Dismissed

The Lord Krishna Sugar Mills Ltd., and Another v. the Union of India and Another

Supreme Court6 May 19591959 INSC 63 · [1960] 1 S.C.R. 391959 INSC 63

Case brief

AI extract

What is this about?

The Supreme Court considered the constitutional validity of the Sugar Export Promotion Act, 1958, which compelled manufacturers to export sugar at a loss. The majority held that the restrictions were reasonable as the loss could be recouped by a concurrent price increase notification under the Essential Commodities Act. The dissenting judges held that the notification under a different Act could n

What did the court decide?

Petitions dismissed with costs.

What the court decided

The Lord Krishna Sugar Mills Ltd… — Constitutional and Fundamental Rights | Supreme Court (1960)

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S.C.R. SUPREME COURT REPORTS 39

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before the Tribunal was to produce the statements x959 recorded by the manager during what we have called Phulbari Tea Estati investigation. This left the matters where they were v. and Das had never an opport.unity of questioning the Its Workmen witneRRes after knowing in full what they had stated Wanchoo J. against, him. In these circumstances we are of opinion that the fiw.ling of t.he •rrilmnal that the enquiry i11 this case was uot proper is correct and must Htand.

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'Ve therefore dismiss tlw appeal. We should, howeYer, like to make it elear tlrnt the order of tlw Tribunal fixing grant of compcnsa,tion till the date of payment must be taken to be limited to the sum of Rs. 11,125, which has been deposited in this Court in pursuance of this Court's order of April 22, 1957 and Das will not be entitled t.o anything more, as further stay of payment was pursuant to the order of this Court. In the circumstances we are of opinion that the parties should hear their own eosts of thits Court.

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Appeal dismis8ed.

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THE I.ORD KRISHNA SUGAR MILV3 LTD., AND ANOTHER

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1959 May 6.

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THE UNION OF INDIA AND ANOTH"ll~R

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(and connected petition)

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(B. l:'. SINHA, .J AFER IMAM, ,J. L. KAP(TR, A. K. SARKAR, SUH"HA RAO AND M. HIDAYATULLAH, ,TJ.)

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Constitution--Fundami:ntal Rights-Rcsirictions on-Reasonableness, relei·anf. considerations for fudging-Enactment obliging sugar manufacturers to s11.pply sugar for export ,,f loss-Notijicat-ion tinder another enactment increasing price of sugar for internal sale for recouping loss--Whether can be tulwn into considerationDiscrimination-Sitgar Export Promotion Act, I958 (30 of I958), ss. 5, 6, 7, 8, and 9-Constifation of India, Arts. I4 and I9Essential Commodities Act, I955 (IO of I955), s. 3--Sugar (Control) Order, I955. cl. 5·

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The petitioners challenged the constitutionality of the Sugar Export Promotion Act, 1958, which was enacted for the purpose of exporting sugar with a view to earning foreign exchange. The impugned Act imposed the following restrictions on the owners of

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SUPREME COURT REPORTS

[1960(1))

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z959 factories producing sugar by the vacuum pan process: (i) it -. . obliged them to deliver to the export agency specified by the The Lord E.rishna Central Government the quota of sugar allocated to them; (ii) it Sugar Mills Ltd .• made them suffer a loss on this delivery of sugar; and (iii) it and Another exposed them to a penalty in case the delivery \vas short of the v. quota. By a notification issued under the Sugar (Control) Order, Thi! trnion of India 1955, which was made under·the Essential Commodities Act, 1955, and Another the Central Government increased the price of sugar for internal sales by 50 nP. per maund to enable the owners to recoup the loss suffered by them by the delivery of the sugar for export. The petitioners contended that it was not permissible to take the notification issued under another statute into consideration and that the impugned Act offended Arts. 14 and l9(1)(f) and (g) of the Constitution. Held, (per Sinha, Imam, Kapur, Sobba Rao and Hidayatullah, JJ., Sarkar, J. dissenting) that the impugned Act was constitutionally valid.

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Per Sinha, Imam, Kapur and Hidayatullah, JJ. The restrictions placed by the Act upon the fundamental rights of the petitioners under Arts. 19(1)(0. and (g) were not unreasonable as arrangements \Vere made to save them frotn Joss by increasing the price of sugar for internal sales, thus passing on the loss to the consumers in India. The reasonablrness of the restriction and not of the law was to be determined, and if the restriction was under one la\v but countervailing advantages were created by another law passed as part of the same legislative plan, the Court must take that other law into account. The reasonableness of the restriction was to be judged at the time it was challenged and in the context of the circumstances then existing. The notification of the Central Government increasing the price of sugar to enable the recoupment of the loss occasioned by the export could be taken into consideration in judging the reasonableness of the restrictions.

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State of Madras v. V. G. Row [ro52j S.C.R. 597; Virendra v. The Slate of Pmijab, [1958] S.C.R. 308; Aru11achalam Nadar ''· State of Madras, 1959 S.C.J. 297; Attorney-General for Alberta v. Attorney-General for Canada, (1939) A. C. II7; Ladore ,., Bennet, (1939) A.C. 468 and Pillai v. Mudanayake, (1953) A. C. 514, relied on.

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The foreign export served the national interest by stabilising· the sugar market and stabilised national economy by earning foreign exchange. The loss, if any, was spread over many factories and was so small as not to amount to an unreasonable restriction.

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The Act did not offend Art. r4 of the Constitution in selecting sugar produced by the vacuum pan process for export and in leaving out sugar produced by other methods and other commodities from the mischief of the Act. The Government was the best judge as to which commodities were most likely to earn

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S.C.R.

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SUPREME COURT REPORTS

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foreign exchange and the selection made was justifiable as a reasonable classification which was related to the object of the Act of earning foreign exchange. •

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I959

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The Lord Krishna Sugar Mills Ltd., Mills Ltd., Ltd., and Another v.

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Per Subba Rao, J. In testing the reasonableness of the Sugar Mills Ltd., Mills Ltd., Ltd., restrictions imposed by the impugned Act it was not permissible and Another to take into consideration the notification under the Sugar v. (Control) Order, 1955, increasing the price of Sugar for internal The Union of India sales by 50 nP. per maund. The test of reasonableness of one Act and A11other could be made to depend upon the impact of another Act on it only when the earlier Act was made part of later :\ct or when both Acts were parts of the same legislative scheme t..r plan. To go beyond this would be to destroy the stability of legislation and to introtluce an uncertain element. To go further and to depend upon a notification of a transitory natui·e issued under an unconnected Act would be to place the statute in a fluid state. The impugned Act and the Essential Commodities Act were enacted for different purposes.

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} .

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State of Madras v. V. G. Row [1952] S.C..R. 597; AttorneyGeneral for Alberta v. Attorney-General for Canada (1939) A. C. u7; Ladore v. Bennet (1939) A. C. 468 and Pillai v. Mudanaya/1e, (1953) A. C. 514, distinguished.

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The restrictions imposed by the impugned Act were not unreasonable as the j_ct served the national interest by earning foreign exchange for the State and building up foreign markets for the future prosperity of the sugar industry. Per Sarkar, J. The impugned Act which made the petitioners suffer a loss on the sale of a part of their produce imposed unreasonable restrictions on their fundamental right to carry on their business and was invalid. Though in deciding the reasonablene1>s of the restrictions imposed by the impugned Act all the prevailing conditions and circumstances had to be considered, the notification increasing the home price of sugar could not be taken into consideration. The impugned Act neither made it obligatory on, nor empowered the Government to take any steps to recoup the loss caused to the petitioners. The increase in the price dependetl solely on the arbitrary discretion or generosity or sense of fair play of the Government. It would be intolerable in any legal system that a statute should be legal when the Government chose to do a thing and illegal when it undid it and so on from time to time at the choice of the Government. Besides, there was nothing in the Essential Commodities Act or the Sugar (Control) Order which authorised the Government to increase the price for the sake of recouping to the manufacturers the loss caused to them by the impugned Act, and the validity of the notification increasing the home price of sugar was doubtful.

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State of Madras v. V. G. Row [1952] S.C.R. 597, distinguished. The impugned Act caused loss to the petitioners which was not negligible and thus imposed unreasonable restrictions on 6

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42 SUPREME COURT REPORTS [1960(1 )]

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'959 The Lord J<rishn(' SugarMillsLtd., andAnother v.	theirrighttocarryontheirbusiness. Therestrictionscouldnot be fustified on tliegroundtil<:ittheyresultedin stablisingthe sugarindustryastheindustrydid notrequireanystabilisation. Theexport\Vasnottob<·n1adcoutoftheexcess ofproduction overinternalconsumptionandin factproductioninIndiahad al\vays been lessthaninternalconsumption.
The UnionofJndir' and Anotiter	0RIGINAI.,JuRISDIC'rION:Petitions Nos. 9and14of 1959. PetitionsunderArticle:J2oftheConstitutionof IndiafortheenforcementofFundamentalRights. _A.V.Viswa,'rw,thvSastri,_and_G.C."o/Iathur,_forthe petitionerninPetitionNo.9of1959. 31.C.Setalvad, Attorney-GeneralofIndia,B.Sen and_R.H.Dhebar,_for respondent No.1inboththe petitions. J}[.C.Setalvad, Attorney-GeneralofInd,ia,B.Sen and_B. P.Jlfaheshwari,_for respondent No.2inPetition No.9of1959. _N.C. Chatterjee_and_G.C.jfathur_forthepetitioners inPetitionNo.14of1959. _B.Sen_and_B.P.Jlfahesk1m.ri,_for respondent No. 2 inPetit-ion No.14of1959. 1959.l\fay6.ThejudgmentofRP.Sinha,Jafar Imam,J_L.Kapurandl\LHidayatul!ah,JJ,,was deliveredbyM.Hidayatu!l,1h,.J.A.K.Sarkar,J., andK. Snbba Rao,J.,deliveredseparatejudgments.
HidayatullahJ-	HIDAYATULLAHJ.-W'ritPetitionNo. 9of1959 hasbeen filedbytheLordKrishnaSugar Mills, Ltd., SaharanpnrandShriSushi!Kumar,a Directorofthe said Mills.Itwasheardalongwith"'ritPetition No.14of1959,whichhasbeen tiledbyShivaPrasad Banarsidas Sugar Mills, Bijnor,throughSethMunnalal andalsobyhim in his own name. These Millsare hereinafter referredtoastheL. ICS.MillsandS.P, R Mills, respectively.Thepetitions raisethesame con- tentions,butin'WritPetitionNo.14of1959,there is one more circumstance, which will be mentioned later. ThepetitionsaredirectedagainsttheUnionofIndia andtheIndianSugarM.illsAssociation(ExportAgency Division) Calcutta.Thepetitioners challenge_interalia_

'959
The Lord J<rishn('
SugarMillsLtd.,
andAnother
v.

theirrighttocarryontheirbusiness.
Therestrictionscouldnot
be fustified on tliegroundtil<:ittheyresultedin stablisingthe
sugarindustryastheindustrydid notrequireanystabilisation.
Theexport\Vasnottob<·n1adcoutoftheexcess ofproduction
overinternalconsumptionandin factproductioninIndiahad
al\vays been lessthaninternalconsumption.

The UnionofJndir'
and Anotiter

0RIGINAI.,JuRISDIC'rION:Petitions Nos. 9and14of
1959.
PetitionsunderArticle:J2oftheConstitutionof
IndiafortheenforcementofFundamentalRights.
_A.V.Viswa,'rw,thvSastri,_and_G.C."o/Iathur,_forthe
petitionerninPetitionNo.9of1959.
31.C.Setalvad, Attorney-GeneralofIndia,B.Sen
and_R.H.Dhebar,_for respondent No.1inboththe
petitions.
J}[.C.Setalvad, Attorney-GeneralofInd,ia,B.Sen
and_B. P.Jlfaheshwari,_for respondent No.2inPetition
No.9of1959.
_N.C. Chatterjee_and_G.C.jfathur_forthepetitioners
inPetitionNo.14of1959.
_B.Sen_and_B.P.Jlfahesk1m.ri,_for respondent No. 2
inPetit-ion No.14of1959.
1959.l\fay6.ThejudgmentofRP.Sinha,Jafar
Imam,J_L.Kapurandl\LHidayatul!ah,JJ,,was
deliveredbyM.Hidayatu!l,1h,.J.A.K.Sarkar,J.,
andK. Snbba Rao,J.,deliveredseparatejudgments.

HidayatullahJ-

HIDAYATULLAHJ.-W'ritPetitionNo. 9of1959
hasbeen filedbytheLordKrishnaSugar Mills, Ltd.,
SaharanpnrandShriSushi!Kumar,a Directorofthe
said Mills.Itwasheardalongwith"'ritPetition
No.14of1959,whichhasbeen tiledbyShivaPrasad
Banarsidas Sugar Mills, Bijnor,throughSethMunnalal
andalsobyhim in his own name. These Millsare
hereinafter referredtoastheL. ICS.MillsandS.P, R
Mills, respectively.Thepetitions raisethesame con-
tentions,butin'WritPetitionNo.14of1959,there is
one more circumstance, which will be mentioned later.
ThepetitionsaredirectedagainsttheUnionofIndia
andtheIndianSugarM.illsAssociation(ExportAgency
Division) Calcutta.Thepetitioners challenge_interalia_

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S.C.R. SUPRE:\IE COURT REPORTS

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the constitutionality of the Sugar Export Promo- z959 tion Act, 1958 (30 of 1958), which shall hereafter be re1erre( "' 1 to as t ie J A ct. "'h _i. .ey quest10n a so t c ega Ity · l h 1 ]" Sugar The Lord Krishna Mills Ltd., The Lord Krishna Mills Ltd., Mills Ltd., Ltd., of certain orders passed by the second respondent and Another purporting to be under the Act. v.

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z959 Sugar The Lord Krishna Mills Ltd., The Lord Krishna Mills Ltd., Mills Ltd., Ltd., and Another v. The Union °1 India aud .lnnllter

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Before describing how this matter came before the The Union °1 India C ourt,^· It · · IS convenient to give t e · h RC J rnmo o f' t I 10 d.Ct A aud .lnnllter and to set out some of it8 provi,-;ions. On June 27, Hidayatul/ahf. 1958, the President promulgated the Snga.r Export Promotion Ordinance, 1958, which wa.8 repealed by and re-enacted as the Act on September 16, 1958. The Ordinance was in the 8ame terms as the Act, and it is not necessary to refer to the Ordinance separately. more so because bys. 14 of the Act which repealed the Ordinance, anything done or any action taken under the Ordinance is rleemed to have been done or taken under the Act, a.nd the Act itself is deemed to have commenced on the 27th day of June, 1938.

