326 of 1953
Original Petition under article 32 of the Constitution of India
SC Isaacs section K Kapur with him for the petitioners
H J Umrigar for the respondents
January 11
The Judgment of the Court was delivered by MUKHERJEA J
This is an application presented by the petitioners under article 32 of the Constitution complaining of infraction of their fundamental rights guaranteed under article 14 and clauses f and g of article 19 1 of the Constitution and praying for enforcement of the same by issue of writs in the nature of mandamus
To appreciate the contentions that have been raised on behalf of the petitioners it would be necessary to give a short narrative of the material facts
The petitioners are a firm of traders who had prior to the cancellation of their licenee been carrying on the business of retail sellers of coal at a coal depot held by them in the town of Kanpur
It is said that the District Magistrate of Kanpur as well as the District Supply Officer who figure respectively as respondents Nos 2 and 3 in the petition had been for a considerable time past issuing directives from time to time upon the petitioners as well as other coal depot holders of the town imposing restrictions of various kinds upon the sale of coal soft coke etc
It is stated that prior to the 14th of February 1953 the prices that were fixed by the District Officers left the coal dealers a margin of 20 per cent profit upon the sale of soft coke and 15 per cent profit on the sales of hard coke and steam coal such profits being allowed on the landed costs of the goods up to the depot
The landed costs 805 comprised several items and besides ex colliery price the middleman s commission and the railway freight there were incidental expenses of various kinds including labour duty loading and unloading charges cartage and stacking expenses
After making a total of these cost elements an allowance was given for shortage of weight at the rate of 5 rods and odd seers per ton in the case of soft coke and 3 rods and odd seers in the case of hard coke and steam coal and it was on the basis of the net weight thus arrived at that the price was calculated
On the 14th of February 1953 the District Supply Officer issued a directive reducing the selling prices of coke coal etc much below the existing rates
This reduction was effected in a three fold manner
In the first place the allowance for shortage of weight was made much less than before secondly a sum of Rs 4 12 0 only was allowed for all the incidental expenses and thirdly the margin of profit was cut down to 10 per cent
On the 22nd of May 1953 a representative petition was filed by seven colliery depot holders of Kanpur including the present petitioners challenging the validity of the executive order dated the 14th of February 1953 mentioned above inter alia on the ground that it infringed the fundamental rights of the petitioners under articles 14 and 19 of the Constitution
There was an application for ad interim stay in connection with this petition which came up for hearing before the learned Vacation Judge of this court on the Ist of July 1953
On that day an undertaking was given by the State of Uttar Pradesh to the effect that they would withdraw the order of the 14th February 1953 and apparently the consideration that weighed with the State in giving this undertaking was that it was a purely executive order without any legislative sanction behind it
The order of the 14th February was in fact withdrawn but on the 10th of July 1953 the State of Uttar Pradesh promulgated by a notification an order intituled The Uttar Pradesh Coal Control Order 1953 purporting to act in exercise of the powers conferred upon it by_section 32 of the Essential Supplies Act 1946 read with the notified order of the Government of India issued under 806 section 4 of the Act
As the constitutionality of this Coal Control Order is the main object of attack by the petitioners in the present proceeding it would be convenient to set out the material provisions of the order in respect of which the controversy between the parties primarily centers THE UTTAR PRADESH COAL CONTROL ORDER 1953
In this Order unless there is anything repugnant in the subject or context 
a Coal includes coke but does not include cinder and ashes
c The Licensing Licensing Authority means the District Magistrate of the District or any other officer authorised by him to perform his functions under this Order and includes the District Supply Officer of the district
d Licensee means a person holding a licence under the provisions of this Order in Form A  or in Form B 
1 No person shall stock sell store for sale or utilise coal for burning bricks or shall otherwise dispose of coal in this State except under a licence in Form A  or B  granted under this Order or in accordance with the provisions of this Order
2 Nothing contained in sub clause 1 a Shall in so far as it relates to taking out a licence for stocking or storing coal for their own consumption apply to the stocks held by persons or undertakings obtaining coal on permits of the District Magistrate or the State Coal Controller for their own consumption
b Shall apply to any person or class of persons  exempted from any provision of the above sub clause by the State Coal Controller to the extent of their exemption
1 Every application for licence under this Order shall be made in the form given in Schedule I appended to this Order
807 2 A licence granted under this Order shall be in Form A  or Form B  appended to this Order and the holder of a licence granted under this Order shall comply with any directions that may be issued to him by the Licensing Authority in regard to the purchase sale storage or distribution of coal
