FATEHCHAND HIMMATLAL & Ors. v. STATE OF MAHARASHTRA ETC

A bunch of counsel, led by Shri Nariman and seconded by Shri B. Sen, have lashed out against the vires of the Maharashtra Debt Relief Act, 1976 (for short, the Debt Act). The former has focused on the fatal flaw in the Act based on Art. 301 of the Constitution and the latter has concentrated his fire on the incompetency of the State Legislature to enact the Debt Act. A plurality of submissions by a procession of lawyers has followed, although the principal points have been comprehensively covered by Shri Nariman and Shri B. Sen. To encore is not to augment, and yet, some counsel, who had not much to supplement, claimed the right to be heard and exercised it ad Ubiem, essaying what had already been forcefully urged and forgetting that a fine, fresh presentation of a case is apt to be staled by a second ver sion of it and pejorated by a third repetition. While in constitutional issues of great moment this Court is reluctant to ratio oral submission it is important, by comity of the Bench and the Bar, to conserve judi cial time in the name of public justice so that. internal allocations avoiding over-lapping may be organised among many counsel who may appear in :;everal appeals, substantially dealing with the same points. A happy husbandry of advocacy is helpful for judge and lawyer alike and to streamline forensic businf)ss is the joint responsibility of both the limbs of the institution of justice. Back to the beginning. Art. 301 of the Constitution mandates . FATEHCIIAND HIMMATLAL v. MAHARASHTRA (Krishan Iyer, J.) 833. "301. Freedom of trade, commerce and intercourse.-·~ -· --- Subject to the other provisions of this Part, trade, com- · ·-. merce and intercourse throughout the territory of India shall be free." We may also read the cognate provision viz., Art. 304 (b) : "304 (b). RestrictioM on trade, commerce and among States.- · Notwithstanding anything in Article 301 or Article 303, the Legfslature of a State may by law- X X X X (b) impose such reasonable restrictions on the freedom of trade, commerce or intercourse with or within that State as may be required in the public interest : Provided that no Bill or amendment for the purposes of clause (b) shall be introduced or moved in the Legislature of a State without the previous sanction of the President." The unmincing submission of Shri Nariman is that money-ending is very much a trade, that the Debt Act deals drastically with money lenders in defiance of Art. 301 and, since the manacles on money lenders and money-lending are unreasonably harsh and callously indis criminate, the 'freedom" which belongs constitutionally to professional money-lenders is breached by the ·statutory liquidation of their loans. Nor can the invalidatory consequence of this violation be obviated by Art. 304(b). This latter provision salvages statutes which contra ,·ene freedom of trade, commerce and inter-course only if they possess the vinue.; of . reasonableness and public interest. The injustice of wiping out the debts of marginal farmers, rural artisans, rural labourers and workers as provided in the scheme of the Act was ana thematised by Shri Nariman as an unwarrantedly unreasonable annihilation, of the trade and its capital. We will deal with this contention presently but we may merely mention for later discussion another short, lethal objection to a part ·of the law, put forward by counsel. He stated that there was legis lative incompetency for the State Legislature because it had forfeited the power to legislate on money-lending where gold loans were involved, since Parliament had occupied the field under Entry 52 of List I by enacting the Gold Control Act, 1968, and had thereby elbowed out the State Legislature from that field. · Considerable eclectic study of English,· Aiistralian and American cases was displayed in the course of arguments, reverberating in Indian . precedents dealing with Part XIII of the Constitution. Of course, we will refer to them with pertinent brevity, although we · must administer to ourselves the caveat that the same words used in consti tutional enactments of various nations may bear different connotations A B c D E G H 834 SUPREME COURT REPORTS [1977] 2 .s.c.R. A B and when Courts are called upon to interpret them they must :u:cli matize the expressions to the particular conditions prevailing . in the country concerned. Different lands and life-styles, di1Ierent value systems and economic solutions, di1Ierent social milieus and thought- ways, different subject matters and human categories-these vital Vari- ables influence statutory. projects and interpretations, although lexi cographic aids and understandings in alien jurisdictions may also be looked into for light, but not beyond that. ·· ~ The constitutional guarantee of the commercial mobility and unity of the country in Art. 301 is sought to be made the major sanctuary of 'money-lenders' whose 'freedom' to lend and thereby end the lendce is, by legislative judgment, hand-cuffed. Before unravelling the pro visions of. the Debt Act, we must first found ourselves on the quintes- sentials of Art. 301 and the juristic and economic basics implied in . that provision. We are not construing a petrified legal parchment but reading the Iuscent lines of a human text with a national mission. We must never forget that the life of the suprema lex is nourished by the social setting, that juridical abstractions and theoretical concep tions may be fascinating forensics but jejune jurisprudence, if the raw Indian realities are slurred over. We are expounding the Constitu- tion of a nation whose people hunger for a full life for each, and there fore, a perception of the signature of social justice writ on it is impera tive. · 'Nothing is more certain in modern society', declared American Supreme Court at mid-century, 'than the principle there are not absolutes'. Legal Einsteinism guides the Court, · not doctrinal absolutes, as we will presently discuss. Since Art. 301 has loomed laige in the debate at the bar, it is . For, if the impugn~d pertinent to ask what is its object and design. legislation does violate Art. 301, it must perish unless rescued by Art. 304(b). This Court, in Atiabari Tea Co. ('),tracing the roots of Art. 301, observed : "Let us first recall the political and co~stitutional back ground of Part XIII. It is a matter of common I>nowledge that, before the Constitution was adopted, neatly two-thirds of the territory of India was subject to British Rule and was then . . known as British India, while the remaining part of the terri tory of India was governed by Indian Princes and it consisted of several Indian States. A large number of these States claimed sovereign rights within the limitations imposed by the paramount power in that behalf, as they purported t<> exercise their legislative power of imposing taxes in respect of trade and co=erce which inevitably led to the erection of customs barriers between themselves and the rest of India. In the matter of such barriers British India was governed by Te>· the provisions of s. 297 of the Constitution Act, 1935. the provisions of this section we will have occasion later. to. (!) (1961) 1 S.C.R. 809, 843 •.. C D E JI G H ' } VATEHCHAND HIMMATLAL v. MAHARASHTRA (Krishan Iyer, J.) 835 Thus, prior refer during the course of this judgment. 1950 the flow of trade and commerce was impeded at several . points which constituted the boundaries of Indian States. After India .attained political freedom in 194 7 and before the Constitution was adopted the historical process of th~ mer ger and the integration of the several Indian States with the rest of the country was speedily accomplished with the result that when the Constitution was first passed the territories of India consisted of Part A States which broadly stated repre sented the Provinces in British India, and Part B States which were made up of Indian States. This merger or integration of Indian States with the Union of India was preceded by the merger and consolidation of some of the States inter se between themselves. It is with the knowledge of the trade barriers which had been raised by the Indian States in exercise of their legislative powers that the Consti "The tution-makers framed the Articles main object of Art. 301 obviously was to allow the free flow of the stream of trade, commerce and intercourse through out the territory of India." in Part XIII. It is fair to realise that Art. 301 springs from Indian history and · hope. We may recall the political and constitutional background of Part XIII-the divided days of British rule, the united aspirations of Independent India, the parochial pressures and regional pulls leading inevitably to the erection of fiscal barriers and hampering of economic The integration of India was not merely a historical pro oneness. cess but a political, social and economic necessity. Gajendragadkar J., in Atiabari Tea Co. (supra) pointed out : "In drafting the relevant Articles of Part XIII the makers of the Constitution were fully conscious that economic unity was absolutely essential for the stablity and progress of the federal polity which had been adopted by the Constitution for the governance of the country. Political freedom which had been won, and political unity which had been accom plished by the Constitution, had to be sustained and strengthened by the bond of economic unity." (p. 843) throughout the · "Free movement and exchange of goods territory of India is essential for the economy of the nation and for sustaining and improving living standards of the country. The provision contained in Art. 301 guaranteeing the freedom of trade, commerce and intercourse is not a declaration of a mere platitude, or the expression of a pious hope of a declaratory character; it is not also a mere state ment of a directive principle of State policy; it embodies and enshrines a principle of paramount importance that the economic unity of the country will provide the main sus taining force for the 'stability and progress of the political and cultural unity of the country." ( p. 844) ' A B c F G H A B c D E F G H 836 SUPREME COURT REPORTS (1977] 2 s.c.R. . Such ~eing t~e perspective, the judicial sights must be set high while read1~g ~1cle. 301. Social solidarity is a human reality, not ~ere ?Onst1tutional. piety, and a non-exploitative economic order out lm~ m. Art. 3~, 1s the bed~ock of a contented and united society. Social disorder 1s the bete noire of commerce and trade. All this is non-controve~sial