Case: Prag Ice &amp; Oil Mills &amp; Anr. Etc Vs. Union Of India

direct deviation form the report of the Commission of inquiry appointed by it with the concurrence of the parties only when it is shown that there has been a departure from the established principles or the conclusions of the commission are shown to be demonstrably wrong or erroneous."In other words, that judgment was not to provide a precedent for anything similar to be done by Courts in other cases.35. In Saraswati Industrial Syndicate Ltd. v. Union of India 1975 1 SCR 956 : (AIR 1975 SC 460 ) the cases mentioned above were discussed by this Court in the context of Sugar Control Order, 1966, where Clause (7) laid down certain matters to be considered in determining fair price. It was held there :"Price fixation is more in the nature of a legislative measure even though it may be based upon objective criteria found in a report or other material. It could not, therefore, give rise to a complaint that a rule of natural justice has not been followed in fixing the price. Nevertheless, the criterion adopted must be reasonable.The guiding factors laid down in Clause (7) of the Sugar Control Order, 1966, were held to afford only indicia to help the Government in fixing prices on the lines indicated in the Control Order."36. We think that unless, by the terms of a particular statute, or order, price fixation is made a quasi-judicial function for specified purposes or cases, it is really legislative in character in the type of control order which is now before us because it satisfies the tests of legislation. A legislative measure does not concern itself with the facts of an individual case. It is meant to lay down a general rule applicable to all persons or objects or transactions of a particular kind or class. In the case before us, the Control Order applies to sales of mustard oil anywhere in India by any dealer. Its validity does not depend on the observance of any procedure to be complied with or particular types of evidence to be taken on any specified matters as conditions precedent to its validity. The test of validity is constituted by the nexus shewn between the order passed and the purposes for which it can be passed or, in other words by reasonableness judged by possible or probable consequences.37. It is true that even executive or legislative action must be confined to the limits within which it can operate. It must fall reasonably within the scope of the powers conferred. The scope of the powers conferred depends upon the terms of the empowering provision. As we have already mentioned, the empowering provision in the instant case is widely worded. The validity of Section 3 has not been challenged before us. As indicated above, it could not be challenged by reason of Article 31-B after its inclusion in the 9th Schedule of the Constitution. The result necessarily is that, in a case in which the Central Government is the judge of expediency and necessity to the extent that even the protection of guaranteed fundamental rights cannot stand in the way of its view or opinion of such necessity and expediency, a challenge on the grounds on which it was attempted before us could not succeed.38. We may also mention that the view we have taken of the dominant purpose of Section 3(1) of the Act is in accordance with the following elucidation of its purpose in Meenakshi Mills case (AIR 1974 SC 366 ) (supra) :"The question of fair price to the consumer with reference to the dominant object and purpose of the legislation claiming equitable distribution and availability at fair price is completely lost sight of if profit and the producers return are kept in the forefront. The maintenance or increase of supplies of the commodity or the equitable distribution and availability at fair prices are the fundamental purposes of the Act."39. We do not think that we need deal with American cases on price fixation such as Leo Nebbia v. People of the State of New York, 1933 291 US 502 : 78 L Ed 940 where the guarantee of due process against capricious action was involved. In this country, such guarantees in regard to rights of property or to carry on industry or trade or business could only arise by reason of Articles 14 and 19 of the Constitution which are excluded here because of the protection conferred upon Section 3 of the Act by the 9th Schedule of the Constitution. I may, however, mention that in Permian Basin Area Rate Cases, 1968 20 L Ed 2d 312 where the majority of learned judges of the U.S. Supreme Court laid down, inter alia, with regard to price fixation by a body of experts of Federal Power Commission required to proceed quasi-judicially, that in order to "over-turn the Commissions judgment" the petitioners must "undertake the heavy burden of making a convincing showing that it is invalid, because it is unjust and unreasonable in its consequences". That was a case in which a Commission was charged with a duty to fix rates in accordance with certain principle after taking evidence and hearing parties affected. Nevertheless, the duty of the petitioners was held to extend to demonstrating the unreasonableness and injustice of the consequences. A fortiori, patent injustice and unreasonable injury to the interests of consumers must be shewn if a measure of price control, in the nature of either legislative or purely administrative action, is assailed. So long as the action taken is not so patently unjust and unreasonable as to lead to the irresistible conclusion that it could not fall within Section 3(1) of the Act it cannot be set aside or declared invalid. The test has to be that of consequences on objects sought by Section 3(1) of the Act. Judged by this test we think that the Order of 30th September, 1977, fell within the purview of Section 3 of the Act and it has served its purposes.

