injunction in Suit No. 2 of 1956 was settled between the parties on the1e terms:

"(l) 'fhe impu~ued resolution dated January

6, 1956, declared to be valid,

1 S.C.R. SUPREME COURT Rli:PORTS

(2) The Board of Directors to meet on Jann-

, &ry 25, 1958, and consider under bye-laws 52 (2) --~ whether the rate of Rs. 700 fixed under the said resolution should continue or whether it should be waived. In considering the same the Board will apply its own mind and exercise its own judgment".

On the same day, i.e. January 24, 1956, the Forward Markets Commission took action under the ,_,, powers vested in them under the new bye· law 52 AA which had been made by government three days earlier. By communication addressed to the Chairman of the Association, the Commission stated:

"In pursuance of cl. (l) of the bye-law 52AA of the Bye-laws of the E.I.C.A. Ltd., Bombay I hereby notify to you that the For-ward Markets Commission is of the opinion that continuation of trading in the hedge contracts for Febr1rnry and May 1956 delivery is detrimental to the intPrests of the trade and the public interest and the larger interest of the economy of India and fixed under cl. (2) of the said bye-law; that the rates prevailing at the time at which the trading in the said contracts clos·.'d on January 24, 195fi, viz., Rs. 700/- for February and Rs. 686 /8/- for May delivery as tbB rates at which and Janu-ary 25, 1956 as the date with effect from which the hedge contracts and on call ccntra-cts in eo far as the cotton is uncalled there-under or in so far as the price has not been fixed thereunder relating to the said delivery shall be deemed to be closed out".Thereupon the three appellants who are part-ners cirrying on business in cotton und(•r the name and st,yle of Indramani Pyarelal Co- moved the . High Court of Bombay by petition und 'r Art. 226 .,. of the Constitution on January 27, 1956, for writ bf mand'1.1nus or direction in the nature of

111! Dr. lndrmfl•z' 'l'.JGr1lal G1111tc WR. " Nathu

Dr. lntlrnt.ni r,,...i.1 au;r. v. W.R. Nalflu 4yJa,,;01J.

mandamu,, against the members of the Forward Markets Commission who were individually implea-ded as respondents to the petition, ordering them to ca.noel or withdraw the notification dated Ja.nuary 24, 1956, whose validity was impugned on varions grounds. The petition was beard by learned single Judge who dismissed it by his order dated February 23, 1956. An appeal was filed therefrom to Bench of the High Court and when this was also dismissed the petitioners moved for & certificate of fitness to appeal to this Court but the same hav-ing been rejected, they applied for and obtained special leave from this Court, and that is how the matter is now before us.

The submissions of Mr. Pathak learned Coun11el for the appellant in support of the appeal may be classified under three main heads : (l) The not ifira-tion dated 24th Jann&ry, 1956, served 'ln the Board of the Association bv the Forward Markets Commi-ssion was ultra vires for the reason that bye-law 52AA as amended by the Central Government on January 21, 1956, was invalid. (2) Assuming the byelaw to be valid it oould not operate rfltrospecti-vely or be availed of retrospectively so as to affect rights under existing contracts subsisting on the day the amended bye-law was notified in the Gazette but that it could if at all. be validly applied only to Forward hedge contracts entered into thereafter. (3) The notification by the Forwa.rd Markets Commission was improper and ma.la.fide and was therefore invalid.

It would be convenient to deal with these

points in that order: (1) The first of the points raised raises the question of the validity of bye-law 52 AA as amended by the Central Government on Ja.nuary 21, 1956. Learned Counsel divided his submission on this matter into two sub·hea.ils: (a) that the Forward Markets Commission could not, on proper construction of the Act, be validly vested

1 s.c.R. SUPREME OOURT REPORTS

with the power with which it was clothed by the

amended bye-law, and (b) that it was beyond the power of the Association to have conferred the power which it purported to do under the amended bye-law 52AA. Put in other words, the objections were that the Forward Markets Commission could not, having regard to the terms of the statute under which it was created, be proper recipient of the power with which it was vested by the bye-law and secondly that the Association was in law incapable of conferring that power on the Forward Markets Commission or on any other body.

We shall first take up for consideration the

argument that the Forward Markets Commission was in law incapable of being the recipient of the power conferred by the bye-law under which it was empowered to issue the impugned notification. For this purpose it is n"'cessary to examine in detail the rt>levant provisions of tbe Act. Section 2 (b) defines 'Commission' as meaning "The Forward Markets Commission" established under s. 3. Section 3 ( I ) enacts :

"3. (1) The Central Government may, by

notification in the Official Gazette establish Commission to be called the Forward Markets Commission for the purpose of exercising such functions and discharging such duties as may be assigned to the Commission by or under this Act."

The point urged by learned Counsel was that the

function or the duty cast upon it by the amended bye-law 52 AA was not such as could be assigned to the Commission "by or under this Act." The meaning of the words [1]by or under' and the extent and nature of the duties assigned to the Commission by the Act will therefore i:eqnire careful examina-tion. Section 4 relates to the functions of the Commission and it is the l1roper com~truction of this

1962 Dr. 1nd1amani Pyartlal Gupta v. W.R. N Chu Ayyan7ar '·

196t Dr. lntlramani Pyar1/ol Gupta v. W.R.Nathu

732 SUPREME C()URT REPORTS (1963)

se~tion. that has loomed ]urge in the arguments on this pomt. It is, therefore, necessary to set this out in full :

"4. The functions of the Commission shall be-

(a) to advise the Central Government in res·

pect of the recognition of, or the withdrawal of recognition from any association or in res-pect of any other matter arising out of the administration of this Act ;

(b) to lrnep""forward markets under observa-

tion and to draw the attention of the Central Government or of any other prescribed autho. rity to any development taking place, in or in relation to, surh markets which, in the opinion of the commission is of sufficient importance to deserve the attention of the Central Government and to make recommen· dations thereon ;

(c) to collect and whenever the Commission

thinks it necessary publish information regar-ding the trading conditions in respect of goods to which any of the provisions of this Act is made applicable, including information regar-ding supply, dt>mand and prices, and to submit to the Central Government periodical reports on the operation of this Act and on the working of forward markets relating to to snt'h goods ;

to make recommendations generally with

view to improving the organisation and working of forward markets ;

( e) to undertake the

inspection of the

accounts and other documents of any reoog-nished association whenever it considers it neceSBary ;"and

1 S.C.R. SUPREME COURT REPORTS

(f) to perform such other duties and exercise such other powers as may be assigned to the Commission by or under this Act, or as may be prescribed''.

Dr lndramani Pyarelal Gupta v. W.R.Nalhu .dyyangarJ.

Pa.using here it is neceBBary to add that the expression "prescribed" fouud at the end of cl. (f) has been defined by s. 2(h) of the Act to mean ''Prescribed by rules made under the Act".

Before considering the points urged as regards the oonstruotion of this section taken in conjuction with the terms of s.3(1) we shall refer to few other proyisions which are of some relevance in the pre-sent context. Section 3(2) which confers power on the Central Government to call for periodical returns from Recognised Associations and to direct such enquiries as they consider necessary to be ma.de, empowers the government to direct the Commission to inspect the accounts and other documents of any recognised Association or of any of its members and submit its rAport thereon to the Central Government [vide s. 3(2) (c)]. Sub·s. ( 4) of this section enacts :

"8(4 ). Every recognised association and every member thereof shall maintain suoh books of account and other documents ad the Commission may specify and the books of • account and other documents so specified shall be preserved for such period not exceed-ing three years as the--Commission may specify and shall be subject to inspection at all reaso-nable t.imes by the Commission".

- Section 28 reads :

"28. (l) The Central Government may, by notification in the Official Gazette ma.ke rules for the purpose of carrying into ~ff Pct the ob-jeote of this Act,

__ JHB ,

Dr. lodramaol P:1ar1lal l1uplo v. W.R.Natlia

(2) In particular, and without prejudice to the generality of the foregoing power, such rules may provide for-

( a) the terms and conditions of service of members of the Commission ;

(b) the manner in whioh applications for recognition may be made under section 5 and the levy of fees in respect thereof ;

(c) the manner in which any inquiry for the purpose of recognising any association may be made and th<> form in which recognition shall be granted;

(d) the particulars to be contained in the

annual reports of recognised associations ;

(e) the manner in which the bye-laws to be

made, amended or revised under this Act shall, before boing so marie, amended or revised be published for criticism ;

(f) the constitution of the advisory commit-

tees established under section 26, the terms of office of and the manner of filling vacancies among membPrs of the committee ; the inter-val within which meetings of the advisory committee may be held and the procedure to be followed at suoh meetings ; and the matters which may be referred by the Central Govern-ment to the advisory committee for advice ;

(g) any other matter which is to be or may be prPscribed."

The argument on this part of the case was brieCJy

t.his : The Forward Markets Commission is statutory body specially created for the purposes of the Act. The powers which may ho conferred upon the Commission and the duties which it may be called on to discharge are therefore subject to the provision~ of the Act. No more power can be conferred upon this body than what the Act allows

1 s.c.R.

