Case: Dr. Indramani Pyarelal Gupta Vs. W. R. Nathu And Others

2. It is necessary to set out briefly certain facts in order to appreciate the points raised by the appeal. The East India Cotton Association is an "association" which has been recognised by the Central Government under S. 6 of the Act. The three appellants are members of the Association carrying on business in partnership. The appellants had, prior to December 1955 entered into "hedge contracts" in respect of cotton with other members of the Association for settlements in February and May 1956. There was no dispute that these contracts were in accordance with the bye-laws of the Association as they stood at the date when the contracts were entered into. The terms and conditions of forward contracts in cotton including "hedge contracts" and the manner of their implementation, were governed by the provisions contained in certain bye-laws of the Association and of these that relevant to the consideration of the matters in this appeal was Bye-law 52AA which on the date when the appellants entered into their contracts ran as followsAA (1) Whether or not the prices at which the cotton may be bought or sold are at any time controlled under the provisions of the Essential Commodities Act. l955, if the Textile Commissioner with the concurrence of the Forward Markets Commission and after consultation with the chairman (of the Board), be of opinion that the continuation of hedge trading is likely to result in a situation detrimental to the larger interest of the economy of India and so informs the Board, the Board shall forthwith cause a notice to be posted on the Notice Board to that effect and on the posting of such notice and notwithstanding anything to the contrary contained in these bye-laws or in any hedge or on call contract made subject to these Bye-Laws, the following provisions shall take effect.2. Every hedge contract and every on call contract in so far as the cotton is uncalled thereunder or in so far as the price has not been fixed thereunder entered into between a member and a member or between a member and a nonmember then outstanding shall be deemed closed out at such rate, appropriate to such contract as shall be fixed by the Textile Commissioner and the provisions of clauses (3), (4) and (6) of Bye-Laws 52 A in so far as they apply to hedge and on call contracts, shall apply as if they formed part of this Bye-Law. After the affixation of the said Notice on the Notice Board trading in hedge and on call contracts shall be prohibited until the Textile Commissioner with the concurrence of the Forward Markets Commissioner and after consultation with the Chairman, permits resumption.Towards the end of 1955 the Chairman of the Association appears to have apprehended that the Forward Market in cotton was heading for a crisis which was in part due to the transacting of unbridled option business, which though prohibited by the Act and also by the bye-laws of the Association was nevertheless indulged in on a large scale. The chairman brought this situation to the notice of the members of the Board of the Association at a meeting held on December 16, 1955 and suggested that they should give serious thought to this vital problem. It may be mentioned that the Government also were anxiously considering the steps to be taken to solve or avert the crisis. The action which the Government took in this matter is reflected in a notification issued by them on December 23, 1955 by which in exercise of the powers conferred on them by S. 14 of the Act they directed the Association to suspend its business in Indian cotton hedge contracts for delivery in February 1956 and May 1956 for a period of 7 days with effect from the date of the notification. The situation did not apparently improve as a result of this temporary suspension so that before the expiry of the work, action under the same provision was again taken under a notification dated December 30, 1955 by which the period of 7 days was extended by a further period of 7 days, i.e. till 6-1-1956. A meeting of the Board of Association was held on January 6, 1956, i.e., the day on which the suspension of forward business expired when the following resolution was unanimously passedview of the suspension of forward trading by Government the Board hereby resolves under bye-law 52 that an emergency has arisen or exists and prohibits until further notice, subject to the concurrence of the Forward Market Commission as from Saturday the 7th January, 1956, trading in hedge contracts above a maximum rate of Rs. 700 pera suit (numbered as suit 2/1956) was filed by a member of the Association as representing himself and all other members, on the original side of the High Court, Bombay against the Association and its Board, challenging the validity of the