Case: Shree Meenakshi Mills Ltd Vs. Union Of India

Kendu Leaves but restricted the invitation to those individuals who had carried out contracts in the previous year without default and to the satisfaction of the Government. The scheme was held by this Court to be discriminatory and unreasonable restriction upon the rights of persons other than the existing contractors and the scheme of selected purchasers was not protected by Article 19 (6) (ii). In the present case, the traders cannot make any profit they like because of specified prices.In Bhatnagars and Co. v. Union of India 1957 SCR 701 = (AIR 1957 SC 478 ) the importers resorted to malpractices leading to speculation and fluctuation in prices. The Government, therefore, canalised distribution of the goods by inviting tenders for the grant of import licences. This Court held that it was open to the Government in national interest to intervene and regulate the distribution in a suitable manner.86. The power to regulate sale through licensed vendors to whom quotas are allotted and who are permitted to sell yarn at fixed prices has been upheld in M/s. Dwarka Prasad Laxmi Narain case, 1954 SCR 803 = (AIR 1954 SC 224 ) (supra). But a note of possible mischief was indicated in instances where no rule or principle to guide them was stated or where no check or control by higher authority was intended.The Textile Commissioner in the present case is guided by the provisions of clause 30 of the Order as well as by Section 3 of the Essential Commodities Act. The rules or principles for guidance are first equitable distribution, and, second availability at fair price. Prices are fixed with limited profit to traders. Furthr, an aggrieved person can appeal to the Central Government.87. In Mannalal Jain v. State of Assam (1962) 3 SCR 936 = (AIR 1962 SC 386 ) the Assam Foodgrains (Licensing and Control) Order, 1961 conferred power on the authority to have regard to Co-operative Societies in the grant of licences. This Court held that such preference did not create a monopoly. The Cooperative Societies in villages were held to be in a better position for maintaining or increasing supplies and for securing equitable distribution and availability at fair prices in accordance with village economy. The question is whether prohibition of others doing the business is reasonable under Article 19(6).88. Canalisation orders have been upheld by this Court as reasonable within Article 19 (6) of the Constitution. The recent unreported decision in M/s. Daruka and Co. v. Union of India, Writ Petn. No. 94 of 1972, D/- 31-8-1973 = (reported in AIR 1972 SC 2711) referred to the earlier decisions of Glass Chaton case, (1962) 1 SCR 862 = (AIR 1961 SC 1514 ), Daya son of Bhimji Gohil case, (1963) 2 SCR 73 = (AIR 1962 SC 1796 ) and upheld the distributing channels of imports and exports of different commodities and goods.89. The petitioners contend that though the order obliges producers of yarn to sell to persons named there is no obligation on those persons to buy, and therefore, it is an unreasonable restriction. The petitioners supported this contention by instances where those persons or bodies failed to lift the stock of yarn. It is said that producers, therefore, suffered losses. There were cases where the allottees did not lift the goods when the voluntary scheme was in operation. The allotment order on record shows that the allotment of yarn is made subject to the conditions that the allotted yarn would be lifted within 15 days of receipt of intimation from the mill after making necessary payments. If any portion of the yarn is not paid for and lifted within the stipulated time, the State Government may intimate the same to the Cotton Corporation of India and the mills concerned. The Cotton Corporation will effect payment and take charge of the yarn. The Textile Commissioner on receipt of such intimation will issue the reallotment orders and in respect of such re-allotted yarn the allottee State Government will make necessary payments to the Cotton Corporation of India. The conditions of allotment ensure lifting of yarn by the nominees of the State Government within a reasonable time. In the past at the initial stages of the voluntary control scheme the State Government nominees were not adequately financially equipped and that is why there were cases of non-lifting of yarn. It cannot happen now. The Distribution Control Scheme does not impose an unreasonable restriction on the producers right to carry on his business.90. It was said on behalf of the State that the petitions were not maintainable because of the proclamation of emergency.During the proclamation of emergency Article 358 does not apply to executive action taken during the emergency if the same is a continuance of a prior executive action or an emanation of the previous law which is otherswise violative of Art. 19 or is otherwise unconstitutional. The petitioners challenged the action or previous law to the violative of fundamental rights.This Court in Bennett Coleman and Co. case (1972) 2 SCC 788 = (AIR 1973 SC 196) said:"During the proclamation of emergency Article 19 is suspended. But it would not authorise the taking of detrimental executive action during the emergency affecting the fundamental rights in Article 19 without any legislative authority or in purported exercise of power conferred by any pre-emergency law which was invalid when enacted."Therefore, if it can be shown that the executive action taken during the emergency has no authority as a valid law its constitutionality can be challenged. The Cotton Textiles Order 1948 was continued by Essential Commodities Act, 1955.The impugned orders are made under pre-emergency Cotton Textiles Control Order. The validity of the impugned orders is challenged under Article 19 (1) (f) and (g) of the Constitution on the ground that it is a pre-emergency executive order which could have been challenged under Article 19 (1) (f) and (g) before the proclamation of emergency. From the point of view the petitions are competent though the challenge is insupportable on all grounds.91.

