PETITIONER: HARAKCHAND RATANCHAND BANTHIA AND ORS. ETC. Vs. RESPONDENT: UNION OF INDIA AND ORS. DATE OF JUDGMENT: 30/04/1969 BENCH: RAMASWAMI, V. BENCH: RAMASWAMI, V. HIDAYATULLAH, M. (CJ) SHAH, J.C. MITTER, G.K. GROVER, A.N. CITATION: 1970 AIR 1453 1970 SCR (1) 479 1969 SCC (2) 166 CITATOR INFO : RF 1972 SC1061 (22) RF 1972 SC2301 (32) D 1974 SC1489 (17) D 1975 SC 446 (19) RF 1977 SC1825 (60) RF 1978 SC1457 (69) R 1984 SC 981 (8) F 1984 SC1249 (2,12) E&D 1985 SC1013 (3,5,8) RF 1988 SC 782 (55) R 1990 SC 40 (9) RF 1990 SC 85 (18) RF 1990 SC2072 (49) ACT: Gold (Control) Act (45 of 1968), ss. 4(4), 4(5), 5(1), (2), 27, 32, 39, 46, 88 and 100-If violative of Arts. 14 and 19 of the Constitution -Delegation by Administrator under ss. 4 and 5(1), not excessive-The phrase 'so far as it appears to him necessary or expedient', if subjective. Constitution of India, 1950, VII Schedule, List 1, Entry 52, List II, Entry 27 and List III, Entry 33-Scope of- Manufacture of qold ornaments if industry-Whether control declared to he expedient in public interest Industries (Development and Regulation) Act (65 of 1951) ss. 2(a) cnd 2(d)-Scheduled industry and 'indistrial undertaking', if synonymous--Manufacturers and semi- manufacturer's meaning of. Severability-Some sections declared ultra vires-Tests for determining validity of Act. HEADNOTE: Even though import of gold into India had been banned, considerable quantities of contraband gold were finding their way into the country through illegal channels, affecting the national economy and hampering the country's economic stability and progress. The Customs Department was not in a position to effectively combat the smuggling over the long borders and coast lines. Therefore, anti-smuggling measures had to be supplemented by a detailed system of control over internal transactions and the Gold (Control) Act, 1968, was passed for this purpose. The petitioners, who were goldsmiths, contended that; (1) the Act was Dot within the legislative competence of Parliament, because, (a) Manufacture of -old ornaments by goldsmiths is not 'industry' within the meaning of Entry 52, List I or Entry 33, List III of the VII Schedule to the Constitution; (b) Even if it was an 'industry' within the meaning of the Legislative Entries, the Control of the industry was not declared by Parliament to be expedient in the public interest as required by the Entries; (c) The provisions of the industries (Development and Regulation) Act, 1951, indicate that what Parliament intended to control under Entry 52 was not the manufacture of gold ornaments by individual goldsmiths but 'industrial undertakings' as contemplated by s. 2(d) of that Act, because, the ex. pression 'scheduled industry' in s. 2(a) and 'industrial undertaking' in s. 2(d) of that Act are synonymous; and (2) that the restrictions imposed by ss. 4(4), 4(5), 5(1), 5(2), 27(2)(d), 27(6), 32, 46, 88 and 100 of the Gold (Control) Act were unreasonable and not in public interest and so are violative of Art. 19(1)(f) and (g) of the Constitution, and that s. 27 and s. 39 are discriminatory and violative of Art. 14. HELD : (1) (a) The manufacture of gold ornaments by goldsmiths in India is a process of systematic production for trade or manufacture and so falls within the connotation of the word 'industry' in the appropriate legislative Entries. Therefore, in enacting the impugned Act, Parliament was validly exercising its legislative power in respect of matters covered by Entry 52 of List I and Entry 33 of List III. Entry 27 of List 11 dealing with 'Production, supply and distribution of goods, subject to the provisions 480 of Entry 33 of List III', is a general Entry and the general power should not be interpreted so as to nullify the particular power conferred by Entry 52 of List 1 and Entry 33 of List 111. There is no reason for imposing on the word 'industry' a restriction that to constitute industry, a process of machinery or mechanical contrivance is essential. The mere use of skill or art by the goldsmith is not a decisive factor and will not take the manufacture or gold ornaments out of the ambit of the relevent legislative Entries. The decisions in Banerji v. Mukherjee, [1953] S.C.R. 302 and National Union of Commercial Employees v. M. R. Meher, [1962] Supp. 3 S.C. R. 157 that the word industry in s. 2(j) of the Industrial Disputes Act, 1947 involved cooperation of employer and employees, did not mean that the activity carried on by self-employed goldsmiths individually without any participation by labour and capital in the activity would not fall within the word 'industry' in the Lists of the Constitution. The interpretation of the word in the Industrial Disputes Act was adopted by this Court with reference to the subject-matter of that Act as that Act was passed to ameliorate the service conditions of workers. [491 B-C, E-F, H; 492 A, F-H] ? (b) There is no scientific or logical scheme in the classification under the headings of the first schedule to the Industries (Development and Regulation) Act as shown by the fact that many items were included under headings which are inappropriate and others are excluded which should have been included. Therefore, the first Schedule to that Act is -a mere enumeration and grouping of various items and the headings do not control the scope and meaning of the entries under them. Hence, the heading 'Metallurgical Industries' does not control the entry B(2) under it, dealing with semi- manufactures and manufactures'. The expression semi- manufactures' could not mean gold in the form of ingots, wire, strips and sheets, nor would the expression 'manufactures' mean gold bricks or standard gold bars and gold castings, because, then items 1-B(1) and (2) would convey the same meaning, and 1-B(2) would be superfluous. The two expressions should be construed in the light of the Brussels Tariff Nomenclature, and so construed, the manufacture of gold ornaments falls within the expression 'semi-manufactures or manufactures'. Since under s. 2 of that Act it is declared that it is expedient in the public interest that the Union should take under its control the industries specified in the first schedule. Parliament is competent to legislate in regard to the subject matter of the impugned Act. [494 F-G; 495 B-C ,D-F; 496 B-C] (c) There is a distinction made between 'scheduled industries' and 'industrial undertakings', because, separate provisions are made throughout the Industries (Development and Regulation) Act, for their regulation. Therefore, the two expressions are not synonymous. [496 F-H] (2)(a) Sections 5(2)(b), 27(2)(d) 27(6), 32, 46, 88 and 100 are invalid. (a) Sections 4(4) and 4(5) contemplate that the Administrator appointed under the Act may authorise such person as he thinks fit, to also exercise all or any of the powers exercisable by him under the Act, except certain specified powers, and such person may exercise the powers as if they were conferred by the Act. Such delegation by the Administrator is necessary, because, the volume of work entrusted to him is great and it must be' assumed