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PETITIONER: P.   V. SIVARAJAN

       Vs.

RESPONDENT: THE UNION OF INDIA AND ANOTHER

DATE OF JUDGMENT: 11/12/1958

BENCH: GAJENDRAGADKAR, P.B. BENCH: GAJENDRAGADKAR, P.B. DAS, SUDHI RANJAN (CJ) DAS, S.K. WANCHOO, K.N. HIDAYATULLAH, M.

CITATION:  1959 AIR  556            1959 SCR  Supl. (1) 779  CITATOR INFO :  RF         1970 SC 564  (191)  R          1986 SC1541  (10)

ACT:        Coir  Industry,  Regulation and Control  of-Registration  of        exporter   and   licensee-Quantitative   test-Constitutional        validity-Coir  Industry Act, 1953 (45 of 1953), S.  26,  rr.        18,  19, 20(1)(a), 21, 22(a) -Constitution of  India,  Arts.        19, 14.

HEADNOTE: The  petitioner, an unsuccessful applicant for  registration as  an  exporter and licensee for exporting  coir  products, challenged  the  vires of the rr. 18, 19, 20(1)(a),  21  and 22(a)  made  by the Central Government in  exercise  of  its powers under S. 26(1) of the Coir Industry Act, 1953 (45  Of 1953).   The  Act  had for its  object  the  regulation  and control  of  the Coir industry in public interest.   It  was contended  on  his  behalf that the  impugned  rules,  which prescribed  the quantitative, and not the qualitative,  test for registration of established exporters, were inconsistent with the provisions of the Act and as such, ultra vires  the Act and that they tended to create a monopoly in the  export trade  of coir commodities and thereby destroy the  business of small dealers and discriminated between those who carried on large scale business and those who carried on small scale business   and  thus  impugned  Arts.  19  and  14  Of   the Constitution. Held,  that the contentions were without substance and  must be negatived. There was no provision in the Coir Industry Act, 1953,  that excluded  or prohibited the application of the  quantitative test and the rules were in no way inconsistent with the  Act nor  in  excess  of  the powers  conferred  on  the  Central Government by s. 26 of the Act. Where  an  Act  sought  to control  an  industry  in  public interest it would obviously be for the rule making authority to  decide  which  rules  and  regulations  would  meet  the requirement of public interest.  Such rules and regulations,

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though  reasonable within the meaning of Art.  19(6),  might cause hardship to those who failed to comply with them.  But once it was conceded that the regulation and control of  the trade were justified in public interest, Art. 19(1)(g) could not be invoked to challenge the validity of the rules. Nor did the impugned rules violate Art. 14 Of the  Constitu- tion.  The classification of traders under rr. 18 and 19 was clearly  founded on an intelligible differentia that  had  a rational  relation to the object of the Act.  The  exemption made  by the rules in favour of co-operative societies  from some  of the relevant tests indicated that  the  Legislature intended to encourage small 780 traders.   It  was not, therefore, correct to say  that  the rules would lead to a monopoly in the trade.