SUPREME COOH.1' REPORTS

and the power under the a.mended bye-law 52AA is n<>t one which is contemplated by the Act as con-ferable on it. Section 4 <le fines the functions of the Commission under five general heads (a) to (e) with a. residuary clause contained in cl. ( ). The powers or duties dealt with in els. (a) to {e) are in their essence either recommendatory or advisory. In the context therefore ''the other" duties or "other" powers which may be assigned to the Commission under cl. ( f) must be either efuesdem ge:neri.-J with advisory or recommendatory powers or of nature similar to those enumerated in the previous sub-clauses.

In support of t.hese submissions learned Coun-

sel invited our attention to several decisions in which ancillary powers which might be implied from the grant of certain express powers were referred to. In particular it was submitted that the Court would not imply power which it was not absolu-tely necessary to 'effectuate on express grant or was need to prevent the nullification of an express power that was granted. In our opinion, these deci-sions afford no assistance for resolving the contro-versy before us. There is no question here of dedu-cing an implied power from the grant of an express one. What we a.re concerned with is the scope of an express power or rather whether the grant of the power conferred upon the Commission by the bye· law could be held to be power which could be assigned to the Commission under cl. (f). So far as the terms of cl. ( f) are concerned, there is no limita-tion upon the nature of the power that might be conferred except, of course, that which might flow from its having to be one in relation to the regula-tion of forward-trading in goods which the Act is designed to effectuate. Any limitation therefore would have to be deduced from outside ol.(f) of s. 4. Ta.king ea.ch of the clauses (a) to (e), it is not possi-ble to put them positively unuer one genus in order

Dr. Indramani PyartlaZ Gupla v. W.R. '1upta --A)')langat' J.

111111 Dr, lntlramani Pp1lal Gup'a •• W.R • .Nathu dpcng,. J,

that there might be scope for the application of the ejusdem generis rule of construction. Negatively, no doubt it might be said that none of these five clauses confer an executive power such as has been vested in them by the amended bye-law 52AA but this can-not be the foundation for attracting the rule of construction on which learned Counsel relies. On the other hand, if there is no common positive thread running throogh cls.(a.) to ( e) such as would bring them under one genus and negatively they do not expressly include any administrative or execu-tive functions, that itself might be reason why the expression "other" occurring in cl.(f) shoud re-ceive the construction that it is intended to com· prehend such function. Learned Counsel further suggested that even if the rule of ejusdem generis did not apply, the allied rule referred to at page 76 of the report of Western Jndi,a Theatres Ltd. v. Munici-pal Corporation of Poona, that the matters expressly rflferred to might afford some indication of the kind and nature of the power, might be invoked, but we consider that, in the context, there is no scope for the application of this variant either. What we a.re here concerned with is whether it is legally compe-tent to vest particular power in st!ttutory body, and in regard to this the proper rule of interpreta-tion would be that unless the nature of the power is such as to be incompatible with the purpose for which the body is created, or unless the particular power is contra-indicated by any specifio provision of the enactment bringing the body into existenoe, any power which would further the provisions of the Act could be legally conferred on it. Judged by this test it would be obvious that the power confer-red by the bye-law is one which could be validly vested in the Commission.

more serious argument was advanced by learned Counsel based upon the submission that

I S.C.R.

power conferred by bye-law framed under s. 11 or 12 was not one tha.t was conferred "by or under the Act or a.s m 1.Y be prescribed". Lea.rned Counsel is undoubtedly right in his submissil)n tha.t power conferrAd by a. bye-law is not one conferred "by the Act", for in the context the expression "confer-red by the Act'' would mean "conferred expressly or by necessary implication by the Act itself". It is also common ground that bye-law framed under s. 11 or 12 would not fall within the phraseology ''as may be prescribed", for the "expression" 'Prescribed' has been defined to mean "by rules under the Act", i.~., those framed under s. 28 and bye-law is cer-tainly not within that description. The question therefore is whether power conferred by bye-law could be held to be power ''conferred iinder the Act". The meaning of the word "under the .A.at" is well-known. [1]'By" an Act would mean by provision directly enacted in the statute in question and which is ga.therable from its express language or by neces-sary implication therefrom. The words "under the Act'' would, in that context, signify what is not directly to be found in the statute itself bu1; is con-ferred or imposed by virtue of powers enabling this to be done; in other words, by laws made by sub-ordinate law-making authority which is empowered to do so by the pa.rent Act. . This distinction ia thus between what is directly done by the enactment and what is done indirectly by rule-making authori-ties which are vested with powers in that behalf by the Act. (vide Hubli Ekotricity Oompony Lt,d. vs. Province of Bombay, and Narayanaswami Naidu vs. Kriskna-Murthi.) That in such sense bye-laws would be subordinate-legislation ''under the Act" is clear from terms of ss. 11 and 12 the:mselves. Section 11 (1) enacts:

"l l. ( l) Any recognised association may, subject to the previous approval of the Central

(1) 76 l.~. 57, 66. (2) I.L.R. 1958 Mad 513, 547,

1962 Dr. fndramani Pyarelal Gupta W.R. "· Nathu Ayyangaf", J,

Dr. lndramari Pyarelol Gupra v. W.R.No.tlu A)'yangar, .'

Government. make bye-laws for the regulation and control of forward contracts'',

and sub-s. (2) enumerates the matters in respect the matters in respect matters in respect in respect of which bye-laws might make provision. Sub-s. (3) refers to the bye-laws as these made under this section and the provisions of sub-s. ( 4) puts this matter b~yond doubt by enacting:

(2) enumerates the matters in respect the matters in respect matters in respect in respect of

"ll (4) Any bye-laws made under this

.•ection shall be subject to such conditions in regard to previous publication as may be prescribed, and when approved by the Central Government, shall be published in the Gazette of India r.nd also in the Official Gazette of State in which the principal office of the recognised association is situate ;

Section 12 under which the impugned bye-law was made states in sub-s. (2) :

"12 (2) where, in pursuance of this

section, any bye-laws have been made or amended, the bye-laws so made or amended shall be published in the Gazette of India and also in the Official Gazette of the State in which the principal office of the recognised association is situate, and on the public&tion there0f in the Gazette of India the bye-laws so made or amended shall have effect as if they had been made or amended by the recognised association",

and in suh-s. (4):

"12. (4). The making or the amendment

or revision of any bye-laws under this section shall in all cases be subject to the condition of previous publication",

............................................................

Having regard to these provisions it would not be

I S.C.R. SUPREME COURT REPORTS

possible to contend that not .vithstanding that the bye-laws are rulos made by an Association under s. 11 or compulsorily m·t.de by the Central Govern-ment for the Association as its bye-laws under s. 18, they a.re not in either case :)ubordinate legislation under s. 11 or 12 as the case may be, of the Act and they would therefore squarely fall within the words '·under the Act" in s- 4(f). Indeed, we did not under-stand Mr. Pathak to dispu~e this proposition.

His contention however was that when cl. (f) specifically made provision for powers conferred by "rules" by the employment of the phrase ''or as may be prescribed" and, so to speak, took the "rules" out of the reach of the words "under the Act" it must necessarily follow that every power confered by Subordinate law-making body must be deemed to have been excepted from the content of that expre-ssion and that consequently in the Content the word "by the Act'' should be held to mean "directly by the Act'' i.e., by virtue of positive enactment, of the words "under the Act" should be held to be reference to powers gatherable by necessary impli-cation from the provisions of the Act. As an instance learned Counsel referred us 'to the power of the Central Government to direct the Commission to inspect the accounts and other doeuments of any recognised association or of any of its members and submit its report thereon to the Central Govern-m<'nt under s. 8 (2)(c) and suggested that this would be case of power or duty which would be covered by the words ''under the Act". We find ourselves wholly unable GO accept this. If without the refer-ence to the phrase "as may be prescribed'' the words "under the Act" would comprehend powers which might be conferred under ''bye-laws" as well as those under "rules'' we are unable to appreciate the line of reasoning by which powers conferred by bye-laws have to be excluded, becau<ie of the specific reference to powers conferred by "rules".

Dr. Ind amani Py12r1l I Gupta v. W.R. Nathu A1yangar, J,

Dr. lndramani P.)11 rtlal Guptn v. W.R. Nathu

SUPREME-COURT REPORTS [1963]

Undoubtedly, there is some little tautology in the use of the expression "as may be prescribed" after the comprehensive reference to the powers conferred ''under the Act", but in order merely to avoii redundancy you Jannot adopt rule of cons-truction which cuts down the amplitude of the words used except, of course to avoid the redundancy. Thus the utmost that could be that though normally and in their ordinary signification the words •'under the Act" wou Id include both "rules" framed under s.28 as well as "bye-laws" under s. 11 or 12, the reference to "rules" might be eliminated as tautlo-gous since they have been specifically provided by the words that follow. But beyond that to claim that for the reason that it is redundant as to part, the whole content of the words "under the Act" should be discarded, and the words "by the Act" should be read in very restricted and, if one may add, in an unnatural sense as excluding power con-fered by necessary implication, when such power would squarely fall within the reach of these words would not, in our opinion, be any reasonable oon-struotion of the provision. We need only add that the construction we have reached of s.4 (f) is reinfo-rced by the hnguage of s. 3 ( 1) which is free from the ambiguity created by the occurrence of the expression "as may be prescribed" in the former. We have therefore no hesitation in holding that there was no incompetency in the Forward Markets Commission being the recipient of the power which was conferred upon them by bye-law 52AA as amended.

