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CASE NO.: Appeal (civil)  5048 of 2000

PETITIONER: The State of West Bengal and Ors

RESPONDENT: M/s Veejay International (India) & Ors

DATE OF JUDGMENT: 20/02/2007

BENCH: Dr. ARIJIT PASAYAT & S.H. KAPADIA

JUDGMENT: J U D G M E N T

Dr. ARIJIT PASAYAT, J.

       Challenge in this appeal is to the judgment rendered by a  Division Bench of the Calcutta High Court holding that  clauses 9 and 10 of the Notification No.4784- F.S./FS/Sectt/Food/148-1/97, dated 19.12.1997 issued in  exercise of the powers conferred by Section 3 of the Essential  Commodities Act, 1955 (in short the ’Act’) read with  Government of India, Ministry of Agriculture and Irrigation  (Department of Food) Order No. G.S.R. 800 dated 8th June,  1978 was contrary to the policy declared under the Foreign  Trade Development and Regulation Act, 1992 (in short  ’Foreign Trade Act’).  Accordingly, it was held as follows:

"In view of our findings aforementioned it must  be held that the order does not conform to the  policy laid down by the Central Government in  exercise of its power conferred upon it under  Section 5 of the 1992 Act inasmuch as in  terms thereof, the Central Government could  not even itself interfere with the proclaimed  policy relating to import and export adopted by  it in terms of Section 5 of the 1992 Act."       

       By the abovesaid notification order in question was made  which was called West Bengal Rice and Paddy Control Order,  1997 (for short ’the Control Order’).   

       Background facts in a nutshell are as follows:

       The notification in question was issued purportedly with  a view to regulate the price and availability of rice in the State  of West Bengal.  The State Government in exercise of delegated  power given under the Act, by the notification No.G.S.R. 800  dated 8th June, 1978 promulgated West Bengal Rice and  Paddy (Restriction on Movement) Order, 1981 (in short  ’Movement Order’).

       Clause 5 of the said order authorizes Officers to enter  into any premises and make search and seizure of essential  commodities or vehicle etc. Vires of the said orders were  considered by a Division Bench of Calcutta High Court.

       Thereafter, the Control Order was issued. Clauses 9 and

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10 of the said Control Order are relevant for the purpose of the  present dispute. They read as follows:-

"9. Regulation of storage of rice and paddy for  export \026

(1)     No person shall store or attempt to store or  transport any quantity of rice or paddy  procured for export without a valid permit  in Form ’D’ granted by the Director or by  the Controller, if so authorized by the  Government.   

(2)     In the case of transshipment of stocks  from one vehicle to another in exigencies, by  an exporter without a valid permit such  transshipment shall be made only with the  prior permission of the nearest Controller,  stating in total the reason for such  transshipment.                                               10.     Regulation of export of rice produced in  West Bengal -  

       No person shall export or attempt to  export any rice or paddy produced or grown in  West Bengal without a written authority  granted by the Government in this behalf, and  if the Government or such authorized officer is  satisfied that such export of rice will not  adversely affect the price and availability of  rice in the local market, the Government or  such authorized officer may grant authority for  export of specified quantity and variety of rice  as may be determined by the Government or  such authorized officer."

       Respondent filed a writ petition before the Calcutta High  Court questioning the legality of the aforesaid clauses  primarily on the ground that they were repugnant and  inconsistent with the policy declared by the Foreign Trade Act.   The State took the stand that the clauses in question are  regulatory in nature and do not suffer from any infirmity.  

The High Court accepted the challenge and, inter alia,  concluded as follows:

"Clause 9(1) of the Control Order deals  with restriction on transport whereas; clause  4.21 of the export and import policy framed by  the Central Government under Section 5 of the  1992 Act clearly states that items allowed for  export shall not be withheld/delayed for any  reason by any agency of the Central or State  Government.  Both the provisions, thus, are in  direct conflict with each other.  Clause 9.2,  provides for a prior permission of the nearest  controller when transshipment takes place  from one vehicle to another.  If clause 9.1 is  bad, clause 9.2 cannot survive independently.

Clause 10 of the Control order is in  mandatory form.  It totally prohibits export or  import.  It confers absolute unguided,

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unbridled and uncontrolled power upon the  authorities named therein to consider as to  whether a permit for export should be granted  or not. By reason of an order made under the  delegated notifications no authority of the  State Government can authorize to issue  permit for export. Such a contingency is  contemplated only in terms of paragraph 5 of  the 1992 Order.  Once in terms of EXIM policy  non Basmati rice is considered to be free for  export which decision must have been taken  into consideration by the Central Government  upon taking into consideration all aspects of  the matter viz. availability thereof in the  country, the quantum of production and the  requirement within the courts, the State  Government in exercise of its delegated power  cannot be held to have any say in the matter.   If the State Government has any difficulty in  relation thereto, it may bring the same to the  notice of the Central Government so that at  the time of registration of such contract  entered into by and between the exporter and  the foreign country, the same may borne in  mind by the appropriate authority so as to  restrict number of registrations of contract by  and between the exporters from India and the  Foreign Countries."                 

       As noted above, an escape route was suggested as would  be seen from the quoted portion of the High Court’s order.