JUDGMENT: ORIGINAL JURISDICTION: Petition No. 121 of 1958. Petition   under   Article  32  of  the   Constitution   for enforcement of Fundamental rights. G.   B. Pai and Sardar Bahadur, for the petitioner. M.   C. Setalvad, Attorney-General for India, B. Sen and  T. M. Sen, for the respondents. 1958.  December 11.  The Judgment of the Court was delivered by GAJENDRAGADKAR, J.-The petitioner has been doing business as an  exporter of coir products to foreign countries  for  the last  twenty  years.   On  July  4,  1958,  he  applied   to respondent   2,   the  Chairman,  Coir   Board,   Ernakulam, requesting  that he should be registered as  an  established exporter.  This application was accompanied by an income-tax clearance  certificate  and  attested  copies  of  bills  of lading.  Respondent 2 declined to register the petitioner on the  ground that his application was defective  inasmuch  as the requisite certificate regarding his financial status bad not  been  produced and no evidence had been given  to  show that  he  had exported the minimum  quantity  required  (500 Cwts.). The petitioner was told that unless he complied with the requirements asked for within seven days his application would  be rejected without further notice.   The  petitioner found that he could not comply with the directions issued by respondent 2 and so it became impossible for the  petitioner to get registration and licence applied for by him.  That is why  he  filed  the present petition under Art.  32  of  the Constitution and prayed for the issue of a writ or order  in the  nature of mandamus to direct the second  respondent  to grant the petitioner registration and licence as applied for by him and to prohibit or restrain the said respondent  from acting on, or implementing, the rules issued under the  Coir Industry  Act,  1953,  by issue of  a  writ  of  certiorari, prohibition  or  such  other writ or  order  appropriate  to protect  his rights.  The petitioner also prayed that  "  if found necessary " the said                        781 rules should be declared to be ultra vires the powers of the Central  Government  and invalid being in violation  of  the fundamental  rights  guaranteed by Arts. 14 and  19  of  the Constitution.   The  Union of India has, been  impleaded  as respondent 1 to the petition. Before  dealing  with the points raised by the  petition  it would  be necessary to refer briefly to the  provisions(  of the Coir Industry Act, 1953 (45 of 1953), hereinafter called the  Act, and the rules framed under it in 1958.   This  Act

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was  enacted  by  the  Parliament  because  it  was  thought expedient in the public interest that the Union should  take under its control the coir industry (s. 2). Section 4 of the Act  provides for the establishment and constitution of  the Coir  Board and s. 10 enumerates its functions  and  duties. Under s. 10(1) it shall be the duty of the Board to  promote by such measures as it thinks fit the development under  the control  of  the Central Government of  the  coir  industry. Sub-section (2) enumerates the measures which the Board  may take with the object of developing the coir industry without prejudice to the generality of the provisions of sub-s. (1). Amongst the measures thus enumerated, sub-s. (2) (b)  refers to  the  regulation  under the supervision  of  the  Central Government  of the production of husks, coir yarn  and  coir products   by  registering  coir  spindles  and  looms   for manufacturing  coir products, as also manufacturers of  coir products, licensing exporters of coir yarn and coir products and   taking  such  other  appropriate  steps  as   may   be prescribed.   Sub-section (2)(g) refers to the promotion  of co-operative  Organisation  among producers of  husks,  coir fibre and coir yarn and manufacturers of coir products,  and sub-s. (2)(1) refers to the licensing of retting places  and warehouses and otherwise regulating the stocking and sale of coir  fibre, coir yarn and coir products both  for  internal market  and  for  exports.  Section  26(1)  confers  on  the Central Government power to make rules for carrying out  the purposes  of  the Act subject to the condition  of  previous publication.  Sub-section (2) enumerates the matters in res- pect  of which rules may be made, in particular and  without prejudice to the generality of the power 782 conferred by sub-s. (1).  Sub- section (2) (k) refers  inter alia  to the registration of manufacturers of coir  products and the conditions for such registration and the ,,grant  or issue  of  licences under the Act; and sub-s.  (2)(1)  deals with the form of applications for registration and  licences under the Act and the fee, if any, to be paid in respect  of any such applications. Under  the powers conferred by s. 26 the Central  Government framed  rules  in  1958.  For the purposes  of  the  present petition  it  would be relevant to refer to rr.  17  to  22. Rule  17 deals with registration and licensing  of  exports; and it provides that no person shall, after the coming  into force  of  the rule, export coir fibre, coir  yarn  or  coir products  unless he has been registered as an  exporter  and has  obtained  an  export licence under  these  rules.   The proviso  deals  with  exemptions  with  which  we  are   not concerned.  Rule 18 lays down that any person who has in any of the three years immediately preceding the commencement of the  rules exported not less than twenty-five tons  of  coir yarn or coir products other than coir rope, or exported  any quantity  of coir fibre or coir rope, may be  registered  an exporter of coir yarn, coir products other than coir rope or coir  fibre  or  coir  rope as the case  may  be.   Rule  19 provides  for the registration of persons other  than  those covered  by  r.  18 and it lays down inter  alia  that  such persons  may  be registered as exporters of  coir  yarn  if, during the period of twelve months immediately preceding the date of application, a minimum quantity of twenty-five  tons of  coir yarn had been rehanked or baled in a factory  owned or otherwise possessed by the applicant and registered under the Indian Factories Act, 1948, or, if the applicant has had a total purchase turnover of one hundred tons of coir  yarn. The  proviso  to  this  rule  authorises  the  Chairman   by notification  to exempt from the operation of this rule  any