3 The Licensing Authority may grant refuse to grant renew or refuse to renew a licence and may suspend cancel revoke or modify any licence or any terms thereof granted by him under the Order for reasons to be recorded
Provided that every power which is under this Order exercisable by the Licensing Authority shall also be exercisable by the State Coal Controller or any person authorised by him in this behalf
The State Coal Controller may by written order likewise require any person holding stock of coal to sell the whole or any part of the stock to such person or class of persons and on such terms and prices as may be determined in accordance with the provisions of clause 8 8
1 No licensee in Form B  and no person acting on his behalf shall sell agree to sell or offer for sale coal at a price exceeding the price to be declared by the Licensing Authority in accordance with the formula given in Schedule III
2 A licensee in Form A  or any other person holding stock of coal or any other person acting for or on behalf of such licensees or person transferring or disposing of such stocks to any person in accordance with clause 6 or clause 7 shall not charge for the coal a price exceeding the landed cost plus incidental and handling charges plus an amount not exceeding 10 per cent of the landed cost as may be determined by the Licensing Authority or the State Coal Controller
Explanations 1 Landed cost means the excolliery price of the coal plus the LDCC and Bihar
Sales tax plus middleman s commission actually paid and railway freight
808 2 Incidental and handling charges mean the cost of unloading from wagons transporting to stacking site unloading at the stacking site plus godown rent plus choukidari charges if any not exceeding Rs 8 8 0 per ton as may be determined by the Licensing Authority or the State Coal Controller according to local conditions
The District Magistrate shall within a week of the commencement of this Order prepare and publish in a local paper a list of persons carrying on the business of sale of coal in his district and upon the publication of the list the persons included therein will be deemed for purposes of this Order to be licensee until three months next following the publication of the list in Form A or B as may be specified
If any person contravenes any of the provisions of this Order or the conditions of licenee granted thereunder he shall be punishable under section 7 of the Essential Supplies Temporary Powers Act 1946 with imprisonment for a term which may extend to three years or with fine or with both and without prejudice to any other punishment to which he may be liable     Schedule III referred to in the Order is as follows SCHEDULE III
Formula for declaration of prices of soft cokehard cokesteam coal
Ex colliery Price Actuals
LDCC and Bihar Sales tax Actuals
Middleman s commission Actually Raid subject to the maximum laid down under clause 6 of the Government of India Colliery Order 1945 4
Railway freight Actuals
Incidental and handling chargers including Maximum of Rs 8 8 0 per per ton as may be determ ined by the licensing i Unloading from wagons
Licensing Authority according to local condition ii Transport upto premises provided that at places 0of stacking which are extra oridenarily iii Unloading and stacking distant form the railway at the premises or depot
way head a higher rate may be allowed by the Licensing Authority
809 iv Godown rent and chaukidari charges if any v Weighing charges if any 6
Local taxes Octroi etc
Actuals
Shortage Not exceeding 312 maunds per ton in the case of soft coke and 2 12 maunds in the case of hard coke and steam coal as may be determined by the Licensing Authority
Profit At 10 per cent on total items 1 to 6 above except item No5 It is said that on the 16th of July 1953 the respondent No 2 issued a declaration whereby he fixed the retail rates for the sale of soft coke coal etc
at precisely the same figures as they stood in the directive issued on the 14th of February 1953
The result according to the petitioners was that the selling prices were reduced so much that it was not possible for the coal traders to carry on their business at all
In accordance with the provision of clause 11 of the Control Order set out above the petitioners  name appeared in the list of B licence holders and they did apply for a licence in the proper form as required by clause 4
The licence it is said was prepared though not actually delivered over to the petitioners
By a letter dated the 3rd of October 1953 the Area Rationing Officer Kanpur accused the petitioners of committing a number of irregularities in connection with the carrying on of the coal depot
The charges mainly were that there were two other depots held and financed by the petitioners themselves in the names of different persons and that the petitioners had entered into agreements for sale of coal at more than the fixed rates
The petitioners submitted an explanation which was not considered to be satisfactory and by an order dated the 13th of October 1953 the District Supply Officer Kanpur cancelled the petitioners licence
In the present petition the petitioners have challenged the validity of the Coal Control Order of the 10th of July 1953 the declaration of prices made on the 16th of July following and also the order cancelling the petitioners  licence on the 13th of October 1953
