The State of Bihar v. Abdul Majid

the contentions that have been raised it would be necessary to on behalf of the petitioners, give a short narrative of facts. The the material petitioners are a firm of traders who had, prior to the cancellation of their licence, been carrying on the busi ness of retail sellers of coal at a coal depot held by them in the town of Kanpur. District Magistrate of Kanpur as well as the District Supply Officer, who figure respectively as respondents in the petition, had been for a consider Nos. 2 and 3 able time past issuing directives the petitioners as well as other coal depot holders of the town, restrictions of various kinds the sale of coal, soft coke, etc. It is stated that . prior the prices that were fixed by the District Officers left the coal dealers a margin of 20 per cent porfit upon the sale of soft coke the sales of hard coke and and 15 per cent profit on steam coal, . such profits being allowed on the landed landed costs costs of the goods up to the depot. The the 14th of February, 1953, imposing 1954 Messrs. Dwarka Prasad Laxmi Narain v. The Stale of Uttar Pradesh aM Two Others. Mukhtrjea ] .. • S.C.R. SUPREME COURT REPORTS 805 thus arrived at that the 14th of February, 1953, reduction was effected in a the first place, items and besides ex-colliery price, comprised several the railway freight, the middleman's commission and incidental expenses of various kin\ls includ there were ing labour duty, loading and unloading charges, cartage and stacking expenses. After making a total of these cost elements, an allowance was given for shortage of weight at the rate of 5 mds. and odd seers per ton in the case of soft coke and 3 mds. and odd seers in the case of hard · coke and steam coal, and it was on the the price basis of the net weight was calculated. On District Supply Officer issued a directive reducing the selling prices of coke, coal, etc., much below the existing rates. This three-fold manner. In the allowance for shortage of weight was made much less than before ; second! y, a sum of Rs. 4-12-0 only was allowed for all the incidental expenses, and thirdly, the margin of profit was cut down to 10 per cent. On the 22nd of May, 1953, a representative petition was filed by seven colliery depot holders of Kanpur the present petitioners challenging the validity of the executive order, dated the 14th of February, 1953, mentioned above inter alia it infringed the fundamental rights on the ground that of the petitioners under articles 14 and 19 of Constitution. There was an application for ad interim this petition which came up .stay for hearing before learned Vacation Judge of this court on the 1st of July, 1953. On that day an under taking was given by the State of Uttar Pradesh to they would withdraw the order of the 14th effect February, '.1953, and apparently weighed with the State in giving this undertaking was it was a purely executive order without any legislative sanction behind it. The order of the 14th February was in fact withdrawn, but on the 10th of the State of Uttar Pradesh promulgated. by July, 1953, a notification an order intituled "The Uttar Pradesh Coal Control Order, exercise of the powers conferred upon it by _section 3(2) read with the noti of the Essential Supplies Act, 1946, issued under fied order of the Government of India in connection with 1953" purporting the consideration including to act I 1954 Mtssrs. Dwarka PraJad Laxmi Narain v. The State of Uttar Pradesh and Two Others. Mukh•r.J'a J. 806 SUPREME COURT REPORTS [1954] the constitutionality of section 4 of the Act. As Coal Control Order is the main object of attack by the it would be petitioners the present proceeding, convenient to set out the material provisions of order in respect of which the controversy between parties primarily centers : "THE UTTAR PRADESH COAL CoNTROL ORDER, 1953.

#2. In this Order unless there is anything repugnant in the subject or context (a) "Coal" cinder and ashes. includes coke but does not include Authority" means ( c) "The Licensing District Magistrate of the District or any other officer authorised by him to perform his functions under this Order and includes district. the District Supply Officer of ( d) "Licensee" means a person holding a licence this Order in Form 'A' or in Form 'B'. the provisions of

#3. (1) No person shall stock, sell, store for sale or for burning bricks or shall otherwise utilise dispose of coal in this State except under a licence in Form 'A' or 'B' granted under this Order or in accord ance with the provisions of this Order. it relates (2) Nothing contained in sub-clause (1)- (a) Shall in so far as taking out a licence for stocking or storing coal for their own con the stocks held by persons or sumption, apply undertakings obtaining coal on permits of the District Magistrate or the State Coal Controller for their own consumption. (b) Shall apply to any person or class of persons exempted from any provision of the above sub-dame by the State Coal Controller, to the extent of their exemption.