ground but the learned Attorney General contests the very applicability of Art. 301 to money-lenders and money lending vis a vis the humble beneficiaries of the statute viz., the margi nal farmers, rural artisans, rural labourers, workers 'and small It is a cruel legal joke to legitimate as trade this age-old mers. bleeding business of agrestic India whereby the little peasant. the landless tiller, the bonded labourer, the pavement tenant and the slum dweller have been born and buried during the Raj and the Republic in chill penury. Is trade in human bondage to be dignified legaUy, For whom do the constitu betraying the proletarian generation? tional bells of the socialist Republic toll? Therefore, argues Attorney General, it is juristic blasphemy to call 'unscrupulous money lending' -a rural spectre which stalks Maharashtra-a trade at all. These chronic operations, socially obnoxious and economically inhu man, cannot be recognised as licit and wear the armour of Art. 301, for this preliminary reason. Not all systematic economic activity is trade. Sinister, socially shocking ones, are not. ., .. trading It is the life-blood of business. Shri Nariman has counter-asserted, backed by a profusion of prece-· dents, that money-lending in the modem complexities of business life is a lubricant for the wheels of commerce and has been treated .as It needs no argument to say trade. that the topics of legislation, listeq in the Seventh Schedule, must receive a large and liberal, yet realistic, interpretation. So under stood, the expression 'trade' in its wide import, covers not merely facilities like advances, 'buying and selling of goods' but overdrafts, mercantile documents, trading intelligence, telegraphic and telephonic communications, banking and insurance and many oilier sophisticated operations connected with and essential for commerce and intercourse. Even travel facilities in certain circumstances have a nexus with trade and commerce and are part of them. Learned counsel referred to Ibrahim(') wherein this Court has referred to the corresponding provisions in the Australian Constitution and imparted a comprehensive meaning to 'trade'. American and Australian case law, Halsbury and the Judicial Committee, were read with special emphasis on the amplitude of the expression 'trade'. An inventory of Indian statutes wherein 'money-lending' as a business was mentioned and licensed, was also brought to our notice. Indeed, this wealth of legal literature may well be held ~o make 01;1t that mone}'.-lendin~, banking, insurance and other financial transactions, commerc1~l credit and mercantile advances may, conceptually, be charactensed as 'business'. Mercantile credit, money-lending, pawn-broking and advances on pledges are business. Othe~e, the co~erce of O';!r country will grind to a halt. ~an we conceive .of trad.e w1thou! credit, or commerce without mercantile documents, d1scountmg, lendmg and (1) [1970] 3 S.C.R. 498. FATEHCHAND HIMMATLAL v. MAHARASHTRA (Krishan Iyer, J.) 837 negotiable paper? To deny to monetary dealings the status of trade is to push India into the medieval age : Broadly viewed, money-lending amongst the commercial community is integral to trade and is trade. A So far we go with Shri Nariman and others who have urged the same point with allomorphic modifications. The learned Attorney General's stance is radical and rooted in B the rural bondage to break which is the mission of this legislation. If in the limited statutory accepted, it will mean that money-lending, se~ and projected on the Indian rural-urban screen vis a vlv cxplmted people below-the-poverty-line, cannot be regarded as 'trade'. It is apt to be reminded of the then famous epigram of Frederick W. Maitland : "A woman can never be outlawed, for a woman is C never in law." Money-lending-is it in law at all? Thus intercourse'. No trade, no Art. 301, and so the baptismal certificate that Art. 301 insists upon from the economic activity that seeks its 'free' bles sings is that it is 'trade, commerce or critical question is as to whether money-lending and the class of money-lenders who have been preying upon the proletarian near-proletarian segments of Indian society for generations may be legally legitimated as 'traders' or 'businessmen'. This is not abstract legal question turning) on semantic exercises but a living economic question of incurable indebtedness. Blood, sweat and tears animate amelioratory law which exiles literal interpretation. The heart beats of the Debt Act, according to the State counsel, cannot be felt without humanistic insight by first ostracising, in the name of social E order, the die-hard, death-grip practices which have defied legislative policing in the past and have kept, in chronic servitude, vast numbers of the Indian agrarian community and working class. But if, as urged by the opposition, the law flatly flouts Art. 301, it fails. and D The rule of law, for functional success, must run close to the rule of life. Therefore, constitutional assays must be on the touchstone of F societal factors. So we cannot embark upon a study of the working of stock-exchanges, the dependence of industry and business on credit and key-loans, the role of pledges in financing commercial activity, when the chalfenge is to an economic legislation dealing with the lowliest and the lost, the destitude and the desperate, far from big business and industry, trade and commerce and high sophisticated credit. We must zero-in on the social group the Debt Act seeks save, the pattern of lending the statute strikes at, the heaviness of the blow and on whom it falls, and the raison d'etre of the measure. Does this specific species of deleterious economic activity, masked as money lending 'trade', qualify for the freedom that Art. 301 confers on trade? The specific social malady and the legislative therapeutics suggested guide the court. Here again, relativity, not absolutes, rules jurispru- dence. finance and to G H Of course, while interpreting the relevant Articles_ in Part XIII and pronouncing upon the concept of 'trade', we must i'lave regard to the general scheme of the Constitution and should not truncate the r, 838 SUPREME COURT REPORTS (1977] 2 s.c.R. scope a.nd .an_ipli~ude of economic unity, free movement, protection from d1scnmmat10n, unhampered financial arrangements and the like. Undoubtedly, the freedom, while it is wide, is not absolute. Our Constitution, framed by those who were sensitive to the massive po ve:ty of the country and determined to extirpate the social and ccono nuc backwardness of the masses, could not have envisioned a develop ment where some will be 'free' to keep many 'unfree' [See Articles 38 and 39 (c)l. That is why, to make assurance doubly sure, a further provision is made in Art. 304(b) by adding a rider to the freedom of commerce subjecting it to the requirement of reasonableness and imposition of restrictions in public interest. Das, J., in Automobile Transport (') struck the truy note, if we may say so with great res pect, that while the text of the Articles is a vital consideration interpreting them, 'we must' at the same time, remember that we arc dealing with the Constitution of a country and the interconnection of the different part's of the Constitution forming part of an integrated whole'. The learned Judge asks : 'Even textually, we must ascertain the true meaning of the word 'free' occurring in Art. 301 From what This is a question of burdens or restrictions is the freedom assured? vital importance even in the matter of construction'. Later, in judgment, Das J., drives home the point that 'the conception of free dom of trade in a community regulated by law pre-supposes degree of restriction, that freedom must necessarily be delimited by considerations of social orderliness' (underscoring sµpplied). Even the Australian Case (1916 22 CLR 556, 573) conceptulizes freedom as nothing extra legem, lest freedom should be confounded with anarchy. said Cicero, 'that we may be free'. Sir Samuel Griffith, C. J. in Duncan v. State of Queensland (22 CLR 556, 573), said : "But the word 'free' does not mean extra legem any more than freedom means anarchy. We boast of being an absolutely free people, but that does not mean that we are not sub ject to law." in India, as The conscience of the commerce clause elsewhere, is the promotion of an orderly society. social justice is the core of the constitutional order. 'We are the slaves of the law", Is anti-social, usurious, unscrupulous money-lending Two inter-connected, but different facets of freedom of trade and commerce fall for serious consideration i'n the light of the above dis cussion. economically weaker sections, eligible for legal recognition as 'trade' within the meaning of Art. 301 ? Secondly, a&-suming that eveE such activi•ties have title to be termed 'trade' are the provisions of the Debt Act reasonable, regulatory and in the public interest ? The learned Attorney General argued for the proposition that the narrow, noxious category of money-lending with which we are con cerned is so oppressive and back-bre!lking so far as the poorest sections of the community are concerned that a sense of social justice forbids the court to legitimate it as 'trade'. Not all systematic economic acti vity, even if not formally banned by the law, can be christened 'trade', he submits, and relies on Chamorbaughwala to reinforce this reason- A B E F G H (!) [1963] (I) S.C.R. 491. (2) [1957] S.C.R. 930. 