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PETITIONER: RAGHUBAR DAYAL JAI PRAKASH

       Vs.

RESPONDENT: THE UNION OF INDIA AND OTHERS

DATE OF JUDGMENT: 12/09/1961

BENCH: AYYANGAR, N. RAJAGOPALA BENCH: AYYANGAR, N. RAJAGOPALA GAJENDRAGADKAR, P.B. SARKAR, A.K. WANCHOO, K.N. GUPTA, K.C. DAS

CITATION:  1962 AIR  263            1962 SCR  (3) 547  CITATOR INFO :  F          1962 SC1753  (19)  R          1963 SC  90  (15)  RF         1970 SC1589  (10)  R          1971 SC1737  (3)  E&R        1987 SC 379  (11)

ACT: Forward Contracts-Law to regulate such contracts-Recognition of associations-Constitutional validity of enactment-Forward Contracts  (Regulation) Act, 1952 (74 of 1952), ss.2(j),  5, 6,  10, 15, 16, 17, 20, 21(e) & (f)-Constitution  of  India, Arts 14, 19(1)(f), 19(1)(g), 19(5), 19(6).

HEADNOTE: Traders  like  the petitioner combined together to  form  an association  the objects of which were to  regulate  forward transactions  in  the  sale and purchase of  gur  and  other commodities   entered  into  between  the  members  of   the association,  as  also  to declare the rates  at  which  the contracts  were  to  be  settled  on  the  dates  fixed  for delivery.  The petitioner had entered into forward contracts of  purchase of gur at certain rates and had also  deposited as  the  buyer  the amount as well  as  the  special  margin required   to  be  deposited  under  the  bye-laws  of   the association.  Contracts entered into by him were outstanding on  February  11,  1959,  when  on  that  date  the  Central Government  issued a notification under s.15 of the  Forward Contracts (Regulation) Act, 1952, under which every  forward contract for the sale of purchase of any goods specified  in the  notification  which  was  entered  into  in  the   area specified  therein  otherwise  than  between  members  of  a recognised  association or through or with any such  member, shall be illegal.  The association in question of which  the petitioner  was  a  member,  was not  on  the  date  of  the notification  dated  February  11, 1959  recognised  by  the Central  Government  under s. 6 of the Act, as a  result  of which  the  forward  contracts entered into  by  him  became illegal   and   void.   The  further  consequence   of   the notification  was that under s. 16 the transactions  entered

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into  by the petitioner and others situated  similarly  like him which remained to be performed after the said date  were to  be  deemed  to  be  closed out  on  that  date  and  the differences  arising out of the contract were to be  payable not  at  the rate originally stipulated by  the  contracting parties but at the rates specified in the notification.  The petitioner challenged the validity of the provisions of  the Act on the grounds inter alia (1) that ss. 5 and 6  relating to the recognition of associations by the Central Government and  s.10 which enabled it to direct rules to be- made  and, in case the recognised association failed to take action, to themselves make the rules, infringed the freedom 548 guaranteed  by Art. 19(1)(c) of the Constitution  of  India, (2)  that  s. 15 infringed Arts. 14, 19(1)(f) and  19(1)(g), and (3)   that  s.16 in so far as it enabled the  Government to fix the     rates at which the differences payable by one party  to  the other, without giving any indication  of  the principles  underlying the fixation of the price,  conferred an unguided power and offended Art. 14. Held : (1) that ss. 5, 6 and 10 and other provisions in  Ch. III  of  the  Forwards  Contracts  (Regulation)  Act,  1952, proceeded on the basis that organisations of tradesmen might be entrusted with the task of regulating these transactions, so  that while legitimate trade might be furthered the  evil conscquences.  of undesirable speculation might be  avoided, and they were enacted with the object of ensuring  effective control over the mechanism of forward trading.  Accordingly, the provisions in Ch.  III of the Act do not contravene Art. 19(1) (c) of the Constitution. (2)  that  on a proper construction of s.15 the  recognition of an association under the provisions of the Act was not an essential  pre-requisite  before  a  notification  could  be issued  under  the  section, and that the issue  of  such  a notification  was  not an unreasonable  restriction  on  the right  of  the petitioners to carry on business  within  the meaning of Art. 19(6) of the Constitution of India. (3)  that the selection of the commodity for the  regulation of  forward trading in it or of prohibition of such  trading could  only be left to the Government and the  purposes  for which the power was to be used and the machinery created for the    investigation    furnished    sufficient    guidance; consequently, s. 15 did not confer an unguided and arbitrary power and did not infringe Art. 14. (4)  that the restrictions imposed by s. 15 of the Act  were reasonable within Art. 19(5) and (6) and did not  contravene Art. 19 (1) (f ) and (g). (5)  that s.16 of the Act could not be challenged as  either a piece of excessive delegation or offended Art. 14.

JUDGMENT: ORIGINAL  JURISDICTION : Petitions Nos. 22 to 26 and  42  of 1959. Petitions under Art. 32 of the Constitution of India for the enforcement of fundamental rights. M.   K.  Nambiar, E. Udayarathnam, Rameshwar Nath and S.  S. Shukla,  for  the petitioners (In Petn.  Nos. 22 and  23  of 59). N.   C.  Chatterjee, B. C. Gupta, E. Udayarathnam and S.  S. Shukla, for the petitioners (In Petn. Nos. 24 and 25 of 59). E.   Udayarathnam and S. S. Shukla, for the petitioners  (In Petn.  No. 26 of 59).                             549

