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TMI Blog1969 (4) TMI 107X X X X Extracts X X X X X X X X Extracts X X X X ..... . - Writ Petitions Nos. 282, 407 and 408 of 1968. - - - Dated:- 30-4-1969 - RAMASWAMI, V., HIDAYATULLAH, M., SHAH, J.C., MITTER, G.K. AND GROVER, A.N., JJ. For The Petitioners : C. K. Daphtary, B. R. L. Iyengar, R. N. Banerjee, Ravinder Narain, J. B. Dadachanji and 0. C. Mathur, N. A. Palkhivala And A. K. Sen, J. C. Bhatt For The Respondent : M. C. Setalvad, J. M. Mukhi, A. Sreedharan Nambiar and R. N. Sachthey JUDGMENT: ORIGINAL JURISDICTION : The Judgment of the Court was delivered by Ramaswami, J. In these petitions which have been filed under art. 32 of the Constitution a common question is presented for determination, namely, whether the Gold (Control) Act, 1968 (Act No. 45 of 1968) is constitutionally valid. The Gold (Control) Act, (hereinafter called the impugned Act) was passed by Parliament and received assent of the President on September 1, 1968. The impugned Act be-ins with the following preamble, namely, an Act to provide in the economic and financial interests of the community, for the control of the production, manufacture, supply, distribution, use and possession of, and business in, gold, ornaments and articles of gold and for matters c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... escribed. Section 4 deals with the appointment and functions of the Administrator and Gold Control Officers and reads is follows (1) The Central Government shall, by notification, appoint an Administrator for carrying out the purposes of this Act. (2) The Central Government may, by notification, appoint as many persons as it thinks fit to be Gold Control Officers for the purpose of enforcing the provisions of this Act. (3) The Administrator shall discharge his functions subject to the general control and directions of the Central Government. (4) The Administrator may authorise such person as he thinks fit to also exercise all or any of the powers exercisable by him under this Act other than the powers under subsection (6) of this section or under clause (a) of sub-section (1) of section 80 or under section 81, and different persons may be authorised to exercise different powers. (5) Subject to any general or special direction given or condition imposed by the Administrator, any person authorised by the Administrator to exercise any powers may exercise those powers in the same manner and with the same effect as if they had been conferred on that person directly by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion for the issue or renewal of a licence under this section, the Administrator may, after making such inquiry, if any, as he may consider necessary, by order in writing, either issue or renew the licence, or reject the application for the same; Provided that no licence shall be issued or renewed under this section unless the Administrator, having regard to the following matters, is satisfied that the licence should be issued or renewed, namely :- (a) the number of dealers existing in the region in which the applicant intends to carry on business as a dealer, (b) the anticipated demand, as estimated by him, for ornaments in that region, (c) the turnover of the applicant, if he had been carrying on business as a dealer prior to the cornmencement of Part XIIA of the Defence of India Rules, 1962, during the, two years immediately preceding such commencement, or in the case of an application for the renewal of a licence, the date of the application for such renewal, (d) the previous experience, if any, of the applicant with regard to the making, manufacturing, preparing, repairing or polishing of, or dealing in, ornaments, (e) the suitability of the applicant, (f) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fficer authorised in this behalf by the Administrator, it is found that such person is not either readily traceable or is a fictitious person, it shall be presumed, unless such dealer or refiner or certified goldsmith, as the case may be, establishes that he had taken all reasonable steps to satisfy himself as to the identity of such person, that such gold was bought, acquired, accepted or received by such licensed dealer or refiner or certified goldsmith, as the case may be, in contravention of the provisions of this Act. The first question to be considered is whether the impugned Act is within the legislative competence of Parliament under Entry 52 of List I, and Entry 33 of List III of the Seventh Schedule. It was argued on behalf of the petitioners that the legislation fell within the exclusive competence of the State Legislatures under Entry 27 of List II. It was said that the goldsmiths work was a handicraft requiring application of skill and the art of making gold ornaments was not an industry within the meaning of Entry 52 of List I, or Entry 33 of List III of the Seventh Schedule. The opposite viewpoint was presented by Mr. Setalvad who argued that the Legislative ent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d a reconciliation attempted between two apparently conflicting jurisdictions by reading the two entries together and by interpreting, and, where necessary, modifying, the language of the one by that of the other. If indeed such a reconciliation should