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co-operative  society  the members of which  are  owners  of industrial   establishments  or  any  Central   Co-operative Marketing  Society.  Rules 20 and 22 prescribe the  mode  of making  an application for registration as an  exporter  and for licence respectively while r. 21 provides for the 783 cancellation of registration.  The present petition does not challenge the validity of any of the provisions of the  Act. It,  however,  seeks to challenge the vires of rr.  18,  19, 20(1)(a), 21 and 22(a). There  is  no  doubt that coir and  coir  products  play  an important   role   in  our  national  economy.    They   are commodities which earn foreign exchange, the total’ value of our  exports  in  these commodities being of  the  order  of Rupees  Ten  Crores  per year.  It was  found  that  several malpractices  had  crept  in  the  export  trade  of   these commodities  such as non-fulfilment of contracts,  supplying goods of inferior qualities and cut-throat competition;  and these  in  turn  considerably -affected the  volume  of  the trade.  That is why Parliament thought it necessary that the Union  should  take under its control the coir  industry  in order  to regulate its export trade.  It is with the  object of developing the coir industry that the Coir Board has been established and the registration and licensing of  exporters has  been introduced.  The petitioner does not dispute  this position  and  makes no grievance or complaint  against  the relevant provisions in the Act. It  is,  however,  urged  that  the  relevant  rules   which prescribe  the  quantitative test for  the  registration  of established   exporters   are  ultra   vires   because   the introduction  of  the  said test is  inconsistent  with  the provisions of the Act.  In this connection Mr. Pai, for  the petitioner,  sought to rely on the report submitted  by  the Ad-Hoc Committee for external marketing which the Coir Board had appointed on August 20, 1954.  His grievance is that the report of the said Committee does not recommend the adoption of  the  quantitative  test, but seems  to  suggest  that  a qualitative  test  would  be more appropriate  ;  and  that, according  to Mr. Pai, also indicates that the  quantitative test  had been improperly prescribed by the rules.   We  are not impressed by these arguments.  It is clear that there is no  provision  in the Act which excludes  or  prohibits  the application  of  the quantitative test in making  rules  for registration of exporters or for issuing licences for export trade.   In  fact the Act has deliberately left  it  to  the rule-making authority to frame rules 784 which it may regard as appropriate for regulating the trade; and  so it would be impossible to accept the  argument  that the  rule-making  authority  was  bound  to  prescribe   the qualitative rather than the quantitative test.  Besides,  it does  not appear that the report of the Committee  on  which Mr.  pai relied definitely indicated its partiality for  the adoption  of the qualitative test.  Indeed Appx.  XI to  the said report would suggest that the Committee in fact was not averse  to the adoption of a quantitative test; but even  if the  Committee had expressly recommended the adoption  of  a qualitative, not a quantitative, :test, it would be idle  to suggest  that  the Coir Board was bound to accept  the  said recommendation  or  that  the  Central  Government  was  not competent  to make rules contrary to the recommendations  of the   Committee.    The  validity  of  the  rules   can   be successfully  challenged  if  it  is  shown  that  they  are inconsistent  with  the provisions of the Act or  that  they have  been  made in excess of the powers  conferred  on  the