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S.   T.  Desai  and S. S. Shukla, for  the  petitioners  (In Petn.  No. 42 of 59). C. K. Daphtary, Solicitor-General of India, B.    Sen, R. H. Dhebar  and T. M. Sen, for the respondent No. 1 (In all  the petitions). B.   P. Maheshwari, for respondent No. 2 (In Petn.  Nos.  22 and 25 of 1959). G.  C. Mathur, for respondent No. 2 (In Petn Nos. 26 and  42 of 1959). R.   L.. Agarwala and P. C. Agarwala, for the Interveners. 1961.   September  12.   The  Judgment  of  the  Court   was delivered by AYYANGAR, J.-These six petitions filed under Art. 32 of  the Constitution  raise for consideration three points: (1)  the constitutional  validity of the operative provisions of  the Forward  Contracts (Regulation) Act (Act LXXIV of 1952)  (to be referred to hereafter as the Act), (2) the validity of  a notification dated February 11, 1959, issued under s. 15  of the  Act by which gur was brought within the purview of  the enactment  with  immediate effect, and (3) the  validity  of another  notification  of  the  Central  Government   issued simultaneously  fixing the price at which Forward  Contracts subsisting on February 11, 1959, was directed to be settled. For  the purpose of understanding the points raised and  the effect  of the impugned notifications on the rights  of  the petitioners  it  is  sufficient to refer  to  the  facts  of Petition No. 23 of 1959 which is typical of the cases before us. The petitioner-Raghubar Dayal Jai Prakash is a firm carrying on  the  business  of purchase and sale  of  gur  and  other commodities   inter  alia  at  Meerut.   Traders  like   the petitioner   had  combined  together  to  form   a   company registered  under  the Indian Companies Act under  the  name ’Kaisergunj  Beopar Co. (P) Ltd’., Meerut.  The function  of this incorporated body was, inter alia, to regulate  forward transactions  in  the  sale and purchase of  gur  and  other commodities entered into between the members of the Society, as also to declare the rates at which the contracts were  to be settled on the 550 dates  fixed  for delivery.  This incorporated  company  has been impleaded as a second respondent to the petition.  This association or company, however, was not, on the date of the impugned   notification,   "recognised"   by   the   Central Government under the provisions of the Act to which we shall presently  advert, in respect of dealings in gur with  which alone  these  petitions are concerned.  The  petitioner  had entered into forward contracts of purchase of gur at certain rates  and he had also deposited as the buyer the amount  as well  as the special margin required to be  deposited  under the bye-laws of this association.  Contracts entered into by him  which  were outstanding on February 11, 1959,  were  in relation to 29,600 maunds.  While so, Government published a notification  under a. 15 of the Act on February  11,  1959, applying  the provisions of that section to gur as a  result of  which the forward contracts entered into in gur  by  the petitioner  became  illegal  and void.   The  further  legal consequence  of the notification was that  the  transactions entered into by the petitioner and others situated similarly like him were to be deemed to be closed out on February  11, 1959-the  date  of  the  notification  and  the  differences arising  out of the contract were to be payable not  at  the rate originally stipulated by the contracting parties but at the rates specified in the notification.  If the  petitioner bad  to  settle  his  outstanding  contracts  at  the   rate

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determined by the Central Government he would suffer a  loss of Rs. 48,000.  He therefore challenges in this petition the validity  of  the provisions of the Act  which  enabled  the notifications  to  be  issued  as  also  the   notifications themselves  on  grounds  to the details of  which  we  shall advert later. Before setting out these details, it would be convenient and tend to the proper appreciation of the problems involved, if we  briefly  indicate the economic implications  of  forward trading in commodities, the need for the regulation of such                             551 trading;  as well as the history of the measures taken  from time  to time to exercise control on forward trading in  gur prior to the issue of the impugned notifications in February 1959, The expert committee to which the Bill which became the  Act (Act 74 of 1952) was referred, explained in their report the function of forward trading in these terms:               "Forward  trading involves  speculation  about               the  future,  but  not all  forms  of  forward               trading could be considered as either unneces-               sary   or   undesirable  for   the   efficient               functioning of anything but the most primitive               economy............  To  the extent  to  which               forward     trading     enables     producers,               manufacturers    and   traders   to    protect                             themselves  against the uncertainties  of  the               future, and enables all the relevant  factors,               whether   actual  or  anticipated,  local   or               international, to exercise their due influence               on  prices, it confers a definite boon on  the               community,   because,  to  that   extent,   it               minimises   the   risks  of   production   and               distribution  and makes for greater  stability               of  prices  and  supplies.  It  thus  plays  a               useful  role in modern business.  At the  same               time,  it  must be admitted that  this  is  an               activity  in  which a great  many  individuals               with  small means and inadequate knowledge  of               the  market often participate, in the hope  of               quick or easy gains and consequently,  forward               trading  often assumes  unhealthy  dimensions,               thereby increasing, instead of minimising, the               risks of business.  There are forms of forward               trading for example, options, which facilitate               participation by persons with small means  and               inadequate   knowledge............   It    is,               therefore,  necessary  to  eliminate   certain               forms  of forward trading, and  permit  others               under  carefully  regulated  conditions.,   in               order   to  ensure  that,   while   producers,               manufacturers               552               and traders will have the facilities they need               for the satisfactory conduct of their business               the,  wider  interests of the  community,  and               particularly, the interests of consumers, will               be adequately safeguarded against any abuse of               such facilities by others.               The Essential Supplies (Temporary Powers) Act,               1946, does not empower the Central  Government               to  regulate forward trading in any  commodity               other than an essential commodity’ within  the               meaning of that Act.  Action may be needed not               only   for  prohibiting  forward  trading   in

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             commodities in which it is still taking place,               but  also for reopening forward trading  under               regulated conditions and if circumstances  are               favourable to such a course, in commodities in               which it is now prohibited.               The  arrangements must be such as will  enable               speedy  and  effective action to be  taken  in               emergencies, and must at the same time provide               sufficient  safeguards  against  arbitrary  or               ill-informed action." It was with these objects and with provisions calculated  to carry  out these suggestions that the Act was enacted.   And now a short resume of the history of the provisions relating to  forward  trading  in gur  which  preceded  the  impugned notifications: After  the end of the war, a, ban on forward trading in  gur was imposed by the Sugar & Gur (Future Trading)  Prohibition Order, 1951, issued under the Essential Supplies  (Temporary Powers)  Act,  1946.   This ban was  however  removed  by  a notification  dated January 7, 1954.  The Forward  Contracts (Regulation)  Act,  1952, was not applied to  gur  with  the result that from January, 1954, all Contracts in relation to gur  remained free and outside the regulatory provisions  of the  Act.   The  Forward  Markets  Commission  took  up  the consideration of the question regarding the advisability  of imposing regulations on forward trading in this 533 commodity.   The Commission considered, first, the  question whether gur was a suitable commodity for forward trading and whether  there  was any need of  bringing  forward  trading, which  was  still then free in that  commodity,  within  the regulatory provisions of the Act.  Their conclusion was that gur  was a commodity in respect of which the production  was large enough for not being cornered by any group of traders; and  that the forces of supply and demand in respect of  the commodity  were  uncertain  so as to  require  a  continuous assessment  of  their  changing  relationships  through  the medium  of a futures market.  They also were of the  opinion that  the fluctuations in the price of gur were wide  enough to attract speculators and to ensure holders of ready stocks against risks arising from the fluctuations consequent  upon speculation it was necessary to bring trade in the commodity within  the  scope of the Act.  In  these  circumstances  by their  report which was submitted to the Government in  May, 1957,  they  recommended (1) that  Government  might  accord recognition  to  certain associations  after  the  necessary formalities   had   been  completed,  and   (2)   to   issue simultaneously  a  notification  under  s.  15  of  the  Act illegalising forward trading in the commodity except through the   associations   or  through  the   member,%   of   such associations,  as  set  out  in  s.  15  of  the  Act.   The Government  however  by their resolution dated  January  17, 1958, recorded:               "The  main recommendations of  the  Commission               are  that  the regulatory  provisions  of  the               Forward  Contracts (Regulation) Act, 1952,  be               applied  to  gur and that forward  trading  be               conducted    through   associations   to    be               recognized under the said Act.               The   Government  of  India   have   carefully               considered  the  recommendations made  by  the               Commission  and  have come to  the  conclusion that  there is no  strong  justification  or               special               554

