05 February 1970
Supreme Court


Case number: Appeal (civil) 1285 of 1966






DATE OF JUDGMENT: 05/02/1970


CITATION:  1970 AIR 1275            1970 SCR  (3) 493  1970 SCC  (1) 386  CITATOR INFO :  E          1973 SC 106  (25)  F          1975 SC1443  (6)  RF         1976 SC1207  (80,89,91,176,177,445,513,541)  RF         1977 SC1825  (12)

ACT: Constitution  of  India, Arts. 301, 304, 305, 358  and  359- Freedom   of   trade  under  Art.  301  if   guaranteed   to individuals-If could be taken away by executive action. Protection  under  Arts.  358 and 359 to  orders  passed  by Government Scope of.

HEADNOTE: The Central Government promulgated the Sugar Control  Order, 1963,  under r. 125(2) of the Defence of India Rules,  1962. The  respondents,  who were holders of  licences  under  the Andhra Pradesh Sugar Dealers Licensing Order, 1963,  (issued under  the  Essential Commodities Act, 1955)  and  who  were dealers   in  sugar  in  the  cities  of  Hyderabad  and   ’ Secunderabad,  were  ’recognised dealers’  under  the  Sugar Control Order.  They were allocated quotas of sugar, but, in 1964, the State Government) ordered that the sugar allocated to the two cities be given in its entirety to a  Cooperative Stores.  The respondents were thus prevented by an executive order from carrying on their business.  They challenged  the order successfully in the High Court. In  appeal to this Court on the questions : (1) whether  the order  was  protected under Arts. 358 and 359,  because  the President had declared a state of emergency; and (2) whether the order was violative of Art. 301, HELD  :  (1) (a) Under Art. 358 the  respondents  could  not challenge  any  executive action which, but  for  provisions contained in Art. 19, the State was competent to take.   But in  the present case, the executive order was not one  which the  State  was competent to make.  Since the order  of  the State  Government has the effect of cancelling the  licences of the respondent, which could be done only after an enquiry



according to the procedure prescribed in the Andhra  Pradesh Sugar  Dealers  Licensing  Order, the  executive  order  was contrary to the statutory provisions contained in the Andhra Pradesh Sugar Dealers Licensing Order and the Sugar  Control Order.   Such  executive  action  of  the  State,  which  is otherwise invalid, is not immune from attack under Art. 358, merely because a proclamation of emergency was in operation. [502 A-D] (a)  In  the present case, there was discrimination  against the  respondents  in  that the impugned  order  conferred  a monopoly  on  the  Cooperative Stores in  disregard  of  the subsisting  right  of  the respondents.  The  order  is  not protected  under Art. 359, because only if it was  shown  to have  been made under the authority reserved by the  Defence of  India Ordinance or the Rules made thereunder,  that  the jurisdiction  of  the  court to  entertain  a  petition  for infringement  of  the guarantee under Art. 14  is  excluded. [502 E-G] (2)  The  impugned order trenches Won the freedom  of  trade and commerce guaranteed by Art. 301. 499 By   this  Article  the  freedom  of  trade,  commerce   and intercourse  throughout the territory of India  is  declared free.  Under it, a restriction upon the legislative power of Parliament   and  State  Legislature  is  imposed   by   the Constitution.   The guarantee of the freedom is not  in  the abstract but to individuals.  Within the limits of Arts. 304 and  305  there could be legislative restrictions  upon  the individuals’  right  to  freedom  of  trade,  but  not,   by executive action. [503 D-F; 504 D-E] Commonwealth  of Australia v. Bank of New South Wales,  L.R. [1950] A.C. 235, referred to.

