No 136 of 1957
Writ Petition under article 32 of the Constitution of India for enforcement of Fundamental Rights
193 Purshottam Tricumdas Mukund R Mody Anil B Divan Ramesh A Shroff and I N Shroff for the petitioner
C K Daphtary Solicitor General of India R Ganapathy Iyer and R H Dhebar for respondent
August 17
The Judgment of the Court was delivered by SUBBA RAO J
This is a petition under article 32 of the Constitution for the issue of a writ of mandamus or a writ in the nature of mandamus or any other appropriate direction order or writ to direct the respondent the Union of India to withdraw or cancel the notification dated August 31 1957 recognising  the Stock Exchange Bombay  under section 4 of the XLII of 1956 hereinafter referred to asthe Act 
At the outset it is necessary to notice briefly how a Stock Exchange is worked and how it is controlled or regulated by the State
 Stock Exchange  means  any body of individuals whether incorporated or not constituted for the purpose of assisting or con
trolling the business of buying selling or dealing in securities 
The history of stock exchanges in foreign countries as well as in India shows that the development of joint stock enterprise would never have reached its present stage but for the facilities which the stock exchanges provided for dealing in securities
They have a very important function to fulfil in the country s economy
Their main function in the words of an eminent writer is  to liquify capital by enabling a person who has invested money in say a factory or a railway to convert it into cash by disposing of his share in the enterprise to someone else 
Without the stock exchange capital would become immobilized
The proper working of a stock exchange depends upon not only the moral stature of the members but also on their calibre
It is a trite saying that a jobber or dealer is born and not made
In the words of the same author a jobber must be a man of good nerve cool judgment and ready to deal 25 194 under any ordinary conditions and he must be a man of financial standing considerable experience with an understanding of market psychology
There are three modes of dealing in shares and stores namely 1 spot delivery contract ie a contract which provides for the actual delivery of securities on the payment of a price thereof either on the day of the contract or the next day excluding perhaps the period taken for the despatch of the securities or the remittance of money from one place to another 2 ready delivery contract which means a contract for the purchase or sale of securities for the performance of which no time is specified and which is to be performed immediately or within a reasonable time 3 forward contracts ie contracts whereunder the parties agree for their performance at a future date
If the stock exchange is in the hands of unscrupulous members the second and third categories of contracts to buy or sell shares may degenerate into highly speculative transactions or what is worse purely gambling ones
Where the parties do not intend while entering into a contract of sale or purchase of securities that only difference in prices should be paid the transaction even though speculative is valid and not void for  there is no law against speculation as there is against gambling 
But if the parties do not intend that there should be any delivery of the shares but only the difference in prices should be accounted for the contract being a wager is void
More often than not it is difficult for a court to distinguish one from the other as a wagering transaction may be so cleverly camouflaged as to pass off as a speculative transaction
These mischievous potentialities inherent in the transactions if left uncontrolled would tend to subvert the main object of the institution of stock exchange and convert it into a den of gambling which would ultimately upset the industrial economy of the country
For that reason in Bombay as early as 1925 the Bombay Securities Contracts Control Act was passed to regulate and control contracts for the purchase and sale of securities in the City of Bombay and elsewhere in the Bombay Presidency
Under section 6 of that Act 195  Every contract for the purchase or sale of securities other than a ready delivery contract entered into after a date to be notified in this behalf by the Provincial Government shall be void unless the same is made subject to and in accordance with the rules duly sanctioned under section 5 and every such contract shall be void unless the same is made between members or through a member of a recognised stock exchange and no claim shall be allowed in any Civil Court for the recovery of any commission brokerage fee or reward in respect of any such contract 
But this Act defined  ready delivery contract  to mean  a contract for the purchase or sale of securities for performance of which no time is specified and which is to be performed immediately or within a reasonable time 
It was also stated therein by way of explanation that what was reasonable time was in each particular case a question of fact
This Act did not achieve its purpose for under section 6 thereof contracts entered into in contravention of the provisions of that section were not made illegal but only void with the result that even members of a stock exchange not recognised under that Act were able to do business in that line
What is more the explanation to the definition of  ready delivery contract  which is excluded from the operation of the Act was so elastic that in the name of ready delivery contracts unrecognised stock exchanges
and individuals were able to carry on business in forward contracts
 ambling in shares went on unchecked in Bombay as elsewhere
After the Second World War the post war boom gave an unhealthy impetus to the stock exchange transactions
Various expert committees appointed by the Government from time to time considered the question of regulation of stock exchanges and the latest of those committees was the Gorwalla Committee
The report of that Committee was circulated to the principal stock exchanges Chambers of Commerce and other interested associations and individuals
After considering the reports of the committees and the comments made thereon by the various bodies the Government introduced a bill in the Parliament which became law on 196 September 4 1956
The Act was passed to prevent undesirable transactions in securities by regulating the business therein by prohibiting auction and by providing for certain other matters connected therewith
The Act mainly provides for the recognition of stock exchanges and for controlling the rule making of the said exchanges
Section 4 of the Act empowers the Central Government to recognise stock exchanges subject to two conditions
Section 13 enables it to issue a notification that in a particular State or area every contract which is entered into after the date of the notification otherwise than between members of a recognised stock exchange in such State or area or through or with such member shall be illegal
Without resorting to such drastic procedure the Government is also given power to prohibit contracts in certain securities in certain areas from doing business without obtaining a licence
Spot delivery contracts are excluded from the operation of sections 13 14 15 and 17 of the Act unless the Central Government by notification thinks fit to extend the operation of section 17 of the Act to such contracts
Section 19 prohibits formation of stock exchanges other than recognised ones except with the permission of the Central Government
It declares all auctions in securities entered into after the commencement of the Act illegal
It also provides penalties for the infringements of the provisions of the Act
In short the Act confers an effective controlling power on the Central Government over the stock exchanges
In exercise of the power conferred upon the Central Government to make rules the Central Government made rules described as the Securities Contracts Regulation Rules 1957 providing inter alia for the qualification for membership of a stock exchange seeking recognition the procedure for recognition the manner of keeping accounts the submission of annual reports the constitution of governing bodies and for taking disciplinary action against any member of such bodies and other similar matters
In Greater Bombay there were two stock exchanges 197 one called the Native Share  Stock Brokers  Association and the other the Indian Stock Exchange Limited
The former was in existence for more than 80 years and it was registered under the Bombay Securities Contracts Control Act 1925
Its rules and bye laws were approved by the Government of Bombay and it was doing business in both forward as well as ready transactions
It has a clearing house and was doing extensive business in different kinds of securities
The other namely the Indian Stock Exchange Limited was a company incorporated under the Indian Companies Act 1913 as a company limited by guarantee without any share capital
The said Company had been functioning since 1937 but was not registered under the Bombay Securities Contracts Control Act 1925
It was mainly doing business in Tata Ordinary and Bombay Dyeing shares and had hardly any investment business
Not being registered under the Bombay Securities Contracts Control Act 1925 it could only deal in ready delivery contracts and as the definition of  ready delivery contract  under that Act was elastic and as forward contracts were not made illegal thereunder this Exchange was also doing speculative business mainly in the said two shares
After the Act came into force both the Exchanges applied for recognition under the Act
The Government after considering the relative merits and the relevant circumstances issued a notification dated August 31 1957 recognising the Native Share and Stock Brokers  Association under the name  The Stock Exchange Bombay  subject to the conditions mentioned therein
One of the conditions imposed was that the members of the Indian Stock Exchange Limited would be entitled to apply for membership of the Stock Exchange Bombay provided they were active members of the Indian Stock Exchange Limited for 12 months immediately preceding August 6 1957 and they were also eligible under r 81 of the Securities Contracts Regulation Rules 1957 to be members of a recognised stock exchange
The notification 198 further gave some concessions to such active members in the matter of payment of the membership fee
They had to apply for membership before October 15 1957 or before such period as the Board of the recognised Stock Exchange might think fit to extend
It appears that within the extended time a number of active members of the Indian Stock Exchange Limited as defined by the notification applied for membership and were admitted as members of the recognised Stock Exchange
Though three years have passed by no member other than the petitioner has so far thought fit to question the validity of the notification that is the validity of the notification has been accepted and the recognised Stock Exchange has become stabilised on that basis
Subsequent to the filing of
the petition on November 30 1957 the Central Government issued another notification applying section 13 of the Act to Greater Bombay with the result that thereafter every contract in shares between the members of any unrecognised stock exchange in that City would be illegal
The petitioner had become a member of the Indian Stock Exchange Limited on February 27 1956 but he had not been transacting any business on the floor of the said Stock Exchange either on his own account or on account of his clients
He avers in the affidavit filed in support of the petition that he has been doing considerable business on his own account or on account of his clients through other members of the Stock Exchange and that he intends to commence business directly in ready delivery contracts
As the impugned notifications affect his right to do business he seeks for the issue of a writ of mandamus for the aforesaid reliefs
Shri Purshottam Trikumdas learned counsel for the petitioner raised before us the following contentions 1 under article 191g of the Constitution the petitioner has a fundamental right to carry on the business in shares and the notification dated August 31 1957 and the subsequent notification dated November 30 1957 imposed unreasonable restrictions on his said right 2 the notification dated August 31 199 1957 is void inasmuch as it is not sanctioned by the provisions of section 4 of the Act and 3 the condition 2ia of the said notification classifying members of A the Indian Stock Exchange Limited as active members and members who were not active infringes the fundamental right enshrined in article 14 of the Constitution and that as the said condition is not severable the entire notification is bad
Learned Solicitor General in addition to controverting the said contentions pressed on us to hold that as the vires of the Act was not questioned the notification issued thereunder could not be questioned by the petitioner on the ground that it contravened one or other of the said fundamental rights
It would be convenient to take first the contention of the learned Solicitor General as it is in the nature of a preliminary point
He says that as the validity of the Act was not questioned the notification issued in the exercise of the power conferred thereunder cannot also be questioned
There is a fallacy underlying this contention
Under article 132 of the Constitution the State shall not make any law which takes away or abridges the rights conferred by Part III thereof and  law  is defined under article 3a to include a notification
Therefore the validity of a notification issued by the State it being law is as much vulnerable to attack as that of the Act itself on the ground that it infringes any of the fundamental rights
If an Act is a self contained one and the notification issued there under only restates the provisions of the Act the validity of the notification cannot obviously be questioned as the validity of its contents were accepted
But if the Act confers a power on the State in general terms and the notification issued thereunder infringes one or other of the fundamental rights the validity of the Act cannot equally obviously prevent an attack on the notification
In the former case the notification only reflects the provisions of a valid Act and in the latter it is the notification and not the Act that infringes the fundamental rights
Take an example of an Act imposing restrictions on the freedom of speech
The Act authorizes the State to impose conditions on 200 the said freedom in the interests of security of State
The Act is constitutionally valid
But if a notification issued under that Act imposes unreasonable restrictions infringing the said rights it is liable to be challenged on the ground of unconstitutionality
So too in the instant case section 4 of the Act empowers the Central Government to issue a notification recognising a stock exchange subject to certain conditions expressed in general terms
The general terms can comprehend both reasonable and unreasonable restrictions
If the notification imposes unreasonable restrictions if the contention of the learned counsel for the petitioner be accepted the restrictions imposed would certainly be unreasonable it is liable to be set aside
We cannot therefore accept this contention
1 Article 191g of the Constitution states that every citizen shall have the right to carry on any business but the State in empowered under el
6 of the said Article to make any law imposing in the interest of the general public reasonable restrictions on the exercise of the said right
Briefly stated the argument is that the combined effect of the two notifications is that the petitioner is driven out of his business of stock exchange in as much as it is said they confer a monopoly on the Stock Exchange Bombay and the rules of the said Stock Exchange exclude any outsider from becoming its member without obtaining a nomination and that too only in the place of an existing member
To put it differently the argument proceeds that under the rules of the Stock Exchange Bombay membership is not thrown open to the public
This leads us to the consideration of the relevant provisions of the Stock Exchange Rules Bye laws and Regulations 1957
Under r 3 the membership of the Exchange shall consist of such number of members as the Exchange in general meeting may from time to time determine
It is common case that the membership of the Exchange is not limited
Under the heading  Election of New Members  the Rules prescribe the conditions of eligibility for election as a member of the Exchange
These Rules adopt the provisions of r 8 of the Securities 201 Contracts Regulation Rules 1957
The Rules do not contain any limitation on the eligibility of a person to be elected as a member such as that the person should be nominated in the manner provided by the Rules or that he should come only in the vacancy caused by another member ceasing to be one in one of the ways mentioned thereunder
The words  no person  in r 17 are comprehensive enough to take in any outsider seeking for election as a member
Rule 22 provides for an application for admission in the form prescribed in Appendix A to the Rules
This rule also does not impose any such limitation
The admission application form in Appendix A is also general in terms and enables any person of India to apply for membership provided he agrees to abide by the conditions imposed therein
In the form also there is no such limitation
But it is contended that a fair reading of the provisions of rr 20 and 21 makes it clear that a candidate for admission is confined only to two categories viz 1 a candidate nominated by a member or a legal representative of a deceased member seeking admission to membership in the place of  the deceased and 2 a person recommended for admission to membership in the place of a member who has forfeited his right to membership
A careful scrutiny of the Rules does not bear out the contention nor do they enable us to cut down the wide amplitude of rr
17 to 22
Rule 10 says  When a right of membership is forfeited to or vests in the Exchange under any Rule Bye law or Regulation of the Exchange for the time being in force it shall belong absolutely to the Exchange free of all rights claims or interest of such member or any person claiming through such member and the Governing Body shall be entitled to deal with or dispose of such right of membership as it may think fit Rule 54 is to the following effect  A member s right of membership shall lapse to and vest in the Exchange immediately be is declared a defaulter Rule 11 is as follows 26 202 a A member of not less than seven years  standing who desires to resign may nominate a person eligible under these Rules for admission to membership of the Exchange as a candidate for admission in his place b The legal representatives of a deceased member or his heirs or the persons mentioned in Appendix C to these Rules may with the sanction of the Governing Board nominate any person eligible under these Rules for admission to membership of the Exchange as a candidate for admission in the place of the deceased member
In considering such nomination the Governing Board shall be guided so far as practicable by the instructions set out in Appendix C to these Rules
 Appendix B gives the nomination forms Nos 1 and 2 to be filled by a member or a legal representative as the case may be under r 11 a and b
Now it would be convenient to read rr 20 and 21
They are as follows Rule 20  A candidate for admission except  a candidate applying for a membership vesting in the Exchange must obtain a nomination in the manner provided in these Rules
 Rule 21  A candidate for admission must be recommended by two members none of whom should be a member of the Governing Board
The recommenders must have such personal knowledge of the candidate and of his past and present circumstances as shall satisfy the Governing Board
 The argument is that under r 20 a candidate for ad
mission falls under two categories namely 1 a candidate who must obtain a nomination in the manner provided in the Rules ie r 11 a and b and 2 a candidate applying for a membership vesting in the Exchange and therefore these two categories exhaust the candidates for admission and that when under r 21 the same words  a candidate for admission  are used they must carry the same meaning as in r 20 that is they must be confined only to the two categories comprehended by r 20
This argument appears to be plausible and even incontrovertible if 203 rr 20 and 21 are taken out of their setting and construed independently of other rules
But in the setting in which they appear they can bear only one meaning namely that r 20 provides for nomination only in the case of a candidate for admission who requires a nomination in the manner provided by the rule and r 21 provides for all the candidates for admission that they should be recommended by two members who have personal knowledge of the candidates
To put it in other words under the Rules candidates for admission fall under three groups viz 1 candidates falling under r 11 a and b 2 candidates applying for membership vesting in the Exchange and 3 other candidates
All the three categories of candidates must be recommended by two members
But the candidates belonging to the first category shall in addition be nominated in the manner provided by the Rules
We therefore hold that the Stock Exchange Rules do not operate as a bar against the petitioner becoming a member of the Stock Exchange subject to the rules governing such application
The petitioner has the right to do business in shares in spite of the notifications he can still do business in spot delivery contracts
He can apply to become a member of the Stock Exchange subject to the conditions laid down by the Rules
The Act the validity of which he has not chosen to question enables the State to give or refuse recognition to any Stock Exchange and it has chosen to give recognition to the Stock Exchange Bombay subject to the conditions prescribed
The restrictions in our view are not unreasonable having regard to the importance of the business of a stock exchange in the country s national economy and having regard to the magnitude of the mischief sought to be remedied in the interest of the general public
At another place we have already dealt with the necessity for stringent rules governing this type of business For the reasons Mentioned we reject the first contention
2 The second contention also has no merits
The criticism is that condition 2i a annexed to the notification cannot be supported on the basis of any 204 of the provisions of section 4 of the Act
Condition 2 i reads as follows  The Members of the Indian Stock Exchange Limited Bombay will be entitled to apply for Membership of the Stock Exchange Bombay provided they fulfil or comply with the following terms and conditions a they have been active members of the Indian Stock Exchange Limited for twelve months immediately preceding the 6th August 1957
Explanation Active Members  for purpose of this condition means members who have themselves transacted business regularly on the floor of the Indian Stock Exchange Limited either on their own account or on account of their clients
To appreciate the argument it is also necessary to read the material provisions of section 4 of the Act
Section 4  1 If the Central Government is satisfied after making such inquiry as may be necessary in this behalf and after obtaining such further information if any as it may require a that the rules and bye laws of a stock exchange applying for registration are in conformity with such conditions as may be prescribed with a view to ensure fair dealing and to protect investors b that the stock exchange is willing to comply with any other conditions including conditions as to the number of members which the Central Government after consultation with the governing body of the stock exchange and having regard to the area served by the stock exchange and its standing and the nature of the securities dealt with by it may impose for the purpose of carrying out the objects of this Act and c that it would be in the interest of the trade and also in the public interest to grant recognition to the stock exchange It may grant recognition to the stock exchange subject to the conditions imposed upon it as aforesaid and in such form as may be prescribed
2 The conditions which the Central Government 205 may prescribe under clause a of sub section 1 for the grant of recognition to the stock exchanges may include among other matters conditions relating
to i the qualifications for membership of stock exchanges ii the manner in which contracts shall be entered into and enforced as between members iii the representation of the Central Government on each of the stock exchanges by such number of persons not exceeding three as the Central Government may nominate in this behalf and iv the maintenance of accounts of members and their audit by chartered accountants whenever such audit is required by the Central Government
 The argument proceeds that condition 2ia enables only the active members of the Indian Stock Exchange Limited to apply for membership of the Stock Exchange Bombay and that such a condition can be imposed only if it amounts to a qualification of membership within the meaning of sub section
2 of section 4 as the other conditions in that sub section are obviously inapplicable
It is further pointed out that sub section 2 refers back to sub section
ia and under that clause the condition imposed must only be that prescribed by the Rules made under the Act and that the condition imposed by the notification is not a condition so prescribed
There is force in this argument but the acceptance of this contention does not advance the case of the petitioner for if the condition is not covered by cl
a of section 41 it falls under cl
b thereof
Under that clause the Central Government may grant recognition to a stock exchange if the said stock exchange is willing to comply with  any other conditions 
It is said that the other conditions in section 4 1 b must only be conditions relating to the area served by the stock exchange its standing and the nature of the securities dealt with by it
This is not what cl
b of section 41 says
The conditions under cl
b of section 41 no doubt shall be such as may be imposed by the Government having regard to the aforesaid three considerations but they need not necessarily be 206 confined only to the said considerations
The Government may impose any conditions no doubt germane to the recognition of a stock exchange after consultation with its governing board and having regard to the said considerations
It cannot be said that condition 2ia imposed on the Stock Exchange is not a condition germane to its recognition
The record discloses that the Central Government in recognising the Stock Exchange sought to avoid the consequential hardship on the members of the rival stock exchange and therefore imposed the said condition on the Stock Exchange Bombay as a condition for its recognition
The condition is germane to recognition of the Stock Exchange and is therefore a condition within the meaning of  any other conditions  in cl
b of sub section
1 of section 4 of the Act
3 Learned counsel for the petitioner advanced a forcible argument questioning the validity of condition 2ia of the notification on the ground that it infringed article 14 of the Constitution
Elaborating his argument the learned counsel stated that the said condition classified members of the Indian Stock Exchange Limited into two groups one active members and the other who were not active members and that that classification was arbitrary and had no reasonable relation to the object sought to be achieved by the notification
He further pointed out that the defining of active members as those who had themselves transacted business regularly on the floor of the Indian Stock Exchange Limited either on their own account or on account of their clients for 12 months immediately preceding August 6 1957 was not only arbitrary and vague but also if analysed would lead to anomalies destructive of any standard of reasonableness
It is alleged in the affidavit filed by the petitioner that from the inception of the Indian Stock Exchange Limited 199 members of the said Stock Exchange were actually trading on the floor of the said Exchange from time to time but for some reason or the other were not trading during the period of 12 months immediately preceding August 6 1957 that there were 34 members of the said Stock Exchange who were regularly 207 transacting business on the floor of the said Stock Exchange prior to August 6 1956 and for some time after August 6 1956 but not during the entire period of 12 months from August 6 1956 to August 6 1957 and that there were 24 members of the said Stock Exchange who started transacting business regularly on the floor of the said Stock Exchange some time after August 6 1956 and continued to transact business right upto and after August 6 1957
It was asked what was the reasonable basis for confining the definition of active members to those who were carrying on business during the period of 12 months from August 6 1956 to August 6 1957 while excluding the aforesaid three categories who were equally active members and indeed more active than those included in the definition
It was further asked what was the justification for excluding a member who was an active member for years before the crucial year and irregularly conducted business on the floor of the Stock Exchange during the crucial year while including a member who might have been a newcomer or who might have been earlier a nominal member but began to do business regularly only during the said year
Emphasis was also laid upon the alleged elastic and indefinite content of the word  regular  and it was suggested that the said word could not possibly afford a precise standard
These are all weighty con siderations and we must confess that there is force in them
But there is the other side of the picture
It is well settled that a classification must have reasonable relation to the object sought to be achieved
The standard of reasonableness is inextricably conditioned by the extent and nature of the evil and the urgency for eradicating the same
The object of the notification is twofold
The main object is to carry out the purpose of the Act namely to prevent undesirable transactions in securities by regulating the business in them
The subsidiary object is to assuage the hardship that recognition of only one stock exchange would cause to the members of the other association
To achieve this twin object the classification is made between active members and inactive members
While 208 on the one hand the Government found it necessary to exclude the nominal members who would add their deadweight to the recognised association and bring down its efficiency and affect its disciplined conduct of business on the other hand it gave opportunity to persons who were actively interested in the business to become regular members of the Stock Exchange Bombay
There is every justification for excluding members who had not been taking active interest in the business for as we have already pointed out the efficient carrying out of the business of the Stock Exchange depends upon the moral stature high caliber and genuine and active interest evinced by the members
The active members justified themselves to the preferential treatment by their sustained interest in the business whereas the members who were not active showed their continued indifference to that line of business
But the crux of the question is what is the justification for fixing twelve months immediately preceding August 6 1957 as the standard for active membership  The Under Secretary to the Govern ment of India Ministry of Finance filed an affidavit describing the circumstances whereunder this classification was made
It discloses that the notification was issued after taking into consideration the representations made on behalf of both the Stock Exchanges and also the facts pertaining to the course of business conducted by the Indian Stock Exchange Limited
It also gives the vicissitudes through which the said Stock Exchange passed from the date of its formation and the circumstances under which the membership of that Exchange was divided into full members and associate members
It points out that the Indian Stock Exchange Limited became moribund in a few years and to revive its activities it allowed the members of the East India Chamber of Commerce by relaxing its entrance fee and security deposit requirements in 1950 51 and created a new class of Associate Members which facilitated the enrollment of hundreds of Associate Members on payment of a nominal entrance fee of Rs 100
The Government on a consideration of the necessary data and presumably 209 having regard to the record of the activities of the various members fixed the activities in the crucial year 1956 57 as the standard of activity for membership
There is a presumption in favour of the State that there is a reasonable basis for the classification
Except the mere allegations in the affidavit which are not admitted the petitioner has not placed before us any materials to ascertain that any other members who were regularly doing business on the floor of the Indian Stock Exchange Limited before August 61956 temporarily suspended their business for one reason or other over which they had no control
No statement from the accounts has been produced to enable us to evaluate the activities of the members before the crucial date so as to enable us to form a view that really active members were excluded by the fixing of this period
Nor are we in a position to verify whether any of the members excluded were regularly doing business during a part of the year in continuation of their business in the earlier period
We cannot also say that the words carrying on business regularly  are so vague that the parties did not understand their connotation for it is admitted that some of the regular members applied for membership of the Stock Exchange Bombay and most of them were admitted
There is also the fact that though three years have elapsed since the date of the notification no other member of the Indian Stock Exchange Limited thought fit to question the notification on the ground that the period fixed was unreasonable and that really active members were excluded from membership of the Stock Exchange Bombay
So far as the petitioner is concerned he was admittedly not an active member though lie now pretends that he was doing business through other members
There is also no material placed before us to support the said assertion
If the classification between active members and others who were not is justifiable we hold it is the Government has to draw a line somewhere and to fix a period of activity reasonable in its opinion as a 27 210 standard to satisfy the test of  active member 
The burden which lies upon the petitioner who impeaches the validity of the classification to show that it violates the guarantee of equal protection has not been discharged
On the material placed before us we cannot say that the period fixed by the Government as the standard for ascertaining the active membership is arbitrary or unreasonable
We must make it clear that this finding must be confined only to the validity of the impugned notification dated August 31 1956
The petition accordingly fails and is dismissed with costs
Petition dismissed


Summary:
The respondent a firm carrying on tannery business used to take out licences under the provisions of the Madras General Sales Tax Act 1939 but did not renew the licence for the assessment year 952 1953 and was assessed to sales tax on the sale value of tanned hides and skins during the year
It challenged the validity of the order of assessment by filing a petition before the High Court under article 226 of the Constitution of India on the grounds that under section 5vi of the Act the liability to pay sales tax in respect of hides and skins could only be at a single point that r 165 of the Madras General Sales Tax Turnover and Assessment Rules 1939 which limited the operation of this mode of taxation to licensed dealers was ultra vires as it contravened section 5vi and had been so held in V M
Syed Mohammed  Co vs The State of Madras   and that section 6A was not applicable to the case of a dealer which did not take out a licence
Held that section 3 of the Madras General Sales Tax Act 1939 envisages multipoint taxation on the total turnover of a dealer 149 but under section 5 an exception is made in the case of sale transactions of certain specified goods providing for single point taxation subject to certain restrictions and conditions which include conditions as to licences and if the conditions and restrictions are not complied with under section 6A the tax is to be levied under section 3 as if the provisions of section 5 did not apply to such sales
Accor dingly r 16 5 of the Madras General Sales Tax Turnover and Assessment Rules 1939 is not ultra vires
Syed Mohamed  Company vs State of Andhra 1956 7 STC 465 and State of Mysore vs Sarvatula  Co 1957 9 STC 593 approved
V M Syed Mohammed  Company vs The State of Madras  explained