NAGAR RICE & FLOUR MILLS & ORS. v.

N. TEEKAPPA GOWDA & BROS. & ORS.

February 27, 1970 _

[J.C. SHAH, K. S. HEGDE AND A. N. GROVER, JJ.]

Rice Milling Industry (Regulation) Act, 1958 (21 of 1958)-Shifting of existing rice mill to new site-Prior permission under s. 8(3') (c) how far necessary-Cons.iderations in giving such permission--Another mill situated near new site objecting that it8 business would be adversely affected-Objection whether sustainable under Art. 19(1)(g) of Constitution- Locus standi of party making such ob; ection.

According to s. 8(3)(c) of the Rice Milling Industry (Regulation) Act, 1958, no owner of a rice mill "shall without the previous permissin of the Central Government, change the location of the whole or any p_art of that rice mill in respect of which licence has been granted under s. 6".

The lands and buildings of the appellants' rice mill in the State of Mysore were acquired under the Land Acquisition Act 1894 and the award expressly recited that the appellants were entitled to remove the machinery of the mill.

The appellants were allotted a new site by the Mysore Government. After obtaining sanction from the Tehsildar the appellant shifted their machinery to the new site. Thereafter the Director o"f Fo<id and Civil Supplies in purported exercise of the delegated powers of the Cell tral Government passed an order under s. 8(3)(c) sanctioning a change in the location of the appellants' rice mill. He overruled the objection of the respondents whose rice mill was situated near: the new site: The respondents challenged the order before the High Court in a writ petition.

The High Court having allowed the same the appellant obtained special leave and appealed to this Court. The questions that fell for consideration were: (i) whether the shifting df the appellants' rice mill tO the new site without prior permission of the Central Government as required by s. 8( 3) ( c) of the Act, was legal, and if not whether it affected the respondents' right under Art. 19(1)(g) of the Constitution; (ii) whether the order under s. 8 ( 3 )( c) was bad for the reason that it did not take into consideration the relevant factors such as mentioned in s. 5 ( 4) of the Act.

HELD: (i) Section 8(3)(c) is merely regulatory: if it was not complied with the appellants may probably be exposed to a penalty, but a competitor in the business could not seek to prevent the appe1lants from exercising their right to carry on business, because of the default, nor could the rice mill o'f the appellants be regarded as a new rice mill. C.ompetition in the trade or business may be subject to such restrictions as are permissible and arc imposed by the State, by a law enacted in the interests of the general public un.dcr Art. 19(6), but a person cannot claim indepen.

dently of such r::striction that another person shall not carry on business or trade so as to affect his trade or business adversely. The appellants complied \Vith the statutory requirements for carryingon rice milling operations in the building on the new site.

Even assumir1g that no previ ous permission was obtained, the respondents would have no locus standi for challenging the grant of the pern; ission, because no right vested in the respondents was infringed. [851 G-H]

(ii) The considerations which are prescribed by sub-s. (4) of s. 5 only apply to the grant of a permit in respect of a new rice mill or a ilefunet

rice mill. They have no application in considering the shifting the location of an existing rice mill. In respect of a new or defunct mill a permit and a Jicence are both required ; in respect of an existing rice mill only a licence is required. The conditions prescribed by sub-s. (4) of s. 5 only apply to the grant of a permit and not a licence. Bys. 8(3) (c) it is made one of the conditions of the 1icence that the location of the rice m.ill shall not be shifted without the previous permission of the Central Government. It is true that the appropriate authority clothed with the power must consider the expediency of permitting a change of location.

But there is no statutory obligation imposed upon him to take into consideration the matters prescribed by subs. ( 4) of s. 5 in granting the permis~ sio_n to change the location. [852 E-G]

On the facts o'f the present case the permissiori granted under s. 8(3)(c) could not be said to be granted without considering the relevant circumstances.

CIVIL APPELLATE JURISDICTION : Civil Appeal No. 2228 of 1969.

Appeal by special leave from the judgment and order dated

Sptember 26, 1969 of the Mysore High Court in Writ Petition No. 496 of 1969.

S. V. Gupte, S. S. Java/i, H. N. Narayan and B. Datta, for the appellants.

H. R. Gokhale, C. R. Somasekharan, H. G. Balakrishna, and P. C. Bhartari, for respondent No. 1.

The Judgment of the Court was delivered by

Shah, J.