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

Explanation:
0[ds]18. The dictionary meanings of cotton textile are any material that is woven, a material, as a fibre or yarn, used in or suitable for weaving, woven or capable of being woven. The meaning of textile as a noun is a fabric which is or may be woven fabric, made by weaving, a woven fabric, or a material suitable for weaving, textile material. The dictionary meanings show that cotton yarn is concluded in cotton textile.19. The setting in which the words "cotton textile" are used has a legislative and executive understanding of the words consistently over a period of time. There are also decisions of Courts which accepted yarn to be within textile. The Cotton Cloth and Yarn Control Order, 1943, was made in exercise of powers conferred by Rule Cloth and yarn in that Order mean and include respectively cloth and yarn manufactured either wholly or partly from cotton. The Cotton cloth and Yarn Control Order, 1945 repealed the Cotton Cloth and Yarn Control Order, 1943. The meaning of cloth and yarn was the same as in the Control Order of 1943.The legislative practice shows that cotton textiles is a generic term which includes cotton fabric and yarn. One of the methods of construction of statutes is to ascertain the setting and circumstances in which the words are used. The entire product is cotton textile Yarn is the material or component with which cotton textile is manufactured or woven.These legislative measures show that in regard to the scope of these controls in some cases it is possible with reference to the circumstances relating to nature and use of the commodity in question to institute control right from the point of origin to the point of ultimate consumption. In regard to other commodities control has to stop at some intermediate point. The methods of control also vary from commodity to commodity. In regard to the very important matter of the method of pricing, one method is adopted regarding cloth and another method is adopted in regard to steel and a third in regard to other commodities. Empiric process has been resorted to in this organisation of system ofPanipat Sugar Mills case, AIR 1973 SC 537   (supra) it is said that fair price of sugar is to be determined ensuring to the industry a reasonable return on the capital employed in the business of manufacturing sugar but the Government cannot fix any arbitrary price or fix it on extraneous considerations or fix such price that it does not secure a reasonable return on the capital employed in the industry. Panipat Sugar Mills case, AIR 1973 SC 537   (supra) is governed by sub-section (3C) of Section 3 of the 1955 Act, and has, therefore, no relevance to the present case.If fair price is to be fixed leaving a reasonable margin of profit, there is never any question of infringement of fundamental right to carry on business by imposing reasonable restrictions. 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 it profit and the producers return are kept in the fore-front. 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. If the prices of yarn or cloth are fixed in such a way as to enable the manufacturer or producer to recover his cost of production and secure a reasonable margin of profit, no aspect of infringement of fundamental right can be said to arise.In determining the reasonableness of a restriction imposed by law in the field of industry, trade or commerce, it has to be remembered that the mere fact that some of those who are engaged in these are alleging loss after the imposition of law will not render the law unreasonable. By its very nature, industry or trade or commerce goes through periods of prosperity and adversity on account of economic and some times social and political factors. In a largely free economy when control have to be introduced to ensure foodstuff, cloth and the like at a fair price it is an impracticable proposition to require the Government to go through the exercise like that of a Commission to fix the prices. The Tariff Board and the Tariff Commission did not deal with the question of fixing prices with a view only to holding price line and in the circumstances that justify giving pre-eminent preference to the interest of the consumer or general public over that of the producers of the commodity and the dealers. Even these Commissions cannot always make a correct estimate of a price which is fair to all because there are intricacies of the trade of all profit making enterprises which a Commission may not be able to probe. As an illustration, the Tariff Commission Report points out that many textile mills use cotton mixes with a view to reducing cost and the result of such mixes is difficult tothe present case the legislative measures have left the question of resolving the economic problems of increasing supplies, equitable distribution and availability of essential commodities at fair prices to the judgement of