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Both the Ordinance and the Act were passed to provide for the export of sug~ir in the pi.1blic interest. and for t-he levy and collection in certain cirrumRtances of an additional duty of excise on sugar prodneed in India. To achieve this objective, the Act; :111thorises the Centl'al Government (as did the Orcliuance previously) to specify an export agency to perform the functions mentioned in the Ad., and the Central Government by a not.ification issued the r-;amc day, specified the Indian Sugar Mills Association (Export Agency Division) Calcutta, as the export agency.

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The Aet next provides that the Central Government may by notification in the Officia.l Gazette, fix the quantity of sugar to be . exported during any period taking into consideration :

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(a) the quantity of sugar available in the country; (b) the quantity of sugar rec1uired for consumption in the country ; and

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(c) the necessity of exporting sugar with a view to earning foreign exchange in the public interest, but, so as not to exceed 20 per cent. of the quantity to be produced in India in the season eudin,g with the month of October falling within that year. The Central

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SUPREME COURT R.EPORTS [1960(1)]

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I959 Government fixed 50,000 tons as the quantity to be - exported up to December 31, 1958, later extended to The Lord Kriohna J 31 19"9 Th" ffi t" 1 · d 5^{,.garMill' Ltd..} anJuary , n . IS no 1 ca Ion was a so Issue and Another O!l une 27' 1958· v. Section 5 of the Act enables the Central Govemment The Union of India to apportion, by order in writing, the quantity to be and Another exported among " owners " of factories, the word Hidayatullah 1. "factory" being confined to a factory where sugar is produced by the vacuum pan process. The term "owner " is defined to include transferees, and agents and managers under Industries (Development and Regulation) Act, 1951. The apportionment of the quantity of sugar to be exported is to be in proportion to the quantity of sugar produced or likely to be produced by the owners during the season referred to earlier. On the communication of the m-der to an owner, the quantity so apportioned is deemed to be the export quota for the factory ofthat owner.

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Section 6 then provides that on demand by the export agency, every owner shall deliver to it from time to time, sugar procluced in his factory in such quantities (not exceeding in the aggregate his export quota fixed for the factory or group of factories, as the case may be), of such grade, in such manner, within such time and at such place, as may be specified by the export agency in this behalf. If the sugar is delivered by a:-1 owner in accordance with the provisions of this section, he retains no rights in such sugar except his rights to receive ·payment therefor under s. 9 of the Act.

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Section 7 provides for levy of additional excise duty on sugar despatched from the factory for consumption in India, if the owner of a factory does not fulfil the demands under s. 6. It provides:

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"(1) Where sugar delivered ·by any owner falls short of the export quota fixed for it by any quantity (hereinafter referred to. as the said quantity), there shall be levied and collected on so much of the sugar despatched from the factory for consumption in India as is equal to the said quantity, a duty of excise at the rate of seventeen rupees per maund.

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S.C.R. SUPREME corRT REPORTS

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(2) The duty of excise referred to in sub-section (1) I959 - shall be in addition to the duty of excise chargeable on sugar un d er an.y ot h er 1 aw ior c th e time emg . b . 111 . .iorce, c The Sugar Lord Krishna Mills Ud., and shall be paid by the owner to such authority as and Another may be specified in the notice demanding the payment v. of duty and within such period not exceeding ninety The Union ~1 India days as may be specified in such notice. and Another

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(3) If any such owner does not pay the whole or Hid1iyatullah J. any part of the duty payable by him within the period referred to in sub-section (2), he shall be liable to pay in respect of every period of thirty days or part thereof during which the default continues a penalty which may extend to ten per cent. of the duty outstanding from time to time, the penalty being adjudged in the same manner as the penalty to which a person is liable under the rules made under the Central Excises and Salt Act, 1944 (I of 1944), is adjudged."

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By sub-s. (4) of this section, the provisions of the Central Excises and Salt Act, 1944 and the rules made thereunder are made applicable as far as may be, including those relating to refunds ·and exemptions from duty in relation to the duty mentioned in this section or any other sum due as a penalty.

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Section 8 then deals with the export by the export agency of sugar delivered to it. The section also authorises the sale of such sugar within India under certain circumstances. The section may be rcproducerJ in full here, as its terms will torm the subject of consideratfon in the sequel.

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8(1) "The export agency shall take all practical measures to export sugar delivered to it under this Act:

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Provided that, if the export agency is of opinion that having regard to the quality of the sugar delivered to it by any owner, or to the expenses involved in transporting. the sugar from one place to another, or to the delay likely to be involved in exporting it,.or to the conditions prevailing in the markets for sugar, whether in or out of India, or to any other relevant circumstance, it is expedient so to do, the export agency may sell the whole or any part of the sugar in India

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46 SUPREME COURT REPOHTS [1960(1)]

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'959 >md may, if it thinks fit, purchase such quantity of - sugar as it may co1'.sider necessary for export at the TheLordf.rishna · t t'' • Sugar ,1till8 Ltd., <.1})J.)ro11r1a e .1n1e. and Ano""' (2) l•'or the purposos of sub-section (1), the export _ . v. . agency may itself sell sugar or permit the owner to sell Tiu·""'"" of 1"'¹ '"the whole or >:Lny part of the export quotn. in his aud Anolha . t . d t .· ' d ·1 •t } ' · h t h cus .o y a a pnce approve )y 1 on cone 1t10n t a. t e Hidayatullah ]. srilc-riroceeds arc' rniyable ~ to it." Section 9 deals with payments to owners who have delivered sugar for export. It provides n.s follows:

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(l) "The export agency shn.11, at such time as it thinks fit, make to the owners who ha.ve delivered sugar to it urnler this Act, payments dc,tc.rmined in accordance with the provisions hereinafter in this section contained.

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(2) From the tot.al sale-proceeds in respect of the quantity fixed for export under sec1 ion 4 for any year, there shall be deducted the total expenditure incurred by tho export. agency in respect of the sugar, whether by way of administrative expenses or otherwise, and the balance shall be apportioned among the owners in proportion to the quantity nf sugn.r deli\·ered by them respectively during tlmt ye»1".

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(3) In making any distribution under this section, the export 1igency shall make such adjustments as may he necessary having rc,gard to the grade of sugar t!elivcred hy tiny owner, the >tdjustnwnts being made on the basis of sugar of ISS-E-2fl grade and with reference to the price difforential schedule for different grades of sugar which the Central Government may, by notification in the OJficial Gazette, publish in this bC>half.

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(4) Notwithstanding anything eontn.ined in this section and subject to the rules which ma.y be nrnde in this behn.lf, the export agency may make on account payments to owners against documents of delivery of sugar furnished by them, and such payments shall be adjusted at the time of final payment."

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In the remaining five sections, the Act provides for aucilhtry matters, the hist (s. 14) incorporating the repeal of the Ordinance and sa vmgs. Section 10

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SUPl~EME COURT REPORTS

S.C.R.

reserves to the Central Government the power to give x959 directions to the export agency, and s. 11 allows the 1 ' l (' d l b" d" · The Lord Krishna ventra ..-overnment to e egate, su 1ect to c011 1t10ns Sugar ill ills Ltd .• if any, its functions under the Act to an officer or and Another authority specified by notification. It may be pointed v. out that the Chief Director, Directorate of Sugar and The i:nion of lndia Vanaspati, Ministry of :Food ttnd Agriculture, was and Another specified aH such in a notification issued on Juno 27, c · f' l llidayatullah J. 1958. Section 12 provides ior protect10n o ant 10rities, ands. 13 confers on tl].eCentral Government the power to make rules and includes a power to make a breach of any rule ·an offence punishable with fine extending to five thousand rupees. All such rules must be laid before Parliament, and may be modified by Parliament. Xo rules, however, have been made.

¶79

We next proceed to the facts of these two cases. By an order No. 6(53)/58-SC, dated ,June 27, 1958, the Chief Director, Directorate of Sugar and V anaspati, fixed 461 ·05 and 412·04 tons of sugar as the quantities apportioned to the L. K. S. Mills and the S. P. B. J\fills respectively. On July 17, 1958 the export agency wrote to the two owners informing them of the quotas and their equivalents in bags, intimating nJ1m that the supply would be required in Grade C-29, and/or Grade D-29 and/or Grade E-29. Inquiry was made as to the grades and quantities in stock with them. It was also stated in these letters - that a further communication would be sent in due course giving detailed despatch/ delivery/disposal instructions for the export quota. They were also informed that the Central Board of J{evenue had issued detailed instructions to the Collectors of Central Excise, and that it had been agreed that the order of the Chief Director (Sugar) served on the owners with copy to the Central Excise Officer of the fo,ctory concerned would also be the release order from the Sugar Directorate.

¶80

Different replies were sent by the two petitioners. The L. K. S. Mills replied that they had only sugar of D-28 grade, while the S. P. B. Mills replied that they had E-29. On August 24, 1958, the export agency wrote to them that the export quota was diverted for internal sale. They were told that they were permitted to

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48 SUPREME COURT REPORTS [1960(1)]

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'959 sell the "quotn, sug:tr" for iuternal consumption at the - price of Rs. 36, per maund for Grade D-29, fixed by The LordKr;dma the Government. The export agency asked the two 5 "!:~~;:!;";:a., Mills to Jet it know by telegram the grade in which the v. export quota was available, so that documents could The un;on of 1n<1;a be sent to enable (,hem to deliver sugar to their a11d A11othcr respective buyers. The export agency described the documents as follows : flidayatulla-11 J. "(1) A delivery order authorising the Central Excise Officer of your factory to deliver the quantity sold.

¶83

(2) This delivery order will be sent through the Punjab National Bank Ltd., attached to a demand draft drawn on you for the tJ.mount of the sale proceeds payable to us. Please pay this on presentation. (3) The sale proceeds payable to us will be calculated as in the following examples :-

¶84

Rs. Sale price itt Rs. 36 per maund D-29 Less Excise Duty to be paid by you

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Less 'on acco11nt' payment of Rs. I 0 per rnaun<l Amount for which draft will be drawn on you

¶86

After receiYing the delivery order you will pay the Excise duty and deliYcr the sugar to the buyer. .

¶87

" Gmde diffomntials will be allowed as per the Government Notification GSR. 661 d/30th July fixing ex-factory prices.

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The sale tmnsaction will be as between you and your buyer and the Export Agency cannot take any responsibility.

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\Ve now await to hear by telegram the grade availn,ble. Please also S<iy in your telegram to which branch of the Punjab National Bank we should send the documents."

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S.C.R. SUPREME COURT REPORTS

¶92

The facts from here progress differently with these r959 two petitone.rs, and they are stated separae~y. !he The Lord -;rishna L.K.S. Mills mformed the export agency their mab1hty Sugar Mills Ltd., to sell sugar at the controlled rate fixed by the Govern- and Another ment by its notification of July 30, 1958, as the market v. was very weak, and there were no purchasers of sugar The Union of India at the controlled rate even out of the releases made by and Another the Government for free sales. The export agency Hidayatullah J. reminded the L.K.S. Mills that the industry had agreed to finance the Export Agency Division by letting it have the sale-proceeds of sugar diverted for internal sale less Rs. 10 per maund as an "on account" payment. The export agency offered to show a concession to the L.K.S. Mills, and asked them to sell sugar in instalments of 1,500, 1,500 and 1,565 bags with a week's interval between each. It asked the L.K.S. Mills to co-operate and let the export agency send documents for 1,500 bags at Rs. 35·69 nP. per maund ex-factory. It appears that a mistake was made in putting down 1,000 bags, but the meaning was perfectly plain. The L.K.S. Miils, however, insisted that they were unable to sell sugar at the controlled rate, and that as they were in financial difficulties, it was not possible to honour the documents as suggested by the export agency.

¶93

The L. K. S. Mills proving obdurate, the export agency wrote on November 5, 1958, that it proposed to send documents for the full quota of 4,565 bags at Rs. 35·69 per maund. The L.K.S. Mills were requested to retire the documents immediately, as funds were needed urgently for purchase of additional quantities for export to replace the quota diverted for internal sale. It enquired the name of the bankers to whom the documents might be sent by the agency. The L.K.S. Mills, it appears, did not agree to any of the courses suggested, and the export agency wrote on November 27, 1958, that the L.K.S. Mills were requested to remit a sum of Rs. 1,88,216·63 nP. being the amount calculated at the rate of Rs. 35·69 nP. per maund in respect of the total sugar quota, less excise duty to be paid by the L.K.S. Mills and less "on account" payment of Rs. 10 per maund as indicated in the e&rlier letters,

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SUPREME COURT REPORTS [1960(1)]

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'959 It also stated that unless the remittance was received The Lord Krishna by Decem?er 5, 1958, the permission to sell the quota Sugar Mills Ltd., sugar for mternal consumption would be withdrawn. aud Another Subsequent to this too, the export agency wrote to . v. . the L. K. S. Mills saying that a demand draft for The Union °1 India Rs. 61,845·57 nP. was being sent, to which was attached and Another th e d e l" ivery or d er a dd resse d to t e h c entra I E xcISe . Hidayatullah ]. Officer of the factory for releasing the first instalment of 1,500 bags. The L.K.S. Mills were asked to pay the excise duty and to clear the bags from bond and to intimate to the agency that they had done so. Similar documents were prepared for the other instalments and forwarded through the Bank. The L.K.S. Mills, however, did not agree to this, and the export agency thereafter on December 18, 1958, sent a telegram that unless the drafts were retired immediately, the quota sugar should be kept ready for despatch so that delivery might be taken by the export agency. The export agency also informed the L.K.S. Mills that otherwise the name of the Mills would be communicated to the Chief Director, Sugar, as a defaulter. The export agency also sent an order for delivery of the quota sugar, and required the L.K.S. Mills to depatch it by goods train, freight to pay, consigned to the export agency. It also intimated that the Mills should draw on the export agency for the amount of excise duty paid by the Mills plus "on account" payment at Rs. 10 per maund. Much was made of the error in describing the quota as of D-29, but in view of what · had already been understood, it cannot be suggested that the L.K.S. Mills were in any way misled.