The next pa.rt of the enomission in relation to

this matter was that it was not competent for the Association to have framed this bye-law and that the powers of the Central Government under s. 12 and of the Association under s. 11 in regard to the framing of bye-law being co-extensive, the bye-law framed was not competent to confer any power on the commission.

I s.c.R. SUPREME COURT REPORTS

This contention was urged with reference to

two considerations:

(a) that bye-law of the type now in contro-versy was llOt within s.11 of the Act, and ( lJ) that haviug regard to the provision contained in the Articles of Association of the Associa-tion the bye-law was beyond the powers of the Association to frame. These we should deal in that order.

The first objection naturally turns upon whe-ther the bye-Jaw is one which could be comprehen-ded with s. 11 of the Act. Its first sub-section enacts;

. "11(1) any recognised association may, subject to

the previous approval of the Central Govern· ment, make bye-laws for the regulation and control of forward contract."

That the impugned bye-law is one for the regula-tion and control of forward contracts cannot be disputed, and the terms being very general would include bye-law of the type now impugned. In. this connection reference may be made to bye-la.w 52AA which the impugned bye-law amended, under which power was vested in the Textile Commissioner with the concurrence of the Forward Markets Commission, (though after consultation with the Chairman of the Board) to direct the en-closure of hedge contracts and fix the 1~ates at which such oontracts might be closed out -a provi-si Jn whose validity was not impugned in the pre-s ~nt proceedings. Mr. Pathak no doubt submitted that he was not precluded from challenging before us even the earlier bye· law for the purpose of sus-taining his argument that the amended bye-law was 'tdt,ra vires, NevertheleEs it must be a.pparent that it wa<J alwa.ys assumed that bye-laws which vest in 1utllorities externa.l to the ABBociation the

Dr. Ind1amoni Pyarllal J·upta v. W.R. NaChu AyJangar J.

19~B --Dr. /11tiramani Pym/a/ Gupt. •• W.R. N,tl.u

power to interfere with forward dealing was within· ,._ the scope of the. bye.Jaw making powers under s. I I.

This general provision apart, sub-s. (2) of

a. 11 enact:

"ll(2). In particular, and without pre-judice to the generality of the foregoing power, such bye-laws may provide for-

(a) ....................................................... .

(b) ........................................................ .

(c) ........................................................ .

( d) fixing, altering or postponing days for settlement;

( e) determining and declaring market rates, including opening, closing, highest and lowest rates for goods;

(f) ....................................................... ..

(g} ........................................................ .

(h) ........................................................ .

(i). o o o o o o 0 o O O o o o O o O O o 0 O O O O o o o IO o o 0 o O O O o O o o O O O 0 t 0 0 0 0 O O O I I 0 0 I 0

(j) ........................................... ~·············

(k) ........................................................ . (!)..........................................................

(m) ........................................................ .

(n) the regulation of fluctuations in rates ancl prices;

(o} the emergencies in trade which may 11.ri!e and the exercise of powers in such eme r-gencies including the power to fix ma.xi-mum prices;

1 S.C.R. SUPREME COURT REPOR'l'S

--------------."

As the power of the Central Government to make bye-laws under s. 12 is admittedly co-extensive with the power of the Associations to frame bye-laws, it is not necessary, to refer to the terms of the latter section.

Before considering in detail the argument on

this part of the case we consider it useful to set out few of the bye-laws of the Association whose validity has not been challenged and which would show the manner in which the Association has been functioning in emergencies such e.s that for which the impugned bye-law provides, Bye-law 52 which still exists:

"52.( I) If in the opinion of the Board an

emergency bas a.rised or exists, the Board may, by resolution,

(i) passed by majority of not less than --

---------- ----, . and

(ii) confirmed-----------

prohibit, as from the date of such confir-mation or from such later date as may be fixed by the Board in the resolution referred to in sub-clause (1),

(a) trading in the Hedge Contract for any

delivery or deliveries --------- or (b) all tr&ding in such contracts as are referred to in clause (a) for specified period-----

''52A.-If the Board, at meeting specially convened in this behalf, resolve that st&te of emergency exists or is likely to ooour such as shall in the opinion of the Boa.rd make free trading in forward contracts extre-mely difficult, the Board shall so inform the Forwal'd Markets Commission and 11pon the

J96Z Dr. fndr•m•ni P;111r1/al fJu~llJ v. W.R. N•thu Ayyangar, J •

1968 Dr. lndramatti Pyartlnl <Jupla v. W.R. Nalhu .AJ;angar, J.

Forward Markets Commission intimating to the Board its agreement with such resolution, then notwithstanding anything to the con-trary contained in these bye-laws or in any forward contract m.>de subject to these Bye. laws, the following provisions shall take effect-

( I) 'l'he Boa.rd shall at a. meeting speci· ally convened in this behalf,

(a) fix a. date for the purpose hereinafter contained,

(b) fix settlement process for forward con·

tract~,

(c) fix special Settlement Day.

(2) ............... Every hedge contract entered into between member and mem· her or between member and non-member outstanding on the date fixed under clause (I)( a) hereof shall be demand closed out at the rate appropriate to such contracts fixed under clause (l)(b) hereof."

3-6-----------~~-~

and then follows Bye.Jaw 52AAA.

Apart for the amended bye-law occurring in the group of existing bye.laws making provision for emergencies to which sub-clause (o) of a.II (2) refers. there is no dispute that there was an emer-gency in the forward market and that the impug-ned bye-law was framed to meet such contingency. It was not contended before us that the method by which the emergency was resolved by the impugned bye.faw-·viz., by closing out subsisting contraqt was not the usual method employed for the purpose. If therefore the bye-law was provision for an emer· gency within s. l l (2)( o) then it would seem to follow that for the resolution of that emergency,

every one of the matters which could be included in such bye-laws would be attracted to it, and so we find it impossible to accept Mr. Pathak's sub-mission regarding the invalidity of the bye-Law.

An analysis of the impugnl3d bye-law 52AA and comparison of it with that which it replaeed would show that the main point of difference is that where-as formerly action to stop forward trading and for closing out contracts and to fix the rate at which contracts were to be closed out was vested in the Textile Commissioner, acting with the concurrence of the Forward Markets Commission, under the amended bye-law the power is directly vested in the Forward Markets Commission itself. The argu-ments addressed to us on this point are concerned not so much with the propriety as with the vires of provisions by which the power to close out con-tracts by the issue of a. notification is veHted in the Commission. Apart from an argument immediately to be noticed, we do not see how, if such power could validly be conferred upon Textile Commis-sioner or even exercised by the Board of the Associa-tion under bye-law framed under s. 11, the same would be beyond the power to make bye-laws under s. 11 by the mere fact that the authority vested with the power is the Forward Markets Commission. We are clearly of the opinion that bye-law 5.:'AA is well within the bye-law ma.king power under s. 11 of the Act and therefore within s. 12.

It was then said that the amended bye-law 52AA was invalid as in violation of the Articles of Association of the Association being an impermissible delegation of the powers vested in the board of the Association by its Memorandum of Articles. In this context Mr. Pathak placed reliance on cl. 64 of the Articies as laying down the limits " ithin which

Dr. I11dran ani Pyarelal Gupta v. W.R·Notliu

/Y6Z Dr. Indramani Pyortlal Gupttt v. W.R. Nat~u 4fJOngar J.

the Board might delegate their powers. He contend-ed that the conferment of the power to take action on the Forward Markets Commission was thus con• trary to and inconsistent with the powers of the Association under this Article. It would be seen that it' learned Counsel is right, this would render invalid not merely bye-l&w 52AA as now amended but even the bye-law as ·it originally stood, but as already stated learned Counsel urged that he was not precluded from raising this contention. This point was not raised in the Court below but having heard arguments on it we shall pronounce upon it. We consider t.bat there is no substance in this objection. Article 64 on which reliance was placed runs in thPse terms:

"The Board may delegate any of their

powers, authorities and duties to committees consisting of such mem hers or mem her.< of their body or consiRting of such other members or me-mbers Associate Members, Special Associate Members or Temporary Special Associate Mem· hers of the Association not being Directors, or partly of Directors and partly of such other ml'mbers and/or Associate Members, Speoial Associate Members or Temporary Special AllSo-oiate Members as the Directors may think fit. Any Committee so formed shall in the exercise of the powers so delegated conforms to any regulation that may from time to time be imposed on it by the Directors".

as the III ,, ___ _

In so far as the Memorandum is concemerl, its paragraph III states the objects for which the Association was established, as being, inter alia :

-------"

(e) To make from time to time bye-laws for--- ----------the opening a.nrl closing of market.II in cotton and the

times during which they shall open or closed; the making performance and determination of contr&cts-------the prohibition of specified classes of dealings and the time during which such prohibition shall operate; the provision of an dealing with 'Croners' or •Bear Raids' in any and every kind of cotton and cotton transactions so as to prevent or stop or mitigate undue speculation inimical to the trade as whole; the course of business between Original Members inter se or between any of them on the one hand, and their con-stituents on the other hand, thef,forms of contracts between them and their rights and liabilities to each other in respect of dealings

in cotton-----------------"

The Articles dealing with bye-laws, the manner in which they are to be made aR well as the sub-ject to which they might relate is to be found in Articles 73 and 74. The relevant portion of Arti-cle 73 runs:

"Under and in conformity with any Sta-tutory provieions for the time being in force, the Board may pass and bring into effect such bye-laws as may be considered in the interest of or conduciy-e to the objects of the Association------------,----"

and Article 74 runs:

