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PETITIONER: PUNJAB TRADERS AND ORS.

       Vs.

RESPONDENT: STATE OF PUNJAB AND ORS.

DATE OF JUDGMENT18/09/1990

BENCH: THOMMEN, T.K. (J) BENCH: THOMMEN, T.K. (J) SINGH, K.N. (J) KULDIP SINGH (J)

CITATION:  1990 AIR 2300            1990 SCR  Supl. (1) 499  1991 SCC  (1)  86        1990 SCALE  (2)603

ACT:     East Punjab Molasses (Control) Act, 1948--Ss. 2(c) 2(f), 3,  3A,  4, 6. 8 & 13--Clarificatory amendment  of  by  East Punjab Molasses (Control) Amendment Act, 1973--Constitution- al validity of.     Constitution  of India: Articles 304(b) proviso,  305  & 366(10)-East  Punjab Molasses (Control) Act,  1948--Existing Law--Clarificatory  amendment  of by  East  Punjab  Molasses (Control)  Amendment Act, 1973--Previous sanction of  Presi- dent-- Whether mandatory.

HEADNOTE:     The  East Punjab Molasses Control (Amendment) Act,  1973 substituted the definition of "molasses" in section 2(c)  of the  East Punjab Molasses (Control) Act, 1948 to  mean  "the mother liquor produced in the final stage of manufacture  of sugar  or khandsari sugar". The unamended section  2(c)  had hitherto  referred  only to sugar. Consequent  changes  were also  made in other provisions of the Principal Act to  give effect to the amendment.     The  appellants-dealers in khandsari molasses  aggrieved by  the expanded definition of molasses challenged the  con- stitutionality of the Amendment Act, 1973 on the ground that it had imposed direct and immediate restrictions upon  their trade  and commerce unsupported by the previous sanction  of the  President  of India in terms of Article 304(b)  of  the Constitution.     The High Court dismissed the writ petition holding  that the appellants were not shown to have been aggrieved  solely by  reason of the amendment on the view that their  business had  been in equal measure controlled by the  Principal  Act itself.     In this appeal by special leave, the appellants  reiter- ated  their contentions advanced before the High Court.  For the respondents it was contended that the provisions of  the Amendment  Act,  1973 were regulatory  measures  enacted  to facilitate trade and therefore they did not come within  the ban  of the proviso to clause (b) of Article 304 to  require the previous sanction of the President. 500 Dismissing the appeal, the Court,

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   HELD: 1. The main object of the Amendment Act, 1973  was to  clarify that the Principal Act applies in equal  measure to  a khandsari unit as it does to any other sugar  factory. It was always well understood in trade that khandsari  sugar was  also  sugar  and that any reference to  sugar,  in  the absence of specific exclusion or qualification, was  capable of equal application to sugar of all kinds including  khand- sari.  The Act did not become applicable to  the  appellants only  as a result of the amendment. Even though persons  who dealt with the statute may have understood its provisions in a restricted sense, such mistaken construction of the  stat- ute  did not bind the Court so as to prevent it from  giving it its true construction. [316A-C]     The Trustees of the Clyde Navigation v. Laird & Sons,  8 AC 658, 670 and National & Grindlays Bank Ltd. v. The Munic- ipal  Corporalion of Greater Bombay, [1969] 1 SCC  541,  re- ferred to.     2. The Principal Act being an "existing law" within  the meaning  of  Article 366(10) read with Article  305  of  the Constitution, and the provisions of the Amendment Act  being clarificatory,  the previous sanction of the  President  was not required. [316D-E]     Syed  Ahmad  Aga v. Stale of Mysore, [1975]  Suppl.  SCR 473, referred to.