the statutory authorities.The differences between sub-sections (3) and (3A) on the one hand and sub-sections (3B) and (3C) on the other are these Sub-sections (3) and (3A) speak of fixing price by agreement consistent with or with reference to controlled price or failing both market rate prevailing in the locality during these months preceding the date of the notification Sub-section (3B) speaks either of controlled price or where no such price is fixed the price prevailing or likely to prevail during the post harvest period in the area to which the order applies. In sub-section (3C) which relates to sugar price is to be calculated with reference to minimum price of sugarcane, manufacturing cost of sugar, duty or tax, and a reasonable return and different prices may be provided for different areas or factories or different kinds of sugar.e controlled price fixed under Section 3 (1) read with Section 3 (2) (c) is different from price under sub-section (3A), (3B) and (3C).The control of prices may have effect either on maintaining or increasing supply of commodity or securing equitable distribution and availability at fair prices. The controlled price has to retain this equilibrium in the supply and demand of the commodity. The cost of production, a reasonable return to the producer of the commodity are to be taken into account. The producer must have an incentive to produce. The fair price must be fair not only from the point of view of the consumer but also from the point of view of the producer. In fixing the prices, a price line has to be held in order to give preference or predominant consideration to the interest of the consumer or the general public over that of the producers in respect of essential commodities. The aspect of ensuring availability of the essential commodities to the consumer equitably and at fair price is the most important consideration.The producer should not be driven out of his producing business. He may have to bear loss in the same way as he does when he suffers losses on account of economic forces operating in the business. If an essential commodity is in short supply or there is hoarding, cornering or there is unusual demand, there is abnormal increase in price. If price increases, it becomes injurious to the consumer. There is no justification that the producer should be given the benefit of price increase attributable to hoarding or concerning or artificial short supply. In such a case if an escalation in price is contemplated at intervals, the object of controlled price will enable both the consumer and the producer to tide over difficulties. Therefore, any restriction in excess of what would be necessary in the interest of general public or to remedy the evil has to be very carefully considered so that the producer does not perish, and the consumer is not crippled.The mere suggestion that no provision is made for adjustment on account of changes in the cost of production does not amount to infringement of fundamental right to carry on business and to hold and dispose of property. There is no material to show that increase in yarn prices was on account of cost of production The fixing of controlled price is much more than a fair price to the producer on the date it is fixed. The prices of new cotton crop, i.e., for September, 1973 to August, 1974 are not known at the time of the fixation of the price. Even when they are known the petitioners will have to show with reference to the different types of mixed used in producing yarn, the impact of cotton prices on the cost of production of that category of yarn. Further, even if there is increase in the cotton prices, the petitioners can absorb it because the controlled price fixed is more fair to the producer. If he sustains alleged losses for some time, it will be a reasonable restriction because the object of the price control is to hold the price line or revert the prices to normal levels and make available cotton yarn to the handloom and powerloom weavers at a fair price which will enable them to withstand competition from mill made cloth. It is not shown here that the controlled price is, so grossly inadequate that it not only results in huge losses but also is threat to the supply position of yarn. The controlled price is in the interest of the country as a whole for just distribution of basic necessities The distribution price is neither arbitrary nor an unreasonable restriction.The prices for such sale are on consideration of (a) invoiced price of yarn (b) incidental charges including transport and local taxes, (c) such reasonable margin of profit not exceeding two per cent of the invoiced price as the Deputy Commissioner or the District Collector may determine in each case and any other relevant factor. There is thus price control as well as distribution control to meet the problems of availability of goods at reasonable prices.The distribution channels are contended to be monopolies in