¶98

The L.K.S. Mills informed the export agency that their bank position did not allow them to honour the drafts, nor despatch the desired quantity of sugar at the rates mentioned by the agency. They also stated that they were not able to despatch more than 500 bags, as wagons over the Eastern Railway were limited. The export agency, however, did not agree. Finally, the export agency demanded remittance of the sum of Rs. 1,88,216·63 nP. by the 25th January, and gave the alternative to the L. K. S. Mills to despatch the sugar by that date according to the

¶99

, • •

¶100

S.C.R. SUPREME COURT REPORTS 51

¶101

¶102

despatch instructions communicated earlier. The r959 L.K.S. Mills wired saying that the Banks were demand- Th L d K . h ing interest and that the agency should instruct the su~a:~m;'~1';, Banks to forego interest. The export agency on and Another January 29, 1959, wired as follows : v.

¶103

"Your tel. twentyninth without prejudice and to Ths Union of India 'd · l' t' · t t• b k · and Another av01 serious comp ica ions we ms rue mg an waive _ interest. Regarding interest Committee will consider Hidayatullah 1. whose decision will be communicated in due course." The petition (No. 9 of 1959) was, however, filed on January 27, 1959, that is to say, two days earlier.

¶104

The facts relating to the S.P.B. Mills are as follows: After the letter of August 24, 1958 was sent, nothing appears to have been heard by the export agency. On November 27, 1958, the export agency asked the S. P. B. Mills to remit to it by December 15, 1959, Rs. 1,69,524. 77 nP. being the amount calculated in the same way as for the L.K.S. Mills. On December 14, 1958, in continuation of this letter a despatch order for the entire quota was sent in the same terms as in the other case. In reply, the S.P.B. Mills pointed out that they were working the Mills as short-term lessees, having obtained the lease from the High Court of Allahabad on payment of Rs. 6,10,000 as lease money and Rs. 1,00,000 as security on August 6, 1956. They also pointed out that they were required to purchase additional machinery, stores etc., for a sum of Rs. 5 lakhs, and that a sum of Rs. 3,43,500 was spent in connection with the repairs to the factory and wages for the period during which the factory was re-started. They further pointed out that they had suffered a loss of Rs. 2,40,000 in the last season and another loss of Rs. 50,000 on account of the strike of cane-growers in March, 1958; that all their sugar stock was pledged with the Punjab National Bank, Bijnor, against an advance of 75 per cent. of the price; and that there were arrears of cess amounting to about Rs. 5,50,000 and that the lease money amounting to Rs. 6,10,000 for the next season was also due. They therefore, expressed their inability to send any sugar: They also stated that if they redeemed the pledged sugar even after paying the "on account" money to the Bank,

¶105

52 SUPREME COURT REPORTS [1960(1))

¶106

z959 the Bank would be receiving Rs. 15-2-0 per maund - less than the controlled price· of sugar. They further Ts"' LoMrd Ku,.,L· htdna stated that it was not possible for them to sell sugar ugar ' s ., 1 . fi b h . d and Another at the contro led pnce xed y t e Drrectorate an v. ended by saying that they were not in a position to The Union of India despatch sugar, pointing out at the same time that and Another the Act was unconstitutional and not binding on them. The export agency, however, was not agreeable, and Hidayotullah ], it asked the S.P.B. Mills either to deliver the export quota or pay the net sale-proceeds for the same, pointing out that the Mills ran the risk of liability for the additional excise duty of Rs.17 per maund.

¶107

While matters stood at this stage ~nd the S. P. B. Mills had neither paid the amount demanded nor agreed to despatch the sugar, a petition was filed in this Court and a temporary stay was obtained.

¶108

The questions that have been raised in these petitions are many, but they can be grouped under two heads, viz., the vires of the legislation and the propriety of the action taken under it. The argument about the vires challenges the Act as a whole and also clause by clause. In regard to the vires of the Act, the petitioners draw attention to the statement of objects and reasons, incorporated in one of the affidavits in the case. According to them, the declared object of the Act is to earn foreign exchange. They contend that if foreign exchange is so urgently needed, there should have been uniform legislation compelling other sugar manufacturers, who do not manufacture by the vacuum pan process, also to export sugar. This argument is based on alleged discrimination and on Art. 14 of the Constitution. The petitioners further contend that manufacturers of commodities other than sugar are not compelled to export in a like manner, and thus there is further discrimination.

¶109

In our opinion, this argument is without substance. The power of Parliament to make laws in relation to foreign exchange is manifest. Entry No. 36 of the Union List specifically confers jurisdiction on Parliament to legislate in relation to foreign exchange. That Entry, if interpreted widely, would embrace within

¶110

¶111

¶112

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¶113

itself not only laws relating to the control of foreign I959 economic stability exchange but also to of its acquisition the country. to The better need for the n s~~ar L 0--;;~ 1;u;,;.: . h foreign exchange to finance the various development and Another schemes was, very properly, not disputed. It is thus v. plain. that the object of the Act is in the public interest. The Union of India If we are to exist as a progressive nation, it is very and Another necessary that we carve out a place for ourselves in Hidayat,.llah J. the International market. The beginning has to be made, and many a time, it is at a great loss. That the Central Government has selected the sugar industry for an export programme does not mean that it cannot make a classification of the commodities, bearing in mind which commodity will have an easy market abroad for the purpose of earning foreign exchange. During the Suez crisis, sugar was exported in large quantities from this country, and earned 12·4 crores as foreign exchange. There is nothing on the record to show that export of other commodities was not also undertaken, though it was pointed out in arguments that manganese ore was also exported in a similar manner to earn foreign exchange. It is quite obvious that the Central Government cannot order the export of all and sundry manufactured commodities from the country, without being assured of a market in foreign countries. Necessarily, the Government can only embark upon an export policy in relation to these products, for which there is an easy and readily available market abroad. For this reason also, sugar produced by the vacuum pan process may have been selected, because such sugar is perhaps in demand abroad and not.sugar produced by any other process. It must be realised that goods manufactured in our country have to stand heavy competition from goods produced abroad, and even this export can only be made at great sacrifice, and is made only to earn foreign exchange, which would not, otherwise, be available.

¶114

In this view of the matter, it cannot be said that there is discrimination in so far as sugar manufacturers by the vacuum pan process are concerned. Government is the best judge as to which commodities are

¶115

54 SUPREME COURT REPORTS [1960(1))

¶116

¶117

z959 most likely to earn foreign exchange, and the selection - . thus made is justifiable as a reasonable classification TheLordKrishna • h · 1 h b" f h A 1 h Sugar Mills Ltd., wh1c is re ated tot e o iect o t e ct, name y, t e and Another earning of foreign exchange. v. The next contention is under Arts. 19(1) (f) and (g) The Union of India and also 31 of the Constitution. The petitioners and Another contend that the whole export programme in respect of sugar amounts to an infringement of their fund- Hidayatullah ]. amental rights under Arts. 19(1) (f) and (g), and amounts also to a compulsory acquisition of their property without payment of compensation. The petitioners analyse the scheme of the Act, and state that it amounts to taking sugar from owners for sale abroad at such price as it may fetch, the owners being paid when such money is received, after deducting the expenses of the export agency and the cost of export. They state that the owners stand to lose, because, admittedly, sugar is going to be exported at a loss, and the loss is to fall on the owners of factories. They further state that if the necessity for foreign exchange was felt, the loss entailed in the earning of foreign exchange should be borne by Government or be distributed among all industries, or at least among all the sugar producers in the country. It is urged that the Act is an unreasonable restriction upon the fundamental rights to hold, acquire, and dispose of property and to carry on occupation, trade or business.

¶118

In reply, the learned Attorney-General on behalf of the Union as well as the Directorate of Sugar refers to the negotiations which took place between the Government and the sugar industry and the arrangements which were made to save owners of factories from the loss which is inevitable as a result of this export programme. We were taken through the various Control Orders which were passed by Government under the Essential Commodities Act about this time, fixing the. price of sugar for internal consumption. In particular, referenee is made to the Sugar (Control) Order, 1955, Notification No. G. S. R. 661/ ESS. Com/Sugar dated July 30, 1958. It is pointed out that by that Notification the price of sugar was increased by 50 nP. per maund on all internal sales

. ,

SUPREME COURT REPORTS

¶124

S.C.R.

¶125

to enable the factories giving their export quota to z959 recoup themselves for the loss, which might be entail- The Lord :.rishna ed. It was anticipated that the loss would be recouped sugar Mills Ltd., if there was an increase of 50 nP. per maund in and Another the price of sugar for internal consumption and the v . export quota was fixed at 2i per cent. of •the total The Union of India production of a factory for 1957 -58. The loss, it was and Anoth., expected, would be more than set off by the excess Hidayatullah J. price which the producers would be able to get for every 20 maunds sold for internal consumption. It is also pointed out that Government at that time did not wish to take over the work of export on itself and specified as the export agency, the Indian Sugar Mills Association, a body composed of 95 per cent. of the sugar mills in the country. The learned AttorneyGeneral also points out that more than 95 per cent. of the mills have stood by this arrangement, and did either supply their quota of sugar or sold it in the internal market and made available the money for purchase of sugar for export. Only a few mills in the country resorted to these devices to get out of the commitment which the industry as a whole had entered into. The learned Attorney-General also contends that the petitioners had obtained favourable prices for sale of sugar in the country but were not willing to honour their other commitments which, after the agreement of the sugar industry, were given legislative form.

¶126

Learned counsel for the petitioners contends that the vires of the Act should be considered without reference to other circumstances such as the agreements, price adjustments and price control, as they have no bearing upon the resonableness of the legislation. In State of Madras v. V. G. Row (¹ ), this Court laid down that in judging the resonableness of a restriction upon fundamental rights, the surrounding circumstances can be looked into. Patanjali Sastri, C.J., observed as follows :

¶127

" It is important in this context to bear in mind that the test of reasonableness, wherever prescribed, should be applied to each individual statute impugned, (1) [1952J s.c.R. 597, 607.

¶128

56 SUPREME COURT REPORTS [1960(1)]

¶129

'959 and no abstract standard, or general pattern of reason- Th L . ableness can be laid down as applicable to all cases. sua:':ti;·1;~~ The nature of the right alleged to have been infring- and Another ' ed, the underlying purpose of the restrictions imv. posed, the extent and urgency of the evil sought to be The Union of India remedied •thereby, the disproportion of the imposition, and Another the prevailing conditions at the time, should all enter Hidayatullah J. into the judicial verdict. In evaluating such elusive factors and forming their own conception of what is reasonable, in all the circumstances of a given case, it is inevitable that the social philosophy and the scale of values of the judges participating in the decision should play an important part, and the limit to their interference with legislative judgment in such cases can only be dictated by their sense of responsibility and self-restraint and the sobering reflection that the Constitution is meant not only for people of their way of thinking but for all, and that the majority of the elected representatives of the people have, in authorising the imposition of the restrictions, considered them to be reasonable."

¶130

In Virendra v. The State of Punjab (¹ ), S. R. Das, C.J., again reaffirmed this approach. See also Arunacha'la Nadar v. State of Madras(').

¶131

It is, however, contended that though one can look at the surrounding circumstances, .it is not open to the Court to examine other laws on the subject, unless those laws be incorporated by reference. In our opinion, this i.s a fallacious argument. The Court in judging the reasonableness of a law, will necessarily see, not only the surrounding circumstances but all contemporaneous legislation passed as part of a single scheme. The reasonableness of the restriction and not of the law has to be found out, and if restriction is under one law but countervailing advantages are created by another law passed as part of the same legislative plan, the Court should not refuse to take that other law into account.

¶132

The existence of such other law is not difficult to establish. The Courts can take judicial notice of it. As was laid down by the Privy Council in Attorney-General (1) [1958] S.C.R. 308, 318. (2) 1959 S.C.J. 297, 299-301,

¶133

S.C.R. SUPREME COURT REPORTS 57

¶134

for Alberta v. Attorney-General for Canada (¹ ), the Courts in determining • the effect of legislation, do • take into account,

¶135

the z959 take Th eor L. dK nsu . h Sugar Mills Ltd., the andAnot/ur .v. . what The U~·~· 0{h India Acts an no er Hidayatullah J.

¶136

"any public general knowledge of which the andAnot/ur Court would take judicial notice, and may in a proper .v. case require to be informed by evidence as to what The U~·~· the effect of the legislation will be. Clearly, the Acts an no passed by the Provincial Legislature may be conside- Hidayatullah red, for it is often impossible to determine the effect of the Act under examination without taking into account any other Act operating, or intended to operate, or recently operating in the Province."

¶137

No doubt, this was laid down in a case falling within ss. 91 and 92 of the British North America Act, but the general proposition is equally applicable where the effect of the legislation on those governed by it has to be measured. In the same connection, their Lordships looked into the historical background of legii;ilation to find out the materials which were coni?idered before the legislation was promoted in the legislature. See also Ladore v. Bennett (² ). This Court also in Arunacluila Nadar v. State of Madras(⁸ ), examined the ' historical background ' and discovered the object of the Act, "from the circumstances under which it was passed."