#4. (1) Every application for licence under this Order shall be made in the form given in Schedule I appended to this Order. · S.C.R. SUPREME COURT REPORTS 807 (2) A licence granted under this Order shall be in Form 'A' or Form 'B' appended to this Order and the holder of a licence granted under this Order shall comply with any directions that may be issued to him by the Licensing Authority in regard to the purchase, sale, storage or distribution of coal. thereof granted by him under (3) The Licensing Authority may grant, refuse to grant, renew or refuse to renew a licence and may suspend, cancel, revoke or modify any licence or any the Order for reasons to be recorded. Provided that every power which is under this Order exercisable by the Licensing Authority shall also be exercisable by the State Coal Controller or any person authorised by him in behalf. 1954 Messrs. Dwarlca Prasad Laxmi Narain v. The Staie of Uttar Pradesh and Two Others. MukherJea. J.

#7. The State Coal Controller may by written order likewise require any person holding stock of coal to sell the whole or any part of the stock to such person or class of persons and on such terms and prices as may be determined in accordance with the provisions of clause (8).

#8. (1) No licensee in Form 'B' and no person acting on his behalf shall sell, agree to sell or offer for sale, coal at a price exceeding the price to be declared by the Licensing Authority in accordance with the for mula given in Schedule III. (2) A licensee in Form 'A' or any other person holding stock of coal or any other person acting for or on behalf of such licensees or person transferring or in accordance disposing of such stocks with clause 6 or clause 7 shall not charge for the coal a price exceeding the landed cost, plus incidental and handling charges, plus an amount not exceeding 10 per cent of the landed cost as may be determined by the Licensing Authority or the State Coal Controller. to any person Explanations :-( 1) Landed the ex colliery price of the coal plus the L.D.C.C. and Bihar tax plus middleman's commission actually paid Sales and railway freight. cost means 808 SUPREME COURT REPORTS [1954] 1954 Mems. Dwarka Prasad Laxmi Narain v. The State of Uttar Pradesh and Two Othtrs. MukMrjea J. (2) Incidental and handling charges mean the cost of unloading from wagons, to stacking site, unloading at the stacking site, plus godown rent, plus choukidari cliarges, if any, not exceeding Rs. 8-8-0 per ton as may be determined by the Licensing Autho rity or the State Coal Controller according conditions. transporting

#11. The District Magistrate shall within a week of the commencement of this Order prepare and publish in a local paper a list of persons carrying on the busi ness of sale of coal in his district and upon the publi cation of the list, the persons included therein will be deemed for purposes of this Order to be licensee until three months next following the publication of the list in Form A or B as may be specified.

#12. If any person contravenes any of the provisions of this Order, or the conditions of licence granted thereunder, he shall be punishable under section 7 of the Essential Supplies (Temporary Powers) Act, 1946, with imprisonment for a term which may extend to three years or with fine or with both and without pre judice to any other punishment to which he may be liable ........ " Schedule III referred to in the Order is as follows : SCHEDULE III. (Formula for declaration of prices of soft coke/hard coke/steam coal). I.

#2. 3.

#4. 5. Ex-colliery Price L.D.C.C. and Bihar Sales tax Middleman's commission Railway freight Incidental and handling char ges including (i) Unloading from wagons. (ii) Transport upto premises of stacking (iii) Unloading and stacking at the premises or depot. Actuals. Actuals. Actuallv paid subject to the maxi mum'Iaid down under clause 6 of the Government of India Colliery Control Order, 1g45. Actuals. Maximum of Rs. 8-8-o per ton aa may be determined by Licensing Authority according local conditions, provided that at places which are" extra ordinarily distant from the rail way head a higher rate may be a_llowed by the Licensing Autho· rity. 1954 MeJsrr. Dworka Prasad Laxmi ,h'Orain v. Tht State of Uttar PradeJh atid Two Others. MuAherjea J. S.C.R. SUPREME COURT REPORTS 809 (iv) Godown rent and chaukidari charges, if any (v) \.Yeigl1ing charg,s, if any. Local taxes Octroi, etc. Actuals.