15 95 section C I59 The constitutional validity of the Uttar Pradesh Coal Control Order has been assailed before us substantially on the ground that its provisions vest an unfettered and unguided discretion in the licensing authority or the State Coal Controller in the matter of granting or revoking licenses in fixing prices of coal and imposing conditions upon the traders and these arbitrary powers cannot only be exercised by the officers themselves but may be delegated at their option to any person they like
It is argued that these provisions imposing as they do unreasonable restrictions upon the right of the petitioners to carry on their  trade and business conflict with their fundamental rights under article 19 1g of the Constitution and are hence void
With regard to the order dated the 16th of July 1953 by which the prices of coke coal etc were fixed it is pointed out that it was not only made in exercise of the arbitrary power Conferred upon the licensing authority by the Coal Control Order but the prices as fixed are palpably discriminatory as would appear from comparing them with the prices fixed under the very same Control Order in other places within the State of Uttar Pradesh like Allahabad Lucknow and Aligarh
The order of the 13th OCtober 1953 cancelling the petitioners  licenee is challenged on the ground that the charges made against the petitioners were vague and indefinite and that the order was made with the ulterior object of driving the petitioners out of the coal business altogether
It is said further that as a result of the cancellation order the petitioners have been made incapable of disposing of the stocks already in their possession though at the same time the holding of suchstock after the cancellation of their licence has become an offence under the Coal Control Order
It is not disputed before us that coal is an essential commodity under the Essential Supplies Temporary Powers Act of 1946 and by virtue of the delegation powers by the Central Government to the Provincial Government under section 4 of the Act the Uttar Pradesh Government was competent to make provisions by notified order for regulating the supply and 811 distribution of coal in such a way as they considered proper with a view to secure the objects as specified in section 3 of the Act
All that is necessary is that these provisions should not infringe the fundamental rights of the citizens guaranteed under Part III of the Constitution and if they impose restrictions upon the carrying on of trade or business they must be reasonable restrictions imposed in the interests of the general public as laid down in article 19 6of the Constitution
Nobody can dispute that for ensuring equitable distribution of commodities considered essential to the community and their availability at fair prices it is quite a reasonable thing to regulate sale of these commodities through licensed vendors to whom quotas are allotted in specified quantities and who are not permitted to sell them beyond the prices that are fixed by the controlling authorities
The power of granting or withholding licences or of fixing the prices of the goods would necessarily have to be vested in certain public officers or bodies and they would certainly have to be left with some amount of discretion in these matters
So far no exception can be taken but the mischief arises when the power conferred on such officers is an arbitrary power unregulated by any rule or principle and it is left entirely to the discretion of particular persons to do anything they like without any check or control by any higher authority
A law or order which confers arbitrary and uncontrolled power upon the executive in the matter of regulating trade or business in normally available commodities cannot but be held to be unreasonable
As has been held by this court in Chintamon vs The State of Madhya Pradesh1 the phrase reasonable restriction  connotes that the limitation imposed upon a person in enjoyment of a right should not be arbitrary or of an excessive nature beyond what is required in the interest of the public
Legislation which arbitrarily or excessively invades the right cannot be said to contain the quality of reasonableness and unless it strikes a proper balance between the freedom guaranteed under 1  article 19 1 g and the social control permitted by clause 6 of article 19 it must be held to be wanting in reasonableness
It is in the light of these principles that we would proceed to examine the provisions of this control Order the validity of Which has been impugned before us on behalf of the petitioners
The provision contained in clause 31 of the Order that no person shall stock sell store for sale or otherwise utilise or dispose of coal except under a licence granted under this Order is quite unexceptional as a general provision in fact that is the primary object which the control Order is intended to serve
There are two exceptions engrafted upon this general rule the first is laid down in sub clause 2 a and to that no objection has been or can be taken
The Second exception which is embodied in subclause 2bhas been objected to by the learned counsel  appearing for the petitioners
This exception provides that nothing in clause 3 1 shall apply to any person or class of persons exempted from any provision of the above sub clause by the State Coal Controller to the extent of such exemption
It will be seen that the Control Order nowhere indicates what the grounds for exemption are nor have any rules been framed on this point
An unrestricted power has been given to the State Controller to make exemptions and even if he acts arbitrarily or from improper motives there is no check over it and no way of obtaining redress