¶138

That other oontemporaneous legislation passed as part of a legislative plan can be ex11-mined was clearly laid down by the Privy Council in Pillai v. Mudanayake ('). In that case, the question was whether the Ceylon Citizenship Act (18 of 1948) and the Ceylon (Parliamentary Elections) Amendment Act (48 of 1949) were valid, or were ultra vires the Ceylon Parliament, being void under s. 29(2) of the Ceylon (Constitution and Independence) Order-inCouncil, 1946 (as amended). Under the first two Acts, the Indian Tamils were denied as a community, the right of franchise unless they came within the terms of the first Act. They were thus subjected to disabilities and restrictions which were prohibited by (1) (1939) A.C. u7, 130. (3) ~959 S.C.J. 297, 299-301. (2) (1939) A.C. 468, 477. (4) (1953) A.C. 514. 8

¶139

58 SUPREME COURT REPORTS (1960(1)]

¶140

'959 s. 29(2) of the Order-in-Council. During the course of Th L d K . h arguments, their Lordships' attention was drawn to a. 5^{,.~.:~m;•;_,;~later Act, intituled the Indian and Pakistani Residents} and Another (Citizenship) Act (3 of 1949), under which the Indian v. Tamils and others were entitled to get themselves The Union °! India registered a.s the citizens of Cey Ion on proof of anti Another sufficient connection with Ceylon. It was argued by Hidayati<llah 1 Mr. Pritt, Q.C., before the Privy Council that the later Act could not be read to justify the earlier Act, because if the impugned Citizenship Act were bad when it was passed, it could not be 'brought back to light' by the enactment of the subsequent Act. Their Lordships did not accept this argument and read the later Act with the previous. They observed :

¶141

" It was argued that sections 4 and 5 of the Citizenship Act made it impossible that the descendants, however remote, of a person who was unable to attain citizenship himself. could ever be able to attain citizenship in Ceylon no matter how long they resided there, but their Lordships' attention was subsequently drawn to the Indian and Pakistani Residents (Citizen.ship) Act, No. 3 of 1949, by which an Indian Ta.mil could by an application obtain citizenship by registration and thus protect his descendants, provided he had a certain residental qualification. It was suggested on behalf of tho appellant that this Act might itself be ultra vires as conferring a privilege upon Indian Tamils within s. 29(2)(c) of the Constitution Order-in Council, and that i herefore it was inadmissible to rebut the inference that the legislature had intended by the Citizenship and Franchise Acts to make Indian Tamils liable to dis>il>ilities within the meaning of s. 29(2)(b), but their Lordships cannot accept this argument. If there was a legislative plan the plan must be looked at as a whole, and when so looked at it is evident, in their Lordships' opinion, that the legislature did not intend to prevent Indian Ta.mils from attaining citizenship provided that they were sufficiently connected with the island. "

¶142

It is not necessary to speculate as to the remedies of the sugar dealers if the Sugar Control Order, or the notification were varied or abrogated in future. The

¶143

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reasonableness of the restriction is to be judged today z959 and in the context of the circumstances now existing. The Lord Krishna It cannot but be accepted that the Government sugar Mills Ltd., made adequate arrangements to recoup the sugar and Another industry for the loss which it might suffer in giving .y. . the export quota. For that purpose though the The Union °1 Ind"' ' f h . and Another export quota was fi xe d at 22^{1per cent. o t e total} quantity produced by a factory, the loss which was Hidayatullah J. expected to be Rs. 10 per maund was spread over the remaining sugar to be sold in the country and was recouped at 50 nP. per maund. We are unable to accept th~ plea that the petitioners were not able to sell sugar at the controlled price, because the price was fixed too high. Learned counsel for the petitioners contend that by fixing a ceiling there is no guarantee that the commodity will be sold at the ceiling price and not at a lower rate. It is a well-known proposition that when commodities are controlled by fixation of price, the commodities sell only at the controlled price and not less. Economists have complained that the worst fault of price control is that the price does not fall below the controlled rate. There is nothing in the record of the case to show that the Mills were not able to sell their sugar at the controlled price.

¶146

We are satisfied that the object of the Act does not infringe the fundamental rights of the petitioners. To prevent any loss to the petitioners, countervailing additional prices were allowed on sales of sugar for internal consumption. The petitioners did not stand to lose ultimately. The quota was fixed at 2! per cent. of their total production, and it is inconceivable that they are unable to sell sugar in the open home market. This suggestion of the petitioners that they are unable to sell sugar at the controlled price has not been substantiated by the production of a single document to show what they held in stock and what they had sold. The balance sheet produced by the S. P. B. Mills shows that they were able to sell more than a lakh of bags in eight months, as against the quantity of 4,079 bags for export.

¶147

It is obvious that the plea that the Mills are unable to sell sugar at the controlled price is a mere sham.

¶148

60 SUPREME COURT REPORTS [1960(1)]

¶149

r959 Indeed, an examination of the correspondence in the first case clearly demonstrates that the Mills were The Lord K rislina devising one excuse or another to a void the liability Sugar Ii-fills Ltd., andAnother to supply the quota of sugar. ]'irst, they raised the v. contention that they did not have the requisite grade. The Union of !>ldia Then they raised the contention that they could not and Another sell sugar. Thereafter they asked for supply in instal- Hidayatullah J. ments, and when instalments were fixed, they put forth the excuse of there being no wagons available. They next urged that the Bank was charging interest, and that interest should be waived before the documents would be retired. When interest was waived, they filed the petition iu this CouJ.lt. In these circumstances, in our opinion, there can be no ground for holding that there has been an infringement of the fund,imental rights of the petitioners. The restriction was not unreasonable, because arrangement was made to save the owners of the factories from loss, and the loss entailed by the export of sugar was to be borne by the consumers in India and not by the producers. There is oue more circumstance which may be considerecl. The foreign export served the national interest by staqilising the sugar market so that the production of sugarcane niay be maintained at a rea,;onable level. It also stabilised national economy by earning foreign exchange. The loss, if any, was comparatively small and was spread over many factories. Apart from the very real possibility of its being recouped by sales in the country, the loss itself was so small as not to amount to an unreasonable restriction.

¶150

The petitioners next challenge the Act in its parts to show that there is infringement of fundamental rights or, in the alternative, compulsory acquisition of their property without compensation. In this connection, ss. 5 to 9 are challenged. Section 5 only permits the Central Government to fix the quota leviable from different factories. If the object and purpose of the Act is valid and also is in the public interest, there being no disadvantage to the owners ultimately, s. 5 which fixes the quota for export from sugar produced by a. factory cannot be challenged sepa.ra.tely •.

¶151

¶152

SUPREME COURT REPORTS

¶153

S.C.R.

¶154

Section 6 makes it incumbent on the owner to supply z959 that! sugar on demand deliery of sugar, the owner retains and further provides no rigt that excpt after o su;a, Th L d K 0;11;:_,;;: . 11 receive payment therefor under s. 9. This sect10n is andAnother criticised on the ground that delivery of goods and v. paym.ent of the price should be concurrent conditions, The Union of India that is to say, that the buyer should be ready and andAnother willing to pay the price in exchange for possession of Hidayatullah 1. the goods. If the Government ws buying sugar, the provisions of s. 32 of the Indian Sale of Goods Act, which is apparently relied upon here, might have been invoked. The object and purpose of the Act is to export sugar and to divide the receipts less expenses, among the owners who supply sugar for export. The argument over16oks the scheme that export is made by a Central Agency for the industry as a whole, and the prices obtained abroad are payable, and they are less than those at which sugar of various grades sells within the country. The section does not suffer from any infirmity, if the object and purpose of the Act is, as has been found above, valid and constitutional. It must not be forgotten that during the time payment was due, the owners were getting an additional 50 nP. on every maund sold by them in the country. Deferred payment is not deprivation of property, nor an encroachment upon fundamental rights. The affidavits show that the entire quota of 50,000 tons has been exported, that it has earned Rs. 2·4 crores in. foreign exchange, and that the exporters have been paid except for a small balance.

¶155

Section 7 is the penalty section. We heard considerable argument as to whether the section would apply to a case where no delivery was at all made, in view of the words :

¶156

"where sugar delivered by any owner falls short of the export quota."

¶157

No action has yet been taken against the Mills under the section ; nor has any penalty been imposed. The question whether the section is ultra vires the legislature need not be considered here.

¶158

Section 8 deals with export of sugar or its sale by the owner or the export agency. It is stated that the

¶159

62 SUPREME COURT REPORTS [1960(1)]

¶160

z959 section deals with sugar delivered to the export agency, T1"LordKrishna and.here.there ~as no sugar delivered. The first otidb- Sugar Mills Ltd.. section <1eals with export, and the export agency can .,.d Another only export sugar delivered to it. The second sub. v. . section authorises the export agency to sell the sugar Th• Umon °! Ind•a for reasons given in the first sub-section. It also and Another authorises the export agency to permit the owner to Hidayatullah 1. sell sugar in his custody. In the present cases, there was a demand for delivery of the sugar of the quota, and that has not been met. Whether the petitioners have exposed themselves to any penalty can only be considered when penalty is actually imposed on them.

¶161

The condition that the sale-proceeds are payable to the export agency is perfectly valid, regard being had to the scheme of the export and the advantage allowed on all sales in India. The owners having obtained that advantage cannot claim to keep the proceeds of such sales, by which the export policy is to be run. Out of the 50,000 tons, about half was sold in India, and with the sale-proceeds other sugar was bought and exported, and this would not be possible if the export agency were required to make a spot cash payment.

¶162

Section 9 provides how payments to owners are to be made. Since the export was by a non-profit-making agency composed of the sugar industry, it is obvious that the payments could not be made forthwith. As explained already, the owners received payment after the sale prices were received from abroad. Necessary deductions of expenses have to be made, and the proceeds are then distributed. No doubt, such payment is likely to be somewhat delayed but looking to the small quantity involved (i.e. not more than 20 per cent. under the Act and in actuality, only 2i per cent.) it was not likely to make it very hard for the owners, who were in the meantime breaking this loss at the rate of 50 nP. for every maund of sugar sold in India. In our opinion, none of the sections considered here, even viewed separately, is ultra vires.

¶163

The petitioners did not cliallenge the action taken by the export agency as being contrary to the Act. No argument can be considered in view of the want of a plea to this effect in the two petitions. In the petition

¶164

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¶165

by the S. P. B. Mills, the petitioner did not invite any r959 decision on the correctness of the demand for the The Lord Krishna additional excise duty, because no such duty has, in Sugar Mills Ltd., fact, been demanded. The main contention of the and Another Mills was that all sugar was pledged with banks. The . "· . pleadings on this part of the case are far from clear or The Union of India Th 1 c · l tt h. J • and Another su ffi 01ent.^· . e on y re~erence is to a e er, w IC 1 1s insufficient. ·However, in view of the fact that learned counsel reserved this point to be raised for exemption from payment of additional duty, we say nothing about it.

¶166

The result is that both the petitions fail, and are dismissed with costs.

¶167

SARKAR J.-I think these two applications should succeed. They raise the question whether the Sugar Export Promotion Act, 1958 is invalid as imposing an unreasonable restriction on the petitioners' right to carry on their trade.

¶168

Sarkar].

¶169

Some of the petitioners are owners of factories manufacturing sugar by a process called the vacuum pan process and they carry on business as manufacturers of and dealers in sugar. For the purposes of this judgment these persons may be taken to be the petitioners. The principal respondent in these applications is the Government of India. The other respondent is the Indian Sugar Mills Association, an association of manufacturers of sugar by the vacuum pan process.

¶170

On June 27, 1958, the Government had promulgated an Ordinance. The impugned Act was passed on September 16, 1958 repealing the Ordinance and reenacting its provisions and also providing that anything done under the Ordinance would be deemed to have been done under the Act as if it had come into force when the Ordinance had been promulgated.

¶171

¶172

As appears from its preamble, the Act was intended to provide for the export of sugar in public interest and it set up a machinery for that purpose. I will summarise here the main provisions of the Act. Section 3 empowers the Central Government to specify a company or other body corporate as the export agency to perform the functions of that agency under the Act.

¶173

64 SUPREME COURT REPORTS [1960(1)]

¶174

•

¶175

r959 The respondent Indian Sugar Mills Association was The Lord Kdsh"a specified as the export agency under this section. sugar Mill., Ltd., Section 4 authorises the Central Government to fix the and Anotha quantity of sugar that may be exported during any . v. . period, but the quantity so fixed for a year is not to The Umon of India exceed twenty per cent. of the quantity of sugar and Another produced in India upto the month of October in that Sa>kar 1. year. 8eotion 4 also provides that. "in fixing such quantity the Central Government shall have regard to -(a) the quantity of sugar available in India, (b) the the quantity of sugar which, in its opinion, would be reasonably required for consumption in India, (c) the necessity for exporting sugar with a view to earning foreign exchange in the public interest." Section 5 requires the Central Government to apportion the quantity fixed under s. 4 among the owners of factories producing sugar by the vacuum pan process in proportion to the quantity produced or likely to be produced by them respectively, during the season. The quantity so apportioned to each factory is called its export quot:t. Section 6 provides that every owner of a factory shall, on demand by the export agency deliver to it sugar upto its export quota and on delivery " the owner shall retain no rights in respect of such sugar except his right to receive payment therefor under section 9." Section 7 makes provision for an additional excise duty being levied in certain circumstances on the quantity of sugar by which the sugar delivered by the owner of a factory falls short of its export quota. Section 8 states that the export agency shall export the sugar delivered to it, provided that in certain circumstances specified, the export agency may sell that sugar in India and may if it thinks fit pur- · chase other sugar for export and for this purpose permit the owner to sell the whole or part of its export .quota at a price approved, on condition t.hat the sale proceeds are paid to it. The provisions of s. 9 are important and will be set out later. It is not necessary to refer to the other provisions of the Act.

¶176

Soon after the Ordinance had been promulgated the Government started taking action under it. By a notification dated June 27, 1958, 50,000 tons of sugar

¶177

¶178

S.C.R. SUPREME COURT REPORTS

¶179

was fixed under s. 4 as the total quantity for export 1 959 for the period ending October ~ 31, 1958. Export quotas The Lord /{rish11a were duly fixed for all factories including those of the suxar Mills Ltd., petitioners. The petitioners were thereafter asked by and Another the export agency to sell the sugar and pay the salev. proceeds to it.. This they failed to do. It is said by Thr Uuion °! India the respondents that the petitioners were also asked to and ~tlier deliver the sugar and this also they failed to do. The Sarkar]. petitioners spt, up various reasons justifying their failure to sell or deliver the requisite quantities of sugar. rt is unnecessary to refer to theRe reasons for if thn Act is invalid, as 'the petitioners contend the orders could not be made and no question would arise as to whether the petitioners had valid reasons for not carrying them out. It appears that t.l1e export agency felt that the petitioners were neither going to sell the sugar and pay the sale proceeds nor to deliver the sugar and it thereupon pointed out to the petitioners that they were hy their conduct exposing themRelves to the risk of having to pay the additional excise duty under s. 7. It was then that the present applicationR for appropriate writs restraining the respondents from taking steps under the Act were launched by the petitioners on the ground inter alia that the Act was invalid as it unreaRonably restricted the petitionerR' right to carry on their trade. I now proceed to examine the ,-alidity of this contention.