that be would delegate his authority only to competent and responsible persons. Therefore, the delegation does not go beyond permissible constitutional limits. [A-D] (b) Section 5(1) requires that in making orders for carrying out the provisions of the Act, the Administrator should have regard to the policy 481 of the Act. The orders should be made within the frame-work of the Act and should not be inconsistent with its provisions. As regards s. 5(2)(a), the section provided the safeguard that regulation -of the price at which any gold may be bought or sold should be made after consultation with the Reserve Bank of India. The phrase 'so far as it appears to him to be necessary or expedient for carrying out the provisions of the Act,' in the sub-Section, is not subjective and does not constitute the Administrator the sole judge as to what is in fact necessary or expedient for the purposes of the Act. In the context of the scheme and object of the legislation the opinion of the Administrator as to the necessity or expediency of making the order must be reached objectively after having regard to the relevant consideration and must be reasonably tenable in a court of law. It Must he assumed that the Administrator will not try to promote purposes to the object of the Act. [499 D-H-] (c) As regards s. 5(2)(b), on a review of ss. 8(6),II( 1) 3 4(2) and (3 the power conferred up-on the Administration under s. 5(2) (b) is legislative in character and extremely wide. But whereas the parallel power of subordinate legislation of rule-making conferred on the Central Government under s. 114(1) and (2) is subject to parliamentary scrutiny, the power of regulation granted to the Administrator under s. 5(2)(b) suffers from excessive delegation of legislative power and must be held to he constitutionally invalid. [501 A-D] (d) Section 27(2) (d) states that the licence issued by the Administrator may contain such conditions, limitations as the administrator may think fit to impose and different condition limitations and restrictions may be imposed for different classes of dealers. On the face of it. the sub- section confers such wide and vague power upon the Administrator that it is difficult to limit its scope and therefore, the section must be struck down as all unreasonable restriction on the fundamental right of the petitioners to carry on business. Section 27 (6) (a) states that in the matter of issue or renewal of licences ,he Administrator shall have regard to the number of dealers existing in the region in which the applicant intends to carry on business as a dealer. But the word 'region' is nowhere defined in the Act. Similarly s. 27(6)(b) requires the Administrator to have due regard to the anticipated demand as estimated by him for ornaments in that region but the expression anticipated demand' is vague and incapable of objective assessment. and is bound to lead to a reat deal of uncertainty. In the same way the expression 'suitability of the applicant' in s. 27(6)(e) and 'public interest' in s. 27(6)(g) do not provide any objective standard or norm. Further. the requirement in the section imposing the same coiiditio.,is for the renewal of the licence as for the initial grant is unreasonable, as it renders the entire future of the business of the dealer uncertain and subject to the caprice and arbitrary will of the administrative authorities. Therefore. clauses (:t). (h). (e) and (g) of s. 27(6) arc constitutionally invalid. Since these clauses are inextricably woven up with other clauses of s. '7(6) the entire s. 17(6) must be held to be invalid. f501 D-H; 502 A-B] If s. 27(6) (d) and s. 27(6) of the Act arc invalid the licensing scheme contemplated by the Act becomes unworkable and it is therefore necessary for Parliament to enact fresh legislation imposing appropriate conditional restrictions for the, grant and renewal of licences to dealers or in the alternative, the Central Government may make appropriate rules for the same purpose under s. 114. [502 B-E] (e) Sections 32 and 46 of the Act authorise a licensed dealer to keep any quantity of standard gold bars and provides a limit Upon the holding of 482 primary gold depending on the number of artisans he employs. But a -standard gold bar cannot, in many cases be handed over to a certified goldsmith without cutting it. If a dealer gives a cut piece of standard gold bar to a goldsmith, the remaining portion is treated as primary gold in his hands. Therefore, the limits prescribed under the sections 'are rendered meaningless and constitute an unreasonable restriction on the right of the petitioners to carry on trade or business and are invalid. [503 C-E] (f) Section 88 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 by any person employed by him in the course of such employment. The section makes the dealer liable even for any past contravention perpetrated by an employee and extends vicarious liability beyond reasonable limits. it therefore imposes an unreasonable restriction and is unconstitutional. [503 H; 504 A-D] Section 100 imposes a statutory obligation upon dealer to take all reasonable steps to satisfy himself about the identity of persons from whom gold is bought. It does not specify the nature of steps which a dealer should take forsuch satisfaction and the obligation is uncertain and incapable of proper compliance. Hence it must also be held to be unconstitutional on the ground that it imposes an impossible and unreasonable burden. [504 D-F] (h) Licensed dealers and certified goldsmiths form separate classes and the classification is a reasonable classification, because, a licencd dealer is essentially a trader who does the business of buying and selling ornaments while a certified goldsmith is a craftsman who does the actual manufacture of ornaments and does not trade in ornaments. Considering the policy underlying the statute and the object intended to be achieved, the classification is reasonable and has a rational nexus with the avowed policy and object of the Act, and hence does not violate Art. 14. [504 G-H: 505 C-E] (3) The provisions which are declared invalid do not affect the validity of the Act as a whole. The test is whether what remains of the statute is so inextricably bound up with the invalid part that what remains cannot independently survive, or whether on a fair review of the whole maker it can be assumed that the legislature would have enacted at all that which survives without enacting the ultra vires part. In the present case. Act still remains substantialy the Act as it was passed, that is, an Act for the control of the production. manufacture, supply, distribution, use and possession of gold and gold ornaments and articles of gold even without including the sections which are found to be ultra vires. The provisions held to be invalid are not inextricably bound up with the remaining portions and it is difficult to hold that Parliament would not have enacted the Act excluding the part found to be ultra vires [506 C-E] JUDGMENT:
ORIGINAL JURISDICTION : Writ Petitions Nos. 282, 407 and 408
of 1968.