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             need for the time being to bring gur under the               purview of the Forward Contracts  (Regulation)               Act, 1952." Subsequently  however by a notification dated  February  11, 1959, the Central Government declared that s. 15 of the  Act shall apply to the whole of the territories to which the Act extends.  The circumstances which led to this change in  the view  of Government is thus expressed in ss. 195 to  197  of the Annual Report of the Forward Markets Commission for  the year 1959.  It is there stated:                "195.  The  Commission in its Report  on  the               Recognition  of  Associations  in  respect  of               Forward Contracts in Gur submitted in May 1957               bad recommended that Gur be brought under. the               regulatory provisions of the Forward Contracts               (Regulation)  Act, 1952, and  that  recognised               futures  markets  be  established  at   Hapur,               Meerut, Agra, Muzaffarnagar and Delhi for  the               purpose.   The Government of  India,  however,               decided not to bring gur under the purview- of               the  Forward Contracts (Regulation) Act,  1952               for  the  time  being, as  a  result,  forward               trading  in gur, continued to be  unregulated.               The price situation in gur markets at the  end               of 1958, however, took a very serious turn  on               account  of  hectic  speculative  activity  in               these  markets.  For example, the gur  prices,               at  Hapur, rose during the three  months  from               the  middle  of  November  to  the  middle  of               February  1959, by 37 per cent as compared  to               the  rise  of  0.15  per  cent  in  sugar a               controlled  commodity-and  1.5  per  cent   in               khandsari,  forward trading in which had  been               banned.               196.  These   developments   necessitated    a               reconsideration  of  the earlier  decision  to               keep  the commodity out of the purview of  the               Act and the Government of India, on the advice               of the Commission, applied section 15 of the                                    555               Forward  Contracts (Regulation) Act, 1952,  to               gur, all over the country on the 11th February               1959.               197.  The application of section 15 of the Act               also  necessitated fixation of the rate  under               section 16 at which all forward contracts out-               standing as on that day, could be closed  out.               The  Government  of India, after  taking  into               account  all the relevant factors  closed  the               outstanding  contracts at the average  of  the               closing  rates  during  the  preceding   three               months." The notifications which brought this about read:                "In  exercise  of  the  powers  conferred  by               clause  (a) of section 16 of the said Act  the               average of the closing rates prevailing in the               respective  forward markets during the  period               of three months immediately preceding the date               of this notification, as the rate at which any               forward  contract for the sale or purchase  of               gur  entered into on or before the  said  date               and  remaining to be performed after the  said               date shall be deemed to be closed." No associations had been granted recognition before the date of  this  notification dated February 11, 1959, but  on  the

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same date another notification was issued by the  Government reading:               "They have also decided that regulate  futures               markets   in   respect  of   gur   should   be               established  in due course at Hapur,  Meerut,               Agra,   Muzzafarnagar  and  Delhi,  and   that               recognition should be granted under section  6               of the said Act................... In   accordance   with  what  was   stated   here   existing associations   in   the  places  mentioned   were   accorded recognition after an enquiry as to whether they conformed to the requirements of the Act.  Like. wise other  associations which  were formed subsequently were also  recognised  after similar enquiries.  The petitioners before us are members of these 556 associations-those in Petitions 22, 23 and 25 being  members respectively   of  the  three  associations  named  in   the notification   extracted  above  and  the   petitioners   in Petitions 24, 26 and 42 of associations subsequently brought into existence.  The formalities preceding the  recognition, however, took some little time and recognition to all  these associations was granted in June 1959 or thereabouts. In  order  to appreciate the submissions made to us,  it  is necessary to set out briefly the provisions of the Act whose validity is challenged.  The preamble to the Act reads  that it  is  an  Act to provide for  the  regulation  of  certain matters  relating to forward contracts, the  prohibition  of options in goods and for other matters connected  therewith. We  are  not  now  concerned with the  second  part  of  the objective,  viz., the prohibition of options in  goods,  but only with those provisions which deal with the regulation of matters  relating  to forward contracts.   Section  2  which contains the statutory definitions defines "an  association" as  "a  body of individuals, whether  incorporated  or  not, constituted  for the purpose of regulating  and  controlling the  business  of the sale or purchase of any  goods"  while sub-cl.  (j) defines "a recognised association"  as  meaning "an  association which is for the time being  recognised  by the Central Government under s. 6".  Chapter II is  entitled ,The  ’Forward Markets Commission" and makes  provision,  in the two sections which constitute the Chapter, first for the establishment   and  constitution  of  a   Forward   Markets Commission  which is a body of independent experts  (s.  3), the  other (s. 4) detailing the functions of the  Commission which include the task of ",’advising the Central Government in  respect  of the recognition of  associations",  and  "in respect  of  any  other  matter arising  out  of  the  admi- nistration  of-the Act....... to keep forward markets  under observation"  and inform Government of  developments  taking place in it and finally to make recommendations with a  view to  improving  the  Organisation  and  working  of   forward markets.                             557 Chapter  III  which  is  headed  "Recognised   associations" contains some of the sections which validity was  challenged in the petitions before us.  Before an association could  be recoganised,  s. 5 requires the body to make an  application to  the  Central  Government  furnishing  the  details   and particulars specified in s. 5(2).  The Government might make such enquiry as might be necessary and after obtaining  such further  information  as may be required were  empowered  to grant  recognition  to  associations  under  s.6  and   such recognition  was  to specify the goods or classes  of  goods with respect to which forward contracts may be entered  into

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between members of such associations or through or with  any such  member.  Section 6(2) contains conditions which  ought to  be complied with by associations before recognition  was granted  and provision was made in s. 6(3) for the rules  of the  association not being amended except with the  approval of  the Central Government.  Complementary to this  was  the provision  contained  in s. 10 which  empowers  the  Central Government  to direct rules to be made, with power  in  case the  recognised association fails to take action  to  comply with  the  order of the Government, to themselves  make  the rules in the forms specified by that order.  The recognition had  to  be  published in the Gazette of India  and  in  the official Gazette of the State in which the principal  office of  the association is situated s.6 (4).  Sections 6 and  10 were the principal subject of attack among the fasciculus of sections  relating to "recognised associations" in Ch.   III but  we shall revert to the grounds of attack after  setting out the other provisions of the Act whose validity was  also the  subject  of challenge.  They were Bs. 15 and  16  under which the notifications now impugned were made.  They run in these terms :               "15.   Forward  contracts  in  notified  goods               illegal or void in certain circumstances.               (1)   The    Central   Government   may,    by               notification in the Official Gazette declare               558               this section to apply. to such goods or  class               of goods and in such areas as may be specified               in the notification., and thereupon,  subject’               to  the  provisions contained in  section  18,               every  forward  contract,  for  the  sale   or               Purchase   of  any  goods  specified  in   the               notification  which is entered into  the  area               specified   therein  otherwise  than   between               members   of  a    recognised  association   or               through  or  with any such  member,  shall  be               illegal.               (2)   Any,  forward contract in goods  entered               into pursuance of sub-section (1) which is  in               contravention of any of the bye-laws specified               in this behalf under clause (a) of  subsection               (3) of section 11 shall be void :-               (i)   as respects the rights of any member  of               the  recognised  association who  has  entered               into  such  contract in contravention  of  any               such bye-law, and also               (ii)  as  respects  the rights  of  any  other               person who! has knowingly participated in  the               transaction entailing such contravention.               (3)   Nothing in sub-section (2) shall  affect               the right of any person other than a member of               a  recognised association to enforce any  such               contract  or  to recover any sum under  or  in               respect of such contract :               Provided  that  such person had  no  knowledge               that such transaction wag in contravention  of               any of the bye-laws specified under clause (a)               of sub-section (3) of section 11.               (4)   No  member of a  recognised  association               shall,  in respect of any goods  specified  in               the notification under sub-section (1),  enter               into any contract on his own account with  any               person  other than a member of the  recognised               association unless he had secured                                    559

