Case: Parvej Aktar  Vs. Union Of India

This Act is to provide for reservation of certain articles for exclusive production by handlooms and for matters connected therewith. On 31st of March, 1986, the Act came into force. Section 4 of the Act provides for constitution of an Advisory Committee to make recommendations to the Central Government to determine the nature of any article or class of articles that may be reserved for exclusive production by handlooms. On 2nd June, 1986, in exercise of the powers conferred under Section 4 of the Act, the Central Government constituted an Advisory Committee. The said Advisory Committee submitted its recommendations. After considering those recommendations the impugned order dated 4th of August, 1986 was issued directing certain articles/class of articles to be exclusively reserved for production by handlooms. It is this order which is attacked on the following grounds in all these cases.2. The Act and the impugned order are violative of Articles 14 and 19(1)(g) of the Constitution.We shall first examine the background leading to the passing of the impugned enactment.20. On 8-1-63, the Government of India appointed a committee, called "The Powerloom Enquiry Committee" under the Chairmanship of Shri Ashok Mehta. This Committee submitted its report to the Government of India on 5-6-1964. Amongst others, the Committee recommended that the production of coloured sarees should be reserved exclusively for handloom sector. In a reference to reservation, the committee has saidwith the phased programmes of introduction of powerlooms in the handloom sector, the handloom sector would continue to play a prominent role for some decades. It will be necessary therefore, to ensure that this Sector is given assistance by a further Reservation of field of production.The said Study Team under the Chairmanship of Mr. B. Sivaraman inter alia made the following recommendationwill be noticed that three items are reserved exclusively for the handlooms and powerlooms units having up to 4 powerlooms. Any breach of these orders is punishable under the Essential Commodities Act. In actual practice, however, the orders are honoured more in breach than in compliance and there is very little of prosecution under the Essential Commodities Act. The most glaring example of such breach is the production of coloured cotton sarees by the powerlooms of Maharashtra. Litigation of various nature is entered into by the powerloom sector to delay the process of law. As a result, even the little punitive action that is attempted becomes infructuous. There is also the inherent difficulty of dealing with the eight items which are also open to powerloom units with four looms and less. Once the goods leave a powerloom it becomes very difficult to establish whether these were produced in a unit with more than four powerlooms or in a smaller unit. As a result, the protection supposed to have been given to the hahdloom sector by reserving certain items of production for the sector has been substantially only on paper and the powerloom sector has been producing the reserved items whenever it has found it profitable to do so. The Team recommends that the eight items which are also open powerloom units with four looms and less shall be reserved exclusively for the handloom sector.The Government of India appointed a Study Group on "Reservation of Handlooms" on 12th August, 1980 under the Chairmanship of Textile Commissioner who has given the following recommendations in respect of certain articles for exclusive production by handloomsmay be true that owing to the dispersed nature of the industry, the much needed orientation of production to market needs is very much wanting in the handloom sector. Yet more important is the inherent technological disadvantage of the handloom sector and the unequal competition that it has to face from the mill and powerloom sector on this account.It is a matter of common knowledge that the bulk of the handlooms in the country produce bread and butter item such as grey dhoties, sarees, towels and plain household fabrics. It is these looms which have suffered on account of the growing competition from the powerlooms. It is in this context that the reservation of certain items of handlooms acquires importance.24. In order to obviate the possibility of further litigations, the Study Group feels that it would be advisable to have a separate legislation for the handloom sector.The Expert Committee observed in April, 1985 thusvast growth of powerlooms has been due to certain advantages which they have enjoyed vis-a-vis the composite mills. These are low wages, low fiscal levies on yarn, absence of levy on grey fabrics which are the only products of the powerlooms, wholesale evasion of protective labour legislation, low overheads, low requirements of working capital and flexibility in changing the product-mix to suit market demands, etc. As against this, it must be recognised that there are also certain advantages with the composite mills. For instance, the yarn costs to the powerlooms are about 8% higher than for the composite mills. The composite mills also have the advantage of much higher level of technological capabilities and marketing strength with reputed brand names established in the market and better quality control. On balance, however, the advantage was distinctly with the powerlooms so far as the production of cotton fabrics is concerned. That this advantage has put the composite mills in some difficulty cannot be gainsaid. In any policy calculated to restore health to the textile industry, it would be necessary to approximately equalise the advantages disadvantages of these two sectors