Petition Under Art. 32 of the Constitution of India for
enforcement of the fundamental rights.
C. K. Daphtary, B. R. L. Iyengar, R. N. Banerjee,
Ravinder Narain, J. B. Dadachanji and 0. C. Mathur, for the
petitioners (In W.P. No. 407 of 1968).
483
N. A. Palkhivala, R. N. Banerjee, Ravinder Narain and J.
B. Dadachanji and 0. C. Mathur, for the petitioners (in W.P.
No. 408 of 1968).
A. K. Sen, J. C. Bhatt, R. N. Banerjee, Ravinder Narain,
J. B. Dadachanji and 0. C. Mathur, for the petitioners
(in W.P. No. 282 of 1968).
M. C. Setalvad, J. M. Mukhi, A. Sreedharan Nambiar and R. N.
Sachthey, for the respondents (in all the petitions).
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 connected
therewith or incidental thereto.” Section 2 contains a
number of definitions. Section 2(b) defines an “article” to
mean anything (other than ornament), in a finished form made
of, manufactured from or containing, gold, and including (i)
any ,old coin, (ii) broken pieces of an article, but not
Including primary old. Clause (d) defines a “certified
goldsmith” to mean a self-employed goldsmith who holds a
valid certificates referred to in s. 30. Clause (h) defines
a dealer as follows
“dealer” means any person who carries on,
directly or otherwise, the business of making,
manufacturing, preparing, repairing,
polishing, buying, selling, supplying
distributing, melting, processing or
converting gold, whether for cash or for
deferred payment or for commission,
remuneration or other valuable considera-
tion,. . . . . .
Clause (i) states
“declaration” means a declaration which is
required by this Act or was required by rule
126-1 of the Defence of India Rules, 1962, or
the Gold (Control) Ordinance, 1968, to be made
with regard to the ownership, possession,
custody or control of gold;”
484
Clause defines ‘gold’ to mean gold, including
its alloy (whether virgin, melted or re-
melted, wrought or unwrought), in any shape or
form, of a purity of not less than nine carats
and including primary gold, article and
ornament.
Clause (p) reads as follows :
” ornament” means a thing, in a finished
form, meant for personal adornment or for the
adornment of any idol., deity or any other
object of religious worship, made of, or
manufactured from, gold, whether or not set
with stones or gems (real or artificial), or
with pearls (real, cultured or imitation) or
with all or any of them, and includes parts,
pendents or broken pieces of ornament.
Explanation.-For the purposes of this Act,
nothing made of -old, which resembles an
ornament, shall be deemed to be an ornament
unless the thin- (having regard to its purity,
size, weight, description or workmanship) is
such as is commonly used as ornament in any
State or Union territory;”
Clause (r) states :
” primary gold” means gold in any unfinished
or semi-finished form and includes ingots,
bars, blocks, slabs, billets, shots, pellets,
rods, sheets, foils and wires;”
Clause (u) defines a “standard gold bar” as
primary gold of such fineness, dimensions,
weight and description and containing such
particulars as may be prescribed.
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 sub-
section (6) of this section or under clause
(a) of sub-section (1) of section 80 or
under section 81,
485
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 this Act
and not by way of authorisation.
(6) The Administrator may also–
(a) perform all or any of the functions of,
and
(b) exercise all or any of the powers
conferred by this Act or any rule or order
made thereunder on,
any officer lower in rank than himself.
(7) A Gold Control Officer shall, subject to
such limitations, restrictions and conditions
as the Central Government may think fit to
impose, exercise such powers and discharge
such functions as are specified or conferred,
as the case may be, by or under this Act.”
Section 5 confers power on the Administrator
to issue directions and orders.
“(1) The Administrator may, if he thinks fit,
make orders, not inconsistent with the
provisions of this Act, for carrying out the
provisions of this Act.
(2) The Administrator may, so far as it
appears to him to be necessary or expedient
for carrying out the provisions of this Act,
by order-
(a) regulate, after consultation with the
Reserve Bank of India, the price at which any
gold may be bought or sold, and
(b) regulate by licences, pen-nits or
otherwise, the manufacture, distribution,
transport, acquisition, possession, transfer,
disposal, use or consumption of gold.”
Chapter III contains a number of restrictions
relating to the manufacture, acquisition,
possession. or delivery of -old. Section 16
provides for declarations as to articles and
ornaments. Chapter VII relates to dealers.
Section 27 of this chapter as regards
licensing of dealers may be quoted :
“(1) Save as otherwise provided in this Act,
no person shall commence, or carry on,
business as a dealer
486
unless he holds a valid licence issued in this
behalf by the Administrator.
(2) A licence issued under this section,-
(a) shall be in such form as may be
prescribed,
(b) shall be valid for such period as may be
specified therein,
(c) may be renewed, from time to time, and
(d) 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.
