Case: Madhya Bharat Cotton Association Ltd Vs. Union Of India &amp; Anr

1. This is a petition made by the Madhya Bharat Cotton Association Limited, under Article 32 of the Constitution, complaining of discrimination under Article 14 and restraint of trade under Article 19(1)(g).India.2. The action of which complaint is made was taken under the Cotton Control Order of 1950. Clause 4 of this Order banned all cotton contracts and options in cotton except those permitted by the Textile Commissioner by a general order made under Clause6. The Textile Commissioner was also authorised to place such restrictions and conditions as he thought fit on the contracts and options which he permitted.3. Acting under this authority the Textile Commissioner made the following orders:(1) S.R.O. 2045, datesS.R.O. 1425, datedS.R.O. 1651, datedthe first he lifted the ban on"Hedge Contracts: that is to say Forward Contracts entered into by members of the East India Cotton Association Limited, entitled to the use of the Clearing House of the Association where such contracts are made in accordance with rules andof the Association in the official markets of the Association."The second order gave the same exemption but limited the lifting of the ban to hedge contracts for February 1954 delivery. The third order added contracts for may 1954 delivery. These are the orders which are impugned. The petition was filed in August 1953. The last of the three orders was made after this, namely onand was included at a later date.

Court's reasoning:
4. Cotton was listed as an essential commodity" under Section 2(a) of the Essential Supplies (Temporary Powers) Act, 1946 (Act XXIV of1946), so the right of the State to control, and even to prohibit, transactions in it is evident. "Hedging" is of vital importance in cotton trading. It not only acts as an insurance and protects cotton growers, manufacturers and merchants but also acts as a check on reckless speculation and gambling when properly controlled. Consequently, it is important to have this type of dealing under proper supervision and control,as in the case of Banks and insurance companies, innocent persons may have to suffer for the reckless gambling and speculation of handful of persons anxious to get rich quickly. Further, cotton being a commodity essential to the life of the community, it is reasonable to have restrictions which may, in certain circumstances, extend to total prohibition for a time, of all normal trading in the commodity. Accordingly, we are of opinion that Clause 4 of the Cotton Control Order of 1950 does not offend Article 19(1) (g) of the Constitution because14. It will be seen that the New Ujjain Society did not merge with the petitioning Association till after the impugned Order was passed. The fact of merger cannot therefore be used to impugn that Order; and as regards the other two Orders, they were made within four and six months of the merger and that has not left the Textile Commissioner sufficient time to judge of the effectiveness of the merger. The merger has been accomplished in a very leisurely and somewhat unbusiness like way; for example, it took from53 to effect the merger. Consequently, there is justification for the omission to include the petitioning Association in the exemption given to the East India Cotton Association of Bombay. Also, the two associations cannot be said to be on a footing of equality, so no question of discrimination under Article 14 can arise.