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TMI Blog1961 (9) TMI 70X X X X Extracts X X X X X X X X Extracts X X X X ..... points raised and the effect of the impugned notifications on the rights of the petitioners it is sufficient to refer to the facts of Petition No. 23 of 1959 which is typical of the cases before us. The petitioner-Raghubar Dayal Jai Prakash is a firm carrying on the business of purchase and sale of gur and other commodities inter alia at Meerut. Traders like the petitioner had combined together to form a company registered under the Indian Companies Act under the name 'Kaisergunj Beopar Co. (P) Ltd'., Meerut. The function of this incorporated body was, inter alia, to regulate forward transactions in the sale and purchase of gur and other commodities entered into between the members of the Society, as also to declare the rates at which the contracts were to be settled on the dates fixed for delivery. This incorporated company has been impleaded as a second respondent to the petition. This association or company, however, was not, on the date of the impugned notification, recognised by the Central Government under the provisions of the Act to which we shall presently advert, in respect of dealings in gur with which alone these petitions are concerned. The petitioner had ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al or international, to exercise their due influence on prices, it confers a definite boon on the community, because, to that extent, it minimises the risks of production and distribution and makes for greater stability of prices and supplies. It thus plays a useful role in modern business. At the same time, it must be admitted that this is an activity in which a great many individuals with small means and inadequate knowledge of the market often participate, in the hope of quick or easy gains and consequently, forward trading often assumes unhealthy dimensions, thereby increasing, instead of minimising, the risks of business. There are forms of forward trading for example, options, which facilitate participation by persons with small means and inadequate knowledge............ It is, therefore, necessary to eliminate certain forms of forward trading, and permit others under carefully regulated conditions., in order to ensure that, while producers, manufacturers and traders will have the facilities they need for the satisfactory conduct of their business the, wider interests of the community, and particularly, the interests of consumers, will be adequately safeguarded against any ab ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tuations consequent upon speculation it was necessary to bring trade in the commodity within the scope of the Act. In these circumstances by their report which was submitted to the Government in May, 1957, they recommended (1) that Government might accord recognition to certain associations after the necessary formalities had been completed, and (2) to issue simultaneously a notification under s. 15 of the Act illegalising forward trading in the commodity except through the associations or through the member,% of such associations, as set out in s. 15 of the Act. The Government however by their resolution dated January 17, 1958, recorded: The main recommendations of the Commission are that the regulatory provisions of the Forward Contracts (Regulation) Act, 1952, be applied to gur and that forward trading be conducted through associations to be recognized under the said Act. The Government of India have carefully considered the recommendations made by the Commission and have come to the conclusion that there is no strong justification or special need for the time being to bring gur under the purview of the Forward Contracts (Regulation) Act, 1952. Subsequently however by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ard contract for the sale or purchase of gur entered into on or before the said date and remaining to be performed after the said date shall be deemed to be closed. No associations had been granted recognition before the date of this notification dated February 11, 1959, but on the same date another notification was issued by the Government reading: They have also decided that regulate futures markets in respect of gur should be established in due course at Hapur, Meerut, Agra, Muzzafarnagar and Delhi, and that recognition should be granted under section 6 of the said Act................... In accordance with what was stated here existing associations in the places mentioned were accorded recognition after an enquiry as to whether they conformed to the requirements of the Act. Like. wise other associations which were formed subsequently were also recognised after similar enquiries. The petitioners before us are members of these associations-those in Petitions 22, 23 and 25 being members respectively of the three associations named in the notification extracted above and the petitioners in Petitions 24, 26 and 42 of associations subsequently brought into existence. The fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ses of goods with respect to which forward contracts may be entered into between members of such associations or through or with any such member. Section 6(2) contains conditions which ought to be complied with by associations before recognition was granted and provision was made in s. 6(3) for the rules of the association not being amended except with the approval of the Central Government. Complementary to this was the provision contained in s. 10 which empowers the Central Government to direct rules to be made, with power in case the recognised association fails to take action to comply with the order of the Government, to themselves make the rules in the forms specified by that order. The recognition had to be published in the Gazette of India and in the official Gazette of the State in which the principal office of the association is situated s.6 (4). Sections 6 and 10 were the principal subject of attack among the fasciculus of sections relating to recognised associations in Ch. III but we shall revert to the grounds of attack after setting out the other provisions of the Act whose validity was also the subject of challenge. They were Bs. 15 and 16 under which the notificat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... consent or authority of such person shall. be necessary for closing out in accordance with the bye laws the outstanding contract, if the member discloses in the note, memorandum or agreement of sale or purchase in respect of such closing out that he has bought or sold the goods, as the case may be, on his own account. 16. Consequences of notification under section 15.