JUDGMENT:     CIVIL  APPELLATE JURISDICTION: Civil Appeal No. 1372  of 1980.     From the Judgment and Order dated the 19.5. 1980 of  the Punjab and Haryana High Court in C.W.P. No. 1378 of 1973.     G.L.  Sanghi, Vivek Gambhir, Dhruv Mehta,  S.K.  Gambhir and Surender Karnail for the Appellants. C.M. Nayar for the Respondents. The Judgment of the Court was delivered by     THOMMEN, J. This appeal by special leave arises from the Judgment  of the Punjab & Haryana High Court in  Civil  Writ Petition No. 1378 of 1973. The appellants in the writ  peti- tion  challenged  the constitutionality of the  East  Punjab Molasses (Control) Amendment 501 Act.  1973 (hereinafter referred to as the  "Amendment  Act, 1973")  on  the ground that the said amendment had  not  re- ceived  the previous sanction of the President of  India  in terms of Article 304(b) of the Constitution. The High  Court dismissed the writ petition holding that the appellants were not shown to have been aggrieved by the impugned amendment.     The  Amendment Act. 1973 amended the provisions  of  the East  Punjab Molasses (Control) Act. 1948 (East  Punjab  Act No.  11 of 1948) (hereinafter referred to as the  "Principal Act").  as it stood at the relevant time. The Principal  Act had  been earlier amended in 1950. 1957. 1964 and  1968.  It was  subsequently  amended  in 1976.  The  appellants  have. however.  challenged only the Amendment Act, 1973  and  have significantly  not  challenged  the  earlier  or  subsequent amendments. Rejecting the appellants’ contentions. the  High Court observed:          ....   We  have  very carefully  gone  through  the petition  and  we  have asked the learned  counsel  for  the petitioners to point out any averment from the petition.  to show  that the petitioners were dealing with molasses  which were  not covered under the definition of molasses given  in the unamended Act. but arc covered within the definition  of molasses  under the Amending Act. No such averment has  been

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made  .....  The grievance of the petitioners that they have been  made subject to the provisions of the Act in  view  of the Amending Act. thus does not stand substantiated from the averments made in the petition ..     The  appellants  admitted before the  High  Court  that, apart  from the Principal Act, as enacted in 1948. being  an ’existing law’. and therefore beyond challenge. none of  its provisions could be regarded as an unreasonable  restriction on  the  freedom  of trade. commerce  and  intercourse.  The appellants, however. contended that the impugned  provisions inserted in 1973 were null and void for the reason that  the restrictions  so  introduced had not received  the  previous sanction of the President.     Section  2 of the Principal Act was amended in  1973  to define  ’molasses’  as  well as ’khandsari  unit’.  By  this amendment, a new definition of ’molasses’ was substituted in the  place  of  the original definition  [See  Clause  (c)]. Clause  (f)  of Section 2 was added to define  a  ’khandsari unit’. 502     Section 3 of the Principal ’Act empowered the Controller to  "direct the owner or occupier of a sugar factory or  any other person" to furnish returns of the stock of molasses in his possession. This Section was amended in 1973 to bring  a khandsari  unit  or distillery within the  statutory  ambit. Section 3(A) had been added in 1964. to empower the Control- ler  to direct the owner or occupier of a sugar  factory  or distillery,  or  any  other person permitted  to  store  and preserve  molasses,  to construct tanks for the  storage  of molasses. This Section was amended in 1973 to bring a khand- sari unit within its ambit.     Section  4  of  the Principal Act says  that  no  person shall,  without  a  permit issued by  the  Controller,  move molasses by road, rail, river or by any other means or  sell or  otherwise dispose of molasses to any person  other  than the  Government  or a person licensed by the  Government  in this regard. It also authorises the Controller to direct the owner  or occupier of a sugar factory to supply molasses  of specified  quantity and quality to such persons as the  Con- troller  may  direct. This section was amended  in  1964  to provide  that  no person shall store  or  preserve  molasses without  the Controller’s permit. It was further amended  in 1973  to  bring  a khandsari unit within the  ambit  of  the controller’s power to direct supply of molasses.     Section  5 of the Principal Act empowers the  Government to  regulate  prices from time to time  and  prescribes  the manner in which molasses has to be graded, marketed,  packed or  stored for sale. It was amended in 1976 in  certain  re- spects  which are not material. Section 6 provides  for  the imposition  of penalty in the event of contravention of  any provision  of the Act. The Section was substituted in  1964- for the original Section. It was amended in 1973 in  certain respects. Section 7 of the Principal Act refers to liability for breaches by corporation or company. This Section has not undergone any change. Section 8 of the Principal Act provid- ed  that  no  court should take cognizance  of  any  offence punishable  under  the Act except on a report  made  by  the Controller. This section was substituted in 1964- to provide for the exercise of supervision and control by the  Control- ler over sugar factories through subordinates. It was amend- ed  in 1973 by including a khandsari unit within its  ambit. Section  9 of the Principal Act provided for power of  entry and  seizure.  It was substituted in 1973 by a  new  section with certain changes which are immaterial. Section 10 of the Principal Act provided for the procedure of seizure. It  was