''Without prejudice to the generality of the powers to make bye-laws conferred by the Memorandum of Association and by these Articles and under or in the absence or any statute or statutes in force in that behalf, it is hereby expressly declared that the said powers to make, alter, add to, or rescined Bye-laws including power to do so in reg-ard to all or any of the followin~ m~tters--~-" Sub-para. (7) repeats inter alia the contents of

Dr. lndram11n; Pyarelal Gupta "· W.H. Nalhu Ayyangar J,

IA. Jndramtni P_,ar1lol Gupt• y, W.R. Natllu

Paragraph III (e) of the Memorandum of Associa-tion which we have extracted. The entire argu. ment of Mr. Pathak on Article 64 was based on the footing that the power to make bye-law was vested solely in the Board, because it is only the powers of the Board that are subject to the limi-tation imposed by Article 64. If however the power to make bye-law was not confined to the Board but bye-laws might be framed by the Asso. ciation itself, the argument based on Article 64 would be seen to have no validity. That the latter is the true position is clear from Article 73 which reads:

"The Board's powers as aforesaid in rela-

tion to bye-laws shall not derogate from the powers hereby conferred upon the As~ocia­tion who may also in the same way and for the same purpose from time to time pass and bring into effect new bye-laws and rescind or alter or add to any existing bye-law by reso-lution passed by majority of two-thirds at the least of the Members present and voting at the General Meeting previous to which at least fourteen day's notice has been given that Member intends at such meeting to propose the making of such bye-law or the decision, alteration of or addition to bye. law or bye-laws".If therefore bye-law could be made by the Associ-ation it is manifest that there is no limitation upon its powers such as is to be found in Article (i4 which applies only to the Board. The validity of the bye-!R.w therefore cannot be challenge by reference merely to the powers of the Board, because what is contemplated bv s. 11 is the power of the "recogni-sed Association" to frame the bye-law. We have therefore no hesitation in rejecting the contention that the bye-law as framed contravenes the rules of the Association.

1 s.c.R.

Mr. Pathak next contended that the impugned bye-law was invalid because it operated retrospec-tively. This argument he presented under two heads. His first submissjon was that consistently with the rule that an enactment would not be construed as retrospective unless the same were to have that effect by express language or by necessR.ry intendment, the impugned bye-law should be held to affect and close out only those contracts, which were entered into after the date on which tne bye-law came into operation and that if he was right in this construction, the impugned notification had gone beyond the powers conferred on the Commission by the new bye law. We are wholly unable to accept this submission as to the construction of the bye-law. The first paragraph of the bye-law hy its last words points out the consequence of notification, by the Forward Markets Commi~sion. It provides that if the Cha.irma.n were notified that the conti-nuation of trading in hedge contracts for any deli-very etc. "was detrimental to the interests of the general public or the larger interests of the economy of India.'' then notwithstanding anything to the contrary contained in the bye· laws of the Associa-tion or in any hedl?e etc. contract the provisions contained in the second paragraph should have . effect. If one had regard only to paragraph I and nothing more there might be some room for plausible argument that subsisting contracts were not to be affected, though the expression "notwith-standing anything to the contrary contained in any hed,l?A eto. oontraot'' would undoubtedly militate a.gain~t any such contention. But such ambiguity ifany is cleared by the provision in paragraph 2 which has effect on the notification under paragraph r, for bv ex:ore~s terms it refers to "every hedCTe contract" and "every on call contract" ''in so f~r as cotton is uncalled therAnnder or in so far as the pnoe has not been fix"ed thAreunder" This there-fore places it beyond doubt that executory contracts

Dr. 1 ndramani Py.re/al Guplt v. W.R. Nathu Ayyangar J.

1962 Dr. Indrom."i Pyar1lal c,,,1a •• W.R. Nathu @an1arJ.

which were subsisting on the date of the notification were within its scope and were intended to be affected by it. And this, if anything more were needed, is made more certain by the reference in parts (2) to the provisions of els. (3), (4) and (6) of bye-law 52A. Bye-law 52A deals with oases where the Board of the Association resolves, to repeat its terms "that state of emergency exists or i8 likely to occur which makes free trading in forward con-tracts lifficult and on obtaining the concurrence of the Forward Markets Commission, then notwith-standing anything to the contrary contained in these Bye-laws subject w these Bye-/,aws. The following provision shall have effect :

"(l) The Board shall at meeting specia-

lly convened in this behalf,

(a) fix a"date for the purposes herein·

after contained,

(b) fix settlement prices for forward

contracts,

(o) fix special Settlement Day."

Clause (3) of bye-law-52A runs:-

"52A (3) All differences arising out of

every such contract between members shall be paid through the Clearing House on the Settlement Day fixed under clause (1) (o) hereof .................................................. ".

Clause (4)

"52A ( 4) All differences arising out of

every such contract between member and non-member shall become immediately due and payable."

and Clause (6)

"52A (6) In hedge and on call contracts

entered into between member and non-member and in contracts to which clause (5)

applies, any margin ·received sha11 be adjusted and the whole or the balance thereof, as the case may he, shall be immediately refundable."

It is thus clear that the entire machinery for resol-ving emergencies such as is contemplated by bye-law 52A includes the suspension of forward busi-ness together with the closing out of forward oontra.cts of hedge and on call types whose . volume or nature had led to the emergency. It proceeds on the basis that the crisis could not be met unless subsisting contracts were closed out and, so to speak, new chapter begun. That is the ratio underlying the combined effect of bye-laws 52AA and 52 and in view of this oircumstanoe the a.rgument that on reasonable construction of the amended bye-law it would apply to constracts to be entered into in future and not to subsisting oontra.-ots must be rejected.

If he was wrong in his argument that the bye-

law on its proper construction did not affect subsis-ting contracts such as these of the Appellants, Mr. PS.the.k's further submission was that the impugned bye-law was invalid and ultra vires of the Act because it purported to operate retrospectively affecting vested rights under con tracts which were subsisting on the day ·on which the bye-law came into force.

Mr. Pathak invited our attention to passage

in Craies' Statute Law, 5th Ed. p. 366 reading:

"Sometimes a. statute, although not inten-

ded to be retrospective, will in fa.ct have retrospective operation. For instance if two persons enter into a. contract, and afterwards statute is passed whioh, as Cockburn, C. J. aaid in Duke of Devonshire v. Barrow, eto,, Co. (1877) 2 Q. B. D. 286, 289) 'engrafts an enactment upon existing contracts' and

Il6t Dr. lrulraaani Py•rel11l fluJta v. W.H'. N•tlw

1962 --

Dr. InJrammi r,ar1lal <Jup' v; W.R. Nal/iu

thus operates so as to produce result which is something quite different from the original intention of the contracting parties, such statute has, in effect a. retrospective operation."

The bye-law in so far as it affects executory contra.· c1 s requiring such contracts to be closed out on a. day not originally contracted for a.nd a.t prioe fixed by law is in the above sense undoubtedly retrospective. The submission of learned Counsel was that thoµgh legislature which had plenary power in this regard could . enact statute having a. retrospective operation, Subordinate legislation, be it a. rule, bye-law or a. notification, could not be ma.de so as to ha.ve retrospective operation and that to that extent the rule, bye-la.w or notification would be ultra virea and would ha.ve to be struck down, relying for this position on the decision of the Mysore High Court reportt.d in AIR 1960 Mys. 326. We do not however consider it neoessary to canvass the correctness of this decision or the broad propositions laid down in it. It is clear la.w th•.t a. Statute which could validly enact la.w with retrospective effect could in express terms validly confer upon rule-making authority a. power to make rule or .frame a. bye-la.w having retrospective operation and we would add that we did Iiot understand Mr. Pathak to dispute this position. If this were so the same result would follow where the power to enact a. rule .or bye-law with "retrospective effect" so a.s to affect pend· ing transactions, is conferred not by express words but where the necessa.ry intendment of the Act confers such a. power. If.in the present case the power to ma.ke a. bye-law so a.a to operate on contracts subsisting on the day the liame wa.s framed, would follow a.s neoessary implication from the term ofs. 11, it would not be necessary to discuss the larger question as to whether anrl the

circumstances in which Subordinate legislation with retrospective effect could be validly made.

Before proceeding further it is necessary to

notice submission that under the Act, far from there being conforment of power to make bye-la.w so as to affect rights uncler subsisting contracts, there was contra. indication of such a. power being conferred. In this connection Mr. Pathak. invited our attention to the terms of ss. 16and17 and 19 of the Act under which the Act has itself made special provision for affecting rights such as those if the appellants in the present case. Detail-ing the consequences of notification under s. 15, s.16 (a) enacts:~

"16 (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 remaining to be performed after the said date and which is not in conformity with the provision of section 15, shall be deemed to be closed out at such rate - as the Central Government may fix in this behalf.

S. 17 (3) enacts

''17. (3) Where notification has been

isaued under au b-aection ( 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 sale or purchase of any goods specified in the notification entered into before the date of the notification and remaining to be performed after the said date as they $-pply to all forward contracts for the sale or purchase of any goods specified in the notification under section 15."

and f. 19 (2) runs:-

"19 (2). Any option in good whioh has been entered into before the date on which

--Dr. lntlratHlll Pyarllol Gupta v. W.R. Naehu AJJ>angar, J.