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             the  consent or authority of such  person  and               discloses in the note, memorandum or agreement               of sale or purchase that he has bought or sold               the  goods,  as the case may be,  in  his  own               account :                Provided  that where the member has  secured               the  consent  or  authority  of  such   person               otherwise  than in writing he shall  secure  a               written  confirmation by such person  of  such               consent  or authority within three  days  from               the date of such contract :               Provided  further  that  in  respect  of   any               outstanding contract entered into by a  member               with  a  person  other than a  member  of  the               recognised   association,   no   consent    or               authority  of such person shall. be  necessary               for  closing  out in accordance with  the  bye               laws  the outstanding contract, if the  member               discloses in the note, memorandum or agreement               of sale or purchase in respect of such closing               out  that he has bought or sold the goods,  as               the case may be, on his own account.               16.   Consequences   of   notification   under               section  15.--Where  a notification  has  been               issued under section 15, then  notwithstanding               anything  contained in any other law  for  the               time being in force or in any custom, usage or               practice  of  the trade or the  terms  of  any               contract  or the bye-laws of  any  association               concerned relating to any contract.-               (a)   every  forward contract for the sale  or               purchase   of  any  goods  specified  in   the               notification, entered into before the date  of               the notification and remaining to be performed               after  the  said  date and  which  is  not  in               conformity with the provisions of section  15,               shall be deemed to be closed out at such  rate               as the Central Government may fix in this               560               behalf,  and different rates may be fixed  for               different classes of such contracts ;               (b)   all  differences  arising  Out  of   any               contract  so deemed to be closed out shall  be               payable  on the basis of the rate fixed  under               clause  (a) and the seller shall not be  bound               to  give and the buyer shall not be  bound  to               take delivery of the goods." In,  cases  where  mere  regulation of  the  trade  was  not considered sufficient Government were empowered to  prohibit forward trading and s. 17 of the Act enacted.               "17.   Power to prohibit forward contracts  in               certain cases.-(1) The Central Government may,               by  notification  in  the  Official   Gazette,               declare  that no person shall, save  with  the               permission  of the Central  Government,  enter               into  any  forward contract for  the  sale  or               purchase  of  any  goods  or  class  of  goods               specified in the notification and to which the               provisions  of ,section 15 have not been  made               applicable,  expect to the extent and  in  the               manner,  if  any, as may be specified  in  the               notification.               (2)   All  forward contracts in  contravention               of  the provisions of subsection  (1)  entered               into  after  the date of  publication  of  the

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             notification thereunder shall be illegal.               (3)   Where  a  notification has  been  issued               under  sub-section  (1),  the  provisions   of               section  16 shall, in the absence of  anything               to the contrary in the notification, apply  to               all  forward--  contracts  for  the  sale   or               purchase   of  any  goods  specified  in   the               notification  entered into before the date  of               the notification and remaining to be performed               after  the  said  date as they  apply  to  all               forward contracts for the sale or purchase  of               any goods specified in the notification  under               section 15."                                    561 There  are two more sections to which reference might  ’be made  and  they  are  s.  20-which  imposes  penalties   for contravention of certain provisions of Ch.  IV-and s.  21(e) & (f) which run in these terms :                "21. Penalty for owning or keeping place used               for entering into forward contracts in goods.-               Any person who                (e)   not  being  a  member   of   recognised               association  or his agent authorised  as  such               under   the   rules  or   bye-laws   of   such               association; canvasses, advertises or touts in               any manner, either for himself or on behalf of               any  other person, for any business  connected               with forward contract& in contravention of any               of the provisions of this Act, or               (f)   joins, gathers, or assists in  gathering               at any place, other than the place of business               specified  in  the bye-laws  of  a  recognised               association, any person or persons for  making               bids or offers or for entering into or  making               or performing, whether wholly or in part,  any               forward  contracts in contravention of any  of               the provisions of this Act, or". It  would  be noticed that the two latter  are  intended  to carry  out  the  object and purposes of  the  Act  and  make effective  the powers vested under the other  provisions  to which  reference has been made. We shall now proceed to consider the grounds of attack  upon each of these provisions and examine the correctness of  the contentions urged by learned Counsel: Sections 5, 6 and 10: It  was urged by Mr. Nambiar, and. in this he was  supported by, the other learned Counsel appearing 562 in  the  case, particularly by Mr. S. T. Desai,  that  these sections infringed the freedom guaranteed by sub-cl. (c)  of cl.  (1) of Art. 19 of the Constitution.  Sub-clause (c)  of el. (1) of Art. 19 runs in these terms :               "19. (1) All citizens shall have the rights-               (e) to form associations or unions ;  " The  freedom, however, is subject to the provisions  of  el. (4) of Art. 19 reading :               "19.  (4).  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  State  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." Briefly  stated,  the argument  regarding  these  provisions