¶180

From the provisions of the Act earlier set out, it is quite clear that it requires the owner of .a sugar factory to part with a portion of the produce of his factory in exchange for an amount to he fixed under the provisions of s. 9. The Act therefore restricts his freedom of trade; it takes away his right to trade with the whole of his merchandise in any manner he likes. The question is, is such restriction reasonable ? .

¶181

It is necessary now to set out the terms of s. 9 of the Act which fixes the amount which a manufacturer of sugar in entitled to receive in respect of the sugar delivered by him. Only sub-ss. (1) and (2) of this section need' be set out and they are as follows :

¶182

Section 9.-(l) The export agency shall, at such time as it thinks fit, make to the owners who have

¶183

¶184

66 SUPREME COURT REPORTS [1960(1))

¶185

'959 delivered sugar to it under this Act, payments deter- T ,^{'· L} or^dK. ris^h Ha th' mined in . accordance with . d the provisions hereinafter in Sugar Mills Ltd., IS sect10n contame . and Anothtr (2) From the total sale-proceeds in respect of the . v. . quantity fixed for export under section 4 for any year, Th• a'';n1,;ut,. there shall be deducte the total expenditure incurred by the export agency m respect of the sugar, whether Sarkar J. by way of administrative expenses or otherwise, and the balance shall be appportioned among the owners in proportion to the quantity of sugar delivered by then respectively during that year.

¶186

The substance of the matter then is that an owner of a sugar factory gets in exchange for the sugar delivered by him under the Act, a proportionate share of the sale-proceeds less the Pxpenses. He has no hand in deciding at what price the goods would he sold by the export agency. If they are sold for a very low p;ice, he has no right to complain. Neither has he any power to control the expenses. The exchange value that a sugar manufacturer is entitled to get under the Act for sugar delivered by him, therefore, depends entirely on the export agency. Again, under subsec. (1) of s. 9, the export agency need pay the manufacturer only at such times as it thinks fit. It may he difficult to say that all these terms are reasonable.

¶187

However that may be, there is another aspect of the question which in my view decides it. It is quite plain that as things are, sugar can be sold abroad only at a loss. That clearly appears from the materials on the record and is not indeed disputed. I think it enough to refer to the Objocts and Reasons of the Act and to a statement in the affidavit of Shri K. P. Jain, Chief Director, Directorate of Sugar, affirmed on February 13, 1959 and filed on behalf of the Government, to show that the Act contemplated that the export of sugar made under it would result in a loss. In the Objects & Reasons of the Act it is stated,

¶188

"With a view to earning foreign exchange it is necessary to promote export of sugar. The export of sugar, however, involves a loss, even if excise duty and cane cess are remitted."

¶189

S.C.R SUPREME COURT REPORTS

¶190

¶191

In paragraph 22 of Shri Jain's said affidavit it is stated,

¶192

z959 T' iieLordKf<shM . sugar Mills Ltd. and Another ' v. The Union of India and Another Sakrar J.

¶193

"If h h th t' h . d urt er Ray t at... e en ire sc eme envisage in the Act depends on the pooling of the losses on export by all sugar factories in India, in proportion to their export quota.''

¶194

We then get to this that on the respondents' own case the exports under the Act can he made only at a· loss. The result therefore is that the Act compels the p()titioners to part with a portion of their merchandise at' a loss. Can the restrictions so put on the petitioners' trade by the Act then be said to be reasonable ? I conceive it is impossible to do so. It is said that the Act was passed with a view to earn foreign exchange by export of sugar. Indeed so it appears from the Objects & Reasons of the Act earlier set out and the provisions of s. 4 earlier quoted. I will agree that earning of foreign exchange is essential for the country. But I do not see that that justifies the enactment of a legislation which imposes a loss on a sugar manufacturer. It is not as if foreign exchange could not be earned without inflicting loss on the manufacturers of sugar. That indeed is not the respondents' case. The loss might have been avoided if for example, the exports were made by the grant of a subsidy, a course in fact adopted by the Government in the year 1951-52. It.has not been said that there was any diffieulty in granting the subsidy for the exports under the Act. A reasonable restriction on a citizen's right to carry on his trade which alone is permitted by Art. 19(6) of the Constitution, must be, as Mahajan, J., said in Chintaman Rao v. The State of Jl;Jadhya Pradesh(¹ ), a restriction "which reason dictates", which "unlei;s it strikes a proper balance between the freedom guaranteed in article 19(1) (g) and the social control permitted by clause (6) of article 19, must be held to be wanting in that quality." Here I do not find the balance struck nor the infliction of the loss a course which reason dictates. The loss which the restrictions imposed by the Act on the petitioners' trade caused to them, was by no means such as could only have been avoided by incurring a greater loss.

¶195

(1) [1950] S.C.R. 759, 763.

¶196

68 SUPREME COURT REPOH.TS [1960(1))

¶197

'959 I also think it clear that an object however laudable, cannot by itself and without more, make a restriction The Lord Krishna S«gar Mills Ltd .. put on a citizen's right to carry on a trade for attain- and Another ing that.object, reasonable. A restriction on a perv. son's right to carry on his trade does not become The Unio11 of Indio reasonable, simply because it had been imposed on and Another him to achieve an object of great necessity and un. doubted merit. The reasonablent>SS has to be judged Sarkar]. in ;111 the circumstances of the case and the object to be attained is only one of such circumstances. This, in my view, is too clear to require elaboration. It is not neeessary for me to pursue the matter further for it is not the respondents' contention that the 1·estrictio11s are reasonable notwithstanding that they <'anse loss. On the other hand, the contention of the respondents is for reasons to be presently stated that the Act really caused no loss and that being so the restrictions imposed by it cannot he said to be unrea.sonable. I proceed now to consider t.he respondents' rea.son for saying that the Act imposes 110 loss on the sugar manufacturers including the petitioners. It is fi1·st s;1id that though the exports result in n loss now, it may in future bring in profits. That hope is dearly only a pious hope. Aud whaf" is more, it is not a hope which has even been expressed in the nffidavits filed. on behalf of the respondents. On the contrary, these affidavits make it perfectly plain that in the foreseeable future there is no hope of export of sugar being made at a profit. Indeed, it is said in these affidavits that the scheme of the Act is bnsed on the pooling of the losses caused by the exports made under it. It is hardly neeessary to point out that if the exports con kl be expected t.o prnduce a profit in in the near future, the nocrcivc machinery of the Act for making the exports would he unnecessary. There is no bn,is whntcver for snying that in some years the export may result in a profit. Indeed on the respondents' own affidavits it is not open to them to say that they hope that it may be possible in future to make a profit oil export of sugar.

¶198

Then it is said that the export quota. fixed for 1957-58 is only 2! per cent. of the production of each

¶199

S.C.R. SUPREME COURT REPORTS

¶200

¶201

factory. The point sought to be made is that, there- I9.S9 fore, the amount of the loss would be very small. Now The Lord Krishna 2l per cent. of the produrtion of the factory of the Sugar Mills Ltd., petitioners in Writ Petiti⁰ 1n No. 9 of 1959 is 12,533 and Another maunds. It is stated by t.he respondents in the supv. plementary affidavit of Shri Jain affirmed on March 11, The Union of India 1959, that on the export the loss will be in the region and Another of Rs. 10 per maund. On this basis the loss to the Sarkar J. petitioners in that petition would be Rs. 1,25,530. The loss to the petitioners in Writ Petition No. 14 of 1959 would be slightlY. less. I for myself would hesitate to say that losses in such amounts are negligible. The export quota for 1958-59 has been fixed at 5 }Jer cent. of the production. Naturally, the loss would be much larger. The Government have the right under the Act to increase the quota upto 20 per cent. The loss if the quota i;:; increased to the utmost would be formidable. In the cases of factories with larger production the losses would be much larger than the petitioners losses. And of course the reasonableness of the restrictions imposed by the Act has to be tested generally and without reference to any particular sugar mannfacturer. I am also unable to agree to the proposition that the reasonableness of a restriction depends on the quantum of the loss it produces. Even a small loss may conceivably make a restriction causing it, unreasonable. The quantum of the loss cannot by itself decide the reasonableness of the restriction. Does reason dictate that a small loss shall be inflicted? Nothing that has been said in this case leads me to hold that.

¶202

It is then said that the loss caused by the Act was recouped by an order made by the Government increasing the home price of the sugar and therefore in fact the manufacturers suffered no loss. The process of recoupment was thus stated in paragraph 14 of the said main affidavit of Shri Jain:

¶203

" The incidence of loss on the first quota of 50,000 tons fixed by the Government was assessed and when the Central Government fixed the price of sugar for internal consumption under the provisions of the Essential Commodities Act and the Sugar (Control)

¶204

¶205

f;UPREME <'OORT HEPOHTS [i!l60(1)]

¶206

I959 Order, 1955, they gave adjustment in price by adding 50 nP. per nrnuud in the ex-factory prices of sugar for

¶207

The Lord Krishna internal s:iles." Sugar J.1.,Jills Ltd., and Anoth" It is said that the increase so made in the home price v. of sugar would completely wipe out the loss incurred The Union vf In.i;a on the export under the Act of 2~ per cent.. of thl' and Anothu produce of a factory. I will accept this as a correct estimate. I will also ignore the petitioners' contention S1irkar J. that they had not been able to Hell the sugar in the home m,trket at t,hc incre•tsed price. ·

¶208

The argument then is that though the impugned Act produces a loss, that loss can he ignored because the Government has taken steps under another Aut to recoup the loss so occasioned. It is s1tid that in the circumstances that prevail, namely, the increase in the homo price, the restrictions imposed by the impugned .\ct cannot he said to be unreasonable, for on the whole they occasion no loss. This is indeed the principal contention of the respondents to establi"h tfoit t.lie restrictions are not unreasonable.

¶209

Now a reference to the Essential Commodities Act under which t,he home price was increased ha" to be made, Jt. wa" passed in Hie year 1955. It was not intended to ont·n foreign exchange; indeed it had nothing to do with foreign exchange or with helping the sugar industry. Section 3 of this Act provides:

¶210

"Section 3. (l) If the Central Government is uf opinion that it is necessary or expedient so to do for maintaining or increasing supplies of any essential commodity or for securing their equitable distribution and availability at fair prices, it may, by order, provide for regulating or prohibiting the production, supply and distribution thereof and trade ,i,nd commerce therein.

¶211

(2) Without prejudice to the generality of the powers conferred by sub-section (l), an order made thereunder may provide

¶212

¶213

Sugar is an essential commodity within the meaning of that term in the Act. Under the powers conferred

¶214

S.C.R. SUPREME COURT REPORTS 71

¶215

by the section quoted above, on August 27, 1955,. the z959 Government passed an ordf;lr called the Sugar (Control) The Lord Krishna Lord Krishna Krishna Order, 1955. Clause 5 of that order provides that, Sugar Mills Ltd., Mills Ltd., Ltd.,

¶216

z959 The Lord Krishna Lord Krishna Krishna Sugar Mills Ltd., Mills Ltd., Ltd., and Another Another . v. v. . The annner UdniAon annner UdniAon UdniAon ° 11hlndsa 1hlndsa Sarkar J.

¶217

"(1) The Central Government may from time to and Another Another time, by notification in the Official Gazette, fix the . v. v. . price b e so . . . . . . . . . . . . . . . . . . . . . . . . uc price or maximum price Id or the maximum price Sh at which^{. .} any sugar may^,. The annner UdniAon annner UdniAon UdniAon ° 11hlndsa 1hlndsa shall be fixe<l with due regard to the price or minimum Sarkar J. price fixed for sugar cane, manufacturing cost, taxes, reasonable margin of profit for producer and/or trade, and any incidental charges.

¶218

(2} Where the price or the maximum price has been so fixed no person shall sell or purchase ........... . any sugar at a price in excess of that fixed under subclause (l)."

¶219

It was under this Order that the Government issued a Notification on July 30, 1958, enhancing the home price of sugar by 50 nP. per maund which it is said wipes out the loss caused by the impugned Act.

¶220

I will assume that the Notification increasing the price was issued with the object of recouping the loss caused by the impugned Act as stated in the affidavit of Shri ,Jain, though the Notification itself does not say so. The question then is, is the increase in the home price of sugar made by the Government by a Notification issued under the powers given to it by another Act which has the effect of wiping out the loss inflicted by the impugned Act, a circumstance which makes the restrictions imposed by the latter Act reasonable?

¶221

It is said that this is so ; that in judging the reasonableness of the restriction imposed by one Act, it is permissible to consider an order made by the executive Government under another Act. We were referred to the observations of Patanjali Sastri, C. J., in State of Madras v. V. G. Rao (1). The learned Chief Justice there stated at p. 607:

¶222

"The nature of the right alleged to have been infringed, the underlying purpose of the restrictions imposed, the extent and urgency of the evil sought to be remedied thereby, the disproportion of the (1) (1952) S.C.R. 597·

¶223

72 SUPREME COURT REPORTS [1960(1)]

¶224

'9⁵9
TlieLm·d lfri.<lmn
SuKarMill.<Ud.,
andA.wt'"'
_TlU _^.v._11_1^.
1e
_11u111o _
_1u1 _
and Auniher
SarlwJ.

imposition,theprevailing conditionsatthetime,should
allenterintothejudicialverdict."

I respectfully agree with allthatthelearnedChief
Justicesairl,but1amunabletoseethatthisadvances
^{thepresentcontPutionoftherespondents.}
W'hat is
a
II
1^.
.
.
.
reaYrew1lupon18thatport10nofthelearnedCluef
Justice'sobs<'rvationwherehe snid tha.tthepre\•ailing
conditions_nt_thetimeshouldbetakeninintoaccount.
Ruppnrt. issoughta.lsofrom a.noth0robservationof
thelearnPd Chi<'f .Tnsticeat_t.\w_snme pagP which1
lrn venotquotPd, totheeffectt!mt.reasonablenesshas
tobe decided in allthecircumstancesofa givPn case.
Itis saidthattheprm·ailing conditions anrlthecir-
cumstancesofthecase would inclrnfo1-hcorrler increas-
ingthehomepriceofsugarmadeundertheEssential
Commorlit.ies Act.1amentirelyunableto11grecthat
suuh_n_thingwasinthecontemplationofthelearned
Chief ,Jnsticn.
Thecase before him was uomplctely
different.He<.'asnotco!lsidningthereasomtbleness
ofone Ad.bvrefrrPncetoanordermadehrthe
Govcl'nment u;1deranother.ThelearnedChieflustiee
was consideringwhetheracertainActhadplaced un-
reasonable restrictiousonthefirnrlamentalrightto
form associations.TheActhadgiven t.hc C:.overnment
therighttodechirl'anassociationanunlawful associa-
tion on cprt>tin specified grounds.
Inholdi11gthe
restrictimrn imposedbytheActnmmsona.hle,the
learnedChief.Jm<ticeobserved11tp. 608,"Theformula
ofsnbjPC'tive~>ttisfad.ionoftheCovernnwntorofits
officers,withanAd 'isoryBoardthro\Yll in to review
thematerialsonwhichtheGovernmentsePkstoover-
ride a bnsic freedom !!Uaranteedtothecitizen,mayhe
viewt'dasreasonableonlyinveryexceptional circum-
stancesandwithinthenarrowestlimitsandcannot
receive judicialapprovalasa generalpatternof
reasonable restrictionsonfundamentalrights." I donot
atall set'thattherespondentscanderiveanysupport
fortheirpresentcontentionfromanythingthat
PatanjaliSastri,C.J., said.