(5) A person who intends to Commence after
the
commencement of this Act, business as a
dealer, shall make an application (in such
form and on payment of such fees, not
exceeding one hundred rupees, as may be
prescribed) for the issue of a licence.
(6) On receipt of an application 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,
487
(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) the suitability of the Premises where
the applicant intends to carry on business as
a dealer,
(g) the public interests, and
(h) such other matters as may be prescribed.
Chapter VIII deals with certified goldsmiths.
Section 39 of this Chapter provides :
(1) Save as otherwise provided in this Act,
no person shall commence, or carry on,
business as a goldsmith after the
cormnencement of this Act, unless he holds a
valid certificate recognising him as a
goldsmith.
(2) The certificate referred to in subsection (1)- (a) shall be in such form as may be prescribed,
(b) shall be valid -until the death of the
holder, or the cancellation thereof, whichever
is earlier, and
(c) 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 certified goldsmiths.
(3) Every certificate granted to a person
under Part XIIA of the Defence of India Rules,
1962, or under the Gold (Control) Ordinance,
1968, recognizing him as a goldsmith, shall,
if in force immediately before the
commencement of this Act, continue to be in
force until the death of the holder, or the
cancellation, thereof whichever is earlier.
(5) Every application for the grant of a
certificate referred to in sub-section (1)
shall be made in such form, in such manner and
on payment of such fee, not exceeding ten
rupees, as may be prescribed.
(8) A certified goldsmith may engage not
more than one hired labourer to assist him in
his work as a gold-
Sup. CI-69-2
488
Smith but such hired labourer shall not make,
manufacture, prepare, repair or process any
article or ornament.”
Chapter X deals with cancellation and
suspension of licences and certificates.
Chapter XII contains provisions relating to
entry, search, seizure and arrest. The other
material chapters are Chapter XIII dealing
with confiscation and penalties, Chapter XIV
providing for adjudication, appeal and
revision and Chapter XV relating to offences
and their trial. Chapter XVI contains certain
miscellaneous provisions. Section 100 of this
chapter enacts
“Every licensed dealer or refiner or certified
goldsmith shall, before accenting, buying or
otherwise receiving any gold from any person,
take all reasonable steps to satisfy himself
as to the identity of such person and if,
after an inquiry made by an officer 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 entries must be construed in a large
and liberal sense and that the goldsmith’s craft was an
industry within the meaning of Entry 24 of List II Entry 33
of List III and Entry 52 of List I and Parliament is
competent to legislate in regard to the manufacture of gold
ornaments. The relevant entries in the Lists of the Seventh
Schedule of the Constitution are List 1, Entry 52-
Industries, the control of which by the Union is declared by
Parliament by law to be expedient in the public interest;
List IT, Entry 24 : Industries subject to the provisions of
Entries 7 and 52 of List I; List II, Entry 27 : Production,
supply and distribution of goods subject to the provisions
of Entry 33 of List HI. List III, Entry 3 3 reads as
follows:
489
“Trade and commerce in, and the production,
supply and distribution of,-
(a) the products of any industry where the
control of such industry by the Union is
declared by Parliament by law to be expedient
in the public interest, and imported goods of
the same kind as such products;
(b) foodstuffs, including edible oilseeds
and oils;
(c) cattle fodder, including oilcakes and
other concentrates;
(d) raw cotton, whether ginned or unginned,
and cotton seed; and
(e) raw jute.”
Before construing these entries it is useful
to notice some of the well-settled rules of
interpretation laid down by the Federal Court
and by this Court in the matter of construing
the entries. The power to legislate is given
to the appropriate legislatures by Art. 246 of
the Constitution. The entries in the three
Lists are only legislative heads or fields of
legislation; they demarcate the area over
which the appropriate legislatures can
operate. It is well-established that the
widest amplitude should be given to the
language of the entries. But some of the
entries in the different lists or in the same
list may overlap or may appear to be in direct
conflict with each other. It is then the duty
of this Court to reconcile the entries and
bring about a harmonious construction. In In
re The Central Provinces and Berar Sales of
Motor Spirit and Lubricants Taxation Act,
1938(1) Sir Maurice Gwyer pro-
ceeded to state :
“Only in the Indian Constitution Act can the
particular problem arise which is now under
consideration and an endeavour must be made to
solve it, as the Judicial Committee have said,
by having recourse to the context and scheme
of the Act, and a reconciliation attempted
between two apparently conflicting jurisdic-
tions 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)
(1) [1939] F. C. R. 18.
490
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 one another and
exist side by side. But the underlying
principle in the two cases must be the same,
that a general power ought not to be so
construed as to make a nullity of a particular
power conferred by the same Act and operating
in the, same field, when by reading the former
in a more restricted sense effect can be given
to the latter in its ordinary and natural
meaning.” (pp. 49-50)
The rule of construction adopted by that decision for the
purpose of harmonizing the two apparently conflicting
entries in the two Lists would equally apply to an apparent
conflict between two entries in the, same List. Patanjali
Sastri, J, (as he then was) held in State of Bombay v.
Narothamadas Jethabai(1), that the words “administration of
justice” and “constitution and organization of all courts”
in Entry 1 of List 11 of the Seventh Schedule to the
Government of India Act, 1935 must be understood in a res-
tricted sense excluding from their scope “jurisdiction and
powers of courts” specifically dealt with in item 2 of List
11. in the words of the learned Judge, if such a
construction was not given “the wider construction of entry
1 would deprive entry 2 of all its content and reduce it to
useless lumber.”