#7. Shortage 1\1ot exc~eding ~~! maunds per ton in the case of soft coke and 2~ maunds in the case of hard coke and stf'am coal as mav be determin..:d by the Licensing Authority. At 10 per cent on total items 1 to 6 abov;: except item No. 5. B. Profit the same figures as it is said, was prepared, It is said that on the 16th of July, 1953, the res pondmt No. 2 issued a declaration whereby he fixed for the sale of soft coke, coal, etc. at the retail rates in the directive they stood precisely issued on the 14th of February, 1953. The result, ac that the selling prices cording . to the petitioners, was it was not possible for the were reduced so much In accord to carry on their business at all. coal traders the provision of clause 11 of the Control ance with Order set out above, the petitioners' name appeared in the lis\ of B licence holders and they did apply for a licence in the proper form as required by clause (4). The though not actually licence, delivered over to the petitioners. By a letter dated the the Area Rationing Officer, 3rd of October, 1953, petitioners Kanpur,. accused committing a in connection with the carry number of irregularities ing on of the coal depot. The charges mainly were that two other depots held and financed by the there were petitioners in the names of different persons into agreements for sale of coal at more than the fixed rates. The peti submitted an explanation which was not .consi tio'.1ers satisfactorv and bv an order elated the dered to be the District Supply Officer, 13t:1 of October, 1953; Kanpur, present petition valiclitv of the Coal Control Order of the 10th of July, the declaration of prices made on the 16th of 1953, July following and also the order cancelling ~eti­ tioners' licence on the 13th of October, 1953. 15-95 s. c. I./59 In the petitioners have challenged themselves the petitioners had entered the petitioners' cancelled licence. tf1e t11e l954 Messrs. Dwarka Prasad Laxmi }larairi "· The Stale of Uttar Pradesh and Tw1 Others. Muk lerjea 1, 810 SUPREME COURT REPORTS [1954} licenses, the ground that to carry on The constitutional validity of themselves but may be delegated at to any person they like. littar Pradesh Coal Control Order has been assailed before us subs its provisions vest an tantially on unfettered and unguided discretion licensing authority or tl1e State Coal Controller in the matter of in fixing prices of coal granting or revoking traders ; and these and imposing conditions upon the arbitrary powers cannot only be exercised by officers option It is argued t'.lat these provisions imposing as they do unreasonable rt strictions the petitioners upon the right of trade and business conflict with fundamental rights under article 19 ( 1) (g) of the Constitution and are hence void. With regard the order oated the 16th of July, 1953, by which the prices of coke, coal, it is pointed out that it was not only etc. were fixed, ~onferred the Coal Control Order, but the prices as fixed, are palpably discrimina tory as would appear from comparing the very same Control Order prices fixed under other places within the State of Uttar Pra( esh Allahabad, Lucknow and Aligarh. The order of 13th October, 1953, cancelling the petitioners' licence is challenged on that the charges made the ground against the petitioners were vague and indefinite and the ulterior object of '.hat the order was m~de with driving coal business altogether. It the petitioners have bern made cancellation incapable of disposing of the holding of possession, such stock after the cancellation of their licwce has become an offence under the Coal Control Order. further that as a resuit of the stocks already in exercise of the petitioners out of licensing authority by the arbitrary pow.er them with though at the same is said order, It is not disputed before us that coal is an essential commodity under (Temporary the Essential Supplies Powers) Act of 1946, and by virtue of the delegation of powers by the Central Government to the Provin cial Government under section 4 of the Act, t1ie Uttar Pradeslf Government was competent to make provi for regulating the supply and ~iohs, by notified order, J954 Messrs, Dwarka Prasad Laxmi Narain ·"· The State of Uttar Pradesh anti Two Others. Mukherjea J. s.c.R.. SUPREME COURT REPOR'TS 811 in such a way as to secure they considered distribution of coal the objects as specified proper with a view in section 3 of the Act. All that is necessary these proYisions should not the fundamental rights of the citizens guaranteed under Part III of the Constitution and if they impose reason carrying on of trade or business, interests of restrictions in article 19 ( 6) of general public as Constitution. restrictions upon they must be imposed laid down infringe licensed vendors licences or of fixing is quite a reasonable Nobody can dispute that to sell them beyond the prices left with some amount of discretion through in specified quantities for ensuring equitable