1'ATEHCHAND HIMMATLAL v. MAHARASHTRA (Krishan /yer, J.) 839 In that case the impugned Act was said to offend against Art. mg. 301. The Court, therefore, considere_d whether gambling was not 'trade, commerce or intercourse' and took ~sky-view of the numerous decisions in various countr;'es bearing on this branch of sociological jurisprudence. One of the Australian cases dealing with lotteries (Mansell v. Beck) elicited the observation that lotteries, not con~ ducted under the authority of government, were validly suppressed as pernicious. Taylor, J. made the trenchant observation • ' . " .... whilst asserti•ng the width of the field in which ·s. 92 may operate it is nec~s3ary to observe that not every transaction which employs the forms of trade and commerce its protection. The will, as trade and commerce, invoke sale of stolen goods, when the transaction juristically analysed, is no different from the sale of any other goods but can it be doubted that the Parliament of any State may prohibit the 3ale of stolen goods w;•thout infringing s. 92 of the Constitution ? The only feature which distinguishes such a transaction from trade and commerce as generally understood is to be found in the subject of the transaction; there is no difference in the means adopted for carrying it out. Yet it may be said that i•n .essence such a transaction constitutes no part of tr.ade and commerc·e ·as that expression is gener; illy understood. Nnmerous examples of other forged transactions may be given, such as th_e sale of a passport, or, the sale of counterfeit money, which provoke the same comment and, although legislation prohibiting such transactions may, possibly, be thought to be legally justifi able pur~uant to what has, on occasion, been referred to all a 'police power', I prefer to think that the subjects of such transactions are not, on any view, the subjects of trade and commerce as that expression is used in s. 92 and that the protection dfforded by that section has nothing to do with such transactions even though they may require for their instruments, whereby consummation, the employment of inter-State trade and commerce is commonly carried on." ( (RMDC Case, pp. 915-916) In the United States of Amerita, operators of gambling sought the protection of the commerce clause. But the Court upheld the power of the Congress to regulate and control the same. Likewise, the Pure Food Act which prohibited the importation of adulterated food was upheld. The prohibition of transportation of women for immoral purposes from one State to another or to a foreign land was held valid. Gambling itself was held in great di<sfavour by the Supreme Court which roundly stated that 'there is no constitutional right to gamble'. Das, C. J., after making a survey of judicial thought, here and abroad, opined that freedom was unfree when society was exposed to grave risk or held in ransom by the operation of the impugned A B c D E F G H t. • •{ ~ . .. .. 840 SUPREME COURT REPORTS [ ! 97'/] 2 s.c.R. A activi'ties. The contrary argument that all economic activities were entitled to freedom as 'trade' subject to reasonable restrictions which the Legislature might impose, was dealt with by the learned Chief Justice in a sharp and forceful present~tion : B c D E F G H "On this argument it will follow that criminal activi•Jes undertaken and carri'ed on with a view to earning profit will be protected as fundamentaJ rights until they are res tricted _by law. Thus there will be a guaranteed right to carry on a business of hiring out goondas to commit assault or even murder, of housebreaking, of selling obscene pic tures, of trafficking in women and so on until the law curbs or stops such activiti'es. This appears to us to be com pletely unrealistic and incongruous. We have no doubt thai: there are certain activities which can under no cir cumstance be regarded as trade or business or commerce although the usual forms and instruments are employed there in. To exclude those activities from the meaning of those words is not to cut down their meaning at all but t9 say only that they are not within the true meaning of those words. Learned counsel ·has to concede that there can be no 'trade' or 'business' in crime but submits that this principle should not be ex!_ended .... " into a to hold We have no hesitation, in our hearts and our heads, every systematic, profit-oriented activity, powever sinister, suppressive trade. or socially diabofa::, cannot, ipso facto, exalt itself Incorporation of Directive Principles of State Policy casting the high duty upon the State to strive to promote the welfare of the people by securing and protec~ing as effectively as it may a social order in which justice--soci•al, economic and political-shall inform all the institutions of the national life, is not idle print but command to action. We can never forget, except at our perjl, that the Constitu tion obligates the State to ensure an adequate means of livelihood to its cit:i!zens and to see that the health and strength of workers, men and women, are not abused, material, shall be extradited. weaker sections from social injusti~e and all forms of exploitation and raising the standard of living of the people, necessarily i•mply that economic activities, attired as trade or business or commerce, can be de-recognized as trade or business. At this point, the legal culture and the public morals of a nation may merge, economic justice and taboo of traumafa: trade may meet and jurisprudence may frown upon dark and deadly dealings. The constitutional refusal to consecrate exploitation as 'trade' in a socialist Republic like ours argues itself .. that exploitation, moral In short, State action defending The next question then i·~ whether rural and allied money-lending is so abominable a·s to be 'bastardized' by the law-for which Attorney General pleaded. Shri Nariman controverted - the vulgar generalisation that all money-lenders are vampirish as unveracious imagery. He argued t})at many of them were not only licencid but had complied with the conditions of their licences in doing honest lending business and supplying rural credit to those ~n need. He ' FATEHCHAND HIMMATLAL v .. MAHARASHTRA (Krishan Iyer, J.) 841 pointed out that institutional ~redi~ had hardly penetrated rural India and the non-institutionalised money-lenders had done economic ser vice to a primitive peasantry although several of them had abused. the si'iuation_ of helplessness in which the weaker denizens of back ward regions found themselves. _His contention was that there was no justification for cal}tigating money-lending as non-trade i;ior was there valid material to condemn wholesale all those who had servod. as the financial .b~ckbone of !1gricultural communities in the past. Reasonable restnctions to obviate abuse were permissfole legislation, but obdura~ tefusal to treat what in fact was trade as trade was injustice born of hostile hunches. 'He had separate arguments on the unreasonableness of the provisions of the Debt Act which we will deal with later. The bone of contention between the parties, there fore, is as to whether money-lenders as a class and money-lending as a systematic traditional activity in the special context of the weakest sections of agrarian humanity and the working class, can be catled 'trade'. The legal principles have ·already been explained by us which we may sum up briefly by stating that, generally speaking, the syste matic business of lending i~ trade, as understood in the commercial world and in ordinary monetary dealings. Moreover, trade cannot be confined to the movement of goods but may extend to transactions linked with merchandi§e or _the flow of goods, the promotion of buying and selling, advances, borrowings, discounting bills and mercantile documents, banking and other forms of supply oJ funds. It is possible, however, to project a different view point and this i•.; precisely what the learned Attorney General has done. Free flow, understood in Article 301, implies some movement from place place. Freedom of trad.!<_, subject to reasonable restrictions, is guaran teed under Art. 19. Th~ special advantage derived by the Trade by virtue of Art. 301 consists in the interdict on impeding, directly and immediately, movement of goods or money transacfrons connected with movement of merchandize or commercial intercourse. In i;hort, the Attorney General considers the element of movement as essential to Art. 301 in contrast with Art. 19. We see the force of the sub mission but are inclined to the view that dealings of Banks and similar instiliutions having some nexus with trade, actual or potential, may itself be trade or intercourse. All modern commercial credit and financial dealings0 covered by the various rulings cited at the bar, come under this heading. Even so, the village-based, age-old, feudal pattern of _money-lending to those below the subsi§tence level, to the village artisan, the bonded labourer the marginal tiller and the broken farmer, who borrows and repay~ ~11 perpetual labour, heredi tary service, periodical delivery of grain and unvouchered usurious interest, is a countryside incubus. Thi's is not an isolated evil but a ubiquitous agrarian bondage. Such debts ever swell, never shrink, such captive debtors never become qui•ts, such countryside creditors never get off the backs of the victims. The worker and peasant of India whose lot is to be 'born to Endless Night' is symbolized by Jawaharlal Nehru, an architect of the Constitution, as the Man with the Hoe: A B c D E F G H '" .... A B 842 .SUPREME COURT REPORTS [1977] 2 s.c.R. "Bowed by the weight of centuries he leans Upon his hoe and gazes on the ground, The emptiness of ages on his face, And on his back the burden of the world. x x x x "Through this dread shape the suffering ages look, Time's tragedy is io. that aching stoop, Through this dread shape humanity betrayed, Plundered, profaned and disinherited, Cries protest to the powers that made the world, A protest that is also prophecy." c All this painful poetry and prose is borne out by the record in case and by studies by econ~mists. A recent issue of the Eastern Economi'St reads : "The problem of rural indebtedness is as old as Indian It is the net result of usurious money agriculture itself. lending, improvident spending and adversities in agriculiure. The heavy bm~den of debt not only continues to cripple our rural economy, but 'it also grows i'n alarming magnitude. Several attempts have been made by expert bodies ~rom time to time for a realistic estimation of indebtedness. Nevertheless, the fact remains that the rural indebtedness in physical terms is mounting up and the nightmare of indeb tedness continues to haunt the Indian peasants ... Qu~te recently the report published by the All India Rural Debt and Investment Survey relating to 1971-72 also depicts It has been esti an increas~ng trend in rural indebtedness. mated that the aggregate borrowings of all rural households on June 30, 1971 was Rs. 3921 crores, while the average per rural household beh1g Rs. 503/-. Fortythre;e per cent of the rural families had reported borrowings. . .. If the problem of rural indebtedness is to be kept with in meaningful limi'l:s and manageable proportions, followin1 legislative and non-legislative measures should be taken :

#1. At present tJ!e institutional agencies provide only ~O Increased efforts per cent of the total rural credit needs. by all the institutional agencies are called for especially m the context of the declarariton of moratorium on rural debt which may affect the flow of non-institutional finance.