The question to be considered is what is the meaning of the
word “industry” in Entry 52 of List I, Entry 24 of List 11
and Entry 33 of List 111. Whatever may be its connotation
it must bear the same meaning in all these entries which are
so interconnected that conflicting or different meanings
given to them would snap the connection. In the Shorter
Oxford English Dictionary the word “industry” is defined as
“a particular branch of productive labour; a trade or
manufacture.” According to Webster’s Third New International
Dictionary (1961 edn.) the word “industry” means “(a)
systematic labour especially for the creation
(1) [1951] S.C.R. 51.
491
of value; (b) a department or branch of a craft, art,
business or manufacture, a division of productive and profit
making labour especially one that employs a large personnel
and capital especially in manufacturing; (c) a group of
productive or profit making enterprises or organisations
that have a similar technological structure of production
and that produce or supply technically substitutable goods,
services or sources of income.” It was said that if the word
“industries” is construed in this wide sense, Entry 27 of
List 11 will 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(1) 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.
Palkhivala that the manufacture of gold ornaments was not an
industry because it required application of individual art
and craftsmanship and aesthetic skill. But mere use of
skill or art is not a decisive. factor and will not take the
manufacture of gold ornaments out of the ambit of the
relevant legislative entries. It is well settled that the
entries in the three lists are only legislative heads or
fields of legislation and they demarcate the area over which
the appro-priate legislature can operate. The legislative
entries must be given a large and liberal interpretation,
the reason being that the allocation of subjects to the
lists is not by way of scientific or logical definition but
is a mere enumeration of broad and comprehensive categories.
It is not, however, necessary for the purpose of this case
to attempt to define the expression “industry” precisely or
to state exhaustively all its different aspects. But we are
satisfied in the present case that the manufacture of gold
ornaments by goldsmiths in India is a “process of systematic
production” for trade or manufacture and so falls ‘within
the connotation of the word “industry” in the appropriate
legislative entries-
(1) [1956] S.C.R. 393.
492
It follows, therefore, that in enacting the impugned Act
Parliament was validly exercising its legislative power in
respect of matters covered by Entry 52 of List I and Entry
33 of List 111.
It was contended by Mr. Ashoke Sen that the manufacture of
,gold ornaments cannot be said to constitute an industry
unless there was cooperation of labour and capital and there
was relationship of employer and employee. It was said that
if ornament making activity was largely carried on by self-
employed goldsmiths individually and there was no
participation by labour and capital in the said activity.
Reference was made to the decision of this Court in Banerji
v. Mukherjee(1) in which it was pointed out that the word
“industry” in s. 2(j) of the Industrial Disputes Act, 1947
should be construed as an activity systematically or
habitually undertaken for production and distribution of
goods or for rendering material services to the community at
large and that such an activity generally involved
cooperation of the employer and the employees and its object
was satisfaction of human needs. The same view was taken in
the National Union of Commercial Employees v. M. R. Meher(2)
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 context that the expression “industry” was
interpreted in Banerjee’s case(1) and Meher’s case(2). It
was an interpretation ,adopted by this Court sacundum
subjectae materies. But what ‘we are concerned in the
present case is the interpretation of the
(1) [1953] S.C.R.302.
(2) [1962] Supp. 3 S.C.R. 157.
493
word “industry” in the legislative lists which constitute
part of the Seventh Schedule of the Constitution. It is
manifest that the, decisions referred to above have no
bearing on the question debated in the present case.
It was argued by Mr. Palkhivala that even on the assumption
that making of gold articles and ornaments was an industry
within the meaning of the legislative entries the control of
the said industry was not declared by Parliament to be
expedient in the public interest and, therefore, Parliament
was not competent to legislate upon the subject matter of
the impugned Act. To appreciate this argument it is
necessary to notice briefly the provisions of the Industries
(Development and Regulation) Act, 1951 (Act 65 of 1951)
which was enacted by Parliament to provide for the
development and regulation of certain industries. Under s.
2 of this Act it is declared that it is expedient in the
public interest that the Union should take under its control
the industries specified in the first schedule. Section
3(1) of the 1951 Act defines a “scheduled industry” to mean
“any of the industries specified in the first schedule”.
The relevant portion of the first schedule is reproduced
below :
“1. METALLURGICAL INDUSTRIES:
A. Ferrous
(1) Iron and steel (metal).
(2) Ferro-alloys.
(3) Iron and steel castings and forgings.
(4) Iron and steel structurals.
(5) Iron and steel pipes.
(6) Special steels.
(7) Other products of iron and steel.
B. Non-ferrous
(1) Precious metals, including gold and
silver, and their alloys.
(1A) Other non ferrous metals and their
alloys,
(2) Semi-manufactures and manufactures.”
The question presented for determination is whether the
manufacture of gold ornaments falls within item 2 “semi-
manufactures or manufactures” under the sub-heading B “non-
ferrous” of the heading “metallurgical industries”. It was
argued that item 2 of sub-heading B cannot be read in
isolation but it must be construed in the context of the
heading “metallurgical industries” which was
494
the controlling factor in the interpretation of the item 2
under the sub-heading. To put it differently 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 orna-
ments the goldsmith has to “melt gold (pure virgin metal,
old ornaments or scrap); make an alloy of the required
specifications; cast it into desired shapes; convert the
alloy into semis like rods, strips, wires etc., and
fabricate it into the required design, finished articles
including ornaments.” These involve metallurgical operations
like melting, refining, making of alloys, casting,
annealing, rolling, forging, pressing, punching, soldering,
pressing, die cutting etc., and a goldsmith therefore is
employed in the metallurgical industry. It is not necessary
for us to express any concluded opinion in this case on the
question whether the manufacture of gold ornaments involves
any metallurgical process. Even on the assumption that the
petitioners are right in saying that the manufacture of gold
ornaments is not a metallurgical industry in the technical
sense we consider that the heading “metallurgical industry”
in the schedule does not control the scope and meaning of
the Entry 1-B(2) “semi-manufactures or manufactures”. The
headings of the schedule do not follow any logical or
scientific pattern but are put in merely as devices for
convenient grouping of the industries. For example, there
is no warrant for excluding electricity meters used in homes
from item 15(1) or for excluding weighing machines used at
airports or railway stations or ports from item 15(3).