JUDGMENT: CIVIL  APPELLATE JURISDICTION : Civil Appeals Nos.  1285  to 1309 of 1966. Appeals  by special leave from the judgment and order  dated June  23,  1965  of the Andhra Pradesh High  Court  in  Writ Appeals Nos. 34 to 58 of 1965. P.   Ram Reddy and A. Y. Rangam, for the appellants (in  all the appeals). K.   Rajendra Chaudhuri and K. R. Chaudhuri, for the respon- dent (in C.A. No. 1304 of 1966). The Judgment of the Court was delivered by Shah, J. These appeals are filed with special leave  against the  order  of the High Court of  Andhra  Pradesh  declaring G.O.M.  No.  2976 dated December 30, 1964  "null,  void  and ultra vires". The  respondents are dealers in sugar and other  commodities and carry on their business in the cities -of Hyderabad  and Secunderabad.  The State of Andhra Pradesh issued the Andhra Pradesh Sugar Dealers Licensing Order, 1963, in exercise  of the  power  conferred by s. 3 of the  Essential  Commodities Act, 1955.  Under that order no person may carry on business as  a dealer except under and in accordance with  the  terms and  conditions  of  a  licence  issued  by  the   specified authority.   Grant and renewal of licence could  be  refused only  on  grounds  reduced  to  writing  and  after   giving opportunity to the party to state his case.  The respondents were  granted  licences  under  the  Andhra  Pradesh,  Sugar Dealers  Licensing  Order,  1963.   Shortly  thereafter  the Central Government, in exercise of the power conferred under sub-r.  (2) of r. 125 of the Defence of India  Rules,  1962,



promulgated the Sugar Control Order, 1963.  By that order  a recognized  dealer was defined as a person carrying  on  the business; of purchasing, selling ’or distributing sugar  and licensed under the order relating to the licensing of  sugar dealers  for the time being in force in a State.  The  order provided  for placing restrictions on sale, or agreement  to sell  or  delivery  by the producers,  for  controlling  the production,   sale,  grading,  packing,   making   delivery, distribution etc. of sugar 500 by  the producers or recognised dealers, for regulating  the movement of sugar, for fixation of its prices, for allotment of  quotas,  for  delivery  of such  quotas  and  for  other incidental matters. The  respondents being holders of licences under the  Andhra Pradesh Sugar Dealers Licensing Order, 1963, were treated as recognized dealers under the Sugar Control Order, 1963.  The State Government allocated quotas of sugar received from the Central  Government for distribution in different areas  and nominated  licensees  or  dealers to take  delivery  of  the allotted quotas from the factories. On  December 30, 1964 the State Government ordered that  the sugar quota -allocated to "the twin cities of Hyderabad  and Secunderabad"  be  given  in its  entirety  to  the  Greater Hyderabad  Consumers  Central  Co-operative  Stores,   Ltd., Hyderabad.   On  that  account  the  respondents  who   held licences under the Andhra Pradesh Sugar Licensing Order  for distribution of sugar and were also recognized dealers under the  Sugar  Control Order, 1963, were by an  executive  fiat prevented from carrving on their business in sugar. The respondents moved petitions in the High Court of  Andhra Pradesh  challenging the validity of the order.   The  State resisted  the petitions principally on the ground  that  the order  made by the State Government was in  conformity  with the provisions of the Sugar Control Order and was issued  in pursuance of the policy laid down by the Central  Government to entrust the work of distribution of sugar exclusively  to cooperative societies and thereby to eliminate in the public interest  the  agency  of private  dealers  in  lifting  and distributing sugar.  It was urged that the respondents could not  seek  any  relief complaining of  infraction  of  their rights under Arts. 14 and 19 because the emergency  declared by the President in October 1962 had not been withdrawn. The  petitions  Were heard by Gopalakrishnan  Nair,  J.  The learned  Judge  held  that  the  executive  order  was   not supported  either  by the provisions of  the  Sugar  Control Order,  1963,  issued by the Central Government, or  by  the Andhra Pradesh Sugar Dealers Licensing Order, 1963, that the step taken by the Government was not permitted by law;  that ’as  a  result of the order of the Government  the  licences held by the respondents were cancelled without following the procedure  laid  down in cl. 7 of the Andhra  Pradesh  Sugar Dealers  Licensing  Order; and that the  provisions  of  the order  could not be circumvented by  executive  instructions and  since the order discriminated between  the  respondents -and  the  Central Consumers Cooperative Stores in  that  it conferred  a monopoly in disregard of the subsisting  rights of  the respondents and amounted to "hostile and  invidious" discrimination in the admi- 501 nistration of the Sugar Control Order.  He further held that since the Government had not taken action under the  Defence of  India Rules or under any Control Order made under  those Rules,  the respondents were not debarred under Arts. 358  & 359  of  the Constitution from claiming  protection  against