#2. There are about 75 million marginal farmers with less than one hectare of operational holding, 20 million artisans and 47 million agricultural labourers in rural sector, who constitute the rural poor. Liquidi1!tion of e.xisting debt is these weaker an essential step in order to give relief to sections. The Debt Relief Acts passed in different states should be effectively implemented. D E F G H r. • .. .... - +- ... •' ,<' E'ATL\HCH.4.)ID HIMMATLAL v. MAHARASHTRA (Krishalt Iyer, J.) 8.43

#3. Institutionalisation of rural savings and inculcation of saving habits amongst rural folk is a positive step to mitigate this problem . . Massive propaganda and education on eco nomising expenditure may discourag~ extravagant spending by certain categories of rural Jiouseholds. If necessary, certain legislative measures such as abolishing dowry system and imposing austere marriagCli !!lay also be resorted to.

#4. Attempts must also be made to bring the money lender1 under some form of monetary regulation and control on the lines suggested by the Banking Commission. Though at present legislations exist in several states for the regulation of money lenders they lack: enforcement which render the ineffective." (emphasis, added) ('Current Trends in Rural Indebtedness-by M. Gopalan & V. Kulandaiswamy-Eastern Economist d/ April 23, 1976 Vol. 66, No. 17, pp. 826-829) - Professor Pani•kar, referri!lg to the nightmare of debt has t}lis to say : "Perhaps, it may be that the need for bqrrowing is taken for granted. But the undisguised fear that fhe oppressive burden of debt on Indian farmers is the main hindrance to progrCM is unanimous. There are many writers who depict indebtedness of Indian farmers as _an unmixed evil. Thus, Alai: Ghosh quotes with approbati'On the French proverb that 'Credit supports the farmer as the hangman's rope the hanged'." (Rural Savings in India-P. G. K. Panikar--Somaiya Publi cation& Pvt. Ltd., Bombay, 1970) Dr. Bhattacharya, in his book 'Social Security Measures (Metropolitan Book Co., Delhi, 1970) dwells on the agricultural indebtedness : India' problem of labour households "A sample survey conducted by Second Agricultural Commission revealed the grim condition of rural indebted ness. The Survey observes, 'Of the estimated total number of 16.3 mi]Jion agricultural country, 63.9 per cent were indebted and debt per indebted household was Rs. 13~ per annum'. This is indeed a dan ger signal particularly for a country whose entire economy i'I dependent on the prosperity of rw-al population. The same source 5ums up the total volume of rural indebted ness in the following words, 'Thus the total volume of dt<bt of the indebted a'gricultural labour households may be esti mated at about Rs. 143 crores similar estimate was made on the basis of the results of the 1950- 51 Enquiry (i.e., the First Agricultural (ommission Report) and it worked out to about Rs. 80 crores, Even though the estimated number of agriculture labour households in in 1956-57. A J·-206SCI/77 A B c D E F G H. A B c D E F -G H 844 lSUPREME COURT REPORTS (1977] 2 ~.C.R. 1956-57 was lower by 1.6 million as compared with 1950- 51, the total debt of indebted agriculture labour household (pp. 164-165) had considerably increased in 1956-57." Dhires Bhattacharya in his 'Concise History of the Indian Economy' (Progress~ve Publishers, Calcutta, 1972) refers to the Indian rural drama and the role of the anti-hero played by the_ money-lender : .•. "Money-lending thus became an easy method of earn-: ing an income and subsequently of acquiring valuable title to land in the event of default by the debtor. Through out the nineteenth century ownership rights in land were being lost by the ryot and acquired by moneyed inter~ts, both rural and urb;m." "The situation created by such extens~ve loss of pro~ perty by the cultivating· classes exploded into riots against money-lenders and usurpers of land in several parts of the country. The agricultural riots in Poona and Ahmed nagar in Bombay Presidency in 1875 are most widely known because they were followed by the appointment of a Commission of Inquiry." (pp. 77-78) ' The author recounts the series of legislation made during the British Indian period and concludes -: "These laws also failed in their purpo~e because no restrictions had been imposed on the transfer of land bet ween members of the agricultural classes. Money-lenders could, therefore, operate through a benamidar (ficti'tiom agent) belonging to an agricultural class and acquire land almost as easily as before. At the same time the bigger agriculturists had no difficulty in swallowing up the smaller ones by giving loans at exorbitant rates of interest latter. (p. 78) in his book The economit: literature, official and other, on agricultural Indeed, the working class indebtedness is escalating and disturbing. the scheme. A. N. 'money-lender' is an oppressive component of (Vikas Publishing 'Indian Economy' Agrawal, indicates that 'money-lenders charge heavy interest ranging House) from 15% 50% and often more. interest, these people take advantage of illiteracy of agriculturists and mani pulate the accounts regarding loans to their advantage. The condi tions of loan repayment are so desi•gned that the debtor is forced to sell his produce to the mahajan at low prices and purchase goods for con~umution and pr0duction at hi!!h prices. In many other ways take advantage of the poverty and the helplessness of farmers and exploit them. .... Unable to pay high interest and the principal, In addit; on to high FATEHCHAND HIMMATLAL v. MAHARASHTRA (Krishan Iyer,!.) 845 ~~e farmers even lose their land or l~ve from gen~ration to genera tion under heavy debt ..... Unless viable alternatives are made avail able, the mahajan will continue to hold an important, harmful and enervating place ill this sphere'. The harmful consequences of mdebted ncss are economic and affect efficient farming, social in that the 'relations . between the loan givers and loan receivers take on the form of rciatiom; -0f hatred, poisoning the social life'. The money-lenders, few in num ber, belong to poor class. There are often disputes between the two In fact classes which get sharpened .. . on the exploitation of the poor. the social groups get split into two broad classes. The exploiting class and the exploited class .. Apart from losing land and leading to tension in the villages their evil effect is rampant .. . the heavily indebted farmers lose even their human existence. They not only render bonded labour to money-lenders, their very self-respect and even respect of their women folk do not remain safe .. They are forced to live the life of slaves. Of course, laws have now been enacted which protect these debtors. But these laws are difficult to be enforced either because farmers are illite rate, or they do not have enough resources to go to the courts, or the money-lenders prove too clever for them." Dr. C. B. Mamoria in his book 'Agricultural Problems of India' (Kitab Mahal) has stressed that rural indebtedness has long bem one of the most pressing problems of India. "Rural people have been under heavy indebtedness. of the average money-lenders and sahukars. The burden of this debt has been passed on from gene ration to generation inasmuch . as the principal and interest· went on · increasing for most of them .. According to Wold, 'The country h<'.5 been in the grip of Mahajans. It is the bond of debt that has shack led agriculture." artisans, Very convincing and compelling, with special reference to Maha·-· rashtm, is the Report of a high-powered Committee appointed by the Government of Maharashtra to make recommendations for the relief of rural and urban indebtedness. The study is at once revealing and industrial workers, marginal farmers :md grim. Rural indigent agriculturists have been steeped in debt despite statutory measures and ineffective credit institutions. These human areas have been the happy hunting ground of money-lenders. The Bombay Moneylenders' Act, according to the Committee, hardly helped bail out the weaker sections. Despite the Act, licensed and unlicensed moneylenders pursued their exploitative profession. The Debt Act implements some of the recommendations of this Committee although positive institutional finance to save the sunken segments from the grip of the moneylenders remains to go into action. Even enforce ment of the Bombay Moneylenders' Act appears to be lukewarm according to the Committee. Be that as it may, th.e econ01nic dis tress, for which moneylenders dealing with the :weaker sections are mainly responsible, is clearly brought out in the Report. Nor is there anything in this Report or in any other literary material on rural economics (particularly relating to artisans, workers and collap -sing cu1tivat01s) to substantiate the dichotomy of scrupulous and un- -scrupulous moneylenders, vehemently pressed before us by Shri A B c D E F G H r. • 146 SUPREME COURT REPORTS [1977] 2 §..C.R. A Nariman. The former species are more a pious wish and the !atter tribe a spectre on the increase, if statistical economic studies are to be trusted. The gravestone on the old 'moneylender' system and the cornerstone of the new liberated order are thus the programme for the Administration. The Debt Act is part of the package. B