PETITIONER: THE STATE OF RAJASTHAN Vs. RESPONDENT: NATH MAL AND MITHA MAL. DATE OF JUDGMENT: 12/03/1954 BENCH: HASAN, GHULAM BENCH: HASAN, GHULAM MAHAJAN, MEHAR CHAND (CJ) MUKHERJEA, B.K. DAS, SUDHI RANJAN BOSE, VIVIAN CITATION: 1954 AIR 307 1954 SCR 982 CITATOR INFO : E&D 1960 SC 475 (9,12) R 1967 SC 829 (6) R 1974 SC 366 (58) RF 1981 SC 873 (18,27) R 1987 SC1802 (9) ACT: Constitution of India, arts. 19(1)(f) and 31(2) -Rajasthan Foodgrains Control Order, 1949, cl. 25-Whether ultra vires the constitution. HEADNOTE: Held, that the first portion of cl. 25 of the Rajasthan Foodgrains Control Order, 1949, relating to the freezing of stocks of foodgrains is not void under art. 19(1)(f) of the Constitution because such freezing of stocks of foodgrains is reasonably related 983 to the object which the Act was intended to achieve, namely to secure the equitable distribution and availability at fair prices and to regulate transport, distribution, disposal and acquisition of an essential commodity such as foodgrains. Hold, that the last portion of cl. 25 to the effect that " such stocks shall also be liable to be requisitioned or disposed of under orders of the said authority at the rate fixed for purposes of Government procurement ", is void both under art. 19(1)(f) and art. 31(2) of the Constitution:- (i)because the clause places an unreasonable restriction upon the carrying on of trade or business and is thus an infringement of the respondents' right under art. 19(1)(f) of the Constitution; (ii)because the clause by vesting the power in the authority to acquire the stocks at any price fails to fix the amount of compensation or specify the principles on which it is to be determined and leaves it entirely to the discretion of the executive authority to fix any compensation it likes and is thus hit by art. 31(2) of the Constitution. JUDGMENT:
CIVIL APPELLATE JURISDICTION: Civil Appeal No. 136 of 1952.
Appeal under articles 132(1) and 133(1)(c) of the
Constitution of India from the Judgment and Order dated the
19th October, 1951, of the High Court of Judicature for
Rajasthan at Jodhpur in D. B. Miscellaneous Writ Petition
No. 3/1951.
K. S. Hajela, Advocate-General of Rajasthan, for the
appellant.
K. N. Aggarwal and P. C. Agarwal for the respondents.
M. C. Setalvad, Attorney-General for India (Porus A. Mehta,
with him) for the intervener (the Union of India).
1954. March 12. The Judgment of the Court was delivered by
GHULAM HASAN J.-The question involved in this appeal relates
to the constitutional validity of clause 25 of the Rajasthan
Foodgrains Control Order, 1949, hereinafter called the
Control Order, and arises in the following circumstances :-
The respondents, who are grain merchants at Raniwara in
Jodhpur Division, Rajasthan State, held
984
licences for dealing in foodgrains. They held considerable
stocks of bajra in the ordinary course of business but on
October 7, 1950, their stocks were frozen by the Deputy
Commissioner, Civil Supplies, Jodhpur, through the Sub-
Divisional Officer. It is not disputed that the market
price then prevailing was about Rs. 18 per maund. The
State, however, requisitioned the stocks at the rate. of
Rs. 9 per maund and sold them at Rs. 13-5-4 per maund. The
respondents claimed that they had purchased the bajra at the
prevailing market rate of Rs. 17 to Rs. 18 per maund. They
filed a petition on January 23, 1951, for the issue of a
writ under article 226 of the Constitution before the High
Court of Rajasthan, contending that clause 25 of the Control
Order was void under articles 14, 19 (1) (g) and 31 (2) of
the Constitution. The High Court held that clause 25 was
void inasmuch as it is a restriction upon the fundamental
right of the respondents to carry on business under article
19 (1)(g) of the Constitution, that the restriction is not
reasonable and is not saved by clause (6) of article 19.
The High Court further held that clause 25 was also hit by
article 31 (2) as fair compensation had not been fixed by
the law for the acquisition of the foodgrains. As the
grains had already been disposed of by the Government, the
High Court holding that Rs. 17 a maund was fair compensation
directed that the State of Rajasthan shall pay compensation
at that rate. The State has preferred.the present appeal on
a certificate granted by the High Court.