Clause 3 2 b of the Cntrol Order seems to us therefore prima facie to be unreasonable
We agree however with Mr Umrigar that this portion of the Control Order even though bad is severable from the rest and we are not really concerned with the validity or otherwise of this provision in the present case as no action taken under it is the subject matter of any complaint before us
The more formidable objection has been taken on behalf of the petitioners against clause 4 3 of the Control Order which relates to the granting and refusing of licences
The licensing authority has been given absolute power to grant or refuse to grant renew or refuse to renew suspend revoke cancel or 813 modify any licenee under this Order and the only thing he has to do is to record reasons for the action he takes
Not only so the power could be exercised by any person to whom the State Coal Controller may choose to delegate the same and the choice can be made in favour of any and every person
It seems to us that such provision cannot be held to be reasonable
No rules have been framed and no directions given on these matters to regulate or guide the discretion of the licensing officer
Practically the Order commits to the unrestrained will of a single individual the power to grant withhold or cancel licences in any way he chooses and there is nothing in the Order which could ensure a proper execution of the power or operate as a check upon injustice that might result from improper execution of the same
Mr Umrigar contends that a sufficient safeguard has been provided against any abuse of power by reason of the fact that the licensing authority has got to record reasons for what he does
This safeguard in our opinion is hardly effective for there is no higher authority prescribed in the Order who could examine the propriety of these reasons and revise or review the decision of the subordinate officer
The reasons therefore which are required to be recorded are only for the personal or subjective satisfaction of the licensing authority and not for furnishing any remedy to the aggrieved person
It was pointed out and with perfect propriety by Mr Justice Matthews in the well known American case of Yick Wo vs Hopkins1 that the action or non action of officers placed in such position may proceed from emmity or prejudice from  partisan zeal or animosity from favouritism and Other improper influences and motives which are easy of concealment and difficult to be detected and exposed and consequently the injustice capable of being wrought under cover of such unrestricted power becomes apparent to every man without the necessity of detailed investigation
In our opinion the provision of clause 43 of the Uttar Pradesh Coal control Order must be must be held to void as imposing an unreasonable restriction upon the freedom 1 at 373
814 of trade and business_guaranteed under article 191 gof the Constitution and not coming within the protection afforded by clause 6 of the article
As this provision forms an integral part of the entire structure of the Uttar Pradesh Coal Control Order the order cannot operate properly unless the provision of clause 4 3 is brought in conformity with the constitutional requirements indicated above
The licenee of the petitioners having been cancelled in pursuance with the above clause of the Control Order the cancellation itself should be held to be ineffective and is not necessary for us to enquire further whether or not the grounds upon which the licensing authority purported to act were vague or idefinite or could constitute proper grounds for cancellation
The two other clauses of the Control Order to which exception has been taken on behalf of the petitioners are clauses 7 and 8
Clause 7 empowers the State Coal Controller to direct by written order any person holding stock of coal to sell the whole or any part of the stock to such person or class of persons and on such terms and prices as may be determined in accordance with the provision of clause 8
Clause 8 1 provides that no licensee in Form B  shall sell or agree to sell coal at a price exceeding the price to be declared by the licensing authority in accordance with the formula given in Schedule III
With regard to both these clauses the contention of the petitioners  counsel in substance is that the formula for determining the price as laid down in Schedule III is per se unreasonable as it is made dependent on the exercise of an unfettered and uncontrolled discretion by the licensing authority
An unfair determination of the price by the licensing authority it is argued would be totally destructive of the business of the coal traders and the grievance of the petitioners is that that is exactly what has been done by the declaration of prices made on the 16th of July 1953
We have examined the formula given in Schedule Iii to the Control Order with some care and on the materials that have been actually placed before us we are 815 not in a position to say that the formula is unreasonable The prices as said already are calculated on the basis of the landed costs of coke and coal up to the depot to which a profit of 10 per cent is added
The landed costs comprise seven items in all which are enumerated  in Schedule III
With regard to items 1 2 3 4 and 6 of the Schedule the actual costs are taken into account and to that no objection can possibly be taken
The entire dispute is with regard to incidental charges specified in item 5 and the allowance or shortage which forms item 7
So far as incidental charges are concerned the Schedule allows a maximum of Rs 8 8 0 per ton to be determined by the licensing authority according to local conditions