There are other examples which show that the heading does
not control the meaning of the industry. Thus “lubricating
oils and the like” in the item at 2(2) are clearly not
“fuels” which is the heading under which they are found.
Again, fire fighting equipment and appliances such as fire
extinguishers used in homes or in offices or in cinema halls
or as accessories to motor cars
495
would clearly be included in the industry at item 8-B(14).
Similarly matches [item 3 6 (3 ) ] is not controlled by the
heading “timber products” nor is there any warrant for
holding that arms and ammunition, item 37, is controlled by
the heading “defence industries”. As we have already said
that there is no scientific or logical scheme in the
classification of first schedule of Act 65 of 1951 but it is
a mere enumeration and grouping of various items. We are
unable to accept the argument of petitioners that the
heading metallurgical industries should be construed as
having a controlling effect on the meaning of item B(2)
“semi-manufactures or manufactures”.
We proceed to consider the next question arising in this
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 “semi-
manufactures 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 “semi-
manufactures” 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-manufactures
thereof and sub-Chapter III deals with manufactures of
precious metals. Headings 71.07 and 71.08 in this sub-
Chapter set out un-wrought or semi-manufactured gold while
headings 71.12 to 71.14 in Sub-Chapter III set out finished
articles of jewellery, goldsmiths’ wares and other articles
of precious metals. The explanatory notes to Brussels
Tariff Nomenclature shows (Vol, 11, p. 633) that “precious
metals in unwrought or semi-manufactured from but which have
not reached the stage of articles” are included under Head-
ing 71.05 to 71.10. So far as silver is concerned “unwrought
and semi-manufactures” are set out at p. 641 and they
include forms like bars, rods, sections, wire, plates,
sheets and strips, tubes, pipes, hollow bars, foils, powder
etc. The enumeration of finished articles of gold, that is
to say, manufactures of gold is given at p. 640.The
enumeration includes articles and ornaments, for
496
example, jewellery and parts thereof, small objects of
personal adornment such as rings, bracelets, necklaces and
articles of personal use such as cigarette cases, snuff
boxes, powder boxes, lipstick holders etc. (pp. 641-646 of
Explanatory notes). In our opinion the expression “semi-
manufactures or manufactures” of the first schedule should
be construed in the context and background of the
classification in the Brussels Tariff Nomenclature. It
follows that manufacture of gold ornaments falls within the
expression “semi-manufactures or manufactures” in item 1-
B(2) of the first schedule and Parliament is, therefore,
competent to legislate in regard to the subject matter of
the impugned Act.
It was also contended that the provisions of Act 65 of 1951
clearly indicate that what Parliament intended to control
under Entry 52 of Union List was not the manufacture of gold
ornaments but industrial undertakings as contemplated by s.
2(d) of that Act. It was contended by Mr. Daphtary that the
expression ” scheduled industry” in s. 2 (a) of the Act was
synonymous with an industrial undertaking under s. 2 (d) and
a declaration under S. 2 of the Act would therefore apply
to industries carried on in the factories as defined in the
Act. It was argued that the Act was intended to apply to
industrial undertakings carried on in factories and not to
individual craftsmanship of goldsmiths. Section 3(d) of the
Act defines an industrial undertaking to mean : ” any
undertaking 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 to cause
investigation to be made etc. We are, therefore, unable to
accept the contention of Mr. Daphtary that the expressions
“industrial undertaking” and “scheduled industry” are, used
synonymously in the Act or the
497
expression “scheduled industry” in s. 2 of the Act should be
construed as a “scheduled industry” carried on in the manner
of an “industrial undertaking.”
Having dealt with and negatived the attack upon the validity
of the entire Act we shall now proceed to deal with certain
sections of the Act, the validity of which was also
questioned. It was argued that the restrictions imposed by
sections 4(4), 4(5), 5(1), 5 (2), 27 (2) (d), 27 (6), 16
(7), 32 read with 46, 88 and 100 were unreasonable and not
in public interest and so are violative of Art. 19 ( 1 ) (f
) and (g) of the Constitution. It was also said that the
sections were also violative of Art. 14 of the Constitution
because of the conferment of unchannered, uncontrolled and
arbitrary power in the Administrator and other authorities
constituted under the impugned Act.
Before examining this argument it is necessary to set out
the circumstances and the social and economic background in
which the impugned legislation was passed. It is stated in
the counteraffidavit that the impugned Act was passed in
order to bring about reduction in the quantity of smuggled
gold by rendering smuggling more dangerous and the disposal
of smuggled gold in the domestic market more difficult.
Even though import of gold had been banned considerable
quantities of contraband gold find their way into this
country through illegal channels. The Customs Department is
in itself not in a position to effectively combat smuggling
over the long borders and the coast lines and, therefore,
the antismuggling measures have to be supplemented by a
detailed system of control over internal transactions so as
to make the circulation of smuggled gold more difficult, if
not impossible. The loss of foreign exchange caused by
smuggling of gold was estimated at nearly Rs. 100 crores per
year in the post-devaluation period, and Government felt
that it was very necessary to reduce the internal demand for
gold and erect barriers to the circulation of smuggled gold
within the country. The submission of Mr. Setalvad was that
the reasonableness of the impugned provisions of the Act had
to be judged in the light of the widespread smuggling 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.
498
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 for
ascertaining the reasonableness of the
restriction of the rights in Art. 19 is of
great importance. There are several decisions
of this Court in which the relevant criteria
have been laid down. It is, however,
sufficient to refer to a passage in the
judgment of Patanjali Sastri, C.J. in State of
Madras v. V. G. Rao (1).