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substituted  by a new section in 1973, but the  changes  are not  material. Section 11 deals with the delegation of  pow- ers.  It  has not undergone any change. Section  12  of  the Principal Act deals with the power of the Govern- 503 ment to exempt any area or person from the provisions of the Act. This Section was amended in 1973 to empower the Govern- ment  to exempt any kind of molasses from the provisions  of the Act. Section 13 of the Principal Act deals with the rule making  power of the Government. It was amended in  1973  to include  khandsari  unit or distillery within the  scope  of that  Section. These are the changes made in  the  Principal Act.     The substantial change introduced by the Amendment  Act, 1973 is in the substituted definition of ’molasses’ so as to include  within  its meaning mother liquor produced  in  the final stage of manufacture of sugar or khandsari sugar.     The  appellants being dealers in khandsari molasses  are stated  to be aggrieved by the expanded definition  of  ’mo- lasses’. ’Molasses’ was defined under the unamended  Section 2(c) of the Principal Act as follows: "2(c)  ’Molasses’  means the heavy, dark  coloured  residual syrup drained away in the final stage of the manufacture  of sugar  by  vacuum pans or in open pans  in  sugar  factories either  from sugarcane or by refining gur; when  such  syrup has  a density of not less than 75 degrees brix and  a  for- mentable sugar content (expresent as reducing sugars) 19 per cent. ’ ’ This  definition was substituted by the Amendment Act,  1973 as follows: "2(c)  ’molasses’  means the mother liquor produced  in  the final  stage of manufacture of sugar or khandsari sugar,  by vacuum pans or in open pans, from sugarcane or gur, with  or without the aid of power." The new definition of ’molasses’ under the amendment  provi- sion  specifically  refers to khandsari  sugar,  apart  from sugar,  while  the unamended section 2(c) referred  only  to sugar.  Section  2(f), as introduced by the  Amendment  Act, 1973 defines ’khandsari unit’ as follows: "2(f)  ’khandsari  unit’ means any premises,  including  the land, godowns or out-houses appurtenant thereto, wherein, or in any part of which a manufacturing process con- 504 nected with  the  production of khandsari sugar from  sugar- cane  or gur in open pans is carried on with or without  the aid of power." The  ’occupier of a khandsari unit’ is defined as "a  person who  has control over the affairs of a khandsari unit".  The definition  of sugar factory’ has not undergone any  change, and it reads as follows: "2(d)  ’sugar  factory’ means any  premises,  including  the land,  godowns  or outhouses  appurtenant  thereto,  whereon twenty  or more workers are working, or were working on  any day of the preceding twelve months, and in any part of which a  manufacturing  process connected with the  production  of sugar  by  means  of vacuum pans or in open  pans  is  being carried  on or is ordinarily so carried on, with the aid  of power." The  main  object of the Amendment Act, 1973 is  to  clarify that the Principal Act applies in equal measure to a  khand- sari unit as it does to any other sugar factory.     The  contention is that the provisions of the  Amendment Act,  1973. though not in themselves  unreasonable  restric- tions,  nevertheless  bring  the  appellants  under  greater statutory  control, and are, therefore. invalid for want  of