and the Committee has attempted to do this through its recommendations.It is also relevant to note that the 7th Five Year Plan stresses the necessity for reservation of articles of the handloom sector. The relevant extract of which is given belowthe purpose of policies, the powerlooms in the organised mill sector and the unorganised powerloom sector shall be treated at par and allowed to compete on the basis of their inherent strength and capabilities. Effective measure, however, would be evolved to prevent encroachment of the powerloom sector on items reserved for handlooms. During the VIIth Plan emphasis would be laid on co-operativisation and development of handlooms through Central State level corporations, modernisation of looms and provision of technological inputs, ensure adequate availability of yarn and other raw materials, increase the production of mixed and blended fabrics on handloom, design support to improve the competitiveness of the product so as to eliminate the cost of handicap of the handloom vis-a-vis powerlooms, improve marketing and infrastructure support and strengthen the data base. Reservation would continue under "Handlooms (Reservation of Articles for Production) Act, 1985". The provision of this Act would be enforced and the machinery for this purpose suitably strengthened. New Spindleage would be installed in co- operative sector to the extent possible. To improve the welfare of the handloom weavers, a contributory thrift fund scheme and workshed-cum-housing scheme would be taken up in the Seventh Plan.Due to the recommendations of the various Committees under the textile policy statements announced by the Government from time to time, the reservation of certain articles for production of handloom had continued from 1-6-1950 under the Cotton Textiles (Control) Order, 1948 issued under Section 3 of the Essential Commodities Act, 1955. However, experience showed that these orders were challenged in course (court) of law, from time to time. The thrust of the argument on behalf of the powerloom was that they had given higher production and the powerloom cloth was cheaper than handloom fabric. Therefore, it was contended that the Notification issued under the Essential Commodities Act which, in effect, seeks to prohibit production was not in consonance with the Essential Commodities Act. It was further urged that the Notification provides for exemption from compliance of reservation order if sufficient reason was adduced by the producer. It was claimed by the powerloom owners that they were not afforded such an opportunity to adduce evidence. To overcome such difficulties, Government of India promulgated the Handlooms (Reservation of Articles of Production) Act, 1985.27. It is necessary to set out the statement of objects and reasons of this Act which runs as followsOF OBJECTS AND REASONSThe handloom industry is characterised by sizeable unemployment and under- employment which are due to factors like lack of organisation of weavers, inadequate availability of inputs, including working capital and absence of a regular and reliable marketing system, which can observe the entire production. Of all these the lack of adequate marketing system is one single factor which comes in the way of proper development of handlooms. Although a number of developmental measures have been undertaken towards improvement of the industry yet due to marketing difficulties production in the Handloom sector continues to suffer. The inherent technological constraints suffered by the handloom sector put a disadvantage when the sector is forced to compete with mill and powerloom sectors in the open market. It is in this context that reservation of certain items for exclusive production by handloom acquires importance. The policy of reservation of certain items for exclusive production by handloom has been adopted since 1950. First under the Cotton Textiles (Control) Order 1948 and later under the provisions of the Essential Commodities Act, 1955. This policy has helped the handloom sector to a considerable extent. However, during the last few years, these reservation orders issued under the Essential Commodities Act had been challenged in various Courts of law. Though their validity had been upheld it is considered desirable to have a separate legislation so as to obviate the possibility of further litigation which may seriously affect the implementation of the reservation orders. A study group appointed by the Government to go into this question has also suggested that it would be desirable to have a separate legislation. It has been decided to accept this recommendation, this question has also suggested that it would be desirable to have a separate legislation. It has been decided to accept this recommendation.The Bill apart from enabling the Central Government to reserve by notified order certain articles or class of articles for exclusive production by handlooms after taking into consideration the recommendations of an Advisory Committee constituted under the provisions of the Bill, provides for prohibition of manufacture of such articles or class of articles by powerloom or the other sectorism penalties for the contravention of the provisions of the order and other matters necessary for implementing the provisions of the Bill also provides for giving an exemption to certain articles covered by the order if the Central Government considers it necessary so to do for the purposes of the Handloom industry.New DelhiV. P. SinghThe 22nd August, 1984.With this background, we will examine the provisions of the Act in juxtaposition to the Industries (Development and Regulation) Act and Cotton Textile Control Order.