notification of Government suspending forward trading, as also of the resolution of the Board, just now extracted. An application for the grant of interim stay was made for restraining the Board from giving effect to its resolution but this was refused by the learned trial Judge and an appeal was filed against the refusal.4. While things were in this state the Central Government in exercise of the powers conferred on them by S.12 of the Act, made a new bye-law which was published in the Gazette of India Extraordinary dated 21-1-1956 in substitution of Bye law 52AA set out earlier. The new bye-law ran(1) Whether or not prices at which cotton may be bought or sold are it any time controlled under the provisions of the Essential Commodities Act. 1955, if the Forward Markets Commission is of the opinion that continuation of trading in hedge contracts for any delivery or deliveries is detrimental to the interest of the trading or the public interest or to the larger interests of the economy of India and so notifies the Chairman, then notwithstanding anything to the contrary contained in these bye-laws or in any hedge or on call contract made subject to these bye-laws the following provisions shall take effect.(2) Every hedge contract and every on call contract in so far as the cotton is uncalled thereunder or in so far as the price has not been a fixed thereunder and relating to the delivery or deliveries notified under cl. (1) entered into between a member and a member or between a member and a non-member then outstanding shall be deemed closed out at such rate appropriate to such contract and with effect from such date as shall be fixed by the Forward Markets Commission and the provisions of clauses (3), (4) and (6) of bye-laws 52A in so far as they apply to hedge and on call contracts shall apply as if they formed part of this Bye-Law.This bye-law was communicated to the Board of the Association on the 23rd January, 1956.6. We might here state that the validity of this new bye-law has been impugned on various grounds and the alleged invalidity of this bye-law serves as the main foundation for challenging the validity of the notification of the Forward Markets Commission issued under the powers conferred by it.7. On January 24, 1956, the appeal from the order refusing the interim injunction in Suit No. 2 of 1956 was settled between the parties on these termsThe impugned resolution dated January 6, 1956, declared to be valid.(2) The Board of Directors to meet on January 25, 1956 and consider under bye-law 52(2) whether the rate of Rs. 700 fixed under the said resolution should continue or whether it should be waived. In considering the same the Board will apply its own mind and exercise its ownthe same day, i.e., January 24, 1956, the Forward Markets Commission took action under the powers vested in them under the new Bye law 52AA which had been made by Government three days earlier. By a communication addressed to the chairman of the Association the Commission statedpursuance of cl. (1) of the Bye law 52AA of Bye-Laws of the E.I.C.A. Ltd., Bombay I hereby notify to you that the Forward Markets Commission is of the opinion that continuation of trading in the hedge contracts for February and May 1956 delivery is detrimental to the interests of the trade and the public interest and the larger interest of the economy of India and fixed (sic) under cl. (2) of the said bye-law; that the rates prevailing at the time at which the trading in the said contracts closed on January 24, 1956, viz., Rs. 700/- for February and Rs. 686/8/- for May delivery as the rates at which and January 25, 1956 as the date with effect from which the hedge contracts and on call contracts in so far as the cotton is uncalled thereunder or in so far as the price has not been fixed thereunder relating to the said delivery shall be deemed to be closed out.Thereupon the three appellants who are partners carrying on business in cotton under the name and style of Indramani Pyarelal Co. moved the High Court of Bombay by a petition under Art. 226 of the Constitution on January 27, 1956 for a writ of mandamus or a direction in the nature of mandamus against the members of the Forward Markets Commission who were individually impleaded as respondents to the petition, ordering them to cancel or withdraw the notification dated January 24, 1956, whose validity was impugned on various grounds. The petition was heard by a learned Single Judge who dismissed it by his order dated February 23, 1956. An appeal was filed therefrom to a Bench of the High Court and when this was also dismissed the petitioners moved for a certificate of fitness to appeal to this Court but the same having been rejected, they applied for and obtained special leave from this Court, and that is how the matter is now before us.