c D E F G H There was much argument about the reasonableness of the res triction on moneylenders, not the general category as such but the cruel species the Legislature had to confront-and we have at great length gone into the gruesome background of economic ffi<!quitics, since the test of reasonableness is not to be applied in vacuo but in the context of life's realities. Patanjali Sastri C.J., in State of Madras v. V. G. Rao(') observed : "It is important in this context to bear in mind that the:, test of reasonableness wherever prescribed, should be ap plied 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 Ll:te evil sought to be remedied thereby, the disproportion of the im position, the prevailing conditions at the time, should all enter into the judicial verdict." Money-lending and trade-financing are indubitably 'trade' in the bread rubric, but our concern here is blinkered by a specific patkm of tragic operations with no heroes but only anti-heroes and victims. Many Conferences, Commissions and resultant enactments Defore and after Independence provided but marginal protection for the rural debtor. Even licensing was evaded by i;:ei; sfully and concilliation machinery proved a mirage. Statutes made of sterner stuff became the desideratum. the money-lender In the counter affidavit filed on behalf of the State of Maharashtra, a lurid presentation of the lender-borrower scenario is found. The deponent states : " ... that it was a common sight around the secretariat, Government Offices, Textile Mills, factories and elsewhere in Bombay to find moneylenders waiting at the gates to catch workers to collect their dues." There is also reference to a number of Official Committees which have examined the question of indebtedness in the urban and rural areas and have recommended measures of relief. The a:ffida·1it goes on to i;t11te : "I say that in Maharashtra and its predecessors the State of Bombay there have been several legislations on this sub ject including the Deccan Agricultural Debt Relief Act, 1879, Bombay Agricultural Debtors Relief Act, 1939, 1946 (1) [1952] S.C.R. 597. FATEHCHAND HIMMATLAL v. MAHARASHTRA (Krishan Iyer, J.) S47 legislation. and in the Vidarbha areas of the State, the Madhya Pradesh Postponement of Execution of Decree Act, 1956. I say that there is a well-established history of dealing with mdebtd- 11.ess in the State by means of I say that . the Reserve Bank carried out an inquiry in the matter of in debtedness in 1971 which is referred to as All India Debt and Investment Survey during 1971-72. The Reserw Bank of India survey established that the total debt liabihties in the rural areas in Maharashtra was Rs. 358 crores m 1971- 72. A preliminary analysis made by the. Reserve Bank of India also indicated weaker sections of the community there- by showing the extent of the burden of debt on the weaker I crave leave to refer to and sections of the community. rely upon the statistical tables prepared by the Reserve Bank I say that the of India in this connection when produc(!d. extent of indebtedness may be much more than what is indicated by the statistical survey of the Reserve Bank of India. The licensed moneylenders alone in the State are known by themselves to have disbursed during 1972-7 3 a sum of about 74.37 crores and the information gethered by the respondents indicates that the known indebtednc5~ in the city of Bombay alone would be of the order of Rs. 45 crores. I say that in additidn to the licensed moneylenders u'!licensed money lending is also carried on in the Stute." A B c B The Statement of Objects and Reasons of the Maharashtra Ordinance VII of 1975 which was the precursor to the impugned Act contains the following sta~ement : E • "The problem of urban and indebtedness bas a~sumed enormous propo~tions in recent tim~. The non institutional sources of unscrupulous credit, money-lenders, have been charging usurious rates of in terest, indulging in malpractices and taking undue advantage of the weak position of the economically weaker sections of the people both in rural and urban areas. The Ordinance, therefore, seeks to give relief to certain sections of people from indebtedness." namely, F Even the 'whereas' vocabulary of the draftsman of the Act refers to the need for immediate action to provide for relief from indebtedness to certain farmers, rural artisans, rural labourers and workers in the G State of Maharashtra. The judgment under appeal also makes reference to the continual legislative effort made in the past to save the agricultural community from chronic indebtedness. The learned Judges observe : "Indeed, agricultural indebtedness has always been the bane of Indian economy ever since the beginning of the twentieth century. Any elementary book on Indian econo- that even the British Government bad mics will disclose H A B c D E F G H 848 SUPREME COURT REPORTS [1977] 2 s.c.R. into agricultural thought it necessary to make an enquiry indebtedness. That was one of the terms of Royal Com mission on Agriculture, and from time to time enquiry com mittees were set up including the Banking Enquiry Committee to go into the question of agricultural indebtedness with a view to find out how alternative sources of credit to be made' available to the agriculturists could be brought into existence. In a sense, the phrase 'agricultural indebtedness' has earned a connotation over the passage of years to indicate the un happy position in which an Indian agriculturist has always fall of prices in 1929. found ever since the phenomenal It has become proverbial that an Indian agriculturist born in debt, he lives in debt and he dies in debt." Eminent economists and their studies have been adverted to by the High Court and reliance has been placed on a Report of ~- Com mittee which went into the question of relief from rural and urban in debtedness which shows the dismal economic situation of the rural farmer and the labourer. It is not merely the problem of agricultural and kindred indebtedness, but the menacing proportions of the money lenders' activities that have attracted the attention of the Committee. Giving facts and figures, which are alarming, bearing on the indebted ness amongst industrial workers and small holders, the Committee has highlighted the exploitative role of money-lenders and the high pro portion of non-institutional borrowings. We have made this extensive tour of the economic scene, with special reference to agricultural indebtedness and the lot of industrial labour, only to present vividly how the predatory money-lender has had a stranglehold on rural and urban proletarians, by resort to methods which are scandalizingly calamitous and unshakably resistant to legislative policing. The learned Attorney General contends that the courts must have a sense of history and sociology informing their judicial perspective and then it is easy t_Q_ understand the syndrome of village and working class indebtedness. There are commercial !end friendly ings, banking loans and institutional finances. There are loans, and occasional accommodations. There are liabilities arising from various circumstances between citizen and citizen and citizen and State. But the pernicious species of money-lending stubbornly flou rishing in the; rural and industrial areas of our country, with the weak est sections as their bled-white, clientele, cannot be regarded as 'trade' because of the painful pages of economic history to which this country is ,witness. The life of the law is n<;>t neat noesis but actual experience. The perspective of Poverty Jurisprudence is radically different from the canons and values of traditional Anglo-Indian jurisprudence. The subject matter of the impugned legislation is indebtedness,_ the benefi ciaries are petty farmers, manual workers and allied categories steeped in debt and bonded to the money-lending tribe. So, in passing on its constitutionality, the principles of Developmental Jurisprudence must come into play. • ,.. .. - FATEHCHAND HIMMATLAL v. MAHARASHTRA tKrLvhan Iyer, J.) 849 Wre> agree with Shri Nariman that the intimate unity of national A U:fe sought to be sustained by Part XIII cannot be invidiously breach- If a ed against the money-lenders provided they qualify to be traders. law cuts into the flesh of the commercial unity and integrity of the country, unreasonably or against public interest, Part XIII electrocutes it. .