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infringing  the  freedom  to ,,,form  associations"  was  as follows:  The Constitution guarantees to every  citizen  the right  to  form an association.  The only  limitation  which might   legally  be  imposed  on  this  right  to  form   an association  is  that set out in cl. (4) of Art.  19,  viz., bye-laws  which place restrictions based on public order  or morality.   Where the object of the association  is  lawful, the  citizen, through that association, and the  association itself  are entitled, by virtue of the guaranteed right,  to freedom from legislative interference in the achievement  of its  object  except on grounds germane to  public  order  or morality.  In other words, the freedom guaranteed should  be read  as  extending  not  merely to  the  formation  of  the association as such, but to the effective functioning of the association  so  as  to  enable it  to  achieve  its  lawful objects.   Unless sub-cl. (c) of el. (1) of Art. 19 were  so read the. 563 freedom  guaranteed would be illusory and the Court  should, in  construing a freedom guaranteed to the citizen, so  read it,  as to give him an effective right which could  be  used for the purpose for which the Constitution-framers intended. The  further  submission,  which  was in  the  nature  of  a corollary from the above was that the freedom  guaranteed by  sub-cl. (c) of cl. (1) of Art. 19 carried with  it  a right  in  the association to determine its  internal arrangements  in  the matter  of selecting the personnel who shall manage it,  the framing  of the bye-laws and regulations which shall  govern the relationship between the association and its members  as also  between  its members without any interference  by  the State  unless the law providing for such  interference  were grounded  on  morality  or  public  order.   In  effect  the submission  was that the right guaranteed under sub-cl.  (c) of  cl.  (1) of Art. 19 was not merely, as  its  text  would indicate, the right to form an association but would include the  functioning of the association without  any  restraints not  dictated  by  the  need for  preserving  order  or  the interests of morality.  On these premises it was urged  that while  the Constitution had guaranteed the freedom. to  form an  association-including  inter alia one for  fostering  or regulating forward trading, still the Central Government had taken  upon themselves the right to determine the rules  and bye laws under which the association could function and had, by  the  provisions  in Ch.  III of the Act,  in  every  way interfered  in the matter of internal management and it  was urged  that  this was violative of the right  guaranteed  by sub-cl. (c) of cl. (1) of Art. 19 since the restrictions  in Ch.  III of the Act could not be held to have been  dictated ,on grounds of public order or morality. We consider this argument is without, force.  In the first place,  the restriction imposed by s. 6 ,of the Act is for the purpose of recognition and no 564 association  is  compelled to apply to  the  Government  for recognition   under  that  Act.   An  application  for   the recognition   of   the  association  for  the   purpose   of functioning  under the enactment is a voluntary act  on  the part   of  the  association  and  if  the  statute   imposes conditions  subject  to  which alone  recognition  could  be accorded  or continued it is a ’little difficult to see  how the  freedom to form the association is affected unless,  of course, that freedom implies or involves a guaranteed  right to recognition also.  Could it be contended that there  if, a right in the association guaranteed by the Constitution to obtain  recognition?   It was not disputed  before  us  that

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forward trading might sometimes assume undesirable forms and become  akin  to  gambling  which  might  have   deleterious consequences  on lawful trade and on the general  public  by causing  violent  fluctuations in prices.  It  would  follow that the control of forward trading. is a legitimate subject of legislative interference and regulation and we might  add that  this was not disputed before us.  The manner in  which this  regulation is effected and the machinery employed  for achieving  it are matters of legislative policy which  could be  determined only by taking into account the  Organisation of  the  market, the manner of trading  and  other  relevant factors.  The impugned enactment in its Ch.  III proceeds on the basis that organisations of tradesmen might be entrusted with  the  task of regulating these  transactions,  so  that while legitimate trade would be furthered, the evil consequ- ences  of undesirable speculation might be avoided. It  was, therefore,  necessary, that the instrument chosen should  be subject  to control so as effectively to further the  policy of the scheme of regulation and that is the ratio underlying the provisions in is. 6 of the Act and those which follow it in Ch.  III.  In this connection it is necessary to add that the restrictions which are impugned as unconstitutional  &re imposed only on "recognised" associations,                             565 Parliament  could well have chosen to effect the  regulation directly  through an official agency instead of through  the medium  of  a  voluntary association.   In  such  an  event, neither the traders nor their associations could complain of any  violation  of the law.  The mere  fact  therefore  that Parliament  chose  to  utilise the  machinery  of  voluntary trades associations for the purpose of enforcing  regulatory control could not invalidate the provision of laws which are designed  to ensure effective control over the mechanism  of forward trading. So far we have dealt with the argument about sub-cl. (c)  of el.  (1) of Art. 19 in relation to the  trades  associations under the Act.  As regards the wider question argued  before us regarding the scope of sub-cl. (c) of el. (1) of Art. 19, this Court has, in All India Bank Employees’ Association  v. National  Industrial Tribunal (1).- examined the content  of this  "freedom  of association" in the light  of  the  other freedoms  guaranteed by the other sub-clauses of el. (1)  of Art. 19, in which judgment has been rendered recently and it is therefore unnecessary to go over the ground again. We  have  no hesitation in rejecting the argument  that  the provisions  in  Ch.   III  of  the  impugned  Act,  and   in particular  those which we have set out above, infringe,  in any manner, the freedom guaranteed by sub-el. (c) of el. (1) of Art. 19. The next provision of the Act whose validity was  challenged was  s.  15 but before stating the grounds upon  which  this challenge  wag made it would be convenient to dispose  of  a contention raised by Mr. Chatterjee-learned Counsel for  the petitioners  in  Writ  Petitions 24 and 25  turning  on  the construction of the section.  His submission was that s.  15 proceeded  on  the  basis  of  there  being  "a   recognised association" through which trading in the notified commodity could be conducted (1) [1962] 3 S.C.R. 269. 566 before  the  ban  under  s. 15(1)  could  be  imposed.   The argument  was based upon the words "otherwise  than  between members  of a recognised association or through or with  any such member" occurring towards the last portion of  s.15(1). It  was urged that under the scheme of the Act  the  Central

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Government bad first to recognise an association of  traders in  the  commodity,  forward  trading in  which  was  to  be regulated,  and  that it was only after the  recognition  of such  an  association under s. 6 that they could,  under  s. 15(1)  prohibit  trading  otherwise  than  through  such  an association  or  its members.  It was pointed out  that  the expert  committee on gur had itself indicated that’  such  a procedure should be followed and that in the case of certain other  commodities  like pepper and  castorseed  which  were notified under s.15 the recognition of associations  through which  forward trading was permitted to be conducted  either preceded or was simultaneous with the notification. Learned  Counsel  is,  no doubt,  right  in  the  submission regarding   the  recommendation  of  the   Forward   Markets Commission  in  its  report on gur, ,as also  in  the  other instances  referred  to by him, but the question  still  for consideration  is  whether on a proper construction  of  the relevant provisions of Ch.  III read in conjunction with  s. 15 the existence of a recognised association is a legal pre- requisite for the issue of a notification under s.15(1).  It need  hardly be pointed out and it was not the  argument  of learned  Counsel that s. 15(1) in express terms  posits  the existence  of  a  recognised  association  as  a   condition -precedent  to the issue of a notification under  s.  15(1). But is such a condition implicit from the section or does it necessarily  flow  from its terms ? The  implication  cannot obviously be raised by reference to the hardship which might otherwise be caused but must surely rest on more secure  and legally Satisfactory grounds.                             567 The Central Government has, no doubt, under s. 17, the power to prohibit all forward contracts in a particular commodity, if the mere regulation of the transactions is considered not adequate to protect public interests, and learned Counsel is right  in his submission that when a notification is  issued under  s. 15(1), the Central Government are  not  exercising their power to lay a complete ban, and that consequently the validity  of  a  notification intended  merely  to  regulate cannot be upheld by reference to the power to prohibit.  But the  scheme  of  the  Act in Ch.   III  envisages  only  the formation  of voluntary associations and their  seeking  and being accorded recognition by the Government on  fulfillment of  the requisite conditions.  In other words, the Act  does not  contemplate  the Central Government itself  setting  up associations  to  discharge the function  of  "a  recognised association"   under  the  Act.   There  might,   therefore, conceivably, be cases where the traders do not or refuse  to organise  themselves into an association which  could  apply for and obtain recognition under Ch.  Ill.  It’ is  manifest that  the provisions of the Act cannot be defeated  and  the exercise of the regulatory power of Government nullified  by traders  in  a commodity not forming  an  association  which could  be  recognised under Ch.  III.  Similarly  the  power conferred  on Government by s. 15(1) of the Act,  cannot  be made dependent on such voluntary associations satisfying the requirements for recognition, such that if the  associations refuse  to do so the power does not emerge.  No doubt,  when there  are  associations  whose  bye-laws  and   regulations conform  to the requirements of the law the recognitions  of such  associations either before or simultaneously with  the issue of a notification under s. 15 world enable the forward trading  to be conducted without a break.  But this  is  not the   same  thing  as  the  submission  that  on  a   proper construction of a. 15 the recognition of an association  for the purpose of forward