prove impossible, then, and only then, will the non-obstante clause operate and the federal power prevail; for the clause ought to be regarded as a last resource, a witness to the imperfections of human expression and the fallibility of legal draftsmanship. (p. 44) The Federal Court in that case held that the entry taxes on the sale of goods was not covered by the entry duties of excise and in coming to that conclusion the learned Chief Justice observed : Here are two separate enactments, each in one aspect conferring the power to impose a tax upon goods; and it would accord with sound principles of construction to take the more general power, that which extends to the whole of India, as subject to an exception created by the particular power, that which extends to the Province only. It is not perhaps strictly accurate to speak of the provincial power as being exceptedout of the federal power, for the two are independent of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lose all meaning and content. It is not possible to accept this contention for, Entry 27 is a general Entry and it is a well-recognised canon of construction that a general power should not be so interpreted as to nullify a particular power conferred by the same instrument. In Tika Ramji v. State of Uttar Pradesh ([1956] S.C.R. 393.) the expression industry wag defined to mean the process of manufacture or production and did not include raw materials used in the industry or the distribution of the products of the industry. It was contended that the word industry was a word of wide import and should be construe: as including not only the process of manufacture or production but also activites antecedent thereto such as acquisition of raw materials and subsequent thereto such as disposal of the finished products of that industry. But this contention was not accepted. It was contended by Mr. Daphtary that if the process of production was to constitute industry a process of machinery or mechanical contrivance was essential. But we see no reason why such a limitation should be imposed on the meaning of the word industry in the legislative lists. Similarly it was argued by Mr. Pa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 3 S.C.R. 157.) in which it was pointed out that the distinguishing feature of an industry was that for production of goods or for the rendering of service, cooperation between capital and labour or between the employer and his employee must be direct. But these decisions are of no avail to the petitioners be, cause they were concerned with the interpretation of the word industry in s. 2(j) of the Industrial Disputes Act, 1947 which reads as follows : industry means any business, trade, undertaking, manufacture or calling of employers and includes any calling, service, employment, handicraft or industrial occupation or avocation of workmen- In interpreting the word industry in that section the court thought it necessary to Emit the scope of the section having regard to the -aim, object and scope of the whole Act. The history of the legislation made it manifest that the Industrial Disputes Act was introduced as an important step in achieving social justice. The Act seeks to ameliorate the service conditions of the workers, to provide a machinery for resolving their conflicts and to encourage their cooperative effort in the service of the community. It was in this contex ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly the argument was that the heading metallurgical industries was the key to the interpretation of the item semi-manufactures or manufactures . It was said that the expression metallurgical industries has a definite technical meaning namely an industry engaged in the actual extraction of metal from ores and the processing, manufacturing and converting the base metal into various forms, shapes and classes so as to make them available in a utilisable form for the purpose of various other industries viz. : machine building industries, electrical industries, ship building industries, railways etc. In support of this proposition reference was made to the affidavits of Dr. G. S. Tendolkar, Head of the Department of Metallurgy, Indian Institute of Technology, Powai and of Dr. V. A. Altekar, Head of the Chemical Technology Department, University of Bombay and also to certain standard text books on metallurgy. On behalf of the respondents reference was made to the affidavit of Mr. Dayal, Industrial Adviser to the Government of India wherein he states that in the process of manufacture of gold ornaments the goldsmith has to melt gold (pure virgin metal, old ornaments or scrap); make an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is case as to whether the manufacture of ornaments falls within item 1-B (2) semi-manufactures and manufactures of the first schedule. It was said that the expression semimanufactures or manufactures in regard to gold means the precious metal in various stages of preparation before its production in a pure state. It was argued that semimanufactures would mean gold in the form of ingots, wire, strips, sheets and manufactures would mean gold, bricks or standard gold bars, cold castings and so on. We are unable to accede to this argument. If the meaning contended for by the petitioners is correct item 