-'· mstitutional credit instrumentalities have ignored B A meaningful, yet minimal analysis of the Debt Act, read in the light of the times and circumstances which compelled its· enactment The bulk of th~ will bring out the human :Setting of the statute. beneficiaries are rural indigents and the rest urban workers. These are weaker sections for whom constitutional concern is shown because them. Money- lending may be ancilliary to commercial activity and benignant its effects, but money-lending may also be ghastly when it facilitates no flow of trade, no movement of commerce, no promotion of inter course, no servicing of business, but merely stagnates rural economy, strangulates the borrowing community and turns malignant in repercussions. The former may surely be trade, but the latter-the In this view, we are more inclined law may well say-is not trade. to the view that this narrow, deleterious pattern of moneylending cannot be classed as 'trade.' No other question then arises, since D the petitioners and appellants cannot summon Art. 301 to their service. C , Assuming that all money-lending is 'trade', can it be contended that this re.lief measure is invulnerable to attack on the ground that the texture of the restrictions is reasonable and regulatory ? Article 304(b) relaxes in favour of the State the prohibition in Art. 301 provided the law imposes only such restrictions as are reasonable Shri Nariman's submission is that the Debt and in public interest. Act is too draconic to fair, processually and substantively, and it cannot be rescued by Art. 304(b). With persuasive pressure he invited us to look at the horror of procrustean infliction of equal hosti lity by the legislature in dealing with the asuric Shylock and The law which brands the good and the bad alike dharmic lender. and indiscriminately discharges all debts, just and unjust, lacks sense., conscience and reasonableness. Secondly 'How is it fair,' asks Shri Nari.man, 'that, if the object of the legislation is to save 'the victims of rural indebtendness and working class burdens that credit institutions should be exempted while non-institutionalised lenders should be picked out for hosj:ile treatment ?' There is no merit in the plea. Liabilities due to government to local authorities are not tainted with exploitation of the debtor. Like wise, debts due to banking companies do not 1ordinarily suffer from overreaching, unscrupulousness or harsh treatment. Moreover, financial institutions have, until recently, treated the village and urban worker and petty farmer as untouchables and so do not figure in the To exempt the categories above referred to is reasonable. picture. Many debt relief laws adopt this classification and those familiar with the lowest layers of economic life will agree that this is as it should be. Money-lenders of the type we are concerned with in the Debt Act are, E F G H A B c D E F G H 850 SUPREl\IE COURT REPORTS [1977] 2 s.c.R. ~~ by and large, heartless in their lending tactics, and the horrowers are anaemic-mostly members of the Scheduled Castes and Scheduled Tribes,. _nomadic groups, artisans, workers and the like. 'Section 13 of the Debt Act is illuminating, regarding the handicapped humans the statute is concerned with. We quote that provision : "13. Agreement for labour in lieu of debt to become void.- Any custom or tradition or any agreement (whether made before or after the appointed day), whereunder or by virtue of which a debtor or any member of his family is required to work as labourer or otherwise for the creditor shall void and of no effect and shall never be enforceable in any civil court." Maybe, some stray money-lenders may be good souls and stigmatize the lovely and unlovely is simplistic betise. But the legislature cannot easily make meticulous exceptions and has to proceed on broad categorisations, not singular individualisations. So viewed, pragmatics overrule punctilious and unconscionable money-lenders fall into a defin ed group. Nor have the creditors placed material before the Court to contradict the presumption which must be made in favour of the legislative judgment. After all, the representatives of the people, are expected to know the socio-economic conditions and Since nice distinctions to suit eVlery kindly creditor is customers. beyond the law-making process, we have to uphold the grouping aa reasonable and the restrictions as justified in the circumstances of the case. The observations of the Privy Council in the Australian Bank Nationalisation Case(') are apposite : In this branch, there are no finalities. law-makers, "Yet about this, as about every other proposition in ibis field, a reservation must be made. For their Lordships do not intend to lay it down that in no circumstances could the exclusion of competition so as to create a monopoly either in a State or Commonwealth agency or in somo other Every case must be judged on its own body be justified. facts and in its own setting of time and circumstance, it may be that in regard to some economic activities and at some state of social development it might be maintained that prohibition with a view to State monopoly was the only practical and reasonable manner or regulation, and inter-State trade, commerce and intercourse thus prohibited and thus monopolized remained absolutely free." • ' We do not downright denounce all money-lenders but the makers have, based on socio-economic facts, picked out a class of money-lenders whom they describe as unscrupulous. law- special (1) Commonwealth of Australia v. Bank of New South Wales ' [1950] A.C. 235, 311. FATEHCHAND HIMMATLAL v. MAHARASHTRA (Krishatl Iyer_: J.) 151 Every cause claims. its martyr and if the law, necessitated by practical considerations, makes generalisations which hurt a few,. it -cannot be helped by the Court. Otherwise, the enforcement of Debt Relief Act will turn into an enquiry into scrupulous and unscru instant pulous creditors, frustrating, through endless litigation, the relief to the indebted which is the promise. of the legislature . . ' / forced to In this pcrspectiw, we see no corstitutional flaw in the Act on· the score that the sheep have not been divided from the goats. Realism in the legislature is a component ·Of reasonableness. It was urged by Shri Chitale that the definitional deficiency in ignoring the movable wealth of debtors makes the scheme arbitrary and unreasonable. A rorgantic view ,of the e.ebtors being considerable owners of costly art pieces and sopllist; cated gadgets and yet eligible for relief is rhetoric but unrealistic. A pathetic picture of the money-lender qeing deprived. of his loan assets while being repay his lender was drawn but that cannot affect the reasonableness of "the relief to the gia~~foots borrower. Nor is it value to attack the Act on the score that the whole debt i.e., the very capital of the business, has been dissolved. More often than not, the money-lender would have, over the long-lived debts and repeated renewals, realized more than the principal if economic studies tell the tale truly. The in justice of today is often the hango~r of the injustice of yesterday, as spelt out by history. The business of money-lending has not been The Act is a temporary measure limited to grimy levels prohibited. Existing debts of some classes of indigents alone have of society. been liquidated. If impossible burdens on huge human numbers are not lifted, social orderliness will be threatened and as a regulatory measure this limited step has been taken by the Legislature. Regu lation, H the situation is necessitous, may reach the limit ot prohi bition. Disorder may break out if the law does not step in to grant Trade cannot flourish where social orderliness is not iOme relief. secure. If the tensions and unrests and violence spawned by the desperation of debtors are not dissolved by State acti, on, no money lending trade can survive. It follows that for the very survival o~ Trade the regulatory measure of relief of indebtedness is required. That form this relief should take is ordinarily for the legislature It is not ordinarily for the Court to play the role of 'Econo decide. mic Adviser to the Administration. Here amelioratory mcasur~ have been laid down by the Legislature so that the socio-economic scene may become more contented, just and orderly. Obwously, This policy decision of is regulatory in the interest of Trade itself. the House cannot be struck down as perverse by the Co_!lrt. The restrictions under the Debt Act are reasonable. Equally clearly, if the steps ot liquidation of current debts and moratori_um are regula tory, Art. 301 does not hit them. Even so, argues Shri Nariman, procedural presumptions grosaly unreasonable, vitiate the measure. Of course, reasonableness has a processual facet and if the law lis lawless in its modalities, it becomes unlaw constitutionally. We may illustratively advert to some of the cri.tici.sms but, at the threshold, we confess we are not impressed with the submissions. A B c D E F G H A B c D E F G H 852 \ SUPREME COURT REPORTS [1977] 2 s.c.R. Shri Nariman itemised the mischievous provisions in the Debt Act from the processual angle. Others too reiterated with consterna tion that the provision whereby every debt of every debtor of specified category stood wholly discharged was improvident, especially because it did not ev'en require the debtor .to move the authorities in that behalf. On the other '11and, the burden was on the creditor to raise the question by institutini:; •. a proceeding as to the disqualification of hls debtor for the benefit of tre Debt Act. On top of this obliga tion to institute proceedings was the precarious prospect of the order being against the creditor because ti.e 'authorised officer' had to hold in favour of the debtor if he merely produced'<! certificate under s. 7(5) from one of those officials enumerated thetei~'I-all minor minions of government at the local level. Once the certificate was produced by the debtor the onus was shifted to the creditor to make out the cont rary. financial position ?' asked Shri Nariman. Moreover, the issuance of a certificate by the local little official was. a unilateral process