Reasoning:
In our opinion, these decisions afford no assistance for resolving the controversy before us. There is no question here of deducing an implied power from the grant of an express one. What we are concerned with is the scope of the grant of an express power or rather whether the grant of the power conferred upon the Commission by the bye-law could be held to be a power which could be assigned to the Commission under cl (f). So far as the terms of cl.(f) are concerned there is no limitation upon the nature of the power that might be conferred except, of course, that which might flow from its having to be one in relation to true regulation of forward trading in goods which the Act is designed to effectuate. Any limitation therefore would have to be deduced from outside cl. (f) of S. 4. Taking each of the clauses,(a) to (e), it is not possible to put them positively under one genus in order that there might be scope for the application of the ejusdem generis rule of construction.. Negatively, no doubt it might be said that none of these five clauses confer on executive power such as has been vested in them by the amended Bye-law 52AA but this cannot be the foundation for attracting the rule of construction on which learned Counsel relies. On the other hand, if there is no common positive thread running through cls. (a) to (e) such as would bring them under one genus and negatively they do not unit expressly include any administrative or executive functions, that itself might be a reason why the expression "other" occurring in cl. (f) should receive the construction that it is intended to comprehend such awe are here concerned with is whether it is legally competent to vest a particular power in a statutory body, and in regard to this the proper rule of interpretation would be that unless the nature of the power is such as to be incompatible with the purpose for which the body is created, or unless the particular power is contra-indicated by any specific provision of the enactment bringing the body into existence, any power which would further the provisions of the Act could be legally conferred on it. Judged by this test, it would be obvious that the power conferred by the bye-law is one which could be validly vested in theCounsel is undoubtedly right in his submission that a power conferred by a law is not one conferred "by the Act", for in the context the expression "conferred by the Act" would mean "conferred expressly or necessary implication by the Act itself." It is also common ground that a bye law framed under Sections(11) or 12 could not fall within the phraseology "as may be prescribed", for the expression "prescribed" has been defined to mean "by rules under the Act", i.e, those framed under S.28 and a bye law is certainly not within that description. The question therefore is whether a power "conferred by a bye-law could be held to be a power conferred under the Act". The meaning of the words under the Act" is well known."By an Act would mean by a provision directly enacted in the statute in question and which is gatherable from its express languages or by necessary implication therefrom. The words "under the Act" would in that context signify what is not directly to be found in the statute itself but is conferred or imposed by virtue of powers enabling this to be done; in other words, bye-laws made by Subordinate law-making authority which is empowered to do so by the parent Act. The distinction is thus between what is directly done by the enactment and what is done indirectly by rule-making authorities which are vested with powers in that behalf by thefind ourselves wholly unable to accept this argument. If without the reference to the phrase "as may be prescribed" the words ":under the Act" would comprehend powers which might be conferred under "bye-laws" as well as those under "rules" we are unable to appreciate the line of reasoning by which powers conferred by bye-laws have to be excluded, because of the specific reference to powers conferred by "rules". Undoubtedly, there is some little tautology in the use of the expression "as may be prescribed" after the comprehensive reference to the powers conferred "under the Act", but in order merely to avoid redundancy you cannot adopt a rule of construction on which cuts down the amplitude of the words used except, of course, to avoid the redundancy. Thus the utmost that could be said would be that though normally and in their ordinary, signification the words "under the Act" would include both "rules" framed under S.28 as well as "bye-laws" under S. 11 or 12, the reference to "rules" might be eliminated as tautologous since they have been specifically provided by the words that follow. But beyond that to claim that for the reason that it is redundant as to a part, the whole content of the words "under the Act" should be discarded, and the words "by the Act" should be read in a very restricted and, if one may add, in an unnatural sense as excluding a power conferred by necessary implication, when such a power would squarely fall within the reach of these words would not, in our opinion, be any reasonable construction of the provision. We need only add that the construction we