1-B(1) and (2) of the first schedule would convey the same meaning. In other words entry No. 1-B (2) would be superfluous and we cannot attribute tautology to Parliament which cannot be supposed to have used words without meaning. We are, on the contrary, of opinion that the expression semi-manufactures or manufactures should be construed in the light of the Brussels Tariff Nomenclature. Section XIV deals with precious metals and articles thereof . Sub-Chapter II of Chapter 71 in this section specifically deals with precious metal in unwrought and unworked form and semi-manufa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pertaining to a scheduled industry carried on in one or more factories by any person or authority including Government . Section 2(i) defines a scheduled industry as meaning any of the industries defined in the first schedule. Chapter III of the Act provides measures for the regulation of scheduled industries. Chapter III-A relates to direct management and control of industrial undertakings in certain cases. In our opinion Act 65 ,of 1951 performs two distinct and independent functions, namely, (1) a declaration under S. 2 that it is expedient in the public interest that the Union should take under its control the industries specified in the first schedule and (2) the setting up of a machinery for imposing controls on industrial undertakings. There is a distinction made between scheduled industries and industrial undertakings throughout the Act and separate provision has been made for registration of industrial undertakings for licensing of new industrial undertakings and for the direct management of industrial undertakings by the Central Government in certain cases. Provisions have also been made for regulation of scheduled industries, procedure for grant of licences, power ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ling of gold which, if not checked, was calculated to destroy the national economy and hamper the country s economic stability and progress. Reference was made in this connection to the report of the Taxation Enquiry Commission which pointed out that the factual position in regard to the existence of widespread smuggling. Smuggling now constitutes not only a loophole for escaping duties but also a threat to the effective fulfilment of the objectives of foreign trade control. The existence of foreign pockets in the country accentuates the danger. The extent of the leakage of revenue that takes place through this process cannot be estimated even roughly, but, we understand, it is not unlikely that it is substantial. Apart from its deleterious effect on legitimate trade, it also entails the outlay of an appreciable amount of public funds on patrol vessels along the sea coasts and permanent works along the land border, and watch and ward staff on a generous scale. It is, therefore, necessary, in our opinion, that stringent measures both legal and administrative should be adopted with a view to minimising the scope of this evil. (p. 320). It is in this context that the test f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at the Administrator may authorise such person as he thinks fit to also exercise all or any of the powers exercisable by him under the Act other than the powers specified in that section. It must be assumed that the Administrator will delegate his authority only to competent and responsible persons in pursuance of the power conferred upon him by s. 4(4) of the Act. It was then said that the provisions of s. 5(1) conferred wide and uncontrolled power without any guidelines and was capable of being used with arbitrary discrimination. But s. 5(1) requires that the Administrator should have regard to the policy of the Act in making his orders. His orders should be made within the framework of the Act and should not be inconsistent with the provisions of the Act. As regards s. 5 (2) (a) the argument was that unguided power was conferred upon the Administrator or his delegate to regulate or fix the price at which any gold whether it be primary gold, article or ornament should be sold. As the power to fix the price may also be exercised not only in respect of primary gold but also in respect of articles and ornaments the business of the petitioners and similarly other persons will be adv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... icle to any person in pursuance of an authorisation made by the Administrator or on production by that person of a permit granted by the Administrator in this behalf. Again, section 114(1) confers power on the Central Government to make rules by notification for carrying out the purposes of the Act. Section 1 14 (2) (d) states : (2) In particular, and without prejudice to the foregoing power, such rules may provide for all or any of the following matters, namely (d) conditions, limitations and restrictions subject to which- (i) a dealer may sell, deliver, transfer or otherwise dispose of any gold on the hypothecation, pledge, mortgage or charge of which he had advanced any loan; (ii) a refiner may refine gold; (iii) a licensed refiner may buy, acquire, accept or receive, gold, or melt, assay, refine, extract or alloy gold or subject it to any other process, or sell, deliver, transfer or otherwise dispose of any gold; (iv) a licensed dealer