The impugned clause 25 is as follows:-
” 25. Notwithstanding anything contained in this Order, the
Commissioner, the Director, the Deputy Commissioner, the
Nazim, the Assistant Commissioner, the Sub-Divisional
Officer, the Senior Officer of a jurisdictional Thikana, the
enforcement officer ‘or such other officer as may be
authorized by the Commissioner in this behalf, may freeze
any stocks of foodgrains held by any person, whether in his
own behalf or not, and such person shall not dispose of any
foodgrains out of the stock so freezed except with the
permission of the said authority. Such stocks shall
985
also be liable to be requisitioned or disposed of under
orders of the said authority at the rate fixed for purposes
of Government procurement. ”
It is not disputed that bajra is an essential commodity
within the meaning of the Essential Supplies Act (No. XXIV
of 1946). The question that arises for consideration is how
far and in what respects clause 25 can be said to be void as
violating Part III of the Constitution. The clause
authorises the Commissioner and various other authorities
mentioned therein and such other officers as may be
authorised by the Commissioner to freeze any stock of
foodgrains held by a person. It is true that the authority
of the Commissioner to delegate his powers to any other
officer at his discretion is expressed in somewhat wide
terms but we need not decide that per se would be sufficient
to invalidate the clause. Admittedly that :power has not
been exercised in the. present case. Nor do we think that
the power to freeze the stocks of foodgrains is arbitrary or
based on no reasonable basis. It is not disputed that the
clause does not state in express terms the circumstances in
or the grounds on which the stocks may be freezed but it
should be read along with section 3 of the Essential
Supplies Act which lays down the policy for controlling the
production,, supply and distribution of essential
commodities. Section 3 in so far as it is material says:-
” The Central Government, so far as it appears to it to be
necessary or expedient for maintaining or increasing
supplies of any essential commodity, or for securing their
equitable distribution and availability at fair prices, may
by order provide for regulating or prohibiting the
production, supply and distribution
thereof
Sub-section (2) lays down:-
” Without prejudice to the generality of the powers
conferred by sub-section (1) an order made thereunder may
provide……………….
(a)…………………..
(b)…………………..
(c)…………………..
986
(d) for regulating by licences, permits or otherwise the
storage, transport, distribution, disposal, acquisition, use
or consumption of any essential commodity;
(e) for prohibiting the withholding from sale of any
essential commodity ordinarily kept for sale;
We are clear, therefore, that the freezing of stocks of
foodgrains is reasonably related to the object which the Act
was intended to achieve, namely, to secure the equitable
distribution and availability at fair prices and to regulate
transport, distribution, disposal and acquisition of an
essential commodity such as foodgrains. We do not agree
with the High Court that the first portion of clause 25 is
void under article 19 (1) (g).
The last portion of clause 25 to the effect that such stocks
shall also be liable to be requisitioned or disposed of
under orders of the said authority at the rate fixed for
purposes of Government procurement “, however stands on a
different footing. The clause, as it is worded, leaves it
entirely to the Government to requisition the stocks at any
rate fixed by it and to dispose of such stocks at any rate
in its discretion. This obviously vests an unrestrained
authority to requisition the stocks of foodgrains at an
arbitrary price. In contrast with this provision we may
refer to clauses 23 and 24 of the Control Order. They are
as
follows:-
” 23. The Commissioner or the Director, and the Deputy
Commissioner or the Senior Officer of a jurisdictional
Thikana with the approval of the Director, may fix the
ceiling prices at which foodgrains in any area to which this
order applies shall be sold, and may from time to time vary
such prices.”
“24. The Commissioner, the Director, the Deputy
Commissioner, the Nazim, the Assistant Commissioner, the
Sub-Divisional Officer, or the Senior Officer of the
jurisdictional Thikana as the case may be, may direct any
person or persons in possession, whether on his own behalf
or not of any foodgrains to sell such foodgrains or part
thereof to any person or persons at any
987
specified place and at such price as may be fixed under
clause 23.”
It appears from these clauses that while the authorities may
fix the ceiling price at which foodgrains should be sold in
the market by the dealers and may direct any person in
possession of foodgrains to sell them to any other person at
the price fixed under clause 23, there is no such limitation
upon the power of the Government to acquire the stocks. In
other words, it will be open to the Government to requisi-
tion the stocks at a price lower than the ceiling price thus
causing loss to the persons whose stocks are freezed while
at the same time the Government is free to sell the same
stocks at a higher price and make a profit. It is obvious
that the dealer whose stocks are thus freezed will stand to
lose considerably and will be unable to carry on his trade
or business at the prevailing market price. No dealer will
be prepared to buy foodgrains at the market price when he
knows that he is exposed to the risk of his stocks being
freezed any moment and the same being requisitioned at the
procurement rate. The present is a typical case which
illustrates how the business of a grain dealer can be
paralyzed, for it is admitted that while the Government
procurement rate was Rs. 9 a maund, the market rate was Rs.
17 or Rs. 18 per maund, with the result that the stock
holder suffered nearly cent. per cent. lose, while the
Government made a profit of Rs. 4-5-4 per maund on the stock
requisitioned. We hold, therefore, that the last portion of
clause 25 places an unreasonable restriction upon the
carrying on of trade or business and is thus an infringement
of the respondent’s right under article 19(1)(g) of the
Constitution and is, therefore, to that extent void. The
same result follows if the impugned clause is examined in
the light of article 31(2). The clause by vesting the power
in the authority to acquire the stocks at any price fails to
fix the amount of the compensation or ,specify the
principles on which the compensation is to be determined.
The clause leaves it entirely to the discretion of the
executive authority to fix any compensation it likes. The
High Court
988
rightly held that the clause offended against article 31(2).
For the foregoing reasons we hold that the last portion of
clause 25 is void and dismiss the appeal with costs.
Appeal dismissed.
Agent for the appellant and for the intervener: R. H.
Dhebar.