have reached of S.4 (f) is reinforced by the language of S.3(1) which is free from the ambiguity created by the occurrence of the expression "as may be prescribed" in the former. We have therefore no hesitation in holding that there was no incompetency in the Forward Markets Commission being the recipient of the power which was conferred upon them by Bye-law 52AA asin the amended bye-law occurring in the group of existing bye-law making provision for emergencies to which sub-clause (o) of S. 11(2) refers, there is no dispute that there was an emergency in the forward market and that the impugned bye-law was framed to meet such a contingency. It was not contended before us that the method by which the emergency was resolved by the impugned bye-law-viz., by closing out subsisting contract was not the usual method employed for the purpose. If therefore the bye-law was a provision for an emergency within S.l1(2)(o) then it would seen to follow that for the resolution of that emergency, every one of the matters which could be included in such bye-laws would be attracted to it, and so we find it impossible to accept Mr. Pathaks submission regarding the invalidity of the bye- law.An analysis of the impugned Bye-law 52 AA and a comparison of it with that which it replaced would show that the main point of difference is that whereas formerly action to stop forward trading and for closing out contracts and to fix the rate at which contracts were to be closed out was vested in the Textile Commissioner, acting with the concurrence of the Forward Markets Commission, under the amended bye-law the power is directly vested in the Forward Markets Commission itself. The arguments, addressed to us on this point are concerned not so much with the propriety as with the vires of a provision by which the power to close out contracts by- the issue of a notification is vested in the Commission. Apart from an argument immediately to be noticed we do not see how, if such a power could validly be conferred upon a Textile Commission or even exercised by the Board of the Association under a bye-law framed under S.11, the same would be beyond the power to make bye -laws under S. 11 by the mere fact that the authority vested with the power is the Forward Markets Commission. We are clearly of the opinion that Bye law 52AA is well within the bye-law making power under S. 11 of the Act and therefore within S.therefore a bye-law could be made by the Association it is manifest that there is no limitation upon its powers such as is to be found in Art. 64 which applies only to the Board. The validity of the bye-law therefore cannot be challenged by reference merely to the powers of the Board, because what is contemplated by S. 11 is the power of the recongnised Association" to frame the bye-law. We have therefore no hesitation in rejecting the contention that the bye-law as framed contravenes the rules of theis thus clear that the entire machinery for resolving emergencies such as is contemplated by bye-law 52A includes the suspension of forward business together with the closing out of forward contracts of hedge and on call types whose volume or nature had led to the emergency. It proceeds on the basis that the crisis could not be met unless subsisting contracts were closed out and, so to speak, a new chapter begun. That is the ratio underlying the combined effect of Bye laws 52AA and 52A and in view of this circumstances the argument that on a reasonable construction of the amended bye-law it would apply to contracts to be entered into in future and not to subsisting contracts must bedo not however consider it necessary to canvass the correctness of this decision or the broad propositions laid down in it. It is clear law that a Statute which could validly enact a law with retrospective effect could in express terms validly confer upon a rule- making authority a power to make a rule or frame a bye-law having retrospective operation and we would add that we did not understand Mr. Pathak to dispute this position. If this were so the same result would follow where the power to enact a rule or a bye-law with "retrospective effect" so as to affect pending transactions, is conferred not by express words but where the necessary intendment of the Act confers such a power. If in the present case the power to make a bye-law so as to operate on contacts subsisting on the day the same was framed, would follow as a necessary implication from the terms of S. 11, it would not be necessary to discuss the latter question as to whether and the circumstances in which Subordinate legislation with retrospective effect could be validlyindicate that in the context of a crisis in forward trading the closing out of contracts was a necessary method of exercising control and was the mechanism by which the enactment contemplated that normalcy could be restored and healthy trading resumed.If therefore we eliminate the provisions in Ss. 16, 17 and 19 as not containing any indication that a power to frame a bye-law with retrospective effect was withheld from the Association, the question whether such bye-law-making power was conferred has to be gathered from the terms of S. 11 itself. Thus considered we are clearly