Court's reasoning:
42. Therefore, where the Cotton Textile Control Order deals with the productions while the impugned Act is an Act which deals entirely with handloom. The order issued under Section 3of the Act is only for protection and development of handloom industry. There is no question of both the Cotton Textile Control Order and the impugned Order operating in the same field.Hence, this argument is rejected.43. The next argument is that Clause (20) of the Cotton Textile Control Order enables the Textile Commissioner to have an over all view while under Section 3of the impugned Act regard is to be had only to the handloom industry.As already seen, the objects of these two orders are different. Therefore, the order under Section 3(1) of the impugned Act (quoted above) does not run counter to Clause (20) of Cotton Textile Control Order.Accordingly, this argument isThis argument, in our opinion, proceeds on a misconception. There is no question of monopoly created in favour of handloom industry. Certain kinds of textiles are reserved to the handloom industry. Still there are number of items available for powerloom owners which they can manufacture. The items of textiles generally manufactured in the mill and powerloom sectors have been left out from reserved items. Only those items which have traditionally been manufactured on handlooms have been reserved for this sector. As a matter of fact, the reservation orders in favour of handloom have been on the statute book since 1950. But this has not deterred the growth of powerloom sector in the last three decades. Recently when the powerloom started producing the items which were traditionally being manufactured on handlooms, that caused a serious inroad into the handloom industry. The result was an unequal competition for the handloom sector. If, as rightly pointed out in the counter affidavit of the Union of India, handloom industry is the biggest cottage industry in the country and is next only to agricultural sector in providing rural employment, certainly, the accusation that the impugned order had created a monopoly in favour of handloom industry is totally baseless. In this connection, the estimates of 1977-78 6th Lok Sabha in its report on powerloom industry made the following observations and it is worthwhile to extract themhas, however, to be ensured that this growth of powerloom industry should not be at the cost of handloom industry otherwise it will lead to greater rural unemployment and problem of large scale migration of rural population to the industrial areas in search of employment. The Committee, therefore, feels that the growth of the powerloom industry should be regulated in such a way that it does not harm the interests of the handloom industry. It would be ensured that powerloom industry does not become a "benami" of the mill sector but is really developed by the conversion of handlooms into powerloom by the handloom weavers themselves. The Committee, therefore, recommend that stringent measures may be taken to ensure that powerloom sector observe the reservations made by the handloom sector and stringent action should be taken for any violation of these orders. Simultaneously, the powerloom sector should be encouraged to produce those varieties of cloth which are not being produced by the handloom sector. The Committee have already in Part I of their report, recommended the formulation of an integrated textile policy assigning role to the various sectors. The Committee hope that while defining the role of the powerloom sector, the above factors will be kept in view by the Government.Thus, it will be clear that the reservation orders are for the continued employment of the handloom industry and are in the larger public interest.50. Even factually, the allegation of monopoly is incorrect. The stand in the counter affidavit is as followsis submitted that the items which are generally manufactured in the powerloom sector have not been reserved for handloom sector at the cost of powerlooms or mill sector. The total production of textile sector at the end of Sixth Plan (1984-85) was 11, 956 million mts. of which the share of handlooms was 3314. At the end of Seventh Plan (1989-90) the total production in textile is estimated at 14500 ml. mts. of which the share of handlooms will be only 4600. These estimated targets indicate that there is sufficient scope for all the sectors including the unorganised powerloom sector to grow during the Seventh Five Year Plan. The differences between the handloom and powerlooms have been defined in the Act itself. The basic difference being that the handlooms are manually operated while the powerlooms are run with the motive force of power.The protection has been given by the Government to handloom weavers because the livelihood of handloom weavers is threatened due to the production of all types of items and varieties by the powerloom industry. It is common knowledge that the handloom weavers are economically very poor and will have no alternative employment in the rural areas unless protected through reservation of varieties for them. So poor is the weaver that he could well say in the words of Karl Marx :"Half a century on my back