The rates undoubtedly vary according to local conditions and some amount of discretion must have to be left in such cases to the local authorities
The discretion given to the licensing authority in fixing these rates is however not an unlimited discretion but has got to be exercised with reference to the condition prevalent in the locality with which the local officers must be presumed to be familiar
The grievance of the petitioners is that in the declaration of 16th of July 1953 the licensing authority allowed incidental charges only at the rate of Rs 4 12 0 per ton and that is grossly unfair
It is pointed out that at Lucknow Aligarh Allahabad and other places much higher rates were allowed though the local conditions of these places are almost identical and there has been consequently a discrimination in this respect which makes the declaration void altogether
The statements that have been made by the petitioners in this connection are not supported by any affidavit of any person who is familiar with the local conditions in the other places and on the materials that we have got here we are unable to say that the rates fixed by the licensing authority of Kanpur are really discriminatory
It is certainly not open to us to substitute our own determination in tile matter of fixing the prices for that of the licensing authority and provided we are satisfied that the discretion that has been vested in a public officer is not an uncontrolled discretion and no unfair 816 discrimination has resulted from the exercise of it we cannot possibly strike down as illegal any order or declaration made by such officer
The same reasons apply in our opinion to the seventh item of Schedule III which relates to allowances for shortage of weight
Here also the Control Order specifies a maximum and the determination of the allowance in particular cases has been left to the discretion of the licensing authority
We are not satisfied from the materials placed before us that this provision is unfair or discriminatory
The formula allows a profit of loper cent upon the cost items with the exception of item No 5 which relates to incidental charges
We do not know why this item has been omitted and Mr Umrigar appearing for the respondents could not suggest any possible reason for it
But even then the result of this omission would only be to lower the margin of profit a little below 10 per cent and nothing more
If the other traders in the locality are willing to carry on business in coal with that amount of profit as is stated on the affidavits of the respondents such fixation of profit would undoubtedly be in the interests of the public and cannot be held to be unreasonable
The counsel for the petitioners is not right in his contention that the Control Order has only fixed the maximum profit at 10 per cent and has left it to the discretion of the licensing authority to reduce it in any way he likes
Schedule III fixes the profit at 10 per cent upon the landed costs with the exception of item No 5 and as this is not the maximum it would have to be allowed in all cases and under clause 8 1 the B  licensees are to sell their stocks of coal according to the prices fixed under Schedule III
Clause 8 2 indeed is not very clearly worded but we think that all that it provides is to impose a disability upon all holders of coal stocks to charge prices exceeding the landed costs and a profit upon the same not above 10 per cent as may be determined by the licensing authority
The determination spoken of here must be in accordance with what is laid down in Schedule III and that as has been said above does specify a fixed rate and not a maximum and does  not 817 allow the licensing authority to make any reduction he likes
On the whole we are of the opinion that clauses 7 is and 8 of the Control Order do not impose unreasonable restrictions upon the freedom of trade enjoyed by the petitioners and consequently the declaration
of the 16th of July 1953 cannot Ie held to be invalid
The result is that in our opinion clause 4 3 of the Control Order as well as the cancellation of the petitioners licence should be held to be invalid and a writ in the nature of mandamus would issue against the respondents opposite parties preventing them from enforcing the cancellation order
The rest of the prayers of the petitioners are disallowed
We make no order as to costs
Petition partly allowed
Agent for the petitioners Ganpat Rai


Summary:
A law or order which confers arbitrary and uncontrolled power upon the executive in the matter of regulating trade or business in normally available commodities must be held to be unreasonable
Under cl
43 of the Uttar Pradesh Coal Control Order 1953 the licensing authority has been given absolute power to grant or refuse to grant renew or refuse to renew suspend revoke cancel or modify any licence under this Order and the only thing he has to do is to record reasons for the action he takes
Not only so the power could be exercised by any person to whom the State Coal Controller may choose to delegate the same and the choice can be made in favour of any and every person
Such provisions cannot be held to be reasonable Held therefore that the provision of cl
43 of the Uttar Pradesh Coal Control Order 1953 must be held to be void as 104 804 imposing an unreasonable restriction upon the freedom of trade and business guaranteed under article 19 1 g of the Constitution and not coming within the protection afforded by cl
6 of the article
Yick Wo vs Hopkins at 373 referred to