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previous  sanction of the President in terms of the  proviso to  Article 304(b). This challenge. as seen above, has  been rejected  by the High Court for the reason that  the  appel- lants’ business has been in equal measure controlled by  the Principal  Act itself. The appellants being dealers  in  mo- lasses.  the  new definition of the term  "molasses",  which includes "khandsari sugar", does not subject their  business to any greater control.     The  appellants’ counsel. Mr. G.L. Sanghi contends  that the provisions of the Amendment Act. 1973 impose direct  and immediate restrictions upon the appellants’ trade. They  are a  burden on trade and they deter the appellants from  trad- ing. They directly affect the freedom of trade and commerce. They are not merely regulatory for the purpose of facilitat- ing  the free flow of trade and commerce. They are  restric- tions hampering trade. They may be justifiable as reasonable restrictions, but being restrictions unsupported by previous sanction of the President, they are nevertheless invalid. Mr. C.M. Nayar, appearing for the respondents, on the other 505 hand. contends that the impugned provisions of the Amendment Act,  1973  are regulatory measures  enacted  to  facilitate trade and they do not come within the ban of the proviso  to clause  (b) of Article 304. These provisions do not  require the  previous  sanction  of the President in  terms  of  the proviso to Article 304(b).     Counsel  on  both sides. in support  of  the  respective contentions. refer to the principle stated by this Court  in Ariabari  Tea Co., Ltd. v. State of Assam & Ors.,  [1961]  1 SCR  809; The Automobile Transport (Rajasthan) Ltd.  v.  The State  of  Rajasthan & Ors., [1963] 1 SCR 491 and  State  0f Bihar  & Ors. v. Harihar Prasad Debuka & Ors.. [1989] 2  SCC 192 and other cases. [1967] (21 SCR 361; [1971] (11 SCC  59; [1986](1)  SCR  939;[1989] (31 SCC 211;[1990]  (31  SCC  87; [1957]  SCR  721; [1970] (11 SCR 400; [1955]  (11  SCR  380; [1954]  (31 All E.R. 6(17; [1954] (51 SCR 873. 8811;  [1975] Supp. SCR 473; [1983] (31 SCC 237 and [1969] (1) SCC 541.     It  is not and cannot be. disputed that if the  impugned provisions are not merely regulatory with a view to  facili- tating trade. but are in quality and substance  restrictive. though  reasonable  as restrictions can be. and if  they  in effect  constitute  a hinderance or impediment to  the  free flow or movement of trade, they are unconstitutional in  the absence of previous sanction of the President. The question, however  is the Principal Act. being an "existing law"  and, therefore,  beyond  challenge. do the  impugned  provisions. introduced in 1973. being additional provisions. enlarge  in substance  and quality the scope and ambit of the  Principal Act.  thereby impeding in greater measure the free  flow  or movement of trade so as to fall within the ban of the provi- so  to clause (b) of Article 304? In other words.  does  the Amendment  Act.1973. restrict the appellants’ business to  a greater  extent or is it merely clarificatory in so far  as. at any rate. the appellants are concerned?     The point then really is. has the amendment made the Act more stringent in so for as the appellants are concerned? If the  answer  is negative. as the High Court  has  held.  the appellants are not aggrieved. and cannot therefore. success- fully challenge the Amendment Act.     Referring to the principle of contemporanea  exposition. Mr. Sanghi says that the Act. as it stood before the  amend- ment.  was  not understood to apply to khandsari  unit.  and consequently  to  the  business of the  appellants.  and  it became  applicable only as a result of the amendment. We  do not agree that this submission is right. The High

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506 Court has, on the basis of the pleadings and other evidence, and with reference to the relevant provisions, categorically held that the Act, as it originally stood, was applicable to the trade of the appellants, and the amendment in effect did not  make any difference to them. The High Court  has  found that  the appellants were not aggrieved solely by reason  of the  amendment, and the provisions, as they stood  prior  to the amendment, applied to them in equal measure. This apart, the amendment, in our view, was merely clarificatory, and it was always well understood in trade that khandsari sugar was also sugar, and that any reference to sugar, in the  absence of specific exclusion or qualification, was capable of equal application to sugar of all kinds including khandsari.  Even if it is true that persons who dealt with the statute under- stood  its provisions in a restricted sense,  such  mistaken construction of the statute did not bind the Court, so as to prevent  it from giving it its true construction.  (see  the observation  of Lord Blackburn in The Trustees of the  Clyde Navigation  v.  Laird & Sons, 8 AC 658, 670), as  quoted  in National & Grindlays Bank Ltd. v. The Municipal  Corporation of Greater Bombay, [1969] 1 SCC 541.     We are of the view that the reasoning of the High  Court was  correct.  The  Principal Act being  an  ’existing  law’ within the meaning of Article 366(10) read with Article  305 of  the  Constitution, and the provisions of  the  Amendment Act, 1973 which are impugned in this appeal being clarifica- tory,  the  previous sanction of the President was  not  re- quired. See the principle stated in Syed Ahmad Aga v.  State of  Mysore, [1975] Suppl. SCR 473. We do not,  however,  ex- press any view as to whether the impugned Act is  regulatory or restrictive, for that question, for the present  purpose, is, in our opinion, academic. The appeal is dismissed with costs throughout. P.S.S.                                Appeal dismissed. 507