and still a pauper".52. Therefore, the contention that there is a total prohibition, is untenable and the case relied on by Mr. Krishnamani, learned counsel, namely, Rustom Cavasjee Cooper v. Union of India, (1970) 3 SCR 530 : (AIR 1970 SC 564 ) has no relevance.53. No doubt, there are restrictions under the impugned order but the question would be whether they are reasonable. The Act, as seen above, has come to be enacted for the protection of the interests of the handloom weavers, mostly concentrated in rurual areas. They are pitted against powerful sector, namely, the mills and the powerloom. As such, they face unequal competition. The restrictions are not only reasonable but also fully justified. Further, the objectives sought to be achieved by way of these reservations should derive support from Article 43 of the Constituion which reads as followsLiving wage, etc., for workers -The State shall endeavour to secure, by suitable legislation or economic organisation or in any other way, to all workers, agricultural, industrial or otherwise, work, a living wage, conditions of work ensuring a decent standard of life and full enjoyment of leisure and social and cultural opportunities and, in particular, the State shall endeavour to promote cottage industries on an individual or co-operative basis in rural areas.The said article ordains that the State shall endeavour to promote cottage industries on individual or co-operative basis in rural areas. It is a welcome measure. We can usefully refer to Orient Weaving Mills v. Union of India, AIR 1963 SC 98 at 103Directive Principles of the Constitution, contained in Part IV, lay down the policies and objectives to be achieved, for promoting the welfare of the people. In the context of the present controversy, the following words of Article 43 are particularly apposite :". . . . . . . and in particular, the State shall endeavour to promote cottage industries on an individual or co-operative basis in ruralhas rightly been pointed out in affidavit filed on behalf of the respondents 1-4 that the exemption granted by the impugned notifications is meant primarily for the protection of petty producers of cotton fabrics not owning more than four powerlooms, from unreasonable competition by big producers, like the petitioner Company. The State has, therefore, made a valid classification between goods produced in big establishments and similar goods produced by small powerloom weavers in the mofussil, who are usually ignorant, illiterate and poor and suffer from handicaps to which big establishments like the petitioner company are not subject.Equally, Article 46 inter alia requires the State to promote with special care the educational and economical interests of the weaker sections of the people. Therefore, these restrictions, can easily be sustained as reasonable since it is in furtherance of the objectives laid down in the directive principles.56. In view of what we have stated above, even if, these restrictions result in the total exclusion of the powerloom sector that could be upheld as reasonable. In Narendra Kumars case (supra) (1960 (2) SCR 375 ) : (AIR 1960 SC 430 ) it was held thusthe word "restriction" in Articles 19(5) and 19(6) of the Constitution includes cases of "prohibition" also; that where a restriction reaches the stage of total restraint of rights special care has to be taken by the Court to see that the test of reasonableness is satisfied by considering 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, the beneficial effect reasonably expected to result to the general public, and whether the restraint caused by the law was more than was necessary in the interests of the general public.On the point of violation of Article 14, a reasonable classification is permissible under the equality clause. Of course, the classification made should be based on intelligible differentia. Further, there should be a nexus in such differentia with the objects sought to be achieved by the particular law. Article 14 requires that all persons subject to a legislation must be treated alike. In other words, equals must be treated alike, in like circumstances and conditions. Undoubtedly, the handloom sector forms a distinguishable class separated from powerloom sector or mills sector. The reservation of certain articles for exclusive production in the handloom sector has the objective of protecting the handloom sector against unequal and powerful competition by the mechanised powerloom/mills sector. At the same time, it is also necessary to ensure continued production coupled with sustained employment to the handloom weavers, largely concentrated in the rural areas. This is also in accord with the Governments declared policy of supporting handloom sector due to its large employment potential. The classification, hence, has a rational nexus with the objective of the Act.58. The handlooms are operated manually, the number of persons employed is many times more than powerloom for production of similar quantities of cloth. The reservation of articles for handlooms does not pose any serious threat to powerloom. It has been proved by the fact that even though the handlooms reservation orders have been on