--Where a notification has been issued under section 15, then notwithstanding anything contained in any other law for the time being in force or in any custom, usage or practice of the trade or the terms of any contract or the bye-laws of any association concerned relating to any contract.- (a) every forward contract for the sale or purchase of any goods specified in the notification, entered into before the date of the notification and remaining to be performed after the said date and which is not in conformity with the provisions of section 15, shall be deemed to be closed out at such rate as the Central Government may fix in this behalf, and different rates may be fixed for different classes of such contracts ; (b) all differences arising Out of any contract so deemed to be closed out shall be payable on t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rt, any forward contracts in contravention of any of the provisions of this Act, or . It would be noticed that the two latter are intended to carry out the object and purposes of the Act and make effective the powers vested under the other provisions to which reference has been made. We shall now proceed to consider the grounds of attack upon each of these provisions and examine the correctness of the contentions urged by learned Counsel: Sections 5, 6 and 10: It was urged by Mr. Nambiar, and. in this he was supported by, the other learned Counsel appearing in the case, particularly by Mr. S. T. Desai, that these sections infringed the freedom guaranteed by sub-cl. (c) of cl. (1) of Art. 19 of the Constitution. Sub-clause (c) of el. (1) of Art. 19 runs in these terms : 19. (1) All citizens shall have the rights- (e) to form associations or unions ; The freedom, however, is subject to the provisions of el. (4) of Art. 19 reading : 19. (4). Nothing in sub-clause (c) of the said clause shall affect the operation of any existing law in so far as it imposes, or prevent the State from making any law imposing, in the interests of public order or morality, reaso ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... taken upon themselves the right to determine the rules and bye laws under which the association could function and had, by the provisions in Ch. III of the Act, in every way interfered in the matter of internal management and it was urged that this was violative of the right guaranteed by sub-cl. (c) of cl. (1) of Art. 19 since the restrictions in Ch. III of the Act could not be held to have been dictated ,on grounds of public order or morality. We consider this argument is without, force. In the first place, the restriction imposed by s. 6 ,of the Act is for the purpose of recognition and no association is compelled to apply to the Government for recognition under that Act. An application for the recognition of the association for the purpose of functioning under the enactment is a voluntary act on the part of the association and if the statute imposes conditions subject to which alone recognition could be accorded or continued it is a 'little difficult to see how the freedom to form the association is affected unless, of course, that freedom implies or involves a guaranteed right to recognition also. Could it be contended that there if, a right in the association guarante ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... edoms guaranteed by the other sub-clauses of el. (1) of Art. 19, in which judgment has been rendered recently and it is therefore unnecessary to go over the ground again. We have no hesitation in rejecting the argument that the provisions in Ch. III of the impugned Act, and in particular those which we have set out above, infringe, in any manner, the freedom guaranteed by sub-el. (c) of el. (1) of Art. 19. The next provision of the Act whose validity was challenged was s. 15 but before stating the grounds upon which this challenge wag made it would be convenient to dispose of a contention raised by Mr. Chatterjee-learned Counsel for the petitioners in Writ Petitions 24 and 25 turning on the construction of the section. His submission was that s. 15 proceeded on the basis of there being a recognised association through which trading in the notified commodity could be conducted before the ban under s. 15(1) could be imposed. The argument was based upon the words otherwise than between members of a recognised association or through or with any such member occurring towards the last portion of s.15(1). It was urged that under the scheme of the Act the Central Government bad firs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e the Central Government itself setting up associations to discharge the function of a recognised association under the Act. There might, therefore, conceivably, be cases where the traders do not or refuse to organise themselves into an association which could apply for and obtain recognition under Ch. Ill. It' is manifest that the provisions of the Act cannot be defeated and the exercise of the regulatory power of Government nullified by traders in a commodity not forming an association which could be recognised under Ch. III. Similarly the power conferred on Government by s. 15(1) of the Act, cannot be made dependent on such voluntary associations satisfying the requirements for recognition, such that if the associations refuse to do so the power does not emerge. No doubt, when there are associations whose bye-laws and regulations conform to the requirements of the law the recognitions of such associations either before or simultaneously with the issue of a notification under s. 15 world enable the forward trading to be conducted without a break. But this is not the same thing as the submission that on a proper construction of a. 15 the recognition of an association for the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nces be characterized as unreasonable. After all, it is a question of balancing individual rights and the profits which could be reaped by individuals under an existing state of the law against the public benefit arising from the exercising of control, and if Government considered that the latter would be best served by immediate action under a valid provision of the law and the circumstances reasonably warranted that opinion, we hold that in. the absence of any proof of mala fides, and there is none here , the action of the Government cannot be hold to violate the constitutional limits set by el. (6) of Art. 19. We shall now proceed to consider the challenge to the constitutional validity of s. 15 itself. The attack was based on the section infringing Arts. 14,19(1)(f) and 19(1)(g) of the Constitution and in respect of the last two