IJr. lndram•n.i l'J•rtlal C.:u,;to •• W, R.N•liw

this section comes into force and which re-mains to be performed, whether wholly or in part, after the said date shall, to that extent, becomes void."

Based on these provisio,ns the submission waa that Act had made special provisions for retrospective operation of certain notifications so as to affect rights ~nder subsisting contracts and that in cases where there was no such specific provision it was not in-tended that bye-law or notification could haye that effect.

We see nQ force in this argnment. The fact

that the Act itself makes provision for subsilting contracts being affected, would in our opinion far from ~upporting the appellants indicate that in the context of crisis in forward trading the closing out of contracts was necessary method of exercis-ing control and was the machanism by which the enactment contemplated that normalcy could be restored and healthy trading resumed.

If therefore we eliminate the provisions in

ss.16, l 7 and 19 as not containing any indication that power to frame bye-law with retrospective effect was withheld from the Association, the ques-tion whether such bye-law-making power was conferred has to be gathered from the terms of s. 11 itself. Thus conside.red we are clearly of the opinion that power to frame bye-law for emer-gencies such as those for which bye-law like-52 AA is intended includes power to frame one so as to affect subsisting contracts for resolving crisis in Forward Markets. We have already referred to the terms of bye-law 52A which shows that ll'hen an emergency of the type referred to a. 11 (2) (a} arises it is not praotioable t-0 rescue & forward mar-ket from crisis without (l) putting ari end to forward trading, and ( 2) closing out subsi1ting contracts so as· to start with clean slate for tho

l S.C.R. SUPREME OOURT REPORTS

future. When therefore under s. 11 ( 2) power is conferred to frame a. bye-law to provide for:

"(0) the emergencies in trade which may

arise and the exercise of power in such emerge-ncies including the power to fix maximum and minimum prices;"

and this is read in conjunction with clause (g) reading:

"regulating the entering into, making, per-formcmoe, rescission and termination of contra-ots ••.•••.•.•.•... ''

It is manifest that the section contemplates the ma.k-

ing of bye-law regulating the performance of con-tracts, the rescission and termination of contracts and this could obviously refer only to the bye-law affecting rights under contracts which are subsisting on the day the action is taken. It is therefore manifest that s. 11 authorises the framiQ.g of bye-law which would operate retrospectively in the sense that it affects rights of parties under subsisting oontracts. Finally it should be . borne in mind is that ultimately what we are concerned in s. 11 of the Act is the power of the Association to frame the bye-law, for if the·Assooia.tion could validly frame such bye-law, the Central Government oould under s. U have a. similar power. We did not hear any argument to establish that the Asso<'i-ation had no such power.

There is ·one other aspect in which the same

problem might be viewed and it is this : The '° contract entered into he one. under the 'bye-laws by the jqr respondents purported the time being inf orce &nd any change in the bye-laws therefore would sa.m to be contemplated and provided for by the contract itaelf, so that it might not be correct to epeak of the new bye-law as affecting any accrued

1961 Dr. lnlir•m•ni Pyar1lol Gu~to v. 11.R. N•thu Ayy•nf•' J.

"" Dr. /ndren.ani PJac1lal Gup'a •• W,b. Nalhu

rights under contract. For when those bye-Ia we were altered the changes would get incorporated into .the contracts themselvPs, so as to afford no scope for the argument that there has been an infringement of vested right. In the view how-ever which we have taken about the validity of the bye· law on the ground that it was well within the terms of as. 11 and 12 we do not consider it neces-sary to pursue this aspect further or to rest our decision on it.

What remains to consider is the challenge to the notification based on the ground that it was vitiate<j by having been issued male.fide. The ground of malsfides alleged was that the impugned notification was issued in order to prevent the Board of Directors of the Association from apply-ing their minds and exercising their judgment which they were directed to do by the terms of the Con· sent Memo filed on which the appeal from the judg-ment in C.S- 2 of 1956 was disposed of on Januar.Y 24, 1956. To the allegation made in this form in the petition the first respondent, the Chairman of the .Forward Markets Commission, filed an affidavit in the course of which he pointed out that the con-tinuance of trading in futur11s was in· the ciroums, tances then prevailing in the market detrimental to the· interests of the trade and that conclusion on this matter had been reached by the Commission even before bye-law 52 AA was amended, that the question of closing out existing contracts was engaging the attention of even the Board of the Aesociation from as early as· the beginning of January 1956 and it was for the purpose of enabling the Commission to take action to set right matters that bye-law 52AA was amended and that immedia-tely the amended bye-law came into force the Com· mission took action and issued the notification ·now impugned .. He also pointed. out that the lilierty given to the Association to consider the matter

1 S.C.R.

under the terms of the Compromise Memo was

factor which had also been taken into account be-fore the notification had been issued. The learned Judges of the High Court accepted this explanation of the circumstances in which the notification came to be issued and considered that on the allegation in the petition no malafides could be inferred. We are in entire agreement with the learned Judges of the High Court on this point. No personal motive or ma.la.tides in that sense has been attributed to the members of the Commission and in these circu-mstances we consider that there is no basis for impugning the notification on the ground that it was not issued bonafide.

This completes all the points urged by the learned Counsel for the appellants. We consider that there is no merit in the appeal which fails and is dismissed with costs.

SuBBA.. RAO, J.-I regret my inability to

agree with the judgment prepared by my learned brother Rajagopala Ayya.ngar, J. A.i the facts have been fully stated in the judgment of my learn-ed brother, I need not repeat them except to the extent necessary to appreciate the two points on which I propose to express my opinion.

The appellants carry on business in cotton

under the name and style of Indrama.ni Pyarelal Gupta & Co. The said firm is member of the .E"st India Cotton Association Limited, which is recognized Association within the meaning of the Forward Contracts (Regulation) Act, 1952, herein-after called ''the Act". The Association has been formed for the purpose of, int,er alia, promoting and regulating trade in cotton and providing cotton Exchange and Clearing House. Under the Act Forward Markets Commission W88 formed by the Central Government and respondent is its Chair-man and respondents 2 and 3 are it_s .Members.

196% D1. J1,dr.,mani Pyarelal Gupta v. W.R.N4;h,11. .4.yyangar J.

Subi• Ra~J.

Jg6! •. lnir•mAni l'y1rel•l Gu,I• ~. 1'.lt. N •thu

Prior to Ja.nua.ry 21, 1956, on behalf of themsell'M and their constituents, the appellants entered into hedge contracts in cotton for Febru_a.ry 1956 and Ma.y, 1956 Settlements with other members of the Assooia.tion in accordance with its bye-la.ws. When the said contracts were effected, bye-la.w 52 AA ra.n a.s follows :

"(l) Whether or not the prices a.t which

cotton may be bought or sold are a.t any time controlled under the provisions of the Essenti-al Commodities Act, 1955, if the Textile Commissioner with the concurrence of the '.Forward Markets Commi8sion and after cons-ultation with the Chairman, be of opinion tha.t the continuation of hedge trading is likely to result in situation detrimental to the larger interests of the economy of India. and so informs the Board, the Boa.rd shall forthwith cause notice to be posted on the Notice Board to that effect and on the posting of such notice and notwithstanding anything to the contrary contained in these Bye-laws or in any hedge or on ca.11 contra.ct ma.de subject to these Bye-la.ws, the following provision shall take effect.

(2) Every hedge contra.ct a.nd every on

ca.11 contract in so far as the ootton is uncalled thereunder, or in so fa.r as the price ha.a not been fixed thereunder, entered into between member a.nd a. member or between a. mem-ber and non-member then outstanding shall be deemed olosed out at such rate, sppropri· a.te to suoh oontract, as eha.11 be fixed by the Textile Commissioner and the provisions of clauses (3), (4) a.nd (6) of Bye.law 52-A, in 110 far as they apply to hedge and on call contra-cts, shall apply as if the formed part of thil Bye-la.w. After the affixation of the 1!111.id notice on the Notice Boa.rd, trading in hedge

and on ca.11 contracts shall be prohibited until

the Textile" Commissioner with the concur· rence of the Forward Markets Commission and after consultation with the Chairman, permits resumption''.

On January 21, 1956, the Centra.l Government, in

exercise of power conferred upon it by sub-s. (I) of s. 12 of the Act, notified new bye-law 52-AA to be substituted in pla.ce of the earlier bye-law 52-AA. The new bye-law reads as follows :

"(l) Whether or not prices at which

Jotton may be bought or sold are at any time controlled under the provisions of t;he Essen-tial Commodities Act, 1955, if the Forward Markets Commission is of the opinion that continuation of trading in hedge contract for any deli very or deliveries is detrimental to the interest of the trading or the public inte-rest or the larger interests of the economy of India and so notified the Chairman, then not-withstanding anything to the contrary contai-ned in these Bve-laws or in a.ny hedge or on call contract ma.de subject to these Bye-laws the following provisions sh,tll take effect.

(2) Every hedge contract and every on

call contract in 130 far as cotton is uncalled thereunder and relating to the delivery or deliveries notified under clause (I) entered into between member and member or between member and non-member then outstanding shall be deemed closed out at such rate appropriate to such contra.ct and with effect from such date as shall be fixed by the Forward Markets Commission and the provisions of Clauses (3), (4) and (6) of Bye-law 5·!A in so far as they apply to hedge and on call contracts shall apply as if they formed part of this Bye-law."