“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 is necessary to emphasise that the principle which
underlies the structure of the rights guaranteed under Art.
19 of the Constitution is the principle of balancing of the
need for individual liberty with the need for social control
in order that the, freedoms guaranteed to the individual
subserve the larger public interests. It would follow that
the reasonableness of the restrictions imposed under the
impugned Act would have to be judged by the magnitude, of
the evil which it is the purpose of the restraints to curb
or eliminate.
Section 4(4) of the Act empowers the Administrator to autho-
rise such person as he thinks fit to also exercise all or
any powers exercised by him under the Act (with certain
exceptions) and different persons may be authorised to
exercise different powers. Section 4(5) states that “any
person authorised by the Administra-
(1) [1952] S.C.R.597,607.
499
tor 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 this Act and not by way
of authorisation.” After having heard the argument of Mr.
Daphtary we are not satisfied that the delegation of power
conferred by s. 4(4) and 4(5) goes beyond the permissible
constitutional limits. Delegation by the Administrator is
necessary for the volume of work entrusted to him is great
and he cannot be expected to do the bulk of it himself.
Absence of such power might seriously impair administrative
efficiency. Section 4(4) contemplates that 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 adversely affected. But the
section provides the safeguard that the regulation of the
price should be made by the Administrator after consultation
with the Reserve Bank of India. It was argued that the
phrase “so far as it appears to him to be necessary or
expedient for carrying out the provisions of this Act” was a
subjective formula and action of the Administrator in making
the orders under s. 5 (2) (a) may be arbitrary and
unreasonable. But in our opinion the formula is not
subjective and does not constitute the Administrator the
sole judge as to what is in fact necessary or expedient for
the purposes of the Act. On the contrary we bold that in
the context of the scheme and object of the legislation as a
whole the expression cannot be construed in a subjective
sense and the opinion of the Administrator as to the
necessity or expediency of making the order must be reached
objectively after having regard to the relevant
considerations and must be reasonably tenable in a court of
law. It must be assumed that the Administrator will
generally address himself to the circumstances of the
situation before him
500
and not try to promote purposes alien to the object of the
Act. As regards s. 5 (2) (b) the contention of the
petitioners was that substantive provisions have been made
in the Act for the grant of licence for manufacture,
acquisition, possession and disposal and consumption of
gold. Reference was made in this connection to s. 8 (6) of
the Act which confers power on the Administrator to
authorise any person or class of persons to buy or otherwise
acquire, accept or otherwise receive or sell, deliver,
transfer or otherwise dispose of any primary gold or
article. Section 1 1 ( 1 ) contains a prohibition in regard
to making, manufacturing etc., preparing or processing of
any primary gold or ornament or article unless there is
authorisation by the Administrator. Section 29 empowers the
Administrator to authorise a dealer in any exceptional case
to make, manufacture or prepare a primary gold or article.”
Section 34(2) prohibits sale, delivery, transfer or disposal
(1) of primary gold to any person other than a licensed
dealer or refiner or certified goldsmith and (2) of any
article to any person other than a licensed dealer or
refiner. But s. 34(3) provides that notwithstanding
anything contained in sub-s. (2) a licensed dealer may sell
or deliver primary gold or article 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;
501
(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 character and extremely wide. A
parallel power of subordinate legislation is conferred to
the Central Government under s. 114 ( 1 ) and (2) of the
Act. But s. 114(3) however makes it incumbent upon the
Central Government to place the rules before each House of
Parliament while it is in session for a total period of
thirty days which may be comprised in one session or in two
successive sessions. It is clear that the substantive
provisions of the Act namely ss. 8, 11, 21, 31(3), 34(3)
confer powers on the Administrator similar to those
contemplated by s. 5 (2) (b) of the Act. In these
circumstances we are of opinion that the power of regulation
granted to the Administrator under s. 5 (2) (b) of the Act
suffers from excessive delegation of legislative power and
must be held to be constitutionally invalid.
We now come to s. 27 of the Act which relates to licensing.
of dealers. It was stated on behalf of the petitioners that
the conditions imposed by sub-s. (6) of s. 27 for the grant
or renewal of licences are uncertain, vague and
unintelligible and consequently wide and unfettered power
was conferred upon the statutory authorities in the matter
of grant or renewal of licence. In our opinion this
contention is well-founded and must be accepted as correct.
Section 27(6) (a) states that in the matter of issue, or
renewal of licences the Administrator shall have regard to
“the number of dealers existing in the region in which the
applicant intends to carry on business as a dealer”. But
the word “region” is nowhere defined in the Act. Similarly
s. 27 (6) (b) requires the Administrator to have regard to
“the anticipated demand, as estimated by him, for ornaments
in that region”. The expression “anticipated demand” is a
vague expression which is not capable of objective
assessment and is bound to lead to a great deal of
uncertainty. Similarly the expression “suitability of the
applicant” in s. 27(6) (e) and “public interest” in s. 27(6)
(g) do not provide any objective standard or norm or
guidance. For these reasons it must be held that clauses
(a), (d), (e) and (g) of s. 27(6) impose unreasonable
restrictions on the fundamental right of the petitioner to
carry on business and are constitutionally invalid. It was
also contended that there was no reason why the conditions
for renewal of licence should be as rigorous as the
conditions for initial grant of licence. The 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
502
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 sub-
section 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 fundamental right of the
petitioners to carry on business. It appears, however, to
us that if S. 27 (2) (d) and S. 27 (6) of the Act are
invalid the licensing scheme contemplated by the rest of s.
27 of the Act cannot be worked in practice. It is,
therefore, necessary for Parliament to enact fresh
legislation imposing appropriate conditions and restrictions
for the grant and renewal of licences to dealers. In the
alternative the Central Government may make appropriate
rules for the same purpose, in exercise of its rulemaking
power under s. 114 of the Act.