Decision (1 = appeal accepted, 0 = rejected): 0

Explanation:
0[ds]8. We need not consider Art. 301 of the Constitution as the petitions do not beyond citing the provision, set out any facts to show how this Article is involved. This Article is meant for protecting inter-State as well as intra-State "freedom of trade, commerce, andbe required in the public interest.Although, Art. 302 does not speak of "reasonable" restrictions, yet, it is evident that restrictions contemplated by it must bear a reasonable nexus with the need to serve "public interest". If the tests of Section 3 of the Act are satisfied by an Order, it could not fail to serve public interest. Hence, from this point of view also it is enough if we consider whether the Control Order fails within S. 3 of the Act. It was evidently for this reason that, beyond mentioning Art. 301, counsel for the petitioners did not, quite rightly, advance much argument to show how Art. 301 in involved here We will, therefore, not consider it any more here.It is evident that Art. 31B protects only Acts and Regulations specified in the Ninth Schedule from the Vice of invalidity for inconsistency with provisions of Part III of the Constitution but not anything done or to be done in future under any of the provisions of any Act so specified, such as an order passed under S. 3 of the Act.12. If Section 3 of the Act, which was held in Hari Shankar Bagla v. State of Madhya Pradesh 1955 1 SCR 380   : (AIR 1954 SC 465  ) to pass the tests of validity imposed by Arts. 14 and 19(1)(f) and (g), read with Art. 19(5) and (6), a Control Order passed under S. 3 would also be required to pass these tests as its scope could not be wider than that of the provision which authorises its promulgation. A delegated or derivative power could not rise higher or travel beyond the source of that power from which it derives its authority and force. If Gaglas case (supra) is good law (no party has questioned its correctness) Arts. 14 and 19(1)(f) and (g) could be deemed to be, if one may so put it, "Written into" S. 3 of the Act itself. They would control the scope of orders which could be passed under it. That is, undoubtedly, the way in which guarantees of fundamental rights could and should function if the Act containing Section 3 itself had not been placed in the Ninth Schedule so as to take away the guarantees of fundamental rights from the substance ofanswer to this question must necessarily depend upon the effect of such a change of the legal position upon the provisions of S. 3 itself which authorise control orders passed under it. If the effect was to widen the orbit of S. 3 of the Act or to remove the limitations put by Arts. 14 and 19 upon the exercise of powers under it, the logical and natural result would be to enlarge also the scope or sweep of the Orders passed under it. But, if it has no such effect upon S. 3 of the Act itself. Orders passed under it would continue to be subject to provisions of S. 3 of the Act as controlled by Arts. 14 and 19 of our Constitution so that they will have to satisfy what may be described as a "dual test" : firstly, that of provisions of Section 3 of the Act itself; and, secondly, that of provisions of Chap. III of the Constitution containing fundamental rights.In practice, it is the exercise of power which is generally assailed and not the mere conferment of it which raises the somewhat different question of legislative competence. Indeed, the Ninth Schedule does not provide any protection at all against attacks based upon either the vice of excessive delegation or want of legislative competence defects which could be said to vitiate the grant of powers despite their place in the Ninth Schedule. But, questions of conflict with fundamental rights and transgression of legitimate or reasonable limits upon their exercise arise when citizens complain of unreasonable impediments to the exercise of their fundamental rights. The distinction between protection to a mere grant of powers and to their exercise, therefore, seems specious in the context of the protection. It cannot explain why, if S. 3 is protected by the Ninth Schedule, the exercise of power granted by it, which manifests itself in control orders, is not protected. It would be so protected, if at all, not because the Orders to be made in future, as such, are protected, but because the power actually conterred and found in existence in S. 3 is protected. The protection is given to a power which is specified and in existence which has to be used for certain purposes and not to what may be specified in future.16. If orders passed under S. 3 of the Act also get a protection it would be what may be described as a "derivative" protection so long as the Orders are covered by Section 3 of the Act. It is available only so long as and because the source of their authority - Section 3 of the Act - is protected by the Ninth Schedule. Orders purporting to be made under S. 3 of the Act must, however, satisfy the tests found in S. 3 itself in every case. They can never escape the basic tests whether S. 3, the