Dr. lnt/1 a"""' i Pyar1lal GU'Jlt• v. W.R Nathu Subba Ra.]J.

D,. /ndn mani P;1a tlol Gupta y, W.1'. Nathu Subba Rao J.

On January 24, 195(}, the Forward Markets Com-mission, in exercise of the power conferred on it under the new bye-law, issued notification closing out all contracts of February 1956 and May 1950 Settlements at the rates mentioned in the said notification. The petition for writ of mandamus filed by the appellants in the High Court of Judi-cature at Bombay for ordering the respondents to oanclll or withdraw the said notification dated January 24, 1956, was dismissed int.he first instance by CoyajP.e, J., and, the appeal preferrPd against the judgment of Coyajee, J., was also dismissed by division Bench consisting of Chagla, C.J., and Tendolkar, J. Hence the appeal.

I pnrpose, as I have already indicated, to

consider the following two questions, as in the view I will be taking on those questions, the appeal will have to be allowed, and no other question, there-fore, will arise for consideration. The said questions are :, (I) Whether under s. 12 ( i) of the Act the Central G·overnment has power to make bye-law with retrospentive effect; and (2) whether under s. 4 (f) of the Act, the Forward Markets Commission can exercise power assigned to it under bye.Jaw made by the Government under a. 12 of the Aot.

Before considering the soope of the power of the Central Government under s. 12 (1) of the Act, it is necessary to consider whether the new bye· Jaw notified on January 21, 1956, has retrospective effect. There are material differences between the old bye-law 52-AA and the new one subs!·;tuted in its place. Under the new bye-law the impor-tant provision is that all hedge contracts outstand-ing at the time it came into force shall be deemed to be closed out at such rates as shall be fixed by the Textile Commissioner. Whereas under the old bye·law the Textile Commissioner had to form his opinion with the concurrence of the Forward l\farkets Commission and after consultathn with

1 S.C.R.

the Cha.irma.n, under the new bye-law the said power of forming an opinion is conferred solely on the Forward Markets Commission. Whereas under the old bye-law the opinion antt was in regard to the question whether hedge trading was likely to result in situation detrimental to the larger interests of the economy of India under the new bye·law the opinion is in respect of the question whether the continu&.tion of trading in hedge con-tracts will be detrimental to the interests of trad-ing or the public interest or the larger interests of the economy of India. While under the old bye· law the question to be considered was in regard to hedge trading as such, under the new bye-law it is in respect of the continuation of trading in hedge contracts for any delivery or deliveries. While under the old bye-law the said opinion was comm. unicated to the Board for action, under the new bye-law it is notified to the Chairman. While under the old bye-law trading in hedge and on call contracts could be resumed if the Textile Comm· issioner, with the concurrence of the Forward Markets Commission and after consultation with the Chairman, permitted the resumption, under the new bye-law the said provision for resumption is omitted. It is, therefore, manifest that the power of closing out contract under the new bye-Jaw differs from that under the old bye law in respect of the purpose of closing out, the authority empow-ered to order the close out and the consequences of such closing out. It is idle to contend that the new bye law makes only inconsequential changes in the old bye-law. The new bye-law operates upon an imvortant te1m of contract entered into before it came into force, namely, the mode of performance: it carries on its face the vice of retroactivity. In Craies on Statutes, 5th Edn. p, 366, the following passage appropriate to the question now raised is found

" .................. if statute is passed which

Dr. lndramani PJarelal Gupta v. W.R. N~thu Subba Rao .1,

Dr. lndt omor1i Pyarelal Gupt• v. W.R. Nathu SubbaRao J.

762 SUPREME OOURT REPORTS [1963]

renders the performanoe or contract impo. ssible, the rule or law is that the contract is frustrated hy supervening impossibility: con. sequently in this case also the statute operates retrospectively."

The learned author proceeds to state at

p. 367:

"The principle or this case has ·been app·

lied in later cases to contracts the perfor. mance of which in manner contemplated by the parties has been rendered impossible by reason of some change in the law."

It is, therefore, clear that the said bye-law,

in so far as it purports to effect the mode of per. formance of the pre-existing contracts, is certainly retrospective in operation. I am· assuming for the purpose of the· present question ~hat the bye. Jaw cannot be construed in such way as to confine jts operation only to contracts that are entered into after it came into force. Ir so, the question arises whether the Central Government had power to make bye law under s. 12 (I) of the Act with retrospective effeot·Section 12 (l) of the Act reads:

"The Central Government may. either

on request in writing received by it in thi1 behalf from the governing body of recognized association, or if in its opinion it is expedient so to do, make bye-laws for all or any of the matters specified in section .11 or &111end any bye laws made by such association un<J.er that section.'

Section 11 enumerates the matters in respect

of which the recognized associations can make bye. laws for the regulation and control of forward con· tracts. Neither s. 12 nor s. 11 expressly 1tates that & bye-law with retrospective operation oa.n be made under either of those two se.ctions. Full effect

1 S.C.R.

oa.n be given to both the sections by recognizing power only to make bye-laws prospective in opera· tion, that is, bye•la.ws that would not affect a.ny vested rights. In the circumstances, ca.nit be held that the Central Government to which the power to make bye-laws is delegated by the Legislature without expressly conferring on it power to give them retrosp"ctive operation can exercise power thereunder to make such bye-laws. Learned coun-sel for the respondents contends that, as the Legis-lature can make law with retrospective operation, so too delegated authority can make bye-law with the same effect. This argument ignores the essential distinction between a. Legislature function-ing in exercise of the powers conferred on it under the Constitution and body entrusted by the said Legislature with power to make subordinate Legislation. In the case of the Legislature, Art. 246 of the Constitution confers plenary power of Legislation subject to the limitations mentioned therein and in other provisions of the Constitution in respect of appropriate entrieR in the Seventh Schedule. This Court, in Union of India v. Madan Gopal Kabra ([1]), held that the Legislature can al-ways Legislate retrospectively; unless there is any prohibition under the Constitution which has crf'at-ed it. But the same rule cannot obviously be applied to the Central Government exercising delegated Legislative power for the scope of their power is not co-extensive with that of Parliament. This distinction is . clearly broughtout by the learned Judges of the Allahabad High Court in Modi Food Produds Ltd. v. Commissioner of Sales-Tax, U. P. \ 2), wherein the learned Judges observed:

"A Lf"gisla.ture can certainly give retrosp-ecti 1e effect to pieces of v~gislation passed by it but an exflcutive Government exercis-ing subordinate and delegated legislative (1) (\954-1 S. C. R. 541. (2) A. T. R. 1'56 All. 35.

Jl61 Dr. Irultamnl P_,orelal Gulltl v. W.R. Nothu

Subb11RuJ.

Iut

Dr. Ir dratn'11 l PJar.lal Gup•o •• W.R.Nalhu S«U•RooJ.

powers, cannot make legislation retrospective in elf'eot unless that power is expreBSly conferred."

In Strawboard Mamifacturing Co. Ltd. v. Gutt.a Mill

Workers Union ([1]) question arose whether the Governor of U. P., who referred an industrial dispute to person nominated by him with direction that he should submit the a.ward not later than a. particular date could extend the date for a. making of the award so as to validate the a.ward made after the prescribed date. Reliance was placed upon s. 21 of the U. P. Genera.I Clauses Act, 1904, in 1mpport of the contention that the power of amendment and modification conferred on the State Government under that section might be so exercised as to have retrospective operation. In rejecting that contention, Das, J., as he then was, observed :

"It is true that the order of April 26,

1950, does not ex fac-ie purport to modify the order of February 18, 11150, but, in view of the absence of any distinct provision in section 21 that the power of amendment and modification conferred on the State Govern-ment may be so exercised as to have retrosp-ective operation the order of April 26, 1950, viewed merely as an order of amendment or modification <'.annot, by virtue of section 21, have that effect."

This decision is, therefore, an authority for the

position that unless statute oonfers on the Government an express power to make an order with retrospective effect, it cannot exerciRe such a. power. The Mysore High Court in a. considered judgment in India Sugar & Refineries LW,. v. St,aoo of JJfysore (') dealt with the question that now a.rites for consideration. There, the Government iBSued

(2) A.[, R. 1960 Mys. 526,

(I) [1953) S.C.R. <39, 447-448.

1 S.C.R.

there notifications dated 9-4-1956, 15-10-1957 and 13-2-1958 purporting to act under s. 14 (1) of the Madras Sugar Factories Control Act, 1949, whereby cess was impos~d on sugarcane brought and crushed in petitioner's factory for the crushing season 1955-56, 1956 57 and 1957-58 respectively. One of the question raised was whether under the said section the Government had power to issue the notifications imposing cess on sugarcane brought and crushed in petitioner's factory for period prior to the date of the said notifications. Das Gupta, C. J., deliver-ing the judgment of the division Bench, held that it could not. The learned Advocate General, who appeared for the State, argued, as it is now argued before us, that in case where power to make rules is oonferred on the Government and if the provision conferring such a. power does not expressly prohibit the ma.king of rules with retrospective operation, the Government in exercise of that power can make rules with retrospective operation. In rejecting that argument, the learned Chief Jm:itice, delivering the judgement of the division Bench, observed at p. 332:

"In my opinion different i-'rinciple would apply to the case of an executive Government exercising subordinate and delegated legislative powers. In such oases, unleBB the power to a.ct retrospectively is expressly oonf erred by the Legislature on the Government, the Government cannot act retrospectively."