of the opinion that a power to frame a bye-law for emergencies such as those for which a bye-law like 51AA is intended includes a power to frame one so as to affect subsisting contracts for resolving crisis in Forward Markets Commission. We have already referred to the terms of bye-law 52A which shows that when an emergency of the type referred to in S.11(2) (o) arises it is not practicable to rescue a forward market from a crisis without (1) putting an end to forward trading, and (2) closing out subsisting contracts so as to start with a clean slate for theis manifest that the section contemplates the making of a bye-law regulating the performance of contracts, the rescission and termination of contracts and this could obviously refer only to the bye-law affecting rights under contracts which are subsisting on the day the action is taken. It is therefore manifest that S.11 authorises the framing of a bye-law which would operate retrospectively in the sense that it affects rights of parties under subsisting contracts. Finally it should be borne in mind that ultimately what we are concerned in S. 11 of the Act is the power of the Association to frame the bye-law, for if the Association could validly frame such a bye-law, the Central Government could under S. 12 have a similar power. We did not hear any argument to establish that the Association had no suchThere is one other aspect in which the same problem might be viewed and it is this :The contract entered into by the respondents (sic) purported to be one under the bye-laws for the time being in force and any change in the bye-laws therefore would seem to be contemplated and provided for by the contract itself, so that it might not be correct to speak of the new bye-law as affecting any accrued rights under a contract. For when those bye-laws were altered the changes would get incorporated into the contracts themselves, so as to afford no scope for the argument that there has been an infringement of a vested right. In the view however which we have taken about the validity of the bye-law on the ground that it was well within the terms of Ss. 11 and 12 we do not consider it necessary to pursue this aspect further or to rest our decision onground of mala fides alleged was that the impugned notification was issued in order to prevent the Board of Directors of the Association from applying their minds and exercising their judgment which they were directed to do by the terms of the Consent Memo filed on which the appeal from the judgment in C. S. 2 of 1956 was disposed of on January 24, 1956. To the allegation made in this form in the petition the first respondent, the Chairman of the Forward Markets Commission, filed an affidavit in the course of which he pointed out that the continuance of trading in futures was in the circumstances then prevailing in the market detrimental then prevailing in the market detrimental to the interests of the trade and that a conclusion on this matter had been reached by the Commission even before Bye-law 52AA was amended, that the question of closing out existing contracts was engaging the attention of even the Board of the Association from as early as the beginning of January 1956 and it was for the purpose of enables the Commission to take action to set right matters that Bye-law 52AA was amended and that immediately the amended bye-law came into force the Commission took action and issued the notification now impugned. He also pointed out that the liberty given to the Association to consider the matter under the terms of the Compromise Memo was a factor which had also been taken into account before the notification had been taken into account before the notification had been issued. The learned Judges of the High Court accepted this explanation of the circumstances in which the notification came to be issued and considered that on the allegation in the petition no mala fides could be inferred. We are in entire agreement with the learned Judges of the High Court on this point. No personal motive or mala fides in that sense has been attributed to the members of the Commissioner and in these circumstances we consider that there is no basis for impugning the notification on the ground that it was not issued bonadecision is, therefore, an authority for the position that unless a statute confers on the Government an express power to make an order with retrospective effect, it cannot exercise such a power. The Mysore High Court in a considered judgment in AIR 1960 Mys. 326, dealt with the question that now arises for consideration. There, the Government issued three notifications dated 9-4-1956, 15-10-1957 and 13-2-1958 purporting to act under S.14(1) of the Madras Sugar Factories Central Act, 1949, where by cess was imposed on sugarcane brought and crushed in petitioners factory for the crushing season 1955-56, 1956-57 and 1957-58 respectively. One of the questions raised was whether under the said section the Government and power to issue the notifications imposing a cess on sugarcane brought and crushed in petitioners factory for a period prior to the date of the said notifications. Das Gupta, C.J., delivering the judgment of the Division Bench held that it could not.