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PETITIONER: FIRM RAMDEO ONKARMAL & ANR.

       Vs.

RESPONDENT: STATE OF U.P. & ANR.

DATE OF JUDGMENT21/07/1981

BENCH: PATHAK, R.S. BENCH: PATHAK, R.S. REDDY, O. CHINNAPPA (J)

CITATION:  1981 AIR 1582            1982 SCR  (1)  14  1981 SCC  (3) 489        1981 SCALE  (3)1046

ACT:      Forward Contracts  (Regulation) Act.  1952 s.  18  (3)- Regulation and Control of non-transferable specific delivery contracts-Notification issued-Area over which regulation and control to  extend-Whether  to  be  expressly  specified  in notification.

HEADNOTE:      The Forward  Contracts (Regulation)  Act, 1952  by sub- section (1)  of section  18 declares  that the provisions of Chapters III  and IV  shall  not  apply  to  nontransferable specific delivery  contracts for the sale or purchase of any goods. Sub-section  (3) of section 18 however, provides that if the Central Government is of opinion that in the interest of the  trade or  in the public interest, it is expedient to regulate and  control such  contracts in any area, it may by notification in  the Official  Gazette, declare  that all or any of  the provisions of Chapters III and IV shall apply to such class  or classes of non-transferable specific delivery contracts in such area and in respect of such goods or class of goods  as may  be specified  in the  notification and may also specify the manner in which and the extent to which all or any of the said provisions shall so apply.      On July  17, 1958  the Central  Government issued three notifications under  the Act.  The first  notification  S.O. 1384-B issued  under section  17 read with section 16 of the Act prohibited forward contracts for the sale or purchase of certain specified  goods, including  Tur (Arhar). The second notification S.O.  1384-C issued  under sub-section  (3)  of section 18  declared that  section 17  would apply  to  non- transferable specific  delivery contracts  in respect of the goods specified  in the notification, and these included Tur (Arhar). The  third notification,  S.O. 1384-D, issued under sub-section (1) of section 17 declared that no person could, save with  the permission  of the  Central Government, enter into any  non-transferable specific  delivery contracts  for the sale  or purchase  of the  goods specified  therein, and these included Tur (Arhar).      The appellants  were prosecuted  for  various  offences under section  20 and  section 21  of the  Act on the ground that three  transactions of  purchase of  Tur  (Arhar)  were entered  into   by  them   in  violation  of  the  aforesaid

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notifications. The appellants challenged the validity of the notifications but  the  Sub-Divisional  Magistrate  and  the Sessions Judge  in revision took the view that the challenge was premature.      A Division  Bench  of  the  High  Court  dismissed  the appellant’s petition  under section  561A read  with section 435 Code of Criminal Procedure, upheld 15 the validity  of the notifications, and rejected the plea of the appellants  that the  notifications were invalid as they did not  specifically mention  the area over which they were to operate.      Dismissing the appeal to this Court, ^      HELD: 1. What sub-section (3) of section 18 requires is that before  issuing a notification under that provision the Central Government  must satisfy  itself that the regulation and control  of non-transferable specific delivery contracts in a  particular area are in the interest of the trade or in the public  interest. The  determination of  the  area  over which the  regulation and  control will  extend is  a  vital component to  which the  Central Government  must apply  its mind when  deciding to  issue a  notification,  and  when  a notification is in fact issued the area must be communicated by specifying it in the notification. [18 D]      2. The area specified may be comprehended from material expressed or  implied in  the notification.  The sub-section does not  require that  the area must be expressly specified in the notification. If it is possible to define the area by necessary implication,  that is  sufficient compliance  with the requirement of the sub-section. [18 E]      3. A  notification may  operate over  part only  of the territory to which the Act extends, or it may be intended to operate throughout  that territory.  Ordinarily, whether the notification extends  over part  only of  the  territory  or throughout  the   territory  would   be  specified   in  the notification. If  the notification  is intended  to  operate over part  only of  the territory  to which the Act extends, the notification  must necessarily define that limited area. When it  contains no  express signification  of the area, it may be implied that it is intended to operate throughout the territory covered  by the  Act. That  is a  construction  by implication. It  is not  mandatory in  such a  case that the notification should  specify that it operates throughout the territory to which the Act extends. [18H- 19 A]      In  the   instant  case  the  absence  of  any  express reference to  a specific  area constituted  a ground  in the High Court  for alleging that the Central Government did not apply its mind to the "area" ingredient when deciding on the notification. The  large volume  of material produced by the respondents shows  that the Central Government did apply its mind to  the fact  that the  notification should  cover  the entire country. [19 C-D]