the statute book since 1950, the powerlooms have continued to proliferate and there is no reason to believe that any of these looms are likely to be closed due to the Reservation Order. The powerloom owners are only required to devesify their line of production so that they do not produce cloth reserved for handlooms. As already pointed out the reservation for handlooms has continued since 1950 for the protection of rural handloom artisans and their continued employment in the industry. Since the Government policy has always been to create more employment particularly in rural areas, it will be unthinkable to imagine the social problems that will be created if the employment of millions of handloom weavers is taken away by allowing powerlooms to produce all items without any reservation. Handlooms and handicrafts are the only traditional cottage industries which provide maximum employment in the rural country-side.Hence, we reject this point as well.59. It has already been noted from the observations of the high-powered Study Team under the Chairmanship of Mr. B. Sivaraman as to how every new powerloom will put out of action six handlooms in the country. A handloom actually is a family industry and not an individuals field alone.60. This means the families of the poor weavers are ruined by encouraging powerloom. It may be that the cost of production in the powerlooms sector is less but if it is the object of the Government to encourage handloom for continued employment of handloom weavers in rural areas, certainly, nothing worthwhile can be said against the impugned reservation. Besides, even under the Notification issued by the Textile Commissioner on 15-4-77 many of the items stated as being produced by the petitioner were reserved for the handloom sector. These items are sarees with borders, lungies, chaddars, bed sheets, bed covers, counter panes, low read pick cloth, table clothes, napkins, duster, towels and cotton crepe fabrics. If violating this order, the petitioner has been manufacturing these items which are specifically reserved for handlooms, it cannot be allowed to continue to indulge in such violation any further. Thus, we reject the argument complaining of violation of Article 14 of the Constitution.61. Sub-section (1) of Section 3 of the impugned Act states that the order specifying the articles for exclusive production of handloom could be issued for the protection and development of handloom industry from time to time. Therefore, the reservation is not for all time to come. It could be revised periodically. It is with this object in view, Rule 3(5) of the Handlooms (Reservation of Articles for Production) Rules, 1986 states as followsThe Advisory Committees may meet at such places and at such times as may be determined by the Chairman :Provided that the Advisory Committee shall meet at least once a year to review the list of reserved articles.Therefore, at least once in a year there could be a meeting of the Advisory Committee. From the counter affidavit it is clear that in order to have a deeper study of the problems relating to reservation of production by handloom three sub-committees were constitutedcotton and art silk fabrics,(ii) pure silk fabrics; and(iii) woollen and tribal fabrics.In order to gain first-hand knowledge of the poduction of these fabrics the sub-committees made field visits. While touring different centres the sub-committees invariably involved local Government representatives.64. It is averred in the counter affidavit that the sub-committee on silk visited powerloom weaving centres in Bangalore and Varanasi, while the sub- committee on wool during their visits to a number of places, including Panipat, Ludhiana, Kulu, Imphal and Srinagar had occasion to study the problems of the woollen powerloom industry alongwith those of the handloom industry. The Advisory Committee on cotton met the representatives of powerlooms, who placed their views before the sub-committee during its sittings at Madras and Bangalore. Thus, it will be amply clear from what has been stated above that the interest of the powerloom sector has been taken into account and powerlooms were represented albeit indirectly on the Advisory Committee.65. Moreover, the sub-committees formed by the earlier Advisory Committee had visited many a places in the country and discussed the matter with officers of the State Government and met persons representing different textile sectors. Apart from the reports received from the sub-committees, the representations received by the Government from various textile interests were duly considered by the Advisory Committee before making their recommendations. It is, therefore, incorrect to say that proper opportunity was not provided to the petitioners for making representations.66. It is important to note that in the Advisory Committee the representatives from powerloom sector, mills sector and powerloom silk sector have been specifically included. Therefore, it is meaningless to state that no opportunity was afforded to powerloom sector and that under Section 3of the impugned Act regard is had only to the handloom industry while under Clause (20) an overall view of all industries could be taken.