This appeal is filed with special leave against the ju.dgment of the High Court of Mysore settiltlg aside the order dated January 20, 1969, of the Director of Food & Civil Supplies oi the State of Mysore under the Rice Milling Industry (Regulation) Act 21 o.f 1958.

The appellants established a rice mill many years ago in village Mudugoppa, DiStrict Shimoga, in the fonner Indian State of Mysore and carried on milling operations. The respondents-N. Teekappa Gowda & Bros.-established ri 1963 a rice mill in village Kelandur at a distance of about 1 t miles from the site of the appellant's mill.

A notification under the Land Acquisition Act 1894 was issued in March 1966 for compulsory acquisition of the land and buildings on the site of the appellants' rice mill for use in the Sharayathi Hydro-Electric Project.

In October 1967 an award acquiring the laind and buildings was made.

The award expressly recited that the appellants were entitled to remove the machinery of the rice mill.

The appellants in the meanwhile applied to the Special Officer for Rehabilitation o.f the State of Mysore to allot them a suitable •

- ';

"'---~---__ ,_ . "· new , site.in which heir rice.mill may be.located. 'Tue. Special Tahs1ldar for Rehabilitation sanctioned that the rice mill building may be shifted to a site in Survey No: 233 or Mudugoppa granted to the appellants by the State of Mysore.

By order dated January 20, 1969,· the Director of Food & Civil Supplies passed an order sanctioning the chang~ in the location of the appellants' rice mill from its original site to the new site "as per the provisions contained in Section'8(3) (c) of the Rice Milling Industry (Regulation) Act,

1958", and rejected the objection raised by the respondents ..

. r . . .

The respondents then moved a petition in .the High Court ... of Mysore for a direction quashing the order dated Jannary 20, 1969passed by the Director of Food & Civil Supplies on the plea that the appellant's mill was moved to.a place in the vicinity of their rice mill iii the Kelandur village n contravention of ss. 5 and 8 of the Rice Milli.ng Industry (Regulation) Act, 1958, and in conseqnence of the removal of the appellants' mill "their business was likely to . be adversely affected" .•.

The High Court held that pefmis&ion nuder s. 8 (3)(c) was a . condition precedent to the shifting of the location of the rice mill, and since the appellants did not obtain the previous permission to

shit the mill; the order of the Director was liable to be "struck down as ultra vires". In the view of the Court, by the shifting of the appellants' rice mill the respondents' busim; ss was directly affected and they had a right to challenge the legality of the order.

The High Court upheld the claim of the respondents on the sole ground that the order of the Director was made in violation of the mandatory injunction of the Rice Milling Industry (Regulation) Act 21 of-1958 and it prejudicially affected the business of the respondents as rice-millern.

A •

The. Parliament enacted the Rice Mi!ling Industry (Regulation) F Act 21 of 1958 to regulate rice milling. By s.' 3(a) a "defunct rice-mill" is defined as meaning "a rice-mill in existence at the commencement of this Act but in which rice-milling operations have not been carried on for a period exceeding one year prior ·

to such commencement". By s. 3 (b) "existing rice-mill" means "a rice mill carrying on rice-millilllg operations at the commence- G ment of this Act, and includes a rice-mil! in existence at such commencement which is not carrying on rice-milling operations but.in which rice-milling operations have been carried (Ill at any time within a period of one year . prior to such commencement".

By s. 2 ( e) ".new rice-mill'' means "a rice mill other than an existing rice mill or a defunct rice mill".

Bys. 2(f) "rice mill" . H is defined as meaning "the plant and machinery with which and the. premises, including the precincts thereof in which or in any part of which, rice-milling operatiqri.s is carried on." Bys. 5 .Provision

A is made for grant ot pennits in respect of new or defunct rice mill'.

~1 By sub-s. ( 1) of s. 5 it is provided that any person or authority may make an application to the Central Government for the grant of permit for the establishment of a new rice mill, and any owner of a defUJnct rice mii! may make a like application for the grant of a permit for re-commencing rice-milling operation in such mill.

B By sub-s. ( 3) if, on. receipt of any such application for the grant of

a permit, the Central Government is of opinion that it is necessary so to Jo for ensuring adequate supply of rice, it may, subject to the provisions of sub-s. ( 4) a1nli sub-s. ( 5) grant the permit specifying therein the period within which the mill is to be established.