With re!rpfct, I entirely agree with the said observa-

tions. The same question was a~ain raised and the l&llle view was expressed by the Kera.la Hi~h Court in O. W .. Motor Service (P) Ltd. v. State of Keral,a (1). There the Regional Transport Authority, Kozhikode, granted stage carria.~e permit to the third respondent therein in respect of proposed (I) A. I. R. (195 ·) Ker. 347, 34R.

196S Dr. /ndramai Pyartlal Gupt11 v. W.R. Naih11 Subba RaoJ.

Dr. 1'rdromani Pyorel'l Gupto v. W,B. Nathu Suhh• R•1 J.

766 SUPREME OOURT REPORTS [1963]

Ghat route.

The grant of the permit

was

challenged on the ground that when that order was passed there was no constituted Regional Transport Authority for the district. It was contended on behalf of the contesting respondent that the said defect was cured by subsequent notification issued by the Government where by Government ordered the continuance of the Road Transport Authority from the date of the expiry of the term of the said Authority till its successor was appointed. The High Court held thllt the notification with retrospe-ctive operation was bad. In that context, Varada-raja Iyengar, J., 0bserved :

"The rule is well.settled that even in

case where the executive Government acts as delegate of legislative authority, it has no plenary power to prodde for retrospective operation unless and unt ii that power is expressly conferred by the parent enactment."

The House of Lords in Howell v. F1•lmO'uth Boat

Construction Co. Ltd. ([1]) expressed the same opinion and also pointed out the danger of conc«d-ing such power to n. delegated authority. There, licence was issued to operate retrospectively and to cover works already done under the oral sanction of the authority. Their Lordships observed:

"It would be dangerous power to place in the hands of Ministers and their subordinate officials to allow them, when-ever they had power to license, to grant the licence ex post facto; and statutory pow.er to license shou Id not be construed as power to authorise or ratify what has been done un'less the special terms of the statutory provisions clearly warrant the construction."

It is true that this is case of licence issued by an (1) (1951) A. C. 837.

1 S.C.R. SUPREME COURT REPORTS

authority in exercise of statutory power conferred on it, but the same principle must apply to bye-law made by an authority in exercise of power conferred under statute. Our Constitution promises·to usher in welfare State. It involves conferment of powers of subordinate legislation on government and governmental agencies affecting every aspt1ct of humman activity. The regulatory process is fast becoming an ubiquitous element in our life. In welfare State, perhaps, it is inevitable, for the simple rea-son that .Parliament or Legislature oannot be ex-pected to provide for all possible contingencies. But there ie no effective machinerJ to control the rule-making powers, or to prevent its diversion through authoritarian channels. If the conferment of power to make delegated Legislation proprio vigore carried with it to make rule or bye-law with retrolilpective operation, it may become an instrument of oppression. In these circumstances, it has been rightly held that the provision conferr-ing such power must be strictly construed and unless statute expreBBly confers powers to make rule or bye-law retrospectively, it must be held that it has not conferred any such power. It is said that such strict construction may prevent rule making authority from making rule in an emergency, though the occasion demands or justi · fies rule with retrospective effect. The simple answer to this alleged difficulty is that if the Le-gislature contemplates or visualizes such emergen-ci~s. calling for the making of such rules or bye-la.ws with retrospective effect, it Bhould expressly confer such power. It is also said that the Govern-ment ·can be relied upon to make such rules only on appropriate occasions. This Court cannot reoog-_nize implied powers pregnant with potentialities for mischief on such assumptions. That apart, the scope or ambit of rule cannot be ~&de to depend upon the status of functionary eiitrusted with

Dr, lndram•n• Py•rel1l Gupt• v. W.R. Nathu ~v/Jba Rao J.

19~• Dr l11Jramal P,..,lal Gupta •• W.R.Nathu SuUoRoo J

rule making power. In public interest the least the court can do is to construe provisions conferring such pow3r strictly and to confine its scope to that clearly expressed therein.

Applying that rule of strict construction, I would hold thats. 12 (1) does not confer power on the Central Government to make bye-law with retrospective effect and, therefore, the new liye-law made on January 21, 1!!56, in so far as it purports to operate retrospectively is invalid.

Assuming that it is permissible to infer such

power by necessary implication, can it be said that it is possible to so imply under s. 12 of the Act ? The phrase "necessary implication", as applied in the law of statutory construction means an impli-cation that is absolutely necessary and unavoid· able; that is to say, court must come to the con· clusion that unless such an implication is made, the provisions of the section could not be given full effect on the wording as expressed therein. Under s. 12 of the Act, the Central Government may either on request in writing received by it from the governing body of recognized association, or if in its opinion it is expedient so to do, make bye· laws for all or any of the matters specified ins. 11 or a.mend any bye law made by such association under that section. Now s. 11 says that any recog· nized association may, subject to the previous app-roval of the Central Government, make bye-laws for the regulation and contr()l of forward contracts; under sub s. (2) thereof, the association is authoriz-ed to make laws providing for any of the matters mentioned therein. glance at those· matters shows that all the bye-laws providing for those matters could be framed without giving s. 12 any retrospective effect. It is said thats. 11 (o) gives an indication that bye-law contemplated by that sub-clause must necessarily provide for its reiro11· pective operation. It reads:

"the emergencies in trade which may

arise and the exercise of powers in such emerg-encise including the power to fix maximum and minimum prices;"

The learned Solicitor General contends tha.t an occasion may arise when by determined action of •[1]bear" or "bull'' the rates may about up beyond reasonable level or fall down steeply below particular point creating an emergency in the market and in that emer-gency it would be necessary ior the authorities con. cerned to step in and close out the contracts, and unless the bye·law is made retrospective such an emergency cannot be met and, therefore, the power to make by-law to meet an emergency contempla-ted ins. ll(o) of the Act must necessarily imply power to make bye-law retrospectively. There is an underlying fallacy in this argument. The con-ferment of power on the Government to make a. bye-law with retrospective operation must be abso-lutely necessary and unavoidable to provide for the matter mentioned in sub-cl. (o) of s. 11 or any other clause of sub-s. (2) of s. 11. bye-law could certainly be made to provide for an emergency visualized by the learned Solicitor General or for any other emergency contemplated by that clause with only prospective operation. It oannot, there-fore, be said that unless retrospective operation was given to the provision• of s. 12, the objects of the legislation would be defeated or the purposes for whioh the power was· conferred could not be ful· filled. I, therefore, hold that s. 12( 1) of the Act does not confer any such power on the Central Government by necessary implication.

The second question turns upon the interpre-tation of s. 4 of the Act. It reads:

''The function of the Commission shall

1 be- ' (a) to advise the Central Government in

n,., lnd,.amani Pyo11lal Qupla Vo W.R. Notb8 Subbr Ru,/.

1962 Dr. 1Mr61nani l')or1/al Gu; .. .. W.R. Nlllliu Su'6111 R111tJ.

respect of the recognition of, or the with-draw al of recognition from, any associa-tion or in respect of any other matter arising out of the administration of this Aot;

(b) to keep forward markets under observa-tion and to take such action in relation to them as it may consider necessary, in exercise of the powers assigned to it by or nnder this Act;

(c) to collect and whenever the Commission thinks it necessary publish information regarding the trading conditions in res-pect of goods to which any of the provi-sions of this Act is mad1> applicable, in-cluding information regarding supply, demand and prices, and to submit to the Central Government periodical reports on the operation of this Act and on the working of forward markets relating to such goods;

( d) to make recommendation generally with view to improving the organisation and working of forward markets;

( e) to undertake the inspection of the acco-unts and other documents of any recog-nized association or registered a88ooiation or any member of such assocfotion when-ever it considers it necessary; and

(f) to perform such other duties and exercise such other powers as may be assigned to the Commission by or under this Act or as may be prescribed." '

Two questions arise under this section, namely, (i) whether the duties imposed and the powers con-ferred on the Commission under cl. (f) of s. 4 shall

J.S.C.R.

be read ejusdem generis with those imposed or con-ferred under els. (a) to (e), and (ii) whether the powers asdgned to the Commission by or under a. bye-law can be performed by the Commission under cl. ( f). To appreciate the first question it would be necessary to know the constitution of the Com-mission and its rule in the scheme of control pro-vided by the Aot. Under s. 2(b), "Commission" means the Forward Markets Commission established under s. 3. Section 3 empowers the Central Gov-ernment to "establish a. Commission to be called the }.'orward Markets Commission for the purpose of exercising such functions and discharging such duties as may be assigned to the Commission by or under this Act". Clauses (a) to (e) of s. 4 show that the function of the Commission are wholly supervisory and advisory in nature. It keeps the forward markets under observation, collects and publishes information, undertakes the inspection of the accounts and other documents, and makes recommen:iations to the Central Government in respect of matters mentioned in that 'section. Under s. 8(2)(c), the Central Government may also direct the Commission to inspect the accounts and other documt'lnts of any recognized association or any of its members and submit its report thereon to the Central Government. It is, therefore, mani-fest that the Commission has no administrative functions or powers of management or powers of interference in the internal management of the registered associations; on the otherhand, s. 11 and the bye-laws fram£.d thereunder it is not necessary to.go into them in detail show that .the regulation anJ contro) of the business of forward contra.ots and other businesses is entirely in the hands of the Association. The doctrine of ejuadem generis is very well~settled. The expression of · ejusdem gen-eris" means ''of the same kind'', and ''it is only an illustration of specific application of the broader maxim nosountur sooiia i. e., general and specific

JIJ(J:t Dr.111,rcrani Py.,elfi 91J1tG W,R.N•tliu "" Suit• R.,J,

1111 D1. fnlratnanz' l';lr«l•l G!Jltr •• 1'.R. N•tAu

words which are capable of an analogous meaning, bein~ associated together, take colour from each other, so that the genera.I words are restricted to sense, analogous, to the less general". While to invoke the application of the doctrine of ej'U8dem generis there must be distinct genus or category, that is to say, the specific words preceding -the general word must belong to the same cla88, the maxim noscuntur sociis is of wider application. This Court in The Western India Theatres Lf!J. v. Municipal Corporation of the City of Prona, though did not expressly say so, in my view was dealing with the said two doctrines, and it observed there-in:

" ........... although the rule of construc-tion based on the principle of ejusdem generi8 cannot be invoked in thi1 case, for items (i) to (x) do not, strictly speaking, belong to the same genus, but they do indicate, to our mind the kind and nature of tax whioh the munioipalties are authorized to impose."