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568 trading in a commodity is an essential pre-requisite  before a notification under s. 15 could be issued. It was next contended that even if on a proper  construction of  s.  15  of  the  Act,  the  existence  of  a  recognised association authorised to regulate dealings in a  particular commodity  was  not  a  prerequisite  for  the  issue  of  a notification   under  the section  in  respect   of   that commodity,  still the issue of the. notification without  an association being recognised was constitutionally invalid as an unreasonable restriction on the, right of the petitioners to  trade  and carry on business.  We are unable  to  uphold this  argument  either.   The need  for  regulating  forward trading  could  not be and was not disputed before  us.   We shall be considering later the contention that s. 15 of  the Act  is  itself invalid as violating the  freedom  to  trade guaranteed  under Art. 19(1)(g).  The very  narrow  question which  is raised by the point now under discussion is  this: Assuming  that forward trading requires regulation and  that regulation through recognised associations which are subject to   control  and  guidance  in  their  activities  by   the Government is justified by the necessities of the  situation and  assuming  also  that it was not  legally  incumbent  on Government  to  recognise an association for  dealing  in  a commodity before forward trading in such commodity could  be brought within the scope of the Act, would the action  taken under  s. 15(1) in the present case have to be held  invalid as not being a reasonable restriction within cl. (6) of Art. 19 ? In situations like those here the reasonableness of the restriction  has necessarily to be tested by the  degree  of urgency which required the intervention of Government.  That would  be  largely a question of fact, and we  have  already extracted paragraphs 195 to 197 of the Annual Report of  the Forward  Markets Commission for 1959 in which the  situation which necessitated the impugned notifications is describe(!. It  is plain enough that enquiries which had to precede  the recognition 569 of  associations  under Ch.  III do take some-time,  and  in fact  in the present case the recognitions were accorded  in June 1959, and if emergent action was required to control  a situation  which  threatened to worsen rapidly,  we  do  not consider  that the action of the Government in  stepping  in even  before  the recognition of associations could  in  the circumstances be characterized as unreasonable.  After  all, it  is  a question of balancing individual  rights  and  the profits  which  could  be reaped  by  individuals  under  an existing state of the law against the public benefit arising from the exercising of control, and if Government considered that  the  latter would be best served by  immediate  action under  a  valid provision of the law and  the  circumstances reasonably  warranted  that opinion, we hold  that  in.  the absence of any proof of mala fides, and there is none here , the  action of the Government cannot be hold to violate  the constitutional limits set by el. (6) of Art. 19. We  shall  now  proceed to consider  the  challenge  to  the constitutional  validity  of s. 15 itself.  The  attack  was based  on  the  section  infringing  Arts.  14,19(1)(f)  and 19(1)(g) of the Constitution and in respect of the last  two as not being protected by cls. (5) and (6) of Art. 19. In regard to Art. 14, the argument-was that a. 15 conferred an unguided and arbitrary power upon    the          Central Government  to choose any commodity it liked and  bring  the Act  into operation in respect of the commodity  chosen,  at any  time  it pleased by notification, the  effect  of  the,

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notification  being  vitally  to  affect  the  interests  of traders by rendering illegal a contract which was  perfectly legal  when it was entered into.  We consider that there  is no substance in this submission.  We have already  extracted relevant portions from the report of the expert committee on the  bill  which became the Act dealing  with  the  economic implications  of forward trading and for the  necessity  for regulating 570 such  contracts  in  particular goods.  It  is  not  forward trading  in every commodity that requires  regulation  under the Act.  The suitability of a commodity for forward trading depends  on factors which are far from static and  similarly the need for bringing forward trading within the  regulatory provisions  of the Act depends on factors which are  subject to  variation over periods of time.  Besides, the nature  of the commodity, the size of its production, the scale of  the demand  for  it  in relation to the supply  and  the  demand itself being not quantitatively fixed but changing so as  to require  a  continuous  assessment  through  the  medium  of futures market are all elements that necessitate  regulation and  these  are  variable.   We have  not  attempted  to  be exhaustive in naming the several factors but these are  some of  the  characteristics which call for and  make  possible, effective  regulation.  It would therefore, follow that  the commodities which would satisfy these tests or  requirements can only be ascertained from time to time after enquiry  and -investigation.   They  cannot obviously be specified  in  a statute.  It is because of these considerations and the need for  expert opinion and guidance on the matter that the  Act has,  by  its Ch.  II., provided for the constitution  of  a Forward Markets Commission on whom has been laid the duty of advising Government on the situation as it exists from  time to  time  and make recommendations in that regard.   In  our opinion,  the selection of the commodity for the  regulation of  forward trading in it or of prohibition of such  trading can  only  be left to the Government and  the  purposes  for which the power is to be used and the machinery created for the investigation furnish sufficient guidance as to preclude any challenge on the ground of a violation of Art. 14.  What we  have  just  now said as regards  the  selection  of  the commodity would suffice to answer the argument regarding the selection of the time at which the notification under s.  15 (1) might take place. 571 We  need only repeat what we have pointed out  earlier  that though the Forward Markets Commission in its report of  may, 1957, recommended that gur might be brought within the scope of  the  regulatory  provisions of the  Act  with  immediate effect,  the Government did not accept  that  recommendation and it was only when Government considered that a  situation developed  rendering the price-situation in the gur  forward market  very critical and that speculative activity  in  the commodity  indulged  in  by powerful  operators  had  raised prices to an unreasonable figure that Government  intervened by the notification now impugned. The  next  submission  of Mr. Nambiar was  that  s.  15  was constitutionally   invalid   as   violating   the   freedoms guaranteed  by sub-cls. (f) and (g) of el. (1) of  Art.  19. As  regards sub-cl (f) of el. (1) of Art. 19, it  was  urged that  the  right to the benefits arising  under  a  contract which  was  lawful when entered into was in  the  nature  of property and that s. 15, by empowering a notification to  be issued  which  rendered  such a  contract  illegal  was  ,in unreasonable  restriction  on the right to  the  holding  or