Subsection ( 4) provides : c

"Before granting any petmit under sub-section (3), the Central Government shall cause a full and complete investigation to be niade in the prescribed manner ion respect of the application and shali have due regard to--

(a) the number of rice mills operating in the locality;

(b) the availability of paddy in the locality;

( c) the availability of power and water supply for the. rice mill in respect of which a permit is applied for;

( d) whether the rice mill in respect of which a permit is applied for will be of the huller type. sheller type or combined heller-huller type;

( e) Whether the functioning of the rice mill i, n respect

of which a permit is applied for would cause substantial un-employment in the locality;

(f) such other particulars as may be prescribed."

By sub-s. ( 6) a permit granted under s. 5 is effective for the period specified therein or for such extended. period as the Central Government may think fit to allow in any case.

Section 6 provides for grant of licences. Any owner of an existing ric~ mill or of a rice mill in respect of which a permit has been granted under s. 5 may make an application to t+te licensing officer for the grant of a licence for carrying on rice-milling; operations in that rice mill.

By sub-s. ( 3) of s. 6 the licensing officer is obliged to grant the licein'.ce on payment of the fee and on deposit of such sum as may be prescribed as security for due .performance of the conditions.

By sub-s. ( 4) a licence granted under s. 6 is valid for the period specified therein. and niay be renewed from time to time for such period and on payment of such fees and on conditions as may be prescribed.

Section 7 provides for revocation, suspension and amendment of .l licences.

By s. 8 restrictions are placed on rice mills.

Under sub-s. ( 1) no person or authority shall, after the commencement of the Act, establish any new rice mill except UDder and in accordallce

ith a. permit granted under s. 5.

By sub-s. (2) no owner of a

ne _mill shall,. after the commencement of tl1c Act, carry on ricemilhng opera!Ion except under and in accordance with a Jicenc<' B granted under s. 6.

By sub-s. (3), itnsofar as it is relevant it is provided: '

"No owner of a rice mil!,- { a)

{b)

(c) shall, without the previous permission of the Central Government, chanee the location of the whole or any part of the ace mill in respect of which a licence has been granted under section 6;

" D

Section 13 provides .for penalties for cuntravention or attempts to contravene or abetting the contravention of any of the provisions, inter alia, of s. 8.

Power of the Central Government to issue a permit under s. 5 and under s. 8 ( 3) ( c) to change the locatiun of rice mill is delegated to the Director of Food & Civil Supplies.

The Director of Food & Civil Supplies sanctioned, in exercise of the power under s. 8(3) (c) of the Act that the location of the rice mill of the appellants may be shifted.

The High Court declared the order invalid on the ground that the previous sanction had not been obtained.

The Court observed that "where a.n officer F granting a licence or passing ain administrative order exceeds his powers and makes an order in violation of the provision which clothes him with that power, his order is liable to be struck down'', and since s. 8 (3) ( c) contemplated gr3jllt of pennission for change of location before the plant and the rnachinery were actually shlfted to a new site. the Director of Food & Civil Supplie; had G no power to grant pennission after the machinery and plant had been shifted. •

The rice mills for the purpose of the Act were divided into three classes : defunct rice-mills, existing rice-mills and new rice-mills.

Defunct rice mills are those wnich had ceased functioning for a H period exceeding one year prior to the commencement of tlie Act; existing rice mills are th.ose which carry on rice milling operations

t the commencement of th.e Act or had carried on rice milling

A operatio.ns within one year prior to the commencement of the Act; and new rice-mills are those which are other than existing rice mills or defunct rice mills. In respect of all rice mills a licence for carrying on rice milling operations under s. 6 must be obtained.

Jn respect of a rice mill new or defunct a permit under s. 5 has first to be obtained.

No permit is required by an existing rice B mill.

Jn granting the permit the authority has to take into consideration matters which are specified in sub-s. ( 4) of s. 5. The licensing authority must on application issue a licence to an existing rice mill or a rice mill in respect of which a permit has been granted under s. 5. For change in the location of any ric~ mill in respect of which a licence has been granted under s. 6 the previous per- C mission of the Central Government is necessary under s. 8(3) (c) ..