So, in the present case, it may be said that els. (a) to (f) may not belong to the same class, but they indicate that the fun\ltions described in the said clauses, being supervisory and advisory in charac-ter, a.re so analogous to each other that they take colour ,from each other and therefore the general words following must be restricted to sense ana-logous to the said functions. It is 1&id that ol.(f) provides for duties and powers, whereas ols. (a) to (e) only deal with functions and, therefore, cl. (f) must be deemed to provide for altogether differ-ent subject-matter. I cannot agree with this con-tention, for the heading of s.4 is "Functions of the Commission", and the action opens out with the words "The functions of the Commil8ion shall be" and the functions are mentioned in ols.(a) to

1 s.c.&.

SUPREME OOURT REPORTS

(f}. It is, therefore. manifeat that the duties and powers mentioned in cl.(f) are also functions.. To put it differently, all the clauses deal with func-tions of the Commission. That apart, power and duty are, the two facts of the same con-cept. Clauses (a) to (e) also, though ex facto they read as if they impose only duties, on closer scrutiny indicate that the duties cannot be exer. cised without the_ corresponding powers for the discharge of those duties. I would, therefore, hold that the duties and powers that may be assigned to the Commission under ol. (f) can be only super-visory or advisory functions other than those mentioned in cls.(a) to (e). The power conferred on the Commission under the bye-law made b_y the Government to close out contracts and thus terminate the contr~ots is neither an advisory nor & supervisory power, and, therefore, the Commis-sion cannot legally exercise the same.

The second question turns upon the interpre-tation of the provisions of cl. (f) of s.4. The said clause reads:

"to perform such duties and exercise

such other powers as may be assigned to the Commission by or under this Act, or as may be prescribed.''

The crucial words are "by or under this Act, or as may be prescribed". Under s. 2(h) of the Act "prescribed" means "prescribed by rules made under this Act'' ; an<l s. 2 (k) de.fines ''rules" thua :

"rules", with reference to the rules relat-

ing in general to the constitution and manage-ment of an association, includes in the case of an incorporated association its memorandum and articles of &88-0ciation. ''

If read with the.definition of the word ''prescribed"

Dr. lndrat1lflnl Pyor1lal Gqla v. W.R. flu/I• --SuH•R,.J.

Dr. lt1tl1amani l*Jor1lr.t Gup'4 •• 1f,R. Nat/iu tsrJ>k I! .. J.

cl. (f) indicate• that the commission can perform the functions assigned to it by or under the Act, or as may be prescribed by the rules made under the Act. The specific mention of the rules made under the Aot in the clause makes it abundantly clear that the phrase "under the Act" excludes rule made in exercise of the power conferred under the Act, for if the said phrase takes in rule, the word "prescribed" becomes redundant. S11oh inep-tit11de and went of precision in drafting shall not be attributed to the Legislature, except for compelling reasons. If rule was not comprehended by the phrase "under the Act", it would be illogica.J to hold that it woul<l take in bye-law. It would mean that the Legislature specially provided for rule, which has certainly higher status than bye-law in legislative practice, while it treated bye-law as provision of Act : that cannot be. The other reason that may be suggested is that the word "prescribed" was used in superabundant caution or by mistake. If superabundant ca11tion was required to mention separately the rules, greater caution would have been necessary to provide separately for bye-law. court ordinarily shall attempt to give meaning to every word used by the Legislature, unless it is impos<ible to do so. Here there is not only no such impossibility, but there is also good reason for the Legislature in excluaing the bye-laws from the operation of cl.(f) of s. 4 of the Act.

Subordinate or delegated legislation takes different forms. Subordinate legislation is divided into two main classes, namely, ( i) statutory rules, and (ii) bye-laws or regulations ma.de, (a) by authorities concerned with local government, and (b) by persons, societies, or corporations. The Act itself recognizes this distinction and prtovides both for making of the rules as well as bye-laws. comparative study of as. 11 and 12 whereunder

power is conferred on the Central Governmant and

the recognized associations to make bye-laws on the one hand, and s. 28, whereunder the Central Government is empowered to make rules on the other, indicate that the former are intended for conducting the business of the association and the latter for the purpose of carrying into effect the objects of the Act. In considering the question raised in this case in this distinction will have to be borne in mind.

It would be unreasonable to assume that private usociation, though registered under the Act, could confer powers on statutory authority under the Act. That is why under s .• 4{f), the Legislature did not think fit to provide for the asEiignment of function to the commission in exercise of power under bye-law. The non-mention of bye-law in cl. (f) is not because of any acoidental omission but deliberate one, because of the incongruity of an .assignment of function· to the Commission under bye-law. I would, there-fore, contrue the words ''by or under this Act, or as may be prescribed" as follows : "by this Act'' applies to powers assigned proprio ?Jigore by the provisions of the Act ; "under this Act" applies to an _assignment made in exercise of an express power conferred under the provi-sions of the Act ; and ''may be prescribed" takes in an assignment made in exercise of a. power conft-rrerl under rule. Thia construction gives natural meaning to the plain words used in the section and avoids stretching the language of eta.tut Jry provision to save an illegal bye-law. In this context two decisions are cited at the Bar. The :first is that of the Judicial Committee in Hubli El~rioity Company Ltd. v. Provino~ of Bomhay (1). There, under s. 3(2)(f) of the Indian Electricity Act (No. IX of 1910) "t.he provisions contained in (I) ( 1948) "6 I.A. 57.

Subba Rao J.

1111 Dr. /ndrt111tni "'""'"' •• a_,,. W.R. /YOlhu SdhRuJ.

the Sohedule shall be deemed to be incorporat.ed with, and to form part of, every Jicenoe granted under this Part". Under s. 4 ( 1 )(a) of the said Aot, "The Provincial Government may, if in itP opinion the publio interest so requires, revoke Iicenoe", inter alia, if "the licensoe in the opinion of the Provincial Government makes wilful and unreasona-bly prolonged default in doing anything required of him by or under this Act". Under sub-cl. (6) of the Schedule, licensee had to comply with certain conditions. The Government revoked the licenoe on the ground that the lioensee did not comply with the conditions laid down in Sohedule VI, whioh were deemed to be incorporated in the licence by virtue of s. 3(2)., and therefore he did not do the thing required of him within the menn· ing of a. 4 of that Act. The Privy Council held that the performance by the JicPnsee of the conditions of the Schedule to the Aot was clearly required to be made under the Act. Thia decision does not help us very much in the present case, as the question of bye-law did not arise therein. Nor the decision of the Madras High Court in Narayanaswamy v. Kriahnamurthi ([1]) is of any assistance. There the question was whether the regulations framed by the Life Insurance Corporation by virtue of the powers vested in it by Act 31 of 1956 prohibiting the emp-loyees from standing for election fell within the meaning of the words "under any law" in Art. 191 (l)le) of the Constitution. The High Court held that the regulations were law made under the Act of ParliamPnt. The conclusion was based on the principle that the rule made in purauanoe of the dele!l'ated power has the same validity and hall the same characteristic as le w made directly by the Parliament. Apart from the faot that the word1 to be oonstrued there were different and in 11eme wider than the words to be construed in the present oase, the principle accepted in the deoi1ion is only (I) l.L.R. 1958 Mad .SIS.

1 s.c.tt.

SUPREME COURT R~PoR'l'S

of genf'ral application and does not help to cons-true the specific words of cl. (f) of s. 4 ; their mean-ing can be gathered only by interpreting the said words, having regard to the setting and the context in which they are used.

For the foregoing reasons, I would hold that the Government had no power under s. 12 of the Act to make bye-law assigning any function to the Commission. It follows that notification dated January 24, 1956, by the Forward Markets Commis-sion was illegal and the appellants would be entit-led to the issue of writ of mandamuB in the terms prayed for. In the result, the appeal is allowed with costs.

ORDER

In view of the Judgment of the majority, the appeal stands dismissed with costs.

Dr. Indramani Pyar1/al Gupta v. W.tl. Nachu Ayyangar J.