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enjoyment  of  that  property.  It was  further  urged  that whether  or not the right to the benefit of a  contract  was property  within  Art. 19(1)(f) it was  a  right  intimately bound  up  with the right to carry on a  trade  or  business within sub-el. (g) of cl. (1) of Art. 19 and it was  broadly contended  that  any  retrospective  invalidation  of   that contract  would not be a reasonable restriction  within  el. (6) of Art. 19. In  view of the nature of these submissions.  the  challenge under  both sub-cl. (f) & (g) might be considered  together. Before  we do so, however, we might dispose of a  subsidiary argument based on the  words we are italicising in s. 15 (1) "’and  thereupon....... every forward contract for the  sale or purchase of any goods specified in the notification which is entered into in the area 572 specified  therein............  etc." It was urged  that  by reason of these words the Government was empowered to  issue a  notification  which  would have  effect  in  relation  to contracts which were entered into after that date, and  that the   impugned  notification  which  invalidated   contracts entered   into  earlier  subsisting  on  the  date  of   the notification  was therefore ultra vires.  We  consider  this submission  as with. out force.  The expression "is  entered into"  is at the worst ambiguous and is capable  of  meaning either only those entered into after the date of the notifi- cation,  or as meaning "is or has been entered into" i.  e., including  a contract which having been entered into  before is  subsisting  on that date.  But that it is ,used  in  the latter  sense is made clear by the terms of s. 16(a)  "every forward  contract  for  the sale of purchase  of  any  goods specified in the notification, entered into before the  date of the notification and remaining to be performed after  the said  date......  "  Sections  15 and 16  have  to  be  read together as being intimately connected, the later  provision setting  out the consequences of the action taken under  the earlier and so read, we consider that there is no scope  for the argument addressed to us. Now  to  revert  to the discussion , of the  attack  on  the provision based on a violation of Art. 19(1) (f) & (g),  the question is whether the giving of retrospective effect to an enactment  dealing with contracts so as to modify the  terms of  or  even  put an end to subsisting contract  is  per  se unreasonable so as to amount to a violation of the guarantee under  sub-cls. (f) & (g) assuming learned Counsel is  right in  contending that a right to the benefit of a contract  is in  the  nature  of a right  to  property-an  assumption  as regards the correctness of which we say nothing.  In support of his submission learned Counsel relied on the observations in the judgment of this Court 573 in  State of West Bengal v. Subodh Gopal Bose and Ors.,  (1) where  it  was observed that the fact that the  statute  was being  given retrospective operation may properly  be  taken into consideration in determining the reasonableness of  the restriction impose  sed-an  observation which was  cited  in the decision of     this   Court  in  Express  News   papers Private Ltd.  v.    Union  of  India  (1).   The   decisions referred  to  and others to a like  effect  are  authorities merely  for the position that the retrospective effect of  a statute  would  be an element to be taken into  account  for determining  the reasonableness of the  restriction  imposed but  these observations do not carry learnea Counsel to  the full  extent needed to sustain the proposition he  seeks  to establish,  viz., that the retrospective invalidation  of  a

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contract  is  not a permissible restriction  that  could  be imposed by a (6) of Art. 19. Learned Counsel referred us to some decisions of the Supreme Court of the United States but to these. we do not  consider it  necessary to advert.  Article 1, Section 10 (1), of  the American  Constitution  lays a ban on the enactment  by  the States  of  inter  alia  ""any  ex  post-facto  law  or  low impairing the obligation of contracts, or grant any title of nobility"  Our  Constitution-makers while  making  provision against  "ex  post-facto laws" in Art. 20(1)  and  ’,against titles" in Art. 18(1), studiously refrained from including a guarantee   regarding  the  impairment  of  obligations   of contracts.   There  is therefore no scope for  the  argument that  a law which affects or varies rights under a  contract is   for   that  reason  constitutionally  invalid   as   an unreasonable restriction on the right either to property  or to  carry on trade or business.  It may be pointed out  that even  in  the United States the recent decisions  have  made such  inroads upon that doctrine that it had been stated  by Prof.   Corwin that "The protection afforded by this  clause does (1) [1954] S.C.R. 587., 626. (2) [1959] S.C.R. 12, 139, 574 not  today  go  much, if at all, beyond  that  afforded  by, Section  1 of the Fourteenth Amendment (against  deprivation of  life, liberty or property without due process of  law)". The learned another proceeding to quote from the decision in Atlantic, Coast Line, Co. v. Goldsboro (1) continues:               "In  the words of the Court : ,It  is  settled               that  neither the contract clause nor the  due               process  clause has the effect  of  overriding               the  power  of  the  State  to  establish  all               regulations  that are reasonably necessary  to               secure   the  health,  safety,   good   order,               comfort, or general welfare of the community’-               in-  short,  its police power.   And  what  is               reasonably  necessary’ for these  purposes  is               today  a question ultimately for  the  Supreme               Court;  and  the present  disposition  of  the               Court  is to put the burden of proof upon  any               person  who  challenges State  action  as  not               reasonably, necessary’. adding:               "Till after the Civil War the principal source               from  which  cases  stemmed  challenging   the               validity of State legislation, the ’obligation               of  contracts’ clause is today  of  negligible               importance,  and might well be  stricken  from               the   Constitution.    For   most    practical               purposes, in fact, it has been."               (Vide  Constitution and what it  means  today,               12th Edn., p. 84)’ If  that is the position in America where  the  Constitution contains  a guarantee against the impairment of  obligations arising from contracts, the position under our  Constitution must  a fortiori be so.  Affecting a subsisting contract  by modifying  its terms cannot ipso jure be treated as  outside the  permissible limits laid by cl. (5) or (b) of  Art.  19. The "reasonableness" of the provisions of a statute are  not to be’ judged by a priori standards unrelated to the  facts- and circumstances (1)  (1941) 232 U.S. 548; 58 L. Ed. 721.                             575 of  a  situation which occasioned the. legislation.   In  an oft-quoted  passage  Patanjali Sastri, C.  J.,  observed  in