The Parliament has by the Rice Milling Industry (Regulation) Act, 1958, prescribed limitations that an existing rice mill shall carry on busniess only after obtaining a licence and if the rice mill is to be shifted from its existing location, previous permission of th.e Central Government shall be obtained. Permission for shi.ftirtg their rice mill was obtained by the appellants from the Director of l'cxi<l & Civil Supplies. The appellants had not started rice milling operations before the sanction of the Director of Food & Civil Supplies was obta\ned.

Even if it be assumed that the previous sanction has to be obtained from the authorities before the machinery is moved from its existing site, we fail to appreciate what grievance the respondents may raise against the giant of permission by the authority permitting .the installation of machinery on a new site. The right to carry on busi, ness being a fundaiµental right under Art. 19(1) (g) of the Constitution, its exercise is subject only to the restrictions imposed by Jaw in the interests of the general public under Art. 19(6)(i).

Section 8(3) (c) is merely regulatory: if it is not complied with the appellants may probably be exposed to a penalty, but a competitor in the business cannot seek to preveint the appellants from exercising their right to carry on business, because of the de.fault, nor can the rice mill of the appellants be regard as a new rice mill.

Competition in the trade or business may be subject .to such restrictions as are permissible and are imposed by the State by a faw enacted in the interests of the general public under Art. 19 ( 6), but a person cannot claim independently of such restriction that another person shall not carry on business or trade so as to affect his trade or business adversely. The appellants complied with the statutory requirements for carrying on rice milling operations .in the building on the new site. Even assumin11 that no previous pennission was obtained, the respondents would have no locus standi for challen~-

ing the grant of the permission, because no right vested in the respondents was infringed.

But Mr. Gokhale for the respondents contended that in granting the permission under s. 8(3)(c) the authoritwas bound to take iillto acCO\lnt matters which govern the issue of a permit under s. 5(4) of the Act.

Counsel submitted that sub-s. (3)(c) of s. 8 was enacted with a view to ensure adequate milling facilitie; and to prevent unfair competition and on that account it is provided that when the location of an existing rice mill has to be shifted, the authority had to take into consideratiQn the jllumber ol rice mills operating in the locality; the availability of power and water supply for the rice mill in respect of which a permit is applied for; whether the functioning of the rice mill in respect of which a permit is applied for would cause substantial un-employment in the locality; and such other particulars as may prescribed.

According to counsel, siin<:e the Act was intended to regulate the carrying on of business of rice mills in the country, it was implicit ins. 8(3)(c) that the authority sanctioning the change of location ol a riee mill shall consider whether another person was by the shifting likely to be prej'udiced thereby.

This counsel says, the Director did not consider, and .GD that account the order is liable to be set aside because the right of the respondents is infringed. This argument was not advanced before the High Court, and, in our judgment, has no substance.

The considerations which are prescribed by sub-s. ( 4) of s. 5 only apply to the grant of a permit i; n respect of a new rice mill or a defunct rice mill.

They have no application in considering the shifting the location of an existing rice mill. In respect of a new or defunc~ rice mill a permit and a licence are both required : iin respect of an existing rice mil! only a licence is required.

The conditions prescribed by sub-s. ( 4) of s. 5 only apply to the grant of a permit and not to a licence.

By s. 8 (3) ( c) it is made one of the conditions of the licence that the location of the rice mill shall not be shifted without the previous permission o:

the Central Govemme11t. , Jt is true thzt the appropriate authority . clothed with the power must consider the expediC\DCY of permittb5

a 'change of location.

But there is no statutory obligation imposed upon him to take into consideration the matters prescribed by sub-s. ( 4) of s. 5 in granting the permission to change the locMion.

The appellants had been carrying on business in miJling rice for more than 30 years and the mill was by reason of the proposal ta submerge the site in the Sharawathi Hydro-Electric Project had to be shifted from its location.

The State allotted another piece of land to the appellants and did not acquiri;: their machinery and permitted erection of their rice mill building on the new location.

This was done with a view to cause minimum hardship to the appet-

!ants arising in consequence of the proposed construction of the dam resulting in submergence of their land. The State also granted penuission to the appellaints to change the location under the Rice Milling Ind:istry (Regulation) Act, 1958. The permission cannot be said to he granted without consideration of the relevant circumstanes.

The ppcal is allowed .and the petition filed by the respondent N. Teekappa Gowda & Bros. is ordered to be dismissed with costs throughout in fal'Our of the appellants.

G.C.

Appeal allowed.