as not being protected by cls. (5) and (6) of Art. 19. In regard to Art. 14, the argument-was that a. 15 conferred an unguided and arbitrary power upon the Central Government to choose any commodity it liked and bring the Act into operation in respect of the commodity chosen, at any time it pleased by notification, the effect of the, notification being ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... We need only repeat what we have pointed out earlier that though the Forward Markets Commission in its report of may, 1957, recommended that gur might be brought within the scope of the regulatory provisions of the Act with immediate effect, the Government did not accept that recommendation and it was only when Government considered that a situation developed rendering the price-situation in the gur forward market very critical and that speculative activity in the commodity indulged in by powerful operators had raised prices to an unreasonable figure that Government intervened by the notification now impugned. The next submission of Mr. Nambiar was that s. 15 was constitutionally invalid as violating the freedoms guaranteed by sub-cls. (f) and (g) of el. (1) of Art. 19. As regards sub-cl (f) of el. (1) of Art. 19, it was urged that the right to the benefits arising under a contract which was lawful when entered into was in the nature of property and that s. 15, by empowering a notification to be issued which rendered such a contract illegal was ,in unreasonable restriction on the right to the holding or enjoyment of that property. It was further urged that whether or not the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at a right to the benefit of a contract is in the nature of a right to property-an assumption as regards the correctness of which we say nothing. In support of his submission learned Counsel relied on the observations in the judgment of this Court in State of West Bengal v. Subodh Gopal Bose and Ors., ([1954] S.C.R. 587., 626.) where it was observed that the fact that the statute was being given retrospective operation may properly be taken into consideration in determining the reasonableness of the restriction impose sed-an observation which was cited in the decision of this Court in Express News papers Private Ltd. v. Union of India ([1959] S.C.R. 12, 139,). The decisions referred to and others to a like effect are authorities merely for the position that the retrospective effect of a statute would be an element to be taken into account for determining the reasonableness of the restriction imposed but these observations do not carry learnea Counsel to the full extent needed to sustain the proposition he seeks to establish, viz., that the retrospective invalidation of a contract is not a permissible restriction that could be imposed by a (6) of Art. 19. Learned Counsel referred ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... against the impairment of obligations arising from contracts, the position under our Constitution must a fortiori be so. Affecting a subsisting contract by modifying its terms cannot ipso jure be treated as outside the permissible limits laid by cl. (5) or (b) of Art. 19. The reasonableness of the provisions of a statute are not to be' judged by a priori standards unrelated to the facts- and circumstances of a situation which occasioned the. legislation. In an oft-quoted passage Patanjali Sastri, C. J., observed in State of Madras v. V. G. Row It is important in this context to bear in mind that the test of reasonableness, wherever prescribed, should be applied to each individual statute impugned', and no abstract , standard, or general pattern of reasonableness can be laid down as applicable to all cases. The nature of the right alleged to have been infringed, the underlying purpose of the restrictions imposed, the extent and urgency of the evil sought to be remedied thereby, the disproportion of the imposition, the prevailing conditions at the time, should all enter into the judicial verdict. It cannot be therefore predicated off-hand and as a matter of law that ev ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... provision in cl. (b) of s. 16 under which the obligation to demand delivery or insist on delivery being taken is provided against. The attack on s. 16 was confined to the validity of vesting a power in the Central Government to fix the rates at which the differences payable by one party to the other should be determined on the closing out of the contract by operation of the notification. It was urged that the provision entrusting the Government with power to fix the price s without specifying the basis therefor vested in them an arbitrary power to fix any price that they liked, that the statute had not given any indication of the principles underlying the fixation of the price, with the result that the relevant portion of s. 16' was either. a piece of excessive delegation or offended Art. 14-by conferring, an unguided power in Government. Before dealing with the constitutional objection which was sought to be supported by contrasting these provisions with analogous Indian legislation wherein the price payable was fixed by the Act itself to which we shall advert a little later, it might be usefull to narrate the circumstances in which the price at which the closing out was to be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e control under ,that enactment, as the one now under consideration, is to be exercised for ensuring that the price fixed shall be reasonable having regard to the cost of production and the general level of prices prevailing of other like commodities which are the subject of legitimate and proper trade. In the very nature of things it is not possible for the legislature to determine beforehand the price at which a commodity may be sold or at which contracts in relation thereto might be entered into. The price must be dependent upon factors varying from time to time and cannot, therefore, be always a proper subject of legislative determination. Any fixation of prices either by naming a figure or by reference to, the market price ruling on a particular date, must be productive of hardship both by reason of being mechanical and therefore out of tune with the varying factors which might obtain from time to time, as also of being liable to manipulation by unscrupulous traders as in the situation described by the Government in regard to gur futures in the passage just now extracted. Nor is it any defect, in the Act that it does not in so many terms lay down the principles for the fixa ..... X X X X Extracts X X X X X X X X Extracts X X X X
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