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State of Madras v. V. G. Row               "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               reasonableness 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." It  cannot be therefore predicated off-hand and as a  matter of   law   that  every  restriction  which   operates   with retrospective  effect and affects rights obtained under  the pre-existing  law, is unconstitutional as obnoxious  to  the freedom guaranteed by sub-cls. (f) or (g) of el. (1) of Art. 19.   It  might, in particular cases, even be  necessary  to completely  efface a subsisting contract but in the  present case that is not what was done but only to vary its terms go that it would be settled out at the prices determined by the other notification.  Learned Counsel challenged the validity of  the provision for price-fixation under s. 16 and of  the actual prices determined under the notification issued under s.  16, but these we shall consider later.  We hold that  s. 15  is constitutionally valid.  It is only necessary to  add that  it is manifest that the restriction on trading  is  in the, interest of the general public since the public have  a vital interest in the availability of an essential commodity like gur at reasonable and relatively stable prices and  the only question for determination for the (1)  [1952] S.C. R. 597, 607. 576 application  of  cls.  (5) or (6) of Art. 19  would  be  the reasonableness  of  the measures  contemplated by  the  law. Taking into account the machinery created in Ch.  II of  the Act in the way of an expert body to furnish Government  with advice  on such a complex problem and the functions  of  the committee, we are clearly of the view that the  restrictions imposed  by  s. 15 of the Act are reasonable  and  pass  the tests for a valid law under cls. (5) and (6) of Art. 19. Learned Counsel’s next submission related to the validity of s.  16 which deals with the consequences of a  notification. These  consequences  are three : (1) All  forward  contracts subsisting  on the date of the notification under s. 15  not entered  into  by or through a recognized  association’  are deemed  to  be  closed  out, (2)  The  rates  at  which  the contracts  have to be settled are those to be fixed  by  the Central  Government,  and  (3) In  respect  of  the  forward contracts so closed out the buyer is not entitled to ask for delivery  of  the  goods and similarly  the  seller  is  not entitled to insist on delivery being taken.  In  considering the  validity of s. 15 and the arguments addressed to us  in that   behalf   we  have  already   considered   the   first consequence, viz., subsisting forward contracts being deemed to  be  closed  on the day  of  the  notification.   Learned Counsel  does not ’impugn the validity of the  provision  in cl.  (b)  of  s. 16 under which  the  obligation  to  demand delivery  or  insist  on delivery being  taken  is  provided against.   The attack on s. 16 was confined to the  validity of  vesting  a power in the Central Government  to  fix  the rates  at which the differences payable by one party to  the other  should  be  determined  on the  closing  out  of  the

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contract  by  operation of the notification.  It  was  urged that  the provision entrusting the Government with power  to fix the price s without specifying the basis therefor vested in them an arbitrary power to fix any price that they liked, that the statute had not given any indication                             577 of the principles underlying the fixation of the price, with the result that the relevant portion of s. 16’ was either. a piece  of  excessive  delegation  or  offended  Art.   14-by conferring, an unguided power in Government. Before  dealing with the constitutional objection which  was sought to be supported by contrasting these provisions  with analogous  Indian legislation wherein the price payable  was fixed  by the Act itself to which we shall advert  a  little later,  it might be usefull to narrate the circumstances  in which  the price at which the closing out was to be  settled was  fixed  by  the  Central  Government  in,  the  impugned notification.   The circumstances are thus described in  the counter-affidavit  filed  on, behalf of the State  to  these petitions.  On July 17, 1958, the Government of India issued a  notification  under  s. 17 of  the  Act  banning  forward contracts  of  minor woodgrains and a  similar  notification followed on the next day banning forward contracts in Khand- sari  sugar.   The closure of these  markets  increased  the speculative  activity  in the forward market  in  gur.   The price  situation  in respect of gur became critical  in  the last  week  of December 1958 when bull operators  acting  in concert  started  to  rise up the  prices.   Contracts  were entered  into at these excessive prices in ’the belief  that even  if  Government intervened and took  drastic  steps  of closing out the contracts by a notification under s. 15, the benefits of the high prices on  the out  standing  contracts would, in accordance with past practice,     available    to the bull  operators.  On A review of   the        situation exsisting  as aforesaid, the Government found that at  Hapur which was a representative market, the rate for gur  futures prices rose from Rs. 11.98 per maund on January 17, 1958, to Rs. 16.27 per maund on February II, 1959, and the Government considered that these forward prices were exerting a   very unhealthy influence on the spot-prices of the commodity.  It 578 was in these circumstances that in the impugned notification the price at which the forward contract should be closed out was fixed at the average of the closing rates prevailing  in the  forward  markets  during the  period  of  three  months immediately preceding the date of the notification. The question now for consideration is whether on the  scheme of the Act read in conjunction with the policy underlying it and  the  purposes for which it is enacted  there  could  be found a guidance as to the principles on which the price  of settling  out  could be fixed by the Government  ?  In  this connection we might usefully refer to the provisions of  the Essential Commodities Act, 1955, under which   Government is vested with power to determine the prices at which essential commodities  may  be bought or sold.  Under s. 3(2)  of  the Essential  Commodities Act 1955, the Central  Government  is empowered  by  order  made  under the  Act  to  provide  for controlling  the price at which any essential  commodity  be bought and sold.  The control under ,that enactment, as  the one now under consideration, is to be exercised for ensuring that  the price fixed shall be reasonable having  regard  to the  cost  of  production and the general  level  of  prices prevailing  of other like commodities which are the  subject of  legitimate  and  proper trade.  In the  very  nature  of things  it is not possible for the legislature to  determine

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beforehand the price at which a commodity may be sold or  at which  contracts in relation thereto might be entered  into. The  price must be dependent upon factors varying from  time to time and cannot, therefore, be always a proper subject of legislative determination.  Any fixation of prices either by naming a figure or by reference to, the market price  ruling on a particular date, must be productive of hardship both by reason  of being mechanical and therefore out of  tune  with the varying factors which might obtain from time to time, as also of being liable to manipulation                             579 by unscrupulous traders as in the situation described by the Government in regard to gur futures in the passage just  now extracted. Nor is it any defect, in the Act that it does not in so many terms lay down the principles for the fixation of the price. In  view of what we have stated earlier, the  only  guidance which the Parliament could have given was to direct that the price  fixed be reasonable taking into account the  relevant factors we have enumerated earlier, and this we consider  is implicit in the provision in s. 16 of the Act as much as  in s. 3 of the Essential Commodities Act. No  doubt,  learned  Counsel  pointed  out  the   provisions contained in the West Bengal Raw Jute Act (Act XXV of 1948), the Jute Goods Act V of 1950 and the Bombay Forward  Markets Contracts  Act  (Act LXIV of 1945), in which in  respect  of closing out of contracts  which  were,  illegalised  on  the coming into    force of the enactment, the price at could be settled was fixed as the spot-price of the closing day.   In normal  circumstances  that might have been a fair  rule  to adopt,  but  from  these precedents no rule of  law  can  be derived that a fixation of a price on any other basis either improder, unjust or ’unconstitutional.  It is patent that if prices  are artificially rigged up and inflated as a  result of excessive speculation and unhealthy trade practices,  the spot-price prevailing on the closing day would not represent the  reasonable  price at which contract  should  be  closed out..  And  this was precisely the case of  the  respondent7 State  as the reasons which compelled it to depart from  the -principle of fixation, on the basis of the spot-Price  on  the  closing day.   We  see,  therefore,  no sufficient  ground for holding that the power  conferred  on the  Central Government to fix the price at which  contracts ’could be closed out is either legislatively incompetent  or constitutionally  invalid.   What we stated  earlier  should suffice  to’  show  that  the  actual  price  at  which  the contracts were required 580 to  be  settled  out  fixed  in  the  impugned  notification conformed  to. the requirement of reasonableness in Art.  19 (6)  and  that  underlying,the  relevant  prosions  of   the statute. The  petitions fail and are dismissed with costs one set  of hearing-fees. Petitions dismissed.