JUDGMENT:      CRIMINAL APPELLATE  JURISDICTION :  Criminal Appeal No. 552 of 1976.      From the judgment and order dated the 22nd May, 1975 of the Allahabad  High Court  in Criminal Misc. Application No. 2138 of 1971.      Pramod Swarup for the Appellants.      R.K. Bhat, for Respondent No. 1.      P.A. Francis and R.N. Podar for Respondent No. 2.

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16      The Judgment of the Court was delivered by      PATHAK, J.  This appeal  by certificate  granted  under sub-clause  (c)   of  clause  (1)  of  Article  134  of  the Constitution by the Allahabad High Court is directed against a judgment of that Court dismissing the appellants’ petition for quashing  criminal proceedings  against them  under  the Forward Contracts (Regulation) Act, 1952.      The  appellants   are  being   prosecuted  for  various offences under  s. 20  and s.  21 of  the Forward  Contracts (Regulation) Act, 1952 on the ground that three transactions of purchase  of Tur  (Arhar) were  entered into  by them  in violation of  Notifications Nos.  1384-B, 1384-C and 1384-D, all dated  July 17,  1958 issued  by the  Central Government under that  Act. During  the  proceedings  before  the  Sub- Divisional  Magistrate,   the  appellants   challenged   the validity of  the  three  notifications.  The  Sub-Divisional Magistrate, and  there after  the learned  Sessions Judge in revision took  the view  that it was premature to decide the question. They  applied to the Allahabad High Court under s. 561A read  with s.  435, Code of Criminal Procedure, raising the same  question and  praying  for  the  quashing  of  the criminal proceedings.  The learned  Single Judge of the High Court hearing  the petition considered the question to be of substantial importance and accordingly the case was referred to a larger Bench.      A Division  Bench of  the High  Court by  its  judgment dated May  22, 1975 upheld the validity of the notifications and dismissed  the petition. It saw no substance in the plea of  the   appellants  that   the   notifications   did   not specifically mention  the  area  over  which  they  were  to operate and,  therefore, were invalid. On application by the appellants the  High Court  granted a certificate under sub- clause (c)  of clause (1) of Article 134 of the Constitution that the case was fit for appeal to this Court.      The point  on which the certificate has been granted is whether  the  only  method  of  specifying  the  area  in  a notification issued under sub-s. (3) of s. 18 of the Forward Contracts (Regulation) Act, 1952 is to expressly describe it in the  notification itself  or whether such a specification can  be   inferred  from  other  circumstances  as  well  as notifications issued  simultaneously. That is the only point on which  this appeal  is pressed,  and we  need consider no other aspect of the case. 17      It is  desirable  to  appreciate  first  the  statutory matrix within  which the controversy is embedded. Sub-s. (1) of s. 18 declares that the provisions of Chapters III and IV (Chapter  IV  includes  s.  17)  shall  not  apply  to  non- transferable specific  delivery contracts  for the  sale  or purchase of  any goods. But by virtue of sub-s. (3) of s. 18 if the Central Government is of opinion that in the interest of the  trade or  in the public interest, it is expedient to regulate and  control such  contracts in any area, it may by notification in  the Official  Gazette, declare  that all or any of  the provisions of Chapters III and IV shall apply to such classes of non-transferable specific delivery contracts in such  area and in respect of such goods or class of goods as may be specified in the notification and may also specify the manner  in which  and the  extent to which all or any of the said provisions shall so apply.      In other  words, by  a notification under sub-s. (3) of s. 18  the Central  Government may make the provisions of s. 17 applicable  to a  class or  classes  of  non-transferable specific delivery  contracts in  an area  and in  respect of