       In support of the appeal, learned counsel for the  appellants submitted that the High Court completely lost sight  of the fact that the two clauses were regulatory in nature.   There was no complete ban on export or import and, it cannot  be said that there was any absolute, unguided, unbridled and  uncontrolled power upon the authorities to decide whether the  permit for export shall be granted or not.  The purpose was to  ensure that the export does not affect the price in the local  market and the availability of stock.  As a matter of fact, there  was no conflict as was held by the High Court.   

       In K. Ramanathan v. State of Tamil Nadu and Anr. (1985  (2) SCC 116) it was held as follows:

"The appellants impugned clause 3(1-A) of the  1982 Order on the grounds that it was ultra  vires the State Government being in excess of  the delegated powers.  It was urged (i) that the  delegation of a specific power under Section  3(2)(d) of the Essential Commodities Act by the  Central Government notification dated June 9,  1979 issued under Section 5 of the Act to  regulate the storage, transport, distribution,  disposal, etc. of an essential commodity, in  relation to foodstuffs, does not carry with it the  general power of the Central Government  under sub-section (1) of Section 3 to regulate  or prohibit the production, supply and  distribution thereof and trade and commerce  therein, and (ii) that the word ’regulating’ in  clause (d) of Section 3(2) of the Act does not  take in ’prohibiting’ and as such there cannot

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be a total prohibition on transport, movement  or otherwise carrying of paddy out of the areas  in question under clause (d) but only  regulation of such activities in the course of  trade and commerce by grant of licences or  permits."         

       Decision in Harishankar Bagla and Anr. v. The State of  Madhya Pradesh (AIR 1954 SC 465) throws considerable light  on the controversy. Para 7 of the judgment read as follows:-

       "7. The first question canvassed by Mr.  Umrigar was that the provisions of Section 3 of  the Control Order infringed the rights of a  citizen guaranteed in sub-clauses (f) and (g) of  Article 19(1) of the Constitution.  These sub- clauses recognize the right of a citizen to  dispose of property and to carry on trade or  business.  The requirement of a permit to  transport by rail cotton textiles to a certain  extent operates as a restriction on the rights of  a person who is engaged in the business of  purchase and sale of cotton textiles.  Clause  (5) of Article 19 however permits such  restrictions to be placed provided they are in  the public interest. During the period of  emergency it was necessary to impose control  on the production, supply and distribution of  commodities essential to the life of the  community.  It was for this reason that the  Legislature passed the Essential Supplies  (Temporary Powers) Act authorizing the  Central Government to make orders from time  to time controlling the production, supply and  distribution of essential commodities.

       Clause 3 of the Control Order does not  deprive a citizen of the right to dispose of or  transport cotton textiles purchased by him.  It  requires him to take a permit from the Textile  Commissioner to enable him to transport  them.  The requirement of a permit in this  regard cannot be regarded as an unreasonable  restriction on the citizen’s right under sub- clauses (f) and (g) of Article 19(1).  If transport  of essential commodities by rail or other means  of conveyance was left uncontrolled it might  well have seriously hampered the supply of  these commodities to the public. Act XXIV of  1946 was an emergency measure and as  stated in its preamble, was intended to provide  for the continuance during a limited period of  powers to control the production, supply and  distribution of, and trade and commerce in,  certain commodities. The number of  commodities held essential are mentioned in  Section 2 of the Act, and the requirement of a  permit to transport such commodities by road  or rail or other means of transport, cannot, in  any sense of the term, be said, in a temporary  Act, to be unreasonable restriction on the  citizens’ rights mentioned in clauses (f) and (g)  of Article 19(1).  The High Court was therefore  right in negativing the contention raised  regarding the invalidity of the Control Order as

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abridging the rights of the citizens under  Article 19 (1) of the Constitution."                               

       Section 5 of the Foreign Trade Act authorizes the Central  Government to formulate and announce, by notification in the  Official Gazette, the export and import policy as also to amend  the same in like manner. If the clauses 9 and 10 of the Control  Order and Section 5 of the policy of the Foreign Trade Act are  harmonized, that rules out any conflict. As a matter of fact,  Section 6 of the Act is also of relevance and it reads as follows:

"6. Effect of orders inconsistent with other  enactments - Any order made under section 3  shall have effect notwithstanding anything  inconsistent therewith contained in any  enactment other than this Act or any  instrument having effect by virtue of any  enactment other than this Act."

       The Control Order was passed in exercise of power  available under the Act.  "Export" under the Foreign Trades  Act involves several activities. It includes transport,  international contract between parties, interstate movement  and delivery to the buyer outside the country. The impugned  clauses of the Control Order relate to certain restrictions on  some parts of the activities. By no stretch of imagination they  can be considered to be opposed to the policy of export.  The  clauses are regulatory in nature and character without in any  manner affecting the policy flowing from Section 5 of the  Foreign Trade Act. It is not that any unbridled and/or  arbitrary power was given to the authorities as held by the  High Court.  In fact, the parameters of exercisable of power are  inbuilt in Clause 10.  Reasons were required to be recorded.  This was to be done objectively and not subjectively as  appears to have been concluded by the High Court.  Looked at  from any angle, the High Court’s judgment is indefensible and  is set aside.  

       The appeal is allowed with no order as to costs.