impairment of their rights by the order issued by the State. In appeal to a Division Bench of the High Court the  grounds on  which the decision was recorded by Gopalakrishnan  Nair, J., were confirmed. In these appeals counsel for the State of Andhra Pradesh has not contended that the impugned order could be issued dither under  the  Andhra Pradesh Sugar  Dealers  Licensing  Order, 1963,  or  the  Sugar Control Order,  1963,  issued  by  the Central  Government.  Indisputably it is an executive  order made  by the State Government.  The State Government  it  is claimed  acted  in pursuance of the policy  of  the  Central Government   to   distribute   sugar   through   cooperative societies.  But the order was still unauthorised.  Under the Essential  Commodities Act, 1955, the State  Government  had issued  an order for distribution of sugar through  licensed dealers  and the respondents had obtained licences  in  that behalf.  Their licences could only be cancelled after making the  enquiry according to the procedure prescribed by cl.  7 of the Sugar Dealers licensing Order.  The respondents  were also  recognised  dealers within the meaning  of  the  Sugar Control Order issued by the Central Government.  The  rights of the respondents could not be taken away by ’an  executive order in a manner plainly contrary to, the provisions of the statutory orders. It  is  true that under Art. 352 of  the  Constitution,  the President declared a state of emergency on October 26, 1962. By  Art-  358  while  a  proclamation  of  emergency  is  in operation,  nothing’ in Art. 19 shall restrict the power  of the  State  (as defined in Part 111) to make any law  or  to take any executive action which the State would but for  the provisions  contained in that Part ’be competent to make  or to  take.  By Art. 359 the President is authorised, where  a proclamation of emergency was in operation, to declare  that the  right to move any court for the enforcement of such  of the  rights conferred by Part III as may be mentioned  shall remain   suspended   for  the  period   during   which   the proclamation was in force or for such shorter period as  may be specified in the order. On the issue of the proclamation of emergency the State  is, for  the  duration  of the  emergency,  competent  to  enact legislation,  notwithstanding that it impairs  the  freedoms guaranteed  by  Art. 19 of the Constitution.  The  State  is also  competent  to take executive action  which  the  State would,  but for the provisions contained in Art. 19  of  the Constitution,  be competent to take.  The impugned order  in this case was issued while the proclamation of emergency 502 was  in operation.  The respondents could not challenge  the validity of any law enacted by the State Legislature so long as  the proclamation of emergency was in operation,  on  the ground that it impaired the freedoms guaranteed by Art.  19. They  could not also challenge any executive  action  which, but  for the provisions contained in Art. 19, the State  was competent to take. In the present case, the State did not enact any legislation impairing the -fundamental right of the respondents to carry on  business  which is guaranteed by Art. 19 (1)  (g),  they proceeded  to  make an executive order.  But  the  executive order immune from attack is only that order which the  State was competent, but for the provisions contained in Art.  19, to make.  Executive action of the State Government which  is otherwise invalid is not immune from attack, merely  because a  proclamation  of  emergency is in operation  when  it  is taken.  Since the order of the State Government was  plainly contrary to the statutory provisions contained in the Andhra