favour of specified persons. The traders say that they are substituted by the distribution channels as middlemen. The nominees of the State Government under the distribution channel could be any dealer chosen and favoured by the Deputy Commissioner or the District Collector. It is said that freedom of trade is violated. These contentions are unsound for these reasons.The channels of distribution are agencies of the State for distribution purposes. Further the Handloom Export Promotion Council, Madras, the Cotton Textiles Export Promotion Council, Bombay and the Federation of Hosiery Manufacturers Association are associations of users of cotton yarn. They can demand service charges. If middlemen be totally excluded the control scheme does not become unreasonable just because a part of the ban in regard to counts of 40s and below is relaxed.87 per cent of the total yarn marketed is in counts 40s and below. Traders are permitted to carry on trade in them though prices are specified for such counts. The balance 13 per cent of yarn is in counts of 40s and above. The requirement not to sell yarn at a price above the maximum price operates on all distributing channels. Even if an ordinary dealer is chosen by the Government within the fifth category of distribution channel, viz., "any other person as may be nominated by the Textile Commissioner" such person could also be actual consumer of yarn.The notification No. CER/20/73 dated 31 March, 1973 states that the nominees can be any dealer carrying on business of selling yarn. The distribution control is intended to ensure availability of yarn at reasonable or fair price. Profiteering, hoarding, cornering are the evils to be eliminated. It is not that all dealers in yarn have been denied the right to carry on trade. It is only those whose carrying on trade in yarn would not in the opinion of the Textile Commissioner ensure availability of yarn to actual consumers at the fair price. Black marketing as the expression goes is to be weeded out in this manner. The selection of traders is made on the basis of ensuring availability of yarn at a fair price. Elimination of persons who have hoarded or cornered or are unscrupulous in distribution is intended in public interest. This is a reasonable restriction in the interest of the general public and is contemplated in Article 19 (6) of the Constitution.The power to regulate sale through licensed vendors to whom quotas are allotted and who are permitted to sell yarn at fixed prices has been upheld in M/s. Dwarka Prasad Laxmi Narain case, 1954 SCR 803 = (AIR 1954 SC 224  ) (supra). But a note of possible mischief was indicated in instances where no rule or principle to guide them was stated or where no check or control by higher authority was intended.The Textile Commissioner in the present case is guided by the provisions of clause 30 of the Order as well as by Section 3 of the Essential Commodities Act. The rules or principles for guidance are first equitable distribution, and, second availability at fair price. Prices are fixed with limited profit to traders. Furthr, an aggrieved person can appeal to the Centralallotment order on record shows that the allotment of yarn is made subject to the conditions that the allotted yarn would be lifted within 15 days of receipt of intimation from the mill after making necessary payments. If any portion of the yarn is not paid for and lifted within the stipulated time, the State Government may intimate the same to the Cotton Corporation of India and the mills concerned. The Cotton Corporation will effect payment and take charge of the yarn. The Textile Commissioner on receipt of such intimation will issue the reallotment orders and in respect of such re-allotted yarn the allottee State Government will make necessary payments to the Cotton Corporation of India. The conditions of allotment ensure lifting of yarn by the nominees of the State Government within a reasonable time. In the past at the initial stages of the voluntary control scheme the State Government nominees were not adequately financially equipped and that is why there were cases of non-lifting of yarn. It cannot happen now. The Distribution Control Scheme does not impose an unreasonable restriction on the producers right to carry on hisif it can be shown that the executive action taken during the emergency has no authority as a valid law its constitutionality can be challenged. The Cotton Textiles Order 1948 was continued by Essential Commodities Act, 1955.The impugned orders are made under pre-emergency Cotton Textiles Control Order. The validity of the impugned orders is challenged under Article 19 (1) (f) and (g) of the Constitution on the ground that it is a pre-emergency executive order which could have been challenged under Article 19 (1) (f) and (g) before the proclamation of emergency. From the point of view the petitions are competent though the challenge is insupportable on all grounds.