source of their authority, is protected by the Ninth Schedule or not. The further tests imported by Arts. 14 and 19 of the Constitution into Section 3 could be applied to these orders only so long as these added tests are attached to or can be read into S. 3 of the Act, but not after they have been deliberately delinked or removed from S. 3, if one may so describe the effect of the inclusion of the Act in the Ninthterm "skeleton" legislation is used sometimes for denoting the broad outlines of a particular scheme found in an Act of which details are to be filled in later by administrative orders of experts. It is doubtful whether the Essential Commodities Act, 1955, could be spoken of as a piece of "skeleton" legislation. Section 3, sub-section (1) of the Act provides for delegation of powers to the Central Government in order that it may carry out certain purposes by framing appropriate schemes and evolving policies which may meet the purposes of the Act. These schemes and policies to serve the stated purposes may differ as regards the nature of means adopted and even in the particular objectives sought at particular times to accord with changing circumstances.18. Orders passed under S. 3 of the Act, in pursuance of such schemes or policies, do not become parts of the Act for the purposes of the Ninth Schedule of the Constitution. On the strength of the views expressed by this Court in Godavari Sugar Mills Ltd. v. S. B. Kamble, 1975 3 SCR 885  ; (AIR 1975 SC 1193  ) with which we respectfully agree, the most one can say is that orders passed under the Act, before its inclusion in the Ninth Schedule, could also be said to be protected directly by the Ninth Schedule it mentioned there. But, there could be no independent and direct protection of this Schedule conferred upon orders passed under the Act before us just as none could be given to either the amendments of an Act or to regulations passed under the Act which were considered in Godavari Sugar Mills casecontrol order passed under S. 3 of the provisions of the Act before us, included in the Ninth schedule, is assailed on the ground that, although S. 3 of the Act may be protected by the 9th Schedule of the Act, yet, an order passed under this provision is not soit falls outside the empowering provision it would be invalid in any case. If it falls within the empowering provision but could be found to be struck by the provisions of Art. 19(1)(f) and (g) of the Constitution, an attack on the control order, by reason of Article 19(1)(f) or (g), would be really one against the empowering provision itself which is protected. The control order, therefore, enjoys what may be called a derivative protection. All that has to be shown by the Central Government is that it falls within the empowering provision. No further test, based on fundamental rights in Chapter III of the Constitution, can be applied to it in such a case.20. All the tests of validity of the impugned price control or fixation order are, therefore, to be found in S. 3 of the Act. A. 3 makes necessity or expediency of a control order for the purpose of maintaining or increasing supplies of an Essential Commodity or for securing its equitable distribution at fair price the criteria of validity. It is evident that an assessment of either the expediency or necessity of a measure, in the light of all the facts and circumstances which have a bearing on the subjects of price fixation, is essentially a subjective matter. It is true that objective criteria may enter into determinations of particular selling prices of each kilogram of mustard oil at various times. But, there is no obligation here to fix the price in such a way as to ensure reasonable profits to the producer or manufacturer. It has also to be remembered that the object is to secure equitable distribution and availability at fair prices so that it is the interest of the consumer and not of the producer which is the determining factor in applying any objective tests at any particular time. Hence, the most important objective fact in fixing the price of mustard oil, which is consumed generally by large masses of people of limited means. Is the playing capacity of the average purchaser orlast question could only be answered by waiting and watching the ultimate effects of a particular price fixation on prices of mustard seed and cost of production of mustered oil ultimately. If the object of price fixation suggested by this question is very necessary to take into account, from the point of view of availability of mustard oil at fair prices to consumers, as we think it is, the actual cost of production to the purchasers could certainly not be the sole or the decisive factor. It could only be one out of a number of relevant facts and circumstances.25. The net result of the mass of statistics placed before us on behalf of the petitioners is that the price fixed should have been about Rs. 3/- per kg. more, that is to say, about Rs. 13/- per kg. Even if we accept this to be a correct estimate for normal times, when fair and reasonable profits to the