We now proceed to deal with ss. 32 and 46 of the Act which
are also challenged. Section 32 states -:
“Save as otherwise provided in this Act, no
licensed dealer shall either own or have at
any time in his possession, custody or control
primary gold in any form except in the form
of standard gold bars ;
Provided that such dealer may, unless the
Central Government (having regard to the needs
of the trade, volume of business and public
interest) otherwise directs, own or keep in
his possession, custody or control not more
than-
(a) four hundred grammes, if he does not
employ any artisan,
(b) five hundred grammes, if he employs not
more than ten artisans,
(c) one thousand grammes, if he employs more
than ten but not more than twenty artisans.
503
(d) two thousands grammes, if he employs
more than twenty artisans, of primary gold in
any form other than in the form of standard
gold bars.”
Section 46 enacts :
“The total quantity of primary gold in the
possession, custody or control, whether
individually or collectively, of the artisans
employed by a licensed dealer shall not, at
any time, exceed the limits specified in
section 32”.:
Section 32 of the Act authorises a licensed dealer to keep
any quantity of standard gold bars and provides a limit upon
his holding of primary -old depending on the number of
artisans he employs. The definition of the term “standard
gold bar” under s. 2(u) does not contemplate the standard
gold bar being cut into pieces. A standard gold bar being
of a prescribed weight and purity cannot in many cases be
handed over to a certified goldsmith without cutting the
same. If a dealer, therefore, has to give a cut piece of
standard gold bar to a certain goldsmith the remaining
portion of the standard gold bar Will be treated as primary
gold in his hands. Hence the limits 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 sub-
section (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
14Sup.Cl/69-3
504
for the imposition of vicarious liability is that the person
made responsible may prevent commission of the crime and may
help to bring the actual offender to book. In one sense
the, dealer is punished for the sins committed by his
employee. It may perhaps be said if the dealer had been
more -alert to see that the law was observed the sin might
not have been committed. But the section goes further and
makes the dealer liable for any past contravention
perpetrated by the employee. It is evident that the dealer
cannot reasonably be made liable for any past misconduct of
his employee though the dealer can be made liable for any
act done by his employee in the course of the employment and
whom he can reasonably be expected to influence or control.
The maxim qui facit per alium facit per se is not generally
applicable in criminal law. But in s. 88 it has been
extended beyond reasonable limits. We are, therefore, of
opinion that s. 88 imposes an unreasonable restriction on
the fundamental right of the petitioners and is
unconstitutional.
We shall now proceed to deal with s. 100 of the Act which
also has been challenged. This section imposes a statutory
obligation upon a dealer to take all reasonable steps to
satisfy himself as to the identity of persons from whom any
gold is bought. The section does not specify the nature of
steps which a dealer should take for satisfying himself as
to the identity of the person from whom any gold is bought.
The statutory obligation imposed by the section is uncertain
and incapable of proper compliance. It must be held that
the section imposes an impossible burden upon the dealers
and constitutes an unreasonable restriction.
We proceed to consider next the question arising in this
case whether the provisions with regard to licensing of ID
dealers and certification of goldsmiths are discriminatory
and violate the guarantee of equal protection under Art. 14
of the Constitution. Reference was made to ss. 27 and 39 of
the impugned Act and it was argued that the provisions with
regard to licensing of dealers were more harsh than in the
case of registered goldsmiths. But in our opinion licensed
dealers -and certified goldsmiths form separate. classes and
the classification made by the impugned Act is a reasonable
classification. A licensed dealer is essentially a trader
who does the business of buying and selling ornaments while
a certified goldsmith is a craftsman 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-
505
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 the object intended to be achieved by it.
Having ascertained the policy and object of the Act the
Court has to apply a dual test in examining its validity (1)
whether the classification is rational and based upon an
intelligible differentia which distinguishes persons or
things that are grouped together from others that are left
out of the group and (2) whether the basis of
differentiation has any rational nexus or relation with its
avowed policy and object. In the present case both the
tests are satisfied and we hold that ss. 27 and 39 of the
impugned Act do not violate the guarantee under Art. 14 of
the Constitution. The only other point that remains to be
decided is whether as a result of some of the sections of
the impugned Act being struck down, what is left of the
impugned Act should survive or whether the whole of the
impugned Act should be declared invalid. We are of opinion
that the provisions which are declared invalid cannot affect
the validity of the Act as a whole. In a case of this
description the, real test is whether what remains of the
statute is so inextricably bound up with the invalid part
that what remains cannot independently survive or as it is
sometimes put whether on a fair review of the whole matter
it can be assumed that the legislature would have enacted at
all that which survives without enacting the part that is
ultra vires. The matter is clearly put in Cooley on
Constitutional Limitations, 8th edn. at p. 360 :
“It would be inconsistent with all just
principles of constitutional law to adjudge
these enactments void because they are
associated in the same act, but not connected
with or dependent on others which are
unconstitutional. Where, therefore, a part of
a statute is unconstitutional, that fact does
not authorise the courts to declare the
remainder void also, unless all the provisions
are connected in subject-matter depending on
each other, operating together for the same
purpose, or otherwise so connected together in
meaning, that it cannot be presumed the
legislature would have passed the one without
506
the other. The constitutional and
unconstitutional provisions may even be
contained in the same section, and yet be
perfectly distinct and separable, so that the
first may stand though the last fall. The
point is not whether they are contained in the
same section; for the distribution into
sections is purely artificial; but 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 provisions of the Act. Writ
Petitions 282, 407 and 408 of 1968 are allowed to this
extent. There will be no order with regard to costs in any
of these petitions.
V.P.S. Petitions allowed in part.
507