where the credi~or was not entitled to be heard as to the means or eligibility of the. debtor. There were two further unreasonable procedural imposi tions on the creditor, argued Shri Nariman. The lender had to make his application with all the facts within 7 days from the date of receipt of the application from the debtor intimating that the debt stood The 7-day period was too short even to make enquiries released. about tl1e assets of the debtor, And worse, the application by creditor shall be entertained by the authorised officer only on creditor depositing the pledged property of its value. Thus the dice was so heavily loaded against the money-lender that even persons who were not petty debtors intended to be beneficiaries might, with illegiti mate success, claim the bonus of the Debt Act. ~How could the money-lender prove the debtor's It is true that the creditor has to move, and Viewed in the abstract, these grievances may look genuine when we get down to the reality, nothing so revolting exists in these prov:isions. not the debtor, before the authorised officer. As between the two, the money lender is sure to be. far shrewder and otherwise more capable To cast that obligation on the debtor-re initiating proceedings. member, in the bulk of cases he is the village artisan, landless labourer or industrial worker-is to deny relief in effect while bestowing it in the book. Likewise, there is nothing horrendous in the debtor seeking a certificate of qualification from the small officer of the area. After all, the officials enumerated in ·s. 7 (5) are government servants, local officials, possess familiarity with the wherewithal and the whereabout~ of persons within their area and are therefore accessible and compe tent. There is no reason whatever for allowing the creditor to be heard at the certificate stage except to prolong and puzzle the proceed The credi ings and by dilatory tactics, deny the relief to be debtor. tor does not suffer because the certificate that the applicant is a debtor raises only a rebuttable presumption and it is idle to argue that the creditor has no means of disproving the income or assets of his debtor. Ordinarily, the mahajan, the sowcar or money-lender the petty borrower live in and around the same neighbourhood, former knows the circumstances of the latter and often these are not . . ' , _ 4"'+~~,;.;.~~ c. :1 '" ''' l;~·"f"i' "!'-' i FATl!HCJ'IAND HIMMATLAL v. MAHARASHTRA (Krishan Tyer,!.) 8 53 isolated transactions between strangers. So much so the debtor's fi.nancial horoscope or impecunious kismet is normally within the ~en of the creditor. Moreover, a perusal of the pro-forma of the certifi cate to be issued needs mention of several particulars which have to be filled up by tho certifying officer who has therefore to make necessary enquiries from and about the debtor. Assurance about the credibility of the certifying officer's entries is lent by the personal responsibility cast on him for the correctness of the particulars men tioned ·in the certificate. This is a protection for the credit-Or that routine and reckless entries will not be made and that the certifying officer will take. care, prima facie, to be satisfied by proper enquiry before issuing the certificate. Such a safeguard warrants the raising or a rebuttable presumption of correctness and red_uces the p_ossibility of injustice to the creditor for not being allowed an opportumty In this view also we see nothing unreason being heard at this stage. able in the pres:umptive evidence of the certificate without the hearing of the creditor. Section 7 (7) expressly provides for an opportunity Fairplay is also afforded in the proceeding not only because the creditor can rebut the certificate but also because under s. 8 ( 6) authorized officer has the power and duty to ·determine all questions in dispute. to. the creditor and the debtor to be heard. After all, the authorised ofiicer is one who exercises quasi-judicialpowers even otherwise on t11e Revenue side. While the enquiry is summary, the procedure under the Maharashtra Land Revenue Code will be adopted which is a fair safeguard. Summary trial does not dispense with evidence or sound judgment but merely relieves the adjudicator from maintaining The enquiring officer, may, in appropriate cases, elaborate records. examine the Debtor or others who can throw light. equate The 'summary' with 'arbitrary' is contrary to common experience. obligation for the production of the pledged article by the creditor as a preliminary to the institution of the preceedings is also a just measure so that when a decision is reached the article may be returned to the. debtor in the vent of the verdict going in his favour. To The negation of a right of appeal against an order under s. 7(6) of the Debt Act is another circumstance. Shri Nariman has pressed before us. He cited other debt relief measures where a single appeal had been provided for. Does the absence of a right of appeal render the procedure unreasonable ? It depends. Where the subject-matter is substantial and fraught with serious consequences and complicated questions are litigatively terminated summarily. Without a second look at the findings by an appellate body, it may well be that unfair ness is inscribed on the face of the law, but where little men, with petty debts, legally illiterate and otherwise handicapped, are pitted against money-lenders with stamina, astuteness, awareness of rights and other superiority, if the purpose of instant relief is to be accomplished, the provision of an appeal may, in many cases, prove abult-in booby trap that frustrates and ruins the hand-to-mouth debtor. No mrer method of baulking the object can be devised than enticing A B c D E F G H ... ~ A B c D E F G H 854 SUPREME COURT REPORTS [1977] 2 s.c.R. th_e debtor into an appellate bout! Daughter gone and ducate too. ~ill. be the. sequel! Of C??fSe, where the enquiry is a travesty of 1us.t1c~ o~ vmla10n of prov1s1ons, where the finding is a perversity of ad1ud1cat1on or fraud on power, the High Court is not powerless to grant remedy, even after the recent package of Constitutional amend ments. • It is true that in several cases this Court has held that a right of appeal is a gesture of statutory fairness in the disposal of cases. Our the rulings reported as Jyoti Pershad('); attention was drawn Mohd. Faruk('); and Ganesh Beedi Works(') and other cases bearing on the necessity of a right of appeal, as an incident of fair hearing. We cannot dogmatise, generalize or pontificate on questions of law whose application depends sensitively on the nature of the subject matte~, the total circumstan~es, the urgency Qf the relief and what not. We have adduced sufficient reason to ho:til that the Debt Act is not bad for processual perniciousness or jurisprudence of remedies. The next constitutional missile aimed at the Debt Act was the in competency of the State Legislature to enact this law, for reasons more than one. The main ground was covered by Shri Nariman, but yet others made their contributions-sometimes overlapping, some times overflowing. Shri B. Sen also challenged the legislative com petency, but on a different basis. Several citations, home-spun and foreign, finely woven theories and subtle punditry, gave a· grave mein to branch. But the point in issue, in our view, admits of straight solu tion, by-passing the heavy learning and jurisprudential finery. When Courts are cocOQned by case-law or caught in the skein of scholarly doctrines, simple questions become complex. However, problems of constitutional law can be well left alone where they do not directly demand a solution in the case on hand. Enough unto the day is the evil thereof : the argument on What then is the incompetence of the State Legislature ? Shri B. Sen urged that the wiping out of private debts which formed the capital assets of the money-lenders--one of the main things .done by the Debt Act-was not in any of the legislative Lists and even if. Parliament had residuary power under Entry 97 of List State had none. Entry 30 in List II is 'money-lending and money lenders; relief of agricultural indebtedne5s'. If commonsense and common English are components of constitutional construction, relief . and against loans by scaling down, discharging, reducing principal, am.I staying the realisation of debts will, among other th~gs, fall squarely within the topic. And that, in a country of hereditary interest I, (I) [1962] 2 S.C.R. 125. (2) (1970] 1 S.C.R. 156. (3) (1974] 3 SC.R. 221. .. - . tf-; . -+- FATBIICHAND HIMMATLAL v. MAHARASHTRA (Krishan Iyer,/.) 