producers could be an important consideration, we think that a price fixed at Rs. 10/- per kg., as a part of an attempt to break the vicious inflationary circle, is not at all an unreasonable step.26. Students and observers of economic systems tell us that inflation is no problem in socialist countries because the whole economy is so completely controlled that there is no question of a rise in prices. Under our what is known as a "mixed economy" planning and price fixation are part of that social control which becomes inevitable under certain conditions. Indeed, it seems often quite unavoidable under any system which adopts socialistic measures to achieve the common good. The argument on behalf of the Union is that the result of this fixation, even below cost price, will necessarily produce desired effects upon the free sector in which price of mustard seed is still not controlled. The control imposed will make it impossible for producers to offer excessive prices for mustard oil seed demanded by the growers. Hence, it was argued that the cost of production was bound to come down in course of time if petitioners could only wait a little. Fixation at even uneconomic selling price implied temporary loss to the producers, so as to serve their own ultimate interests and those of general welfare. Such sacrifices ought, it was suggested, to be readily borne by producers of mustard oil in a system like ours. If they were not able to bear them, they could close down their factories. They could not claim a right to carry on business or manufature on their own terms. Such is not the right granted even by Art. 19(1)(g) of the Constitution. However, as we have already indicated, it seems that the Act was put in the Ninth Schedule to prevent the invocation of Articles 14, 19 and 31 for obstructing measures so necessary as price fixation of essential commodities is for promoting the objectives of a socialist welfare economy. This, in our opinion, would be a sufficient answer to all the arguments which had been put forward at considerable length before us on the unconstitutionality of fixing the price of mustard oil below what is claimed to be the cost price.27. It may be mentioned, en passant, that even during the interval between the passing of our order dismissing Writ Petitions for the enforcement of fundamental rights protected by Part III of the Constitution and the delivery of these reasons, so beneficial was the effect of the order of 30th September, 1977, that price of mustard oil has fallen in the neighbourhood of Rs. 7/- per kg. Apparently, this is enough to cover reasonable profits of producers as well as middlemen. We are informed that the impugned Control Order has itself been withdrawn by the Central Government. We can take judicial notice of these facts which illustrate the extreme inadvisability of any interference by any court with measures of economic control and planning directed at maximising general welfare. It is not the function of the Courts to obstruct or defeat such beneficial measures devised by the Govt. of the day. Courts cannot pass judgments on the wisdom of such actions, unless actions taken are so completely unreasonable that no law can be cited to sanction them.28. If the impugned order of 30th September, 1977, falls within this provision, as we think it does, no question of violating a fundamental right could arise. If an impugned order were to fall outside Section 3 of the Act, no question of applying any test of reasonableness contemplated by Article 19(6) need arise because it would then be a purely illegal restriction upon the right conferred by Article 19(1)(g) which would fail for lack of authority of any law to support it.29. We have also heard considerable argument on principles of fair fixation of price which, it was submitted, must take into account the cost of production as well as a reasonable amount of profit to the manufacturer and the middleman. As indicated above, such principles apply only in those cases where there is an obligation upon the price fixing authority to take certain matters into account which have a bearing on cost of production and are designed to secure fair share of profits to the producers. Section 3 of the Act set out above, as already indicated, has very different purposes in view. It may be that the cost of production and reasonable amount of profits to the manufacturers have an indirect bearing on matters set out in Section 3(1) of the Act. But, in cases where the effects of a policy or a measure adopted in achieving purposes set out in Section 3(1) are matters of guess work, after experimentation, the actual consequences can be indicated with a fair amount of certainty only by giving some time for a policy to work and reveal its results. Presence of such features in a case cannot invalidate price fixation of which the direct objects are set out in Section 3(1) of theprice fixation to meet the general purposes set out in Section 3(1) of the Act, aimed at reversing the vicious inflationary spiral of rising prices, may appear arbitrary or unreasonable judged by standards applicable to price fixation aimed at giving reasonable profits to producers which is not the object of Section 3(1) of the Act. The whole evidence of the petitioners is misdirected inasmuch as it proceeds on the assumption that what could be no more than a relevant consideration is the whole and sole object of Section 3(1) of the Act. About other matters there is practically no evidence so that we are left in the region ofwas rightly urged on behalf of the Union that the Control order is a temporary and experimental device for achieving a particular purpose, covered by Section 3(1) of the Act at a particular time, in a particular state of affairs. It was submitted that, after the purpose is achieved, the order could be and will be withdrawn by the Govt. of India. As already stated above, that order has been withdrawn because the purpose has been achieved. Even if that purpose had not been achieved, the order could be withdrawn if it became evident to the Government that such control would not achieve the desired object. It is extremely hazardous for Courts to enter the sphere of experimentation in matters of economic policy which must be left to the Government of the day.We think that unless, by the terms of a particular statute, or order, price fixation is made a quasi-judicial function for specified purposes or cases, it is really legislative in character in the type of control order which is now before us because it satisfies the tests of legislation. A legislative measure does not concern itself with the facts of an individual case. It is meant to lay down a general rule applicable to all persons or objects or transactions of a particular kind or class. In the case before us, the Control Order applies to sales of mustard oil anywhere in India by any dealer. Its validity does not depend on the observance of any procedure to be complied with or particular types of evidence to be taken on any specified matters as conditions precedent to its validity. The test of validity is constituted by the nexus shewn between the order passed and the purposes for which it can be passed or, in other words by reasonableness judged by possible or probable consequences.37. It is true that even executive or legislative action must be confined to the limits within which it can operate. It must fall reasonably within the scope of the powers conferred. The scope of the powers conferred depends upon the terms of the empowering provision. As we have already mentioned, the empowering provision in the instant case is widely worded. The validity of Section 3 has not been challenged before us. As indicated above, it could not be challenged by reason of Article 31-B after its inclusion in the 9th Schedule of the Constitution. The result necessarily is that, in a case in which the Central Government is the judge of expediency and necessity to the extent that even the protection of guaranteed fundamental rights cannot stand in the way of its view or opinion of such necessity and expediency, a challenge on the grounds on which it was attempted before us could not succeed.We do not think that we need deal with American cases on price fixation such as Leo Nebbia v. People of the State of New York, 1933 291 US 502 : 78 L Ed 940 where the guarantee of due process against capricious action was involved. In this country, such guarantees in regard to rights of property or to carry on industry or trade or business could only arise by reason of Articles 14 and 19 of the Constitution which are excluded here because of the protection conferred upon Section 3 of the Act by the 9th Schedule of the Constitution. I may, however, mention that in Permian Basin Area Rate Cases, 1968 20 L Ed 2d 312 where the majority of learned judges of the U.S. Supreme Court laid down, inter alia, with regard to price fixation by a body of experts of Federal Power Commission required to proceed quasi-judicially, that in order to "over-turn the Commissions judgment" the petitioners must "undertake the heavy burden of making a convincing showing that it is invalid, because it is unjust and unreasonable in its consequences". That was a case in which a Commission was charged with a duty to fix rates in accordance with certain principle after taking evidence and hearing parties affected. Nevertheless, the duty of the petitioners was held to extend to demonstrating the unreasonableness and injustice of the consequences. A fortiori, patent injustice and unreasonable injury to the interests of consumers must be shewn if a measure of price control, in the nature of either legislative or purely administrative action, is assailed. So long as the action taken is not so patently unjust and unreasonable as to lead to the irresistible conclusion that it could not fall within Section 3(1) of the Act it cannot be set aside or declared invalid. The test has to be that of consequences on objects sought by Section 3(1) of the Act. Judged by this test we think that the Order of 30th September, 1977, fell within the purview of Section 3 of the Act and it has served its purposes.