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specified goods  or class  of goods.  By itself, s. 17 deals with forward contracts for the sale or purchase of any goods or class of goods. On a notification under sub-clause (3) of s. 18  it is  made applicable  to non-transferable  specific delivery contracts.  On making  s.  17  thus  applicable,  a notification can follow in exercise of the powers under sub- s. (1)  of s.  17, prohibiting  such contracts save with the permission of  the Central Government; and the issue of such a notification,  by reason  of sub-s.  (3) of  s. 17, brings into play the provisions of s. 16.      Now on  July 17,  1958, the  Central Government  in the Ministry of Commerce and Industry issued three notifications under the  Forward Contracts  (Regulation)  Act,  1952.  The first notification,  S.O. 1384-B was issued under s. 17 read with s.  16 of the Act, and prohibited forward contracts for the sale  or purchase  of certain specified goods, including Tur (Arhar). The second notification, S.O. 1384-C was issued under sub-s.  (3) of  s. 18  and declared  that s.  17 would apply to  non-transferable specific  delivery  contracts  in respect of  the goods  specified in  the  notification,  and these  included  Tur  (Arhar).  In  consequence,  the  third notification, S.O. 1384-D, was issued under sub-s. (1) of s. 17, declaring that no person could, save with the permission of the  Central Government,  enter into any non-transferable specific delivery  contracts for the sale or purchase of the goods specified  therein, and predictably these included Tur (Arhar). 18      As a  result of  the three  notifications, there was an integrated scheme,  prohibiting forward contracts as well as non-transferable specific delivery contracts for the sale or purchase of Tur (Arhar).      The contention  of the  appellants is  that the  powers conferred by  sub-s. (3) of s. 18 to apply the provisions of Chapters III  and IV  to non-transferable  specific delivery contracts must  necessarily  be  exercised  in  terms  of  a specific area,  and  the  area  must  be  specified  in  the notification. They  urge that  is what  sub-s. (3)  of s. 18 mandates. And  they say as the Notification S.O. 1384-C does not expressly specify any area, it is not in accordance with sub-s. (3) of s. 18 and is incomplete and therefore invalid. In consequence,  they submit,  the Notification  S.O. 1384-D must also fail.      It seems  to us  that what sub-s. (3) of s. 18 requires is that  before issuing  a notification under that provision the  Central   Government  must   satisfy  itself  that  the regulation and control of non-transferable specific delivery contracts in  a particular  area are  in the interest of the trade or  in the  public interest.  The determination of the area over  which the regulation and control will extend is a vital component  to which  the Central Government must apply its mind  when deciding  to issue a notification. And when a notification is in fact issued the area must be communicated by specifying it in the notification. The area specified may be comprehended  from material  expressed or  implied in the notification. The sub-section does not require that the area must be  expressly specified  in the  notification. If it is possible to  define the  area by necessary implication, that is sufficient  compliance with  the requirement  of the sub- section. In  the present context, when the notification does not expressly  specify the  area, one  of two conclusions is possible. Either  the notification  is intended  to  operate throughout the  territory over which the Act extends, or the omission indicates  that the authority required to apply its mind to  the "area"  ingredient did not do so. These are two

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distinct, separate and alternative possibilities.      A notification  may  operate  over  part  only  of  the territory to which the Act extends, or it may be intended to operate throughout  that territory.  Ordinarily, whether the notification extends  over part  only of  the  territory  or throughout  the   territory  would   be  specified   in  the notification. If  the notification  is intended  to  operate over part  only of  the territory  to which the Act extends, the noti- 19 fication must  unnecessarily define  that limited area. When it contains  no express signification of the area, it may be implied that  it  is  intended  to  operate  throughout  the territory covered  by the  Act. That  is a  construction  by implication. It  is not  mandatory in  such a  case that the notification should  specify that it operates throughout the territory to which the Act extends.      The  alternative  possibility  is  that  the  authority required to  determine the  "area" ingredient  did not do so when issuing  the notification.  If  such  a  contention  is raised, and  we point  out that it was not raised before us, it is  open to  the authority  to show  that it  did in fact apply its  mind to  the matter.  In the  present  case,  the absence  of   any  express  reference  to  a  specific  area constituted a ground in the High Court for alleging that the Central Government  did not  apply its  mind to  the "area", ingredient when  deciding on  the notification.  But a large volume of  material was  produced by  the respondents before the High Court to show that the Central Government did apply its  mind  to  that  fact  and  it  was  intended  that  the notification should cover the entire country.      In the result, the appeal fails and is dismissed. N.V.K.                                     Appeal dismissed. 20