Case: Narendra Kumar And Others Vs. The Union Of India And Others

1. The three persons who have filed this petition under Art. 32 of the Constitution for enforcement of their fundamental rights conferred by Art. 14, Art. 19(1)(f) and Art. 19(1)(g) thereof are dealers in imported copper and carry on their business at Jagadhri in the State of Punjab. On different dates prior to April 3, 1958, they entered into contracts of purchase of copper with importers at Bombay and Calcutta, Before, however, they could take delivery from the importers the Government of India issued on 2-4-1958, an order called the "Non-ferrous Metal Control Order, 1958" hereafter referred to as "the order" in exercise of its powers under S. 3 of the Essential Commodities Act (Act X of 1955) - referred to hereafter as "the Act". In this order "non-ferrous metal" was defined to mean "imported copper; lead, tin and zinc in any of the forms specified in the Schedule of the order."

Court's reasoning:
Mala fides have not been suggested and we are proceeding on the assumption that the Central Government was honestly of opinion that it was necessary and expedient to make an order providing for regulation and prohibition of the supply and distribution of imported copper and trade and commerce therein. So long as the Order does not go beyond such provisions, the Order, it is urged, must be held to be good and the consideration of any question of infringement of fundamental rights under the Constitution is wholly beside the point. Such an extravagant argument has merely to be mentioned to deserve rejection. If there was any reason to think that S. 3 of the Act confers on the Central Government power to do anything which is in conflict with the Constitution - anything which violates any of the fundamental rights conferred by the Constitution, that fact alone would be sufficient and unassailable ground for holding that the section itself is void being ultra vires the Constitution. When, as in this case, no challenge is made that S. 3 of the Act is ultra vires the Constitution, it is on the assumption that the powers granted thereby do not violate the Constitution and do not empower the Central Government to do anything which the Constitution prohibits. It is fair and proper to presume that in passing this Act the Parliament could not possibly have intended the words used by it, viz., "may by order provide for regulating or prohibiting the production, supply and distribution thereof, and trade and commerce in," to include a power to make such provisions even though they may be in contravention of the Constitution.The fact that the words "in accordance with the provisions of the articles of the Constitution" are not used in the section is of no consequence. Such words have to be read by necessary implication in every provision and every law made by the Parliament on any day after the Constitution came into force. It is clear therefore that when S. 3 confers power to provide for regulation or prohibition of the production, supply and distribution of any essential commodity it gives such power to make any regulation or prohibition in so far as such regulation and prohibition do not violate any fundamental rights granted by the Constitution of IndiaIt is clear that in these three cases, viz., Chintaman Raos Case, 1950 SCR 759  : (AIR 1951 SC 118 ), Cooverjees Case, 1954 SCR 873  : (AIR 1954 SC 220 ) and M. B. Cotton Association Ltd. Case, AIR 1954 SC 634  (supra) the Court considered the real question to be whether the interference with the fundamental right was "reasonable" or not in the interests of the general public and that if the answer to the question was in the affirmative, the law would be valid and it would be invalid if the test of reasonableness was not passed. Prohibition was in all these cases treated as only a kind of "restriction". Any other view would, in our opinion, defeat the intention of the Constitution17. After Art. 19(1) has conferred on the citizen the several rights set out in its seven sub-clauses, action is at once taken by the Constitution in Cls. 2 to 6 to keep the way of social control free from unreasonable impediment. The raison detre of a State being the welfare of the members of the State by suitable legislation and appropriate administration, the whole purpose of the creation of the State would be frustrated if the conferment of these seven rights would result in cessation of legislation in the extensive fields where these seven rights operate. But without the saving provisions that would be the exact result of Art. 13 of the Constitution. It was to guard against this position that the Constitution provided in its Cls. 2 to 6 that even in the fields of these rights new laws might be made and old laws would operate where this was necessary for general welfare. Laws imposing reasonable restriction on the exercise of the rights are saved by Cl. 2 in respect of rights under sub-cl. (a) where the restrictions are "in the interests of the security of the State;" and of other matters mentioned therein; by Cl. 3 in respect of the rights conferred by sub-cl. (b) where the restrictions are "in the interests of the public order;" by Cls. 4, 5 and 6 in respect of the rights conferred by sub-cls. (c), (d), (e), (f) and (g) the restrictions are "in the interests of the general public" -in Cl. 5 which is in respect of rights conferred by sub-cls. (d), (e) and (f) also where the restrictions are "for the protection of the interests of any scheduled tribe". But for these saving provisions such laws would have been void because of Art. 13, which is in these words :"All laws in force, in the territory of India immediately before the commencement of this Constitution, in so far as they are inconsistent with the provisions of this Part, shall, to the extent of such inconsistency be void; (2) The State shall not make any law which takes away or abridges the rights conferred by this Part and any law made in contravention of this clause shall, to the extent of the contravention, be void.."18. As it was to remedy the harm that would otherwise be caused by the provisions of Art. 13, that these saving provisions were made, it is proper to remember the words of Art. 13 in interpreting the words "reasonable restrictions" on the exercise of the right as used in Cl. (2).It is reasonable to think that the makers of the Constitution considered the word "restriction" to be sufficiently wide to save laws "inconsistent" with Art. 19 (1), or "taking away the rights" conferred by the Article, provided this inconsistency or taking away was reasonable in the interests of the different matters mentioned in the clause. There can be no doubt therefore that they intended the word "restriction" to include cases of "prohibition" also. The contention that a law prohibiting the exercise of a fundamental right is in no case saved, cannot therefore be accepted. It is undoubtedly correct, however, that when, as in the present case, the restriction reaches the stage of prohibition special care has to be taken by the Court