¶225

I entirely agree that in deciding the reasonableness of the restrictions imposed by a statute, all the prevailing conditions and all the circumstances of the case

¶226

¶227

S.C.R. SUPREME COURT REPORTS

¶228

have to be considered. But I am wholly unable to see r959 that the conditions or circumstances, which seem to -K. h . l d h h" h TheLord ris na h^. me to mean the same t m_g, can .me u. e t at w IC Sugar Mills Ltd. depends solely on the arbitrary discretion or generos- and Another ity or the sense of fair play of another. That, in my v. view, is not permissible. That is not a reasonable The Union of India test. It is not reasonable to say that the validity of a and Another statute would depend on something which the execut- Sarkar]. ive Government may do or undo at any time. The statute imposing the restrictions does not give any right that the Government would do something to make the restrictions reasonable. How can such a restriction be reasonable? How can an Act which is prima facie unreasonable-and it is on that basis that the present argument arises-be held to be reasonable because of something to which it gives no right and the existence of which depends entirely on the choice of the executive Government ? Is it to be said that the restrictions imposed by a statute are reasonable because the Government has, when the question cropped up, done something which makes the restrictions reasonable though it was not bound to do that and though it is free to undo that which it has done ? To say that would be to say that the Act is valid because the Government has for the time being chosen to make it so. This seems to me to be against all known principles of law.

¶229

Furthermore, if the respondents' contention was right a statute would then be legal when the Government chooses to do a thing and illegal when it undoes it and so on from time to time at the choice of the Government. That would be intolerable in any legal system. It was said that this is unavoidable and may happen in many cases. The following illustration was given. Suppose in famine conditions a statute was passed controlling free sale of foodstuff. Assume that the prevailing conditions made the restrictions put on free sale reasonable. Later. normal conditions returned which made the control of sales of foodstuff unnecessary and therefore unreasonable. The Act would thereupon become invalid. But further suppose that after sometime the famine conditions returned. The

¶230

¶231

'959
T
-
'"LordKrishna
Sugar Mills Ltd.,
andAnother
v.
TheUnionofIndia
andAnother
Sarkar].

74
SUPREMECOURTREPORTS[1960(1))
validityoftheAct wouldthenbe restored. Hence,it
is saidthatthere would be nothing unusual intheAct
b .
rd
d .
]"df
t"
t
t"
B t •t
emgva1
an
mva. 1 . rom1meo1me.
u .l
seems to methatthISISno analogy. The famme
conditions imagined donotdepend onthechoiceof
theGovernment. So, assumingthattheappearance
anddisappearanceoffamine conditions from timeto
time madetheActocevalidandagaininvalid-asto
which I donotfeel c lled upontosayanythingnow-
thatdoesnotjustify'theadoptionofa rule which
would makethevalidityofanAct dependonthe
choiceoftheGovernment.Iffluctuating validity is
theresult in one case,itdoesnotfollowthatthesame
consequence would occur inanotherandatotally
different case.
AgainthevalidityoftheNotification enhancingthe
home price seemstometoadmitofgrave doubt. I
findnothingintheEssential Commodities Actnor
naturallyintheSugar (Control) Order,1955,which
would authorisetheGovernmenttoincreasethe
price simply forthesakeofrecoupingtothemanu-
facturerstheloss causedtothembytheimpugned
Act. Ihaveearlier setouttherelevant provisionsof
theEssential Commodities Act. The powertofix
theprirofsugar given thereby can be exercised " for
maintainingorincreasingthesuppliesofanyessential
commodityorfor securing their equitable distribution
andavailabilityatfair prices".Thatpowercannot
therefore be exercised for recouping loss causedtoa
manufacturerbyanother Act,theobjectofwhich isto
earnforeign exchange.Ifitis saidthattheNotifica-
tion was issued for the purposes mentioned inthe
Essential Commodities Act,itbecomesatonceapparent,
thattheprice fixed underithasno relationtothe
impugned Actandmayhavetobe altered irrespective
ofthelatterAct. I finditimpossibletosaythata
Notification fixing the priceofsugarondifferent condi-
tionscanbetakeninto account in decidingthe
reasonablenessoftheimpugned Act which is entirely
unconnected with these considerations.

¶232

For all these reasons I am unable to agree that the Notification increasing the home price can be taken

¶233

¶234

S.C.R. SUPREME COURT REPORTS

¶235

into consideration in deciding the reasonableness of the z959 .. restrictions imposed by the impugned Act. It follows The Lord Kmr.na th a t th ese res notions t^{. .} d o cause oss l t o tl lC sugar St<gar and Anothtr Mills Mills Ltd., manufacturers and there is nothing to show that the v. restrictions are even so reasonable. The Union of India India

¶236

z959 .. The Lord Kmr.na St<gar and Anothtr Mills Mills Ltd., and Anothtr Mills v. The Union of India India and •¹ "⁰¹ ner Sarkar J.

¶237

Then it is said that the Indian ~ugar Mills Association of which the petitioners <1l'e Raid to be members, wanted that arrangements for export. of sugar abroad be made and it was for that reason that the impugned Act was passed. It was suggested that the Association agreed to the Act being passed. It is therefore contended that the restrictions imposed by the Act must be presumed to be reasonable and the petitioners cannot be heard to say that they are not. Now the request by or the agreement of the Association is of course not the request by or the agreement ofthe petitioners. The Association has no authority to bind the petitioners by any request or agreement. The fact that the petitioners were members of the Association if that were so, does not give the Association the authority. There is no evidence that the petitioners had assented to the Association making the request or the agreement. l!'or all that is known the petitioners may have been agaim;t the As::;ociation making any request to the Government to take steps for export or agreeing to the passing of the Act. Therefore, it seems to me that the petitioners' rights are not affected by anything which the Associctt.ion might have done. I think it/ right also to say that there is no material on the record whatever to lmtd to the conclusion that the Association had agreed to the Act being passed in the form in which it stands. And of course it is only the Act with which we arc concerned. It is true that the Association had suggested that the Government should take steps for export of sugar. That would a.ppra.r from the minutes of various meetings annexed to thl' affidavits used on behalf of the Government. But there is nothing in these minutes nor anywhere else in the records which would indicate tlrnt the Association wanted that sugar should be exported though that might put the manufacturers to a loss. The position appears to have been this. In the yaar 1951-52 the

¶238

¶239

SUPREME COURT REPORTS [1960(1))

¶240

'959 sugar manufacturers were placed in a difficult position The Lo"l Krishna because of competition from khandsari and gur sugar Mills Lid.. manufacturers, who could buy sugar cane for their and Another manufactures at a low price in the open market, while v. the sugar manufacturers were compelled to buy cane at The Union °! India prices fixed by the Government which were high. So and Another some of them, as appears from Annexure "A" to Sarkar J. Shri Jain's said affidavit, made the following suggestions to the Government in March 1952 to give them relief:

¶241

" (a) The price of cane be reduced to Re. 1 per maund.

¶242

(b) The sugar manufactured from the lower priced cane be 'frozen' and kept as a national Reserve for Export or for such other purposes as the Government may consider desirable.

¶243

(c) To reduce the accumulation of stocks in the factories and to make room for further storage, and to liquidate the stocks into cash, serious efforts be made either from Government to Government or through trade channels to export out at least 2 lakh tons: Alternatively, the State Governments be asked to take delivery of the quantities from the factories and store them in their own godowns.

¶244

(d) If there is any 'profit' in the export of such quantities the same may be utilised either for giving a. 'bonus' to the cane growers or in lowering the price of sugar for home consumption."

¶245

It is clear from the suggestions thus made by the manufacturers that they wanted the burden on them to be relieved and export at Government's cost. In that year the Government in fact permitted an export of 10,000 tons and gave a subsidy of Rs. 2 per maund to cover the loss on the export. Later in the same year tho Government reduced the price at which the sugar manufacturers could purchase the cane.

¶246

In the years 1952-53 to 1955-56 India imported large quantities of sugar and did not export sugar at all. It also appears that during these years the consumpt.ion of sugar in India was much more than the production. Hence, obviously the need for the import. So clearly in these years the sugar manufacturers did not need to

¶247

¶248

S.C.R. SUPREME COURT REPORTS

¶249

export their sugar. The respondents do not say that x959 during these years the sugar m~nufacturers had asked Tlie Lord Krishna for arrangements for export bemg made. 1956-57 was S1t•ar Mills Ltd., the year of the Suez crisis. In this year a substantial :nd Another quantity was exported and large profits could be made . v. . because price of sugar in some of the markets abroad Tho Umon °1 India . . d b th ~ •t 1md Another h d a gone up d ue to th e crisis cause y e •:iuez s1 ua_ tion. The proposition then is that between 1952-53 Sarkar J. and 1956-57 the industry was doing very well and had no need to ask for Government's intercession to enable it to export.

¶250

There is no evidence that in 1957 -58 there was. any over-production. The figures for this year in tons are production-19,75,000, consumption-20,14,000 and export-50,000, the figure for export being that fixed under the Act. It appears however that various representatives of the Government and the sugar manufacturers met and decided upon the idea of exporting sugar for earning foreign exchange in Government's inkrest and getting a foothold in the world market in the int~rests of the manufacfurers. It was realised that the export would result in a loss but the manufacturers agreed to export provided they were allowed to make up the loss from the internal market. For this purpose the imggestion made as appears from annexute "D" to the affidavit of Shri Jain, was as follows:

¶251

"The internal market will be Jen free as at present. However to provide an element of stability to the market releases for internal sale shall be regulated by Government of India in active consultation with the industry."

¶252

So what the trade had agreed to was that they would be prepared to export sugar provided they were left free to recoup from the internal sales the loss caused by the export. This is very different from agreeing to the Act which made no provision for recouping the loss from the internal sales. The sugar manufacturers did not approve of the Act, being content to depend on the Government's sense of fair play to relieve the hardship caused by it.

¶253

¶254

¶255

SUPltEME COURT REPORTS [1960(1)]

¶256

'959 There remains one other contention to deal with. Th< Lord Krishna It · 'd th t th · t' bl ' h 5 "!:i M A:o;h., .11 Lid ·· result in stabilising 1s sa1 · a · e restrw the sugar 1011s are industry. reason a e smce Apart from t ey v. saying that the Act would stabilise the sugar industry, The Union of India the affidavits used on behalf of the respondents do not and .1no1hu show how that would be done or that there was any need for it. From what I have earlier stated it does Sarkar]. not appear to me that the industry needed any stabilisation. The figures given earlier show that production has always been less than internal eonsumption, excepting for the year 1951-52. But it appears from one of the annexurcs to the affidavit of Shri Jain that even 'then the difficulty was only temporary. It is there stated : "Again in 1952-53 it was decided to export upto 2 lakh tons. But only about 10,000 tons could be exported as in the meantime there was an appreciable rise in the sugar prices and the surplus stock was consumed in the home m>trket." The estimated figures for th11 Y'"" 19:38-59 in tons appear to be as follows: production-· 19,00,000 consumption-21,00,000, export-1,00,000. It would thus appear that the sugar industry in India has always been stable and did not require any export to make it stable.

¶257

What I think however puts the matter beyond tlou bt is s. 4 of the Act. Under that section, in fixing the total quantity of wgar to be exported in any season regard is to be had only to the quantity available in India, the quantity required for consumption in India and the necessity of earning foreign exchange. l:;o in deciding the quantity to be exported no question of stabilising the industry or prices arises. Again, it is not out of the excess of the production over the internal consumption alone that the exports are to be made. In fact there has never really been any excess of production over consumption requirements. Indeed it is plain that if sufficient sugar were left to meet the home consumption, then the. increased price would not help the industry to recoup the loss. If supplies were adequate to meet the demand the price cannot be forced up.

¶258

S.O.R. SUPREME COURT REPORTS

¶259

¶260

I⁹⁵⁹

¶261

I therefore come to the conclusion that the Act I⁹⁵⁹ which makes the petitioners suffer a loss on the sale The Lord Krishna of a part of their produce imposes a restriction on Sugar Mills Ltd., their right to carry on their business which cannot in and Another the circumstances of this case he said to be reasonable -~· an d IS^'th · ereiore " inva ' l'd 1 • The and Another Union v. o 1 1 lnuia

¶262

-~· The and Another Union v. o 1 1 lnuia and Another

¶263

I may also mention that the learned counsel for the petitioners had taken certain other objections to thP validity of the Act but in the view that I have earlier indicated I do not. consider it necessary to discuss the other objections.

¶264

I would allow the petitions with costs.

¶265

SuBBA RAO J.-J have had the advantage of perusing the judgment prepared by my learned brother, Hidayatullah, J. I agree with his conclusion but would prefer to give my own reasons. The only justification for me to write a separate judgment is my inability to persuade myself to agree with one of the reasons given by Hiday~tullah, J., for his conclusion. That reason involves a principle of far-reaching importance, namely, whether, in ascertaining the reasonableness of restrictions imposed by a statute on a fundamental right, it is permissible to rely upon a notification issued by Government in exercise of power conferred on it by another Act unconnected with the impugned one. ·

¶266

SubbaRaof.