may buy, acquire, accept or receive or sell, deliver, transfer or dispose of gold. It is manifest upon a review of all -these provisions that the power conferred upon the Administrator under s. 5 (2) (b) is legislative in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... requirement of strict conditions for the renewal of licence renders the entire future of the business of the dealer uncertain and subjects it to the caprice and arbitrary will of the administrative authorities. There is justificaiton for this argument and the requirement of s. 26 of the Act imposing the same conditions for the renewal of the licence as for the initial grant appears to be unreasonable. In our opinion clauses (a), (b), (e) and (g) are inextricably bound up with the other clauses of S. 27(6) and form part of a single scheme. The result is that clauses (a), (b), (c), (e) and (g) are not severable and the entire S. 27(6) of the Act must be held invalid. Section 27(2) (d) of the Act states that a valid licence issued by the Administrator may contain such conditions, limitations and restrictions as the Administrator may think fit to impose and different conditions, limitations and restrictions may be imposed for different classes of dealers. On the face of it, this subsection confers such wide and vague power upon the Administrator that it is difficult to limit its scope. In our opinion S. 27 (2) (d) of the Act must be struck down as an unreasonable restriction on the f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... prescribed under s. 32 and 46 of the Act are rendered meaningless in view of the statutory definition of the term standard gold bar as it stands at present. We are of opinion that ss. 32 and 46 constitute an unreasonable restriction on the right of the petitioners to carry on trade or business and must be held to be invalid. Section 88 of the Act has also been challenged. Section 88 reads thus : (1) A dealer or refiner who knows or has reason to believe that any provision of this Act or any rule or order made thereunder has been, or is being, contravened, by any person employed by him in the course of such employment, shall be deemed to have abetted an offence against this Act. (2) Whoever abets, or is deemed under subsection (1) to have abetted, an offence against this Act, shall be punished with imprisonment for a term which may extend to three years and shall also be liable to fine. This section extends the scope, of the vicarious liability of the dealer and makes him responsible for the contravention of any provision of the Act or rule or order by any person employed by him in the course of such employment. The rational basis in law for the imposition of vicario ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ftsman who does the actual manufacture of ornaments and does not trade in ornaments. A licensed dealer can make or, manufacture ornaments from his own gold but a certified goldsmith can make or manufacture new ornaments for his customers only from their gold. A licensed dealer can sell ornaments to the public and can keep ready stock of such ornaments for the purpose of sale while a certified gold- smith is not permitted to do the business of selling ornaments. A licensed dealer may have in his possession primary gold in the form of standard gold bars without any limit and melted gold in the form other than the standard bars in quantities ranging from 400 to 2,000 grammes. A certified goldsmith cannot have in his possession more than 3000 grammes of primary -old. A licensed dealer can employ as many persons as he likes as his artisans but a certified goldsmith cannot employ more than one hired labourer to assist him in his work as goldsmith and even this hired labourer cannot make, manufacture, prepare or process any ornament,. When a law is challenged as violative of Art. 14 of the Constitution it is necessary in the first place to ascertain the policy underlying the statute and t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... whether they are essentially and inseparably connected in substance. If, when the unconstitutional portion is stricken out, that which remains is complete in itself, and capable, of being executed in accordance with the apparent legislative intent, wholly independent of that which was rejected, it must be sustained. Applying the test to the present case we, are of opinion that the provisions held to be invalid are not inextricably bound up with the remaining provisions of the Act. It is difficult to hold that Parliament would not have enacted the impugned Act at all without including that part which is found to be ultra vires. The Act still remains substantially the Act as it was passed, that is, an Act to provide for the control, production, manufacture, supply, distribution, use and possession of gold and gold ornaments and articles of gold. In the result we hold that the following provisions of the impugned Act are invalid. Sections 5(2)(b), 27(2)(d), 27(6), 32, 46, 88 and 1 00. The petitioners are, therefore, entitled to a writ in the nature of mandamus under Art. 32 of -the Constitution commanding the respondents not to take any steps to implement any of the invalid ..... X X X X Extracts X X X X X X X X Extracts X X X X
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