to see that the test of reasonableness is satisfied. The greater the restriction, the more the need for strict scrutiny by the CourtIn applying the test of reasonableness, the Court has to consider the question in the background of the facts and circumstances under which the order was made, taking into account the nature of the evil that was sought to be remedied by such law, the ratio of the harm caused to individual citizens by the proposed remedy, to the beneficial effect reasonably expected to result to the general public. It will also be necessary to consider in that connection whether the restraint caused by the law is more than was necessary in the interests of the general publicClause 3 of the Order fixes a price while Cl. 4 introduces a system of permits for the acquisition of the material. Some fixation of price, being essential to keep prices within reasonable limits, must therefore be held to be a reasonable restriction in the interests of the general public. Was it necessary, however, that the prices should be fixed in such a manner as to eliminate the dealer completely, as has been done in the instant case? The introduction of a system of permits was also clearly necessary in the interests of the general public. Was it necessary however to specify the principles that would drive the dealer out of business? These questions require careful consideration, for the injury inflicted on the dealer by such elimination is very great and in spite of the presumption of constitutionality that attaches to every law the Court ought to examine with special care laws which result, as in the present case, in total restraint of rights conferred by the ConstitutionIt is entirely wrong to think that the middleman gets his profits for nothing and one has to remember that the middleman by forming the distribution channel between the producers and consumers relieves the producers of the burden of storing goods for a length of time and the risk attendant thereto and relieves the consumers of the trouble and expense of going to the producer who may be and often is a long distance away. It is however in the very nature of things that the middleman has to charge not only as regards the interest on the capital invested by him, and a reasonable remuneration for management but also in respect of the risks undertaken by him what the economists call the "entrepreneurs risk". These charges often add to a considerable sum. It has therefore been the endeavour at least in modern times for those responsible for social control to keep middlemens activities to the minimum and to replace them largely by co-operative sale societies of producers and co-operative purchase societies of the consumers. While it is clear that the middleman does perform important services, it is equally clear that the interests of the public would be best secured interests of the public would be best secured if these services could be obtained at a price lower than what the middleman would ordinarily charge. If the middleman ceases to function because of the fixation of price at landed cost plus 31/2 p.c., the manufactures who require copper as their raw material will have to establish contacts with importers. This will mean some trouble and inconvenience to them, but it is reasonable to think that saving in the cost of obtaining the raw material would more than compensate them for this. The lower cost of the raw material is also likely to be reflected - in a competitive market - in the lower price of the consumers goods. of which copper is raw material, and thus redound to the benefit of the general public23. It must therefore be held that Cl. 3 of the Order even though it results in the elimination of the dealer from the trade is a reasonable restriction in the interests of the general public. Clause 4 read with the principles specified must also be held for the same reason to be a reasonable restrictionThe first evil sought to be remedied by the law being thus the rise in price - which was bound to be reflected in the higher price of the consumers goods in the production of which copper formed a major ingredient - an Order controlling the price would of courses be the first obvious step for fighting this evil. Experience has shown however that if nothing else is done it is practically impossible to make the control of price effective. The essential subsidiary step therefore was to introduce a system of permits so that the persons acquiring copper could be known23. It must therefore be held that Cl. 3 of the Order even though it results in the elimination of the dealer from the trade is a reasonable restriction in the interests of the general public. Clause 4 read with the principles specified must also be held for the same reason to be a reasonable restrictionQuite clearly the dealers and manufactures are by these principles placed in different classes and while some manufactures are eligible for permits dealers are not. It is equally clear however from what has already been said above that the differentia which distinguish dealers as a class from manufactures placed in the other class have a reasonable connection with the object of the legislation. There is therefore no substance in the contention that the specification of the principles violates Art. 14 of the Constitution26. But without the principles, Cl. 4 of the Order is not effective. The system of permits which this clause is designed to introduce can come into existence only if the permits can be issued; but permits issued only in accordance with the principles laid down by the Central Government. It is not possible to build on the use of the words "may specify" in Cl. 4 an argument that so long as no principles are specified the Controller would have authority to issue permits by exercise of his own judgment and discretion. The words used in Cl. 4 do not permit such a construction and compel the conclusion that so long as the principles are not specified by the Central Government no permit can be issued by the ControllerAll that is necessary to make Cl. 4 effective is that some principles should be specified, and these notified in the Gazette, and laid before the Houses of Parliament. It my be necessary from time to time to specify new principles in view of the changed circumstances; these have again to be notified in the Gazette and laid before the Houses of Parliament, in order to be effective. So long as new principles do not come into operation, by being specified by Government, and thereafter notified in the Gazette, and laid before Houses of Parliament, the previous principles last specified, notified in the Gazette and laid before Houses of Parliament, will remain effective. As, however, the principles specified in the letter of the 18th April have not been notified in the Gazette, nor laid before Houses of Parliament, and no principles appear to have been specified before or after that date, Cl. 4 of the order, as now stands, must be struck down as void28. The petitioners are therefore entitled to relief only in respect of Cl. 4 of the order.