¶267

Before I embark upon the merits of the case it would be convenient at the outset to clear the ground by expressing my view on the said question. The facts of the case have been fully stated by my learned brother in his judgment, and I need not restate them except to notice a few relevant and material facts. The Essential Commodities Act, 1955 (Act 10 of 1955), was enacted for the purpose mentioned in the preamble to that Act. In exercise of the powers conferred by s. 3 of the said Act, the Central Government issued an order dated August 27, 1955, called the Sugar(Control) Order, 1955. Under r. 5 of the said order, the Central Government is empowered, inter alia, to fix the price or the maximum price at which any sugar may be sold or delivered, having regard to the price or minimum

¶268

¶269

SUPREME COURT REPORTS [1960(1)]

¶270

'⁹⁵⁹ price fixed for sugar.cane, manufacturing cost, taxes,

¶271

The Lord Kri>hna reasonable margin of profit for producer and/or trade, Sugar Mills Ltd., and any incidental charges. In exercise of powers con- and Anothn ferred on the Central Government under s. 3 of the

¶272

he . v. Ind. said Act and cl. 5 of the said order, the Central

¶273

T a~;·;:,'"' '"Government issued a notification dated July 30, 1958, fixing the ex-factory price for Indian sugar Standard

¶274

subba Rao J. (ISS) D-29 grade. A few days before the said order was issued i.e., on .June 27, 1958, the Central Government promulgated an Ordinance called the Sugar Export Promotion Ordinance, and it was subsequently converted into an Act (30 of 1958), which received the assent of the President on September 16, 1958. It is said that the Central Government in fixing the price for sugar produced during the season 1957-58, in vacuum pan sugar factories situate in the areas specified in the order had taken into account the possible loss the exporters might incur by reason of the application of the provisions of the impugned Act. Shri K. P. Jain, Chief Director in the Directorate of Sugar& Vanaspati, Ministry of Food and Agriculture (Department of Food), in his affidavit says that the ex-factory price of sugar per maund fixed by the said order was made up of the following items:

¶275

Average cost of production including margin of profit. Rs. 22·91 Excise duty. Rs. 10·70 Cane cess. Rs. 1·89 Loss on exports. Rs. 0·50 Total Rs. 36·00

¶276

It is explained therein that the factories are expected to realise actually on their internal sales Rs. 22·91 as their cost of production including margin of profit and Rs. 0·50 to cover losses of export which work out to approximately Rs. 10, per maund of sugar exported. For every one maund of sugar exported, the factories have for sale in the internal market 20 maunds of sugar, and on this, on account of the price fixed, they would realise 0·50 nP. per maund i.e., on 20 maunds Rs. 10, which covers the export loss. The effect of the

¶277

S.C.R. SUPREME COURT REPORTS 81

¶278

said order is that the possible loss to the sugar exporters is off-set by the fact that they can recoup their · h · · 1 t d l oss m t eir mterna ra e.

¶279

z959

¶280

The Lord Krishna 5 ugar M'll i s Ltd ., and Another v.

¶281

The learned Attorney-General sought to justify the and Another restrictions imposed by the impugned Act , on the v. ground, among others, that the Court should rely upon The ,union °! India the said order in determining whether the restrictions and Another imposed by the impugned Act are reasonable within Subba Rao 1. the meaning of Art. 19 of the Constitution. In support of this contention, he relied upon the decision of this Qourt in State of Madras v. V. G. Row (¹ ). That decision was concerned with the question whether s. 15(2)(b) of the Indian Criminal Law Amendment Act, 1908 (14 of 1908), as amended by the Indian Criminal Law Amendment (Madras) Act, 1950, was unconstitutional and void. It was contended in that case that the said provision fell within the limits of constitutionally permissible legislative abridgement of the fundamental right conferred on the citizens under Art. 19(l)(c) of the Constitution. The said limits are defined in cl. 4 of the said article whereunder:

¶282

"Nothing in sub-clause (c) of the said clause shall affect the operation of any existing law in so far as it imposes, or prevent the States from making any law imposing, in the interests of public order or morality, reasonable restrictions on the exercise of the right conferred by the said sub-clause." In discussing the said question, Patanjali Sastri, C.J., observed at p. 607 :

¶283

" It is important in this context to bear in mind that the test of reasonableness, wherever prescribed, should be applied to each individual statute impugned, and no abstract standard, or general pattern of reasonl:!obleness can be laid down as applicable to all cases. The nature of the right alleged to have been infringed, the underlying purpose of the restrictions imposed, the extent and urgency of the evil sought to be remedied thereby, the disproportion of the imposition, the prevailing conditions at the time, should all enter into the judicial verdict. In evaluating such elusive factors (I) {1952]S.C.R. 597, II

¶284

SUPREME COURT REPORTS [1960(1))

¶285

¶286

'959 and forming their own conception of what is reasonable, in n,ll the circunrntn,nces of n, given case, it is Sug"' The Lo•d Mills J{,;sr.na Lid., 111ev1ta . . l I ' e t '1t h ~ 1 ie socm . I )J I u osop iy. "l 1 an d I . t 1e sea. I e. o f and Anvlher values Of the ]Udges partw1p1ttillg Ill tne deern1011 v. should play an important part, mid the limit to their The Unfon of India interference with legislative judgment in such cases and Another can only be dictat.ed by their sense of responsibility and self-restraint 1tnd the sobering reflection that the Sublia Rao j. Constitution is meant not only for p<>ople of their way of thinking but for all, and that the mnjority of the elected representatives of the people have, in authorising the imposition of the restrictions, considered them to be reasonable."

¶287

If I may say so with respect, this passage summarizes the law on the subject folly and precisely. "Vhat is reasonable in a pnrticular set-up may be unreasonable in a society with a different background. The learned Counsel relying upon the words "prevailing conditions" and the subsequent words "in all the circumstances of a given case" contai1rnd in the above observation of Patanjali Sastri, C. J., contended that the said words were comprehensive enough to take in notifications issued by the Government., and, therefore, the said order of the Central Government fixing the rate would be one of the elements to be taken into consideration in testing the reasmmbleness of the impugnl'd Act. I find it difficult to accept this <ugmnent. The learned Attorney-General has not been itble to place before us any decision which "·ent to the length of holding that such notifications could enter the judicial verdict. It is truii that the prevailing conditions at the time the Act was nmde should be taken into considt,ration, for the effectiveness of <1 restriction imposed for a particuhu purpose depends upon the said conditions. In a society addicted to opium, the legislature has to make a law imposing severe restrictions on the right to conwme the same. In a society where a particular vice i8 rampant, any restriction imposed to eradicate that Yi<>e has to be moulded in accordance with the needs of the time. During times of stress and strain, such as war or pestilence, greater restrictions may be imposed on a fundamental right to do business in

¶288

¶289

S.C.R. SUPREME COURT REPORTS

¶290

¶291

public interest. But the same restriction may be I959 unreasonable in norm&l times. Even in normal times, The T.ord !( ri.>/ma the urgency of a social or economic reform, having sugar .lli!ls Ltd •• regard to the sub-normal stancfards of human existence, and Another may demand more stringent restrictions on fundav. mental rights than during times of prosperity. The The U¹¹ i^{011 0} 1 India l earnc d Cl ue^{·f J} ustice, t iere ore, m · } f" · l • 11s grap J · • uc t l escrip-· a ud · ~ not/1•r · tion of the test of reasonablenefi!s, in my view, was suhl>a Rao 1. not stating any thing more than the obvious, for the standard of reasonableness is inextricably conditioned by the state of society and the urgency for eradicating the evil sought. to be remedied. But I am clear in my mind that·the validity of an Act shall not be made to depend upon another Act unconnected with the impugned Act or power conferred thereunder, which .might, if properly exercised, off.set the evil tendency or the vice of the impugned Act. If the validity of an Act is made to depend upon such a foundation, a super-structure will have been built on shifting sands. To do that is to destroy the stability of legislation and to introduce an uncertain element therein. If two or more Acts were parts of the same scheme or plan, to implement the same or common objective, or if the impugned Act, though it was not originally conceived at the time when the earlier Act was passed, was only an extension or a further step by legislature for implementing the object of the earlier Act or if the legislature by express reference incorporated in the impugned Act the provisions of the earlier Act, it would be permissible to rely upon the said provisions of the earlier Act, not because they formed part of the prevailing ·conditions but because either the earlier Act formed part of the impugned Act by reference or both of them formed part of the same legislative plan. The illustrations are not exhaustive, but they all fall under one or other of the following two categories : (i) an earlier Act is made part of a new Act; and (ii) both Acts are parts of a legislative scheme or plan where both of them were conceived at the inception but passed in stages, or conceived at different times on the basis of experience gained but passed in furtherance of the same scheme. In such cases, the test of

¶292

	84 SUPREMECOURTREPORTS[1960(1)]
'959 - ~~;;, 0 ,;:;. and Another v. The UnionofIndia and Another SubbaRao¹·	reasonablenessinregardtoone Actmaybemadeto depend upontheimpactoftheotheron it.Buttogo beyond_thisistodestroyt~estabilityoflegislation andtomtroduceanuncertamelement.Togofurther andtodependupona notificationofatransitory natureissuedunderanunconnectedActistoplace thestatutein a fluid state.Insuch asituationits validitywould depend .uponastatutoryorderof temporaryduration;4twould change colourwiththe changingattitudesofanauthorityempoweredtoissue theorder.Itwould alsomeanthataCourtwillhave toembarkupona roving searchofall Actsand notifications whichmay,bydesignoraccident, alleviate or mollifytheevil consequencesofan impugnedAct. Such a resultcannotbe contemplated. Thelearned Attorney-Generalhasnotplaced before us anydecisioninsupportofhisbroadpropositian;but I findinthejudgmentofmylearnedbrother, Hidayatullah,J.,a few decisions which,itis said, goto thefull lengthofsupportingtheargumentofthe learnedAttorney-General. Ihavecarefully perused thesaiddecisionsandI donotfindanythingsaidgr impliedthereintosupportthesaidcontention.The decisionin_Attorney-General for Alberta_v.Attorney- General forCa:nada(1)was concernedwitha conflict betweenthejurisdictionsoftheDominionandProvin- cial Legislaturesunderss.91and92oftheBritish NorthAmerica Act, 1867,TheLegislative Assembly oftheProvinceofAlbertapassedanActrespecting thetaxationofbanks'andimposedthereunderon everycorporationorjointstockcompanyotherthan theBankofCanada,incorporatedforthepurposeof doingbankingorsavingsbankbusinessinthe Province,anannualtax,inadditiontoanytax payableunderanyotherAct. Defaultersofpayment oftaxweretobe visitedwithpenalties,andthe paymentofeithertaxorpenaltycould be enforced bydistressandsaleofgoodsandchattels,orby actionfor civil debt. Itwas contended before thePrivyCouncilthattheproposedtaxationwas notinitstruesensetaxationinordertotheraising (I)(1939) A.C.II7.

84
SUPREMECOURTREPORTS**[1960(1)]**

'959
-
~~;;,
0
,;:;.
and Another
v.
The UnionofIndia
and Another
SubbaRao¹·

reasonablenessinregardtoone Actmaybemadeto
depend upontheimpactoftheotheron it.Buttogo
beyond_thisistodestroyt~estabilityoflegislation
andtomtroduceanuncertamelement.Togofurther
andtodependupona notificationofatransitory
natureissuedunderanunconnectedActistoplace
thestatutein a fluid state.Insuch asituationits
validitywould depend .uponastatutoryorderof
temporaryduration;4twould change colourwiththe
changingattitudesofanauthorityempoweredtoissue
theorder.Itwould alsomeanthataCourtwillhave
toembarkupona roving searchofall Actsand
notifications whichmay,bydesignoraccident,
alleviate or mollifytheevil consequencesofan
impugnedAct.
Such a resultcannotbe contemplated.
Thelearned Attorney-Generalhasnotplaced before us
anydecisioninsupportofhisbroadpropositian;but
I findinthejudgmentofmylearnedbrother,
Hidayatullah,**J.,**a few decisions which,itis said, goto
thefull lengthofsupportingtheargumentofthe
learnedAttorney-General. Ihavecarefully perused
thesaiddecisionsandI donotfindanythingsaidgr
impliedthereintosupportthesaidcontention.The
decisionin_Attorney-General for Alberta_v.Attorney-
General forCa:nada(1)was concernedwitha conflict
betweenthejurisdictionsoftheDominionandProvin-
cial Legislaturesunderss.91and92oftheBritish
NorthAmerica Act, 1867,TheLegislative Assembly
oftheProvinceofAlbertapassedanActrespecting
thetaxationofbanks'andimposedthereunderon
everycorporationorjointstockcompanyotherthan
theBankofCanada,incorporatedforthepurposeof
doingbankingorsavingsbankbusinessinthe
Province,anannualtax,inadditiontoanytax
payableunderanyotherAct.
Defaultersofpayment
oftaxweretobe visitedwithpenalties,andthe
paymentofeithertaxorpenaltycould be enforced
bydistressandsaleofgoodsandchattels,orby
actionfor civil debt.
Itwas contended before
thePrivyCouncilthattheproposedtaxationwas
notinitstruesensetaxationinordertotheraising
(I)(1939) A.C.II7.

¶293

¶294

S.C.R. SUPREME COURT REPORTS

¶295

of a revenue for Provincial purposes so as to be within r959 the exclusive legislative competence of the Provipcial Legislature, but was merely part of a legislative plan The Lord Krishna Sugar Mills Ltd., to prevent the operation within the Province of those and Another banking institutions which had been called into existv. ence and given the necessary powers there to conduct The Union of India their business by the only proper authority, the and Another Parliament of the Dominion, under s. 91 of the British Subba Rao]. North America Act, and the Bill was therefore ultra vires the Provincial Legislature. The Privy Council accepted the contention. :For the purpose of ascertaining the true plan underlying the bill, the Judicial Committee compared the relative legislative lists, took judicial notice of other Acts and the object and purpose of the Act in question. Having regard to the said consideration, it came to the conclusion that it was a colourable legislation aimed at to prevent the operation within the province of the aforesaid banking institutions. When a statute is attacked on the ground that it is a colourable legislation, i.e., it assumed a form apparently faliing within the legislative competence of the legislature but in effect and substance intended to reach institutions beyond its legislative competence, it is obvious that all the surrounding circumstances, including other acts operating in the Province, have to be scrutinized to unravel the fraud on power. This decision, in my view, cannot be invoked to serve the present purpose. Nor does the decision of the Judicial Committee in Lad,ore v. Bennett (¹ ) carry the matter further. The question in that case was whether the Provincial legislation in question did not encroach upon the exclusive legislative power of the Dominion Parliament in relation to bankruptcy and insolvency, interest or pr iv ate rights outside the Province. For ascertaining the pith. and substance of the impugned statutes, the Judicial Committee relied upon th.e report of the Royal Commission appointed to enquire into municipal and other affairs of the four municipalities in question. At p. 477, it is observed:

¶296

" Their Lordships do not cite this report as evidence of the facts there found, but as indieating the (1) (1939) A.C. i68.