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rule-making authority by s. 26 of the Act.  In our  opinion, no  such  infirmity has been established in respect  of  the impugned rules. It   is  then  contended  that  the  relevant  rules   would ultimately tend to establish a monopoly in the export  trade of  coir commodities and would thereby extinguish the  trade or  business  of small dealers like the petitioner.   It  is also contended that the application of the quantitative-test discriminates  between  persons carrying on  business  on  a large  scale  and  those who carry on business  on  a  small scale.  That is how Arts. 19 and 14 of the Constitution  are invoked and the validity of the relevant rules is challenged on  the ground that they violate the fundamental  rights  of the  petitioner under the said Articles.  We think there  is no substance in this contention. If  it is conceded that the regulation of the coir  industry is  in  the public interest, then it would be  difficult  to entertain  the argument that the regulation or control  must be  introduced only on the basis of a qualitative test.   It may   well  be  that  there  are  several  difficulties   in introducing and effectively enforcing the qualitative  test. It is well-known that granting                    785 permits or licences to export or import dealers on the basis of  a quantitative test is not unknown in regard  to  export and import of essential commodities.  It would obviously  be for  the  rule-making authority to decide which  test  would meet  the  requirements of public interest and  what  method would be most expedient in controlling the industry for  the national’   good.    Beside,%,  even  the  adoption   of   a qualitative  test may tend to extinguish the trade of  those who  do not satisfy the said test; but such a result  cannot obviously be treated as contravening the fundamental  rights under Art. 19.  Control and regulation of any trade,  though reasonable within the meaning of Art. 19, sub-Art. (6),  may in  some cases lead to hardship to some persons carrying  on the said trade or business if they are unable to satisfy the requirements  of the regulatory rules or provisions  validly introduced ; but once it is conceded that regulation of  the trade and its control are justified in the public  interest, it  would not be open to a person who fails to  satisfy  the rules  or regulations to invoke his fundamental right  under Art.  19(1)(g) and challenge the validity of the  regulation or  rule  in  question.   In  our  opinion,  therefore,  the challenge to the validity of the rules on the ground of Art. 19 must fail. The  challenge  to  the validity of the said  rules  on  the ground of Art. 14 must also fail, because the classification of traders made by rr. 18 and 19 is clearly rational and  is founded   on  an  intelligible  differentia   distinguishing persons falling under one class from those falling under the other.  It is also clear that the differentia has a rational relation to the object sought to be achieved by the Act.  As we  have already pointed out, the export trade in coir  com- modities disclosed the existence of many malpractices  which not  only  affected  the  volume  of  trade  but  also   the reputation  of Indian traders; and one of the  main  reasons which  led  to this unfortunate result  was  that  exporters sometimes accepted orders far beyond their capacity and that inevitably  led to non-fulfilment of contracts or to  supply of inferior commodities.  In 99 786 order to remedy this position the trade had to be  regulated and  so the intending exporter was required to  satisfy  the

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test  of the prescribed minimum capacity  and  to  establish the  prescribed  minimum status before his  application  for registration is granted.  In this connection it may also  be relevant  to point out that -the rules seem  to  contemplate the granting of exemption from the operation of some of  the relevant  tests  to co-operative societies; and  that  shows that the intention of the Legislature is to encourage  small traders  to form co-operative societies and carry on  export trade  on behalf of such societies; and so it would  not  be possible  to  accept the argument that  the  impugned  rules would  lead  to a monopoly in the trade.  It is  thus  clear that  the main object which the rules propose to achieve  is to  remove the anomalies and malpractices prevailing in  the export  trade of coir commodities and to put the said  trade on  a  firm and enduring basis in the interest  of  national economy.  We are, therefore, satisfied that the challenge to the impugned rules on the ground of infringement of Art.  14 of the Constitution must also fail. In  the  result we hold that there is no  substance  in  the petition.  It accordingly fails and is dismissed with costs.                                 Petition dismissed. 787