Pradesh Sugar Dealers Licensing Order and the Sugar  Control Order,   it  was  not  protected  under  Art.  358  of   the Constitution. Nor  had it the protection under Art. 359.  On  November  3, 1962 the President issued an order in exercise of the  power under  Art. 359, that "the right of any person to  move  any court  for  the  enforcement  of  the  rights  conferred  by -article  14, article 21 and article 22 of the  Constitution shall  remain  suspended  for the period  during  which  the Proclamation of Emergency issued under clause (1) of article 352 thereof on the 26th October, 1962, is in force, if  such person  has  been  deprived of any  such  rights  under  the Defence of India Ordinance, 1962 (4 of 1962) or any rule  or order made thereunder." Only if the impugned order was shown to  be made under the authority reserved by the  Defence  of India  Ordinance or rules made thereunder, the  jurisdiction of  the Court to entertain a petition for impairment of  the guarantee under Art. 14 may be excluded.  But the action was not  shown to be taken under the Defence of India  Ordinance or under the rule or order made thereunder. Again it may be pointed out that under Art. 301 the  freedom of trade, commerce and intercourse throughout the  territory of India is declared free. -That freedom is declared in  the widest terms and applies to all forms of trade, commerce and intercourse.  But it is subject to certain restrictions  (if which  Arts.  304 and 305 are relevant.  It is  provided  by Art. 304 : "Notwithstanding anything in article 301 or article 303, the Legislature of ’a State may by law-          (a)......................................             .................................... 503 (b)  impose  such reasonable restrictions on the freedom  of trade, commerce or intercourse with or within that State  as may be required in the public interest Provided  that  no  Bill or amendment for  the  purposes  of clause  (b) shall be introduced or moved in the  Legislature of a State without the previous sanction of the President." It  is  also provided by Art. 305 that the existing  law  or laws  which  may be made by the State  providing  for  State monopolies, i.e. relating to any matter as is referred to in sub-cl.  (ii)  of  cl.  (6) of  Art.  19,  are  outside  the guarantee  of Art. 301.  In the present case the  State  had not  assumed  a monopoly to deal in sugar.  It  had  granted monopoly to a Central Consumers Cooperative Stores which was not  a corporation owned or controlled by the  State  within the  meaning of Art. 19 (6) (ii).  The order was  challenged on the ground that it trenches upon the freedom of trade and commerce  guaranteed  by Art. 301 of the  Constitution.   By Art. 304 even by legislature restrictions on the freedom  of trade, commerce and intercourse with or within the State may only be imposed, if such restrictions are reasonable and are required in the public interest and the Bill or amendment is introduced  or moved in the Legislature of a State with  the previous sanction of the President.  Obviously the guarantee under  Art.  301 cannot be taken away by  executive  action. The  guarantee  under Art. 301 which imposes  a  restriction upon  legislative  power  of the  Parliament  or  the  State Legislature and the declaration of freedom is not merely  an abstract  declaration.   There is no reason  to  think  that while  placing  a  restriction upon  legislative  power  the Constitution  guaranteed freedom in the abstract and not  of the  individuals.   Article  301  of  the  Constitution   is borrowed  almost verbatim from s. 92 of the Commonwealth  of Australia  Constitution Act 63 and 64 Vict. c. 12 of  1.900.



In dealing with the contention that no individual right  was guaranteed  by  s.  92  of  the  Commonwealth  of  Australia Constitution  Act the Judicial Committee in Commonwealth  of Australia v. Bank of New South Wales(1) observed at p. 305 "The  necessary  implications of these decisions  (James  v. Cowan-(1932)  A.C.  542-and  James v.  The  Commonwealth  of Australia-(1936)  A.C.  578) are important.   First  may  be mentioned an argument strenuously maintained on this  appeal that  s.  92  of the Constitution  does  not  guarantee  the freedom  of  individuals.  Yet James was an  individual  and James vindicated his, ’freedom in hard won fights. (1)  L.R. 1950 A. C. 235- 504 Clearly  there is here a misconception.  It is true  as  has been said more than once in the High Court, that s. 92  does not  create  any new juristic rights but it  does  give  the citizen  of State or Commonwealth, as the case may  be,  the right to ignore, and, if necessary, to call on the  judicial power to help him to resist, legislative or executive action which  offends against the section.  And this is  just  what James successfully did." Our Constituent Assembly borrowed the concept of freedom  of trade,   commerce  and  intercourse  from   the   Australian Constitution.   It  is true that the  limitations  upon  the amplitude of the guarantee are not expressed in s. 92 of the Australian   Constitution,  as  are  to  be  found  in   our Constitution.    Again,  there  is  no  guarantee   in   the Australian  Constitution of a fundamental right to carry  on trade.  But this departure from the scheme of the Australian Constitution  does  not  alter the  true  character  of  the guarantee  and it cannot be inferred that  the  Constitution imposed restrictions upon legislative, power, but denied  to the  individuals  affected  by  unauthorised  assumption  of executive power the right to challenge the exercise of  that power.   A vital constitutional provision cannot be so  con- strued  as to make a mockery of the declared  guarantee  and the   constitutional  restrictions  on  the  power  of   the legislature.   If  the  power of the  State  Legislature  is restricted  in the manner provided by Art. 301,  but  within limits provided by Arts. 303 to 305, it would be  impossible to  hold that the State by executive order can do  something which it is incompetent to do by legislation. In  any view of the case, these -appeals must fail  and  are dismissed.   Only one respondent has appeared in this  case, but  even he has not filed a statement of the case.  In  the circumstances, there will be no order as to costs. V.P.S.                   Appeals dismissed. 505