¶297

¶298

SUPREME COURT REPORTS [1960(1)]

¶299

'959 materials which the (~overnment of the Province had --_ . before them before promot.ing in the Legislature the ~Jte f.Ol'(i.]\ nsJina_ ~t.atllte 110'-"' itll pugned." 5,, .. ,,, M.tl.< Ud., Tl . d . . h l' l and Aavtlwr 118 Cai"\C Of"S 11ot, Ill ll1,V VJe\Y, t TO\Y R.11}' tg 1t Oil v. question raised in the present case. The decision of The i·uio11 of India the Privy Council in Pillrti v. J.lfudanayake(¹ ) is also ""a Auntl•n not. of much relevance to the present case. The S11h!m Rao J. constitutional validity - of the citizenshiJJ. Act, 1948, of Ceylon, was questioned in tlrnt case. It was contended therein that the main object of that Act was to prevent the Indian Tamils from obtaining citize1rnhip of Ceylon am! that the Act was part. of a plan to effect indirectly something \·hich the legislature had no power to achit>'e directly. The Judicial Committee pointed out, at p. 528:

¶300

"It. must be shown ~iffirmatively by the party challenging a statute which is upon its face intra vires that it was e.nacted as part of phtn to effect indirectly something which the legislature had no power to achieve directlv."

¶301

TJ1e Judicial Committee relied upon the Inclian and Pakistani R(•sidPnts (Citizenship) Act, Xo. 3 of 1949, by which an Indian Tamil would b.'' an application obtain citizenship by registration and thus protect his descendante, provided lH• lmd a eertain residential qualification. \Ylwn objection \·as taken against the Court rel.ving upon the stiic! Act, their Lordships disallowed the objection \·ith the following remarks, at p. 529:

¶302

"If there was a legislati,-e plan the plan must be looked at as a whole, and when so looked at it is evident, in their Lordships, opinion, tlrnt. the legislature did not intend to prevent Indian Tamils from attaining citizenship provided that they \·ere suffidently connected with the island."

¶303

In this case also the reliance on a subsequent Act was only to unravel the pl\in attributed to the Legisla. ture of Ceylon to deprive the Indian Tamils of citizen. ship by passing the impugned Act. The said three decisions, therefore, are not, and cannot be, authorities for the proposition now contended. To unravel a plan

¶304

(1) (1953) A.C. 514.

¶305

¶306

S.C.R. SUPREME COURT REPORTS

¶307

of fraud on powern, it would he necessary to scrutinize r959 all the documents, whether legislative or otherwise, which hel1) to ascertain the truth. It may a so ue 1 1. Sugar T!te Lord ;lfilts I<ris!tna Ltd., necessary to look into another Act to ascertain the etnd Another pith and imbstance of an impugned Act. But the same v. principle cannot be invoked for a,scertaining the The Union of India reasonablenoHs of legislative restl'idiom; on fundarnen- and .luot!tcr tal rights. subba Rao J.

¶308

Now t·oming to the factR of the present case, it is not suggrRtcd that the Es;;;ential Commoditi~;;; Aet, 1955, and t.lw impugned Act form part of one scheme of legislation. Indeml the E;;;sential Commodities Act waH enacted to provide in the i11tore:-1t of the gen<:'ml publie for control of production, :rnpply and di:;trihution of, and trade and commerec in, certain commodities. The provisions of the Act di,;clo;;c that tho ohjcct of the Aet was to nrninta.in or to inerca,;e :mpplies of essential commoditir's and to secure their equitable di;;tribution and availability at fair prices. It was not one of itH objAct;;; to stimnlate foreign trarle or to earn foreign exchange. It is said that the notification issued by the Central Government under s. 3 of that Act and r. 5 of the Order made thereunder was to off-;;et the loss expected to be incurred under the Ordinance, and therefore, the Act whi('h supplanted the Ordinance, must be deemed to have been pn,ssed on the basis of that notification. To put it in other words, though the impugned Aet docs not confer any power or imposn a duty on the Uoveriiment to off-set tlte·loss by fixing the rates of sugar, having regn,rd to the expected losR, the mere fact that it could fix the rn.tes mHkr Home other Act would make the Act good though otherwi;;;o bad. If this argument be accepted a:; correct., even if the notifioation was not issued, the existence of such a power under some other Act would be enough to validate the impugned Act, for, thongh the notifimttion was not issued, it may be issued at n. laier siltgP. 'l'his argmncnt, if accepted, would leave the im pngnl.'d statut.e . in it tl uid state, its validity or ot horwise depending upon the changing attitude of the authority concerned. I cannot, therefore, accept this rnntention.

¶309

¶310

SUPREME COURT REPORTS [1960(1)]

¶311

'959 Let me now consider the reasonableness of the - restrictions imposed by the Act, excluding the notifica- The Lord Ifrishna t' . d b h G'' I . d Sugar Mills Ltd., 10n . issue y t e overnmen.t. t .is . enacte to and Another provide for the export of sugar m pubhc mterest, and v. for the levy and collection, in certain circumstances, The Union of India of an additional duty of excise on sugar produced in and Another India. Section 4 enables the Central Government, by notification in the Official Gazette to fix from time to Subb,-i Rao]. time the quantity of sugar which may be exported during any period, and, in fixing such quantity, the Central Government should have regard to the quantity of sugar available in India, the quantity of sugar which, in its opinion, would be reasonably required for consumption in India, and the necessity for exporting sugar with a view to earning foreign excl;iange in the public interest. In exercise of that power, the Central Government should not fix the quantity of sugar for export as to exceed in any year in the aggregate twenty per cent. of the quantity of sugar prorlnced in India in the season ending wit.h the month of October falling within that year. Under s. 5, the Central Government is empowered to apportion the quantity of sugar fixed from time to time for. purposes of export under s. 4 among the owners in proportion to the quantity of sugar produced, or likely to be produced, by them respectively during the season referred to above. :'-iection 6 enjoins on the owners of sugar factories to deliver to the export agency, appointed under the Act, the sugar produced in their factories in such quiintities, of such grade, in such manner, within such time and iit such place, as may be specified hy the export agency in that behalf. When such delivery is made, the owner ceases to have any more right over the sugar except to receive payment ·therefor. Section 8 empowers the export agency, after taking delivery, to export the sugar or permit the owner to sell the whole or any part of the export quota in his custody at a price approved by it on condition that the sale-proceeds are payable to it. Section 9 directs the export agency to make payments to the owners, who had delivered sugar to it, in the manner prescribed by the section. Out of the total

¶312

¶313

S.C.R. SUPREME COURT REPORTS

¶314

sale-proceeds, the total expenditure incurred by the z959 -- export agency in respect of the sugar exported should · d The Lord Krisllna b d d among t e owners m e e ucte h d an d l tie . b proportion a ance s ou 1 • h to ld b t e h e apport1one quan t" 1ty o f 5 "~ar and Another^, M'lt ' s Ltd ., sugar delivered by them for export during the year. v. It also enables the export agency to make payments TkUnion of India to owners on account against documents of delivery of and Another sugar furnished by them, and to adjust such payments Sub;;;: Rao J. at the time of final payment. Section 10 confers power on the Central Government to give directions to the export agency in discharge of its functions under the Act. Section 7 deals with a situation when the ~ugar is not delivered, and it reads:

¶315

"S. 7(1): Where sugar delivered by any owner falls short of the export quota fixed for it by any quantity (hereinafter referred to as the said quantity), there shall be levied and collected on so much of the sugar despatched from the factory for consumption in India as is equal to the said quantity, a duty of excise at the rate of seventeen rupees per maund."

¶316

Sub-ss. 2, 3 and 4 provide for a machinery for imposing the penal duty and collecting the same from the defaulting owners of sugar. The scheme of the Act, therefore, is a self.contained one. The object is to provide for the export of sugar in the interest of public and that object is sought to be achieved by fixing the quota of sugar for export and distributing the same among the owners of factories; subject to the condition that in no case it should exceed twenty per cent. of the quantity of sugar produced in India in a particular season. The quantity is also fixed \vit.hout detriment to the requirements for internal consumption. The apportionment of the quota among the various factories is objectively and impartially made. The quota delivered, or in case the owner is allowed to sell the sugar himself, the sugar purchased from the sale-proceeds, is· exported, and the nett sale-proceeds are distributed among the owners in proportion to the quantity of sugar delivered by them for export. The Act enables the Government to make payments on account. The Government also retains an over-all

¶317

¶318

90 SUPREME COURT REPORTS [1960(1)]

¶319

, 959 control presumably to see that no injustiee is done to the parties concerned. The short question is whether the Th• Lord Krishna said restrictions on the freedom of the petitioners to Sngar Milts Ltd .• acquire, hold and dispose of property, and carry on and Anoth.e1 v. trade or business, are reasonable within the meaning of Th• Unfon of India clauses (5) and (6) of Art. 19 of the Constitution. The and Anoth<r restrictions must have a reasonable relation to the object which the legislature seeks to achieve and must Subba Rao f. not go in excess of that object. What is the object of the legislature ? The object of the legislature is to provide for the export of sugar in public interest. It cannot be, and indeed it is not, denied that at the time the Act was passed there was a sincere and serious national effort to industrialize our country with the avowed object of raising the economic standards of our people. One of. the necessary conditions for industrializing our eountry is to start heavy industries, and that cannot be done unless the country earn8 foreign exchange to enable it to import plants for starting the same. It is also self-evident that it would be in the interests of sugar industry to build up a foreign market for that commodity. The object of the Act was, therefore, demorrntrably to serve the national interest and the scheme evolved certainly had relation to the object sought to he achieved, for all the provisions of the Act were conceived in :t glmuine attempt to induce foreign export in sugar by co-operative effort. If so, the only ohjcetion to t.he rnstrictions imposed can be on the basis that the fr••edom w11,s abridged or curtailed unduly or arhitmrily. But for the Act, the petitioners could have Kold their sugar in the open market without exceeding the rnkK fix.,d under the Essential Commodities Act, l!.J!i5. The correspondence filed in the case, marked '" 1tn11exures A, H and C, clearly demonstrates that both the irnlustry :i.s well as the 8tate were equally interested to stimulate foreign trade and build up a foreign market. Under the scheme embodied in the Act, three restrictions are imposed on the owners of factories: (i) They must contribute to the stock for export,. not exceeding twenty per cent. of the quantity produced in their factories; (ii) they are paid only their proportionate

¶320

S.C.R. SUPREME COURT REPORTS 91

¶321

share of the nett sale-proceeds realised in the foreign r959 market; and (iii) a penal cess is imposed on those - . who make default in supplying the goods. When once The Lord Krishna . . d d h t h A t . h , l ·. t Sugar Mills Ltd., it is conce e t a t e c serves t e nat10na m erest, and Another I find it not possible to hold that the restrictions v. are unreasonable or excessive. The three restrictions The Union of India are really the props of the scheme. If there was no and Another statutory compulsion on the owners of factories to · f th d d . Subbn Rao], supp l y a reasona e ract1on o bl f e sugar pro uce m their factories, the export agency would not get the requisite quantity of sugar for export. If there was no provision imposing a penal cess on defaulters, there would be no sanction to compel them to deliver their quota of sugar. Though the final payment was deferred till the nett sale-proceeds were realised, they would be paid the price for the sugar supplied, at the rates fetched in the foreign market. It is common case that at present the export trade in sugar ends in loss; but it cannot be predicated that it will be a chronic feature and there will not come a time. when the export trade in sugar will earn profits. It may be that a better scheme migl).t have been evolved by the legislature or it might be more beneficial from the standpoint of owners of factories if t.he State purchased the exportable <1uantity for ready cash and exported the same on its own account. But it is not for this Court to evaluate the comparative merits of different schemes so long it is satisfied that the scheme actually evolved stands the test of reasonabless. The correspondence between the State and the industry shows that the industry as a whole co-operated with the State in evolving the scheme, which culminated in the passing of the Act. The State as well as the industry are equally interested to stimulate foreign trade and build up foreign market. To capture foreign market or to have a substantive share therein is not an easy task, as it depends upon many imponderables, namely, the availability of sugar, its demand, its comparative ID;erit,s with the sugar produced in other markets, transport facilities, mutual agreement requift ments, international affiliations etc. Initial loss must have to be borne to get a ~oothold and the clear

¶322

¶323

SUPREME COURT REPORTS [1960(1)]

¶324

z959 objective will have to be pursued purposrifully and tena. ciously. To achieve the said objective, with the consent The Lord Krishna of the industry and on the basis of past experience, S<1gar and Another Mills Ltd •• th e A t c was passe d b y th e p ar l" 1amen . t Th e ene ma b fi . 1 v. results flowing from the Act are significant. The The Union of India State earns foreigu exchange, and a foreign market is and Another gradually built up for the future prosperity of the sugar industry. Subba Rao]. In the affidavit filed on behalf of the respondents an attempt was made to support the Act on the ground that it was intended to serve a dual purpose of stablising the internal market and earn foreign exchange for the country. An attempt was also made to link the one with the other, but the learned Attorney-General did not pursue that line in his argument, and I have, therefore, considered the question only from the st.andpoint of the compelling need of the State to earn foreign exchange, and the long range aim of the industry to build up a foreign market. I therefore, hold that the restrictions imposed by the statute on the furnlamental rights of the petitioners are not arbitrary, and .are reasonable within the meaning of Art. 19 of the Constitution. I agree with my learned brother, Hidayatullah, J., on the other questions raised in this case. In the result, the petitions are dismissed with costs. ORDER.

¶325

In view of the opinion of the majority these petitions are dismissed with costs.

The Lord Krishna Sugar Mills Ltd., and Another v. the Union of India and Another

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The Lord Krishna Sugar Mills Ltd., and Another v. the Union of India and Another

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