distribution of commodities considered essential the community and their availability at fair prices, thing to regulate sale of these commodities to whom quotas are allotted and who are not that are fixed permitted by the con trolling authorities. The power of granting the prices of the or withholding goods would necessarily have to be vested in certain public officers or bodies and they would certainly have to be matters. So far no exception can be taken ; but the mischief a.rises when the power conferred on such is an arbitrary power unregulated by any rule officers to the discretion of left entirely or principle and it is particular persons like without to do anything any check or control by any higher authority. A law .confers arbitrary and uncontrolled or order, which power upon the matter of regulating in normally available commodities trade or business cannot but be held to be unreasonable. As has been held by this court in Chintamon v. The State of Madhya restriction" Pradesh('), imposed upon a person in enjoyment of a right should not be arbitrary or of an is required in the interest excessive nature beyond what the right, cannot be said to contain excessively the quality of reasonableness, and unless it strikes a proper bala•1ce between the freedom guaranteed under (1) [1950] S. C.R. 759, public. Legislation, which invades the phrase the executive "reasonable arbitrarily limitation 1954 Messrs. Dwarka Prasad Laxmi Narain v. The Stale of Uttar Pradesh and Two Others. Mukh"i•• J. 812 SUPREME COURT REPORTS [1954) article 19 ( 1) (g) and the social control permitted by to be wanting in clause ( 6) of article 19, It is these principles reasonableness. the provisions of that we would proceed to examine this Control Order, the validity of which has been impugned before us on behalf of the petitioners. it must be held in the light of in fact, sell, store this Order" that nothing The provision contained is embodied to by tl11t no objection has been or can be in clause 3( 1) of the Order for sale m stock, that "no person shall otherwise utilise or dispose of coal except under a is quite unexcep licence granted under tional as a general provision ; primary o':ject which the Control Order is intended to serve. There are two exceptions engrafted upon the first is laid down in sub-clause (2) (a) general rule: taken. in sub The Second exception, which clause (2) (b) has been objected learned for the petitioners,. This exception counsel appearing provides in clause 3 (1) shall apply to any person or class of persons exempted from any provision sub-clause by the State Coal Controller, of the above It will be seen to the extent of such exemption. the Control Order nowhere indicates what the grounds rules been framed on for exemjXion are, nor have any this point. An unrestricted power has been given to to make exemptions, and even if the State Co:1trolkr improper motives, .there is he acts arbitrarily or from redress. no check over it ancl no way of obtaining Clause 3 (2) (b) of the Control Order seems to us, there fore, prim a V.l e agree, this portion of the however, with Mr. Umrigar Control Order, even though bad, is severable from the rest and we are not the validity in the present case as no or otherwise of this provision the subject matter of any action complaint before us. really concerned with unreasonable. taken under to be The more formidable objection has been taken on bel11lf of the petitioners against clause 4 (3) of the Co·ctrol. Order which the granting and relates refusing of licences. The licensing authority has been to grant, giv~n absolute power to renew, suspend, revoke, cancel or renew or refuse to grant or refuse ;954 Messrs. Dwarka Prasad Laxmi Nttrain v. The State of Uttar Pradesh and Two Others. S.C.R. SUPREME COURT REi•Cmrs 813 reasons licences individual to delegate the same, and that might result to regulate or guide takes. Not only so, the Order commits to record in our opinion, licence under to do is to record reasons for this Order and the only modify any thing he has the action the power could be exercised to whom the State Coal Controller may by any person the choice can be choose made in favour of any and every person. It seems to us that such provision cannot be held to be reasonable. No rules have been framed and no directions given on the discretion of the these matters l,nsing officer. Practically 'M'f1e unrestrained will of a single the power \;.to grant, ·withhold or cancel in any way he in the Order which could chooses and there is nothing ensure a proper execution of the power or operate as a from improper check upon injustice execution of the same. Mr. Umrigar contends that a safeguard has been provided against any sufficient that the licensing abuse of power by reason of the fact for what he does. authority has got is hardly effective ; for This safeguard, in the Order who there is no higher authority prescribed could examine the propriety of these reasons and revise the decision of the subordinate officer. The or review re:>sons, recorded for the personal or subjective satisfaction of are only furnishing any remedy to the aggrieved person. It was pointed out and with perfect propriety by Mr. Justice Matthews the well-known American case of Yic!( Wo v. Hopkins('), the action or non-action of officers from enmity or placed in such position may proceed prejudice, influences and motives favouritism and other improper which are easy of concealment and difficult to be injustice detected and exposed, and consequently capable of being wrought under cover of to every man, unrestricted power becomes apparent investigation. In our the necessity of detailed without opinion, the Uttar the provision of clause 4 (3) of Pradesh Coal Control Order must be held to be void as the freedom imposing an unreasonable (1) 118 U. S .. 356 at 373. therefore, which are required licensing authority and not zeal or animosity, restriction upon partisan to be 1954 MeJ,· rs. Dwark4 Pro rad Laxmi Narain v. T:.e State of Uttar Pradesh and T:vo Other1. Mukherj•a ]. $14 SUPREME COURT REPORTS [1954j of trade and business guaranteed under article 19 ( 1) (g) of the Constitution and not coming within protection afforded by clause ( 6) of the article. As in conformity with indicated above. The this provision forms an integral part of the entire structure of the Uttar Pradesh Coal Control Order, the the provision of order cannot operate properly unless the consti clause 4 (3) is brought licence of tutional requirements the petitioners having been cancelled in pursuance the Control Order, Sit• cancellation is not necessary for us not the grounds upon which purported constitute proper grounds for cancellation. to enquire further whether or licensing authority to act were vague or idefinite or could itself should be held to be the above clause of ineffective an~.,,' The two other clauses of the Control Order to which taken on behalf of the petitioners exception has been are clauses (7) and (8). Clause (7) empowers the State Coal Controller to direct, by written order, any person holding stock of coal to sell the whole or any part of to such person or class of persons and on the stock such terms and prices as may be determined in accord ance with the provision of clause (8). Clause 8 (1) provides that no licensee in Form 'B' shall sell o; agree the price to be declared to sell coal at a price exceeding in accordance with formula given III. With regard to both these clauses, the contention of the petitioners' counsel, in substance, Ill, is per se unreason price, as laid down in Schedule able as it is made dependent on the exercise of an licensing unfettered and uncontrolled discretion by the authority. An unfair determination of the price by it is argued, would be totally destructive of the business of the coal traders and the that is exactly what grievance of the petitioners has been done by the declaration of prices made on the 16th of July, 1953. licensing authority in Schedule is that the formula for determining licensing authority, is that We have examined the formula given in Schedule Ill to the Control Order with some care and on the mate that have been actually placed before us, we are 1954 Messrs. Dwarka PraJad Laxmi Narain v. 1 he State of Uttar Pradesh and Two Others. Mukhtrjea J. S.C.R. SUPREME COURT REPORTS 815 • .. III. With in Schedule the formula local conditions. The item 5 and the allowance is unreason not in a position to say that able. The prices, as said already, are calculated on the basis of the landed costs of coke and coal up to to which a profit of 10 per cent is added. the depot, in all which are The landed costs comprise seven regard to items !, enumerated 2, 3, 4 and (j of the Schedule the actual costs are into account and to that no objection can possibly be taken. The entire dispute is with regard to incidental .-. cjxl!fges specified item 7. " ~hortage which forms incidental So far as charges are concerned, the Schedule allows a maximum licensing of Rs. 8-8-0 per ton to be determined by the authority according local conditions and undoubtedly vary according to be left in such some amount of discretion must have to the local authorities. The discretion given the licensing authority is, how in fixing ever, not an unlimited discretion, but has got to be exercised with reference to the condition prevalent in local officers must be familiar. The grievance of the peti presumed tioners in the declaration of 16th of July, 1953, the licensing authority allowed incidental ch~rges 011ly at the rate of Rs. 4-12-0 per is grossly unfair. It is pointed out that at Lucknow, Aligarh, Allahabad and other places much higher rates were the local conditions of these places are allowed, though there has been consequently a almost the decla discrimination statements ration void altogether. The in this connection are been made by not supported by any affidavit of any person who is familiar with the in the other places local conditions that we have got here we are and on the licensing unable authority of Kanpur are certain! y not open to us to substitute our own determin ation in the matter of fixing the prices for that of the licensing authority and provided we are satisfied the discretion that has been vested in a public officer unfair Js fixed by really discriminatory. in this respect which makes not an uncontrolled locality with which discretion an@ no the petitioners identical ; and the materials to be ton and the rates It '1 •' I. !954 i-r1.t,.srs. Dwuta Prasasd L12xmi Narain v. The Stale of Utto.r Pradesh and Two Othtrs. Mukl"1i•• J. 816 SUPREME COURT REPORTS [1954] "' ,.,-' formula..J from the exercise of it, we illegal any order or resulted discrimination has cannot possibly <trike down as declaration made by such officer. The same reasons apply, item of Schedule the cost in our opinion, III which relates to carry on business \Ve do not know why for shortage of weight. Here also in particular cases has been left to allow- seventh the Control Order specifies a maximum and the determination of the allowance to the discretion of licensing authority. We are not satisfied from the materials placed before us that "tl14 _ is unfair or discriminatory. The provision allows a profit of 10 per cent upon items with Ihe exception of iftem Nu. 5 which relates to incidental item has been charges. respond- omitted and Mr. Umrigar, appearing for ents, could not suggest any possible reason for it. But the result of. this omission would only be to even then, 10 per cent lower the margin of profit a little below If the other traders and nothing more. in the locality in coal with that are willing amount of profit, as is stated on the affidavits of respondents, such fixation of profit would undoubtedly be in tbe interests of the public and cannot be held be unreasonable. The counsel for the petitioners is not right in his contention that the Control Order has only the maximum pro5t at 10 per cent and has it to the discretion of the licensing authority to reduce in any way he likes. Schedule III fixes the profit at ' the exception landed costs with 10 per cent . upon the is ·not in all cases and under would have clause 8 (1), their stocks of fixed under Schedule Ill. coal according Clause 8 (2) indeed is not very clearly worded, but we to impose a disability that all that it provides to charge prices exceed- upon all holders of coal stocks the hnded costs and a profit upon the same not above 10 per cent as may be determined by licensing authority. The determination spoken of here must be Schedule III anc\ that, as has been said above, does rate and not a maximum and does not specify a fixed to be allowed the 'B' in accordance with what item No. 5 and as licensees are to sell the maximum, laid down the prices • S.C.R. SUPREME COURT REPORTS 817 to make any reduction he allow the licensing authority likes. On the whole we are of the opinion that clauses (7) (8) of the Control Order do not impose unreasonable restrictions upon the freedom of trade enjoyed by the declaration of petitioners and consequently 16th of Juiy, 1953, cannot be held to be invalid. The in our opinion, clause 4(3) of the Control result Order as well as the petitioners' invalid and a writ in the to be licence should be held issue against the respond nature of mandamus would ents opposite parties preventing them from enforcing rest of the prayers of the the cancellation order. The disallowed. petitioners arc \Ve make no order to costs. tbe cancellation of that, 1954 .. i\.ftssrs. Dwarka Prasad Laxmi Narain v. The State of Uttw Pradesh and Two Others. Mukhtrjea J. Petition partly allot11ed. Agent for the petitioners : Ga11pat Rai. Agent for the respondents : C. P. Lal. CHA TTURBHUJ VITHALDAS JASANI v. MORESHW AR P ARASHRAM AND OTHERS. 1954 February 15. BHAGWATI BosE and [MuKHERJEA, V1v1"" JJ. / Represellfation of t!1c People Act (XLlll of 1951), s. 7(d)-A firm entering into co11trac1s with Central Govern1ne11t for supply of goods-A candidate seeking election for Parlianient, a partner of the the crucial dates-Disqualificatio11-Co11stitution of said firm on India, art. 299(1)-Indian Contract Act (IX of 1872) s. 230(3) ivith Gover111nent not in proper forn1-TVhether void Contract Ratification-Contract for supply of goods-Subsists till fully dis charged by both sides-And payn1ent. 1nade-Person of Scheduled to 1\fahanubhava Pa11th-FVhether convert..,· Caste Mahar convertt'd caste statu.i altered. A contract for the supply of goods does not tenninate \Vhcn the goods arc made and the contract is fully discharged by performance on both sides. continues into being till pay1ncnt supplied, it • O'Carroll v. Hastingt ([1905] 2 LR. 590) and Satyendrakumal' (I.L.R . })as v. Chairn1an of the Municipal Com1nissioners of Dacca 58 Cal. 180) relieJ upon. The firm Moolji Sicka and Company of contracts was a partner had _ entered which the candidate the Central \Vith