855 indebetedness on a colossal scale ! It is commonplace to state that legislative heads must receive large and liberal meanings and the sweep Even of the sense of the rubrics must embrace the widest range. incidental and cognate matters come within their purview. The whole gamut of money-lending and debt liquidation is thus within the State's legislative competence. The reference to the Rajahmundry Electricity Case(') i~ of no relevance. Nor is the absence of the expression 'relief' in Entry 30, List II, of any moment when relief from money lenders is eloquently implicit in the topic. Sometimes, arguments have only stated to be rejected. A B. The next ground of attack, in its multi-form presentation, is that the 'gold Joan' part of the Debt Act is void because Parliament has occupied the field. It has also been urged that there is inconsistency between the Debt Act and the Gold Control Act, and pro tanto the former fails to have effect. Let us look at the basics of the legal situation before us, before examining the wealth of learning counsel has accumulated. Article 246 vests exclusi•ve power in Parliament over matters enumerated in List I (Seventh Schedule) and the State Legislature enjoys like power over topics in List II, subject to clauses (1) and (2) of the Article. Plainly, therefore, the State can legislate upon any Entry in the State List. We may visualize situations where Parliamentary occupation may exclude the State Legislature. Where, for instance, Parliament while enacting on a matter in the Union List, makes as it is entitled to make, necessary incidental provisions to effectuate the principal legislation, such ancillary expansions may the State In such al case, if the State makes a l~w on an Entry, field in List II. in its exclusive List, and such law covers and runs counter to what has already been occupied by Parliament, through incidental provi sions, it may be argued that the State law stands pushed out on account of the superior potency of Parliament's power in our consti tutional scheme. Again, there are certain telltale heads of legis lation in the Lists where one may plausibly invoke the doctrine of occupied field. Examples may, perhaps, be furnished by Entries 52 and 54 of List I, Entries 23 and. 24 of List II and Entry 33 of List III. Wi•thout fear of cQntradiction, we may assert that Art. 246(3) read with Entry 30 in List II, emp_owers the State to make the im pugned law. Why incompetent? Because, _says Mr. Nariman, the field of gold industry is already occupied by Parliament and the State Legislature therefore stands excluded. 'Entry 52 in List I reads : trench upon then is it · D G, "Industries, the control of which by the Union is dec lared by Parli'ament by law to be expedient in the public interest." Parliament, in the Industries (Development and Regulation) Act, 1951 (Act 65 of 1951) has made the necessary declaration contem- H. plated in Entry 52 and has occupied the field of gold industry', as is (1)[1954] S.C.R. 770. 856 SUPREME COURT REPORTS [1977] 2 $_,_C.R. evident from reading s. 2 and item l.B(2) of the First Schedule therein. This expression of Parliamentary intent to legislate upon the gold industry is enough to expel from that field the State Legis lature. This is Shri Nariman's contention. But what is the sequitur? Assuming the appropriation by Parliament of the power to legislate It can make laws directly on that industry on gold, what follows? and ancillarily on every allied area where effective exercise of the parliamentary power necessitates it. So much so 'business in gold', licensing of gold merchants, regulation of making or pledging of gold ornaments, keeping of jewellery, disclosure of golci possessions and the like are incidental to the parliamentary power and purpose an·d the Gold Control Act, 1968 and the Rules made thereunder are valid (vide, for example, Banthds Case: 1970 I SCR 479). Several sec tions of the Act, some rules and a few ruliqgs were read before us to drive home the poi'nt that gold loans are already within the ken of If so, what? Does it spell the law made under Entry 52, List I. death sentence on the Debt Act? Or maim it? Or leave it intact? '· , impotent even Here we turn to Entry 24 of List II which runs : "Industries sub~ ject to the provisions of ~ntries 7 and 52 of List I". This means that the State Legislature loses its power to make laws regarding 'gold industry since Entry 24'. List II is expressly subject provisions of Entry 52 of List I. This does not mean that other entries in the State List bec-ome 'gold'. The State Legislature can make laws regarding money-lending even where gold is involved under Entry 30, List II, even as it can regu late -'gambling itn gold' under Entry 34, impose sales tax on gold sales under Entry 54, regulate by municipal law under Entry 5 and by trade restrictions under Entry 26, the type of buildings for gold shops and the kind of receipts for purchase or sale of precious metal. To multiply instances is easy, but the core of the matter is that where under its this power Parliament has made a law which over-rides an entry iti1 the State List, that area is abstracts:d from the State List. Nothing more. regarding In the Kannan Devan Mills Case(') this Court put the point tersely while dealing with Entry 52 of the Union List : "Once it is declared by Parliament by law to be ex pedient itn the public interest to control the industry, Parlia ment can .legislate on that particular industry and the States would lose their power to legislate on that industry. But this would not prevent the States from legislating on subjects (underscoring, ours). other than that particular industry". B c D E F G This is author~ty for the proposition that while Entry 23 of List II, in the light of the fact that under Entry 52 of List I Parliament H has made the Gold Control Act has become inoperative to legislate. legislation on on industry, there is no inhibition whatever on State (1) [1973] 1 S.C.R. 356. • • ~-< FATEHCHAND HIMMATLAL v. MAHARASHTRA (KriJhan Iyer, J.) 857 subjects other than that parti.cular industry. Mone¥-le~ding is one such subject and the power to legislate thereon remams mtact. We are free to agree that the word 'industry' as a legislative topic has to be interpreted in the widest amplitude. We also find, as a fact, that dealings in gold, including pledging, have been covered in part by the Gold Control Act, 1968; even so nothi'Ilg prevents the State from making the impugned Act. In ParesfJ Chandra Chatteriee( 1) Subba Rao J (as he then was) dealt with an apparent conflict beween the Central Act (The Tea Act) and a State legislation [The Assam Land (Requisition and Acquisition) Act,· 1948]. After examining the scheme of the two l_aws, the learned Judge concluded : "A comparative study of both the Acts makes it clear that the two Acts deal with different matters and were passed for different purposes." Umeal and imaginary conflicts between the Central and the State Acts cannot be the foundation for invalidation of the latter. In Kanan Devan (Supra) it was further pointed out : "If the Act (the Tea Act) is within the competence of Parliament and the impugned Act is within the competence impugned Act is repugnarit to the Tea Act but we can .see no conflict between the provisions of the impugned Act and the Tea Act." the petitioners must show State, A B c D Banthia( 2 ) was referred to in the course of the arguments and various passages were stressed by different counsel. The essential question there was as to whether manufilcture of gold ornaments by goldsmiths It was fell within the connotation of the word 'industry'. further pointed out by Ramaswami J in that case that some orf the entries overlap and seem to be in direct conflict but the duty of the Court is to reconcile and harmonize while giving the widest amplitude to the language of the Entries. We see nothing in that decision which contradicts the position that while the Gold Control Act fell within Entry 52 of List I, the State List was not totally suspended for that reason for purposes of legislating on subjects which fell w1thin that List, but incidentally referred also to gold transactions. Nobody dispmes the paramountcy of parliamentary power. We have to. re concile the paramountcy principle with the 'trenching' doctrine. It did. In the Canadian Constitution, the question of conflict and coinci dence in the domain in which provincial and dominion legislation over lap has been considered. If both may overlap and co-exist without conflict, neither le.gislation is ultra vires. But if there is confrontation and conflict the question of paramountcy and occupied field may crop It has been hel.d that the rule as to predominance of dominion up. legislation can only be invoked in case of absolutely conflicting legisla tion in pari materia when it will be an impossibility to give effect to both E F G H (1) [1961] 3 S.C.R. 88. (2) [1970] 1 S.C.R. 479. ·• ., • SSS SUPREME COURT REPORTS [1977] 2 s.c.R. A the: dominion and provincial enactments. There must be a real con Hict between the two Acts i.e. the two enactments must come into collision. The doctrine. ~f Domini~n paramountcy does not operate ~11erely bec:ause th~ Dom_m1on has leg1s~ated on the same subject matter. fhe doctrme of occupied field' applies only where there is a clash between Dominion Legislatic ~ and ProVlincial Legislation within B area co~mon to _both. Where both can co-exist peacefully, both reap their respective harvests (Please see; Canadian Constitutional Law by Laskin-pp. 52-54, 1951 Edn). ,. c D E We may sum up the legal position to the extent necessary for our case. Where Parliament has made a law under Entry 52 of List I and in the course of it framed incidental provisions affecting g@ld loans and money-lending business _invc]ving gold ornaments, the Sta~<\ making a law on a different topic but covering in part the same area of gold loans', must not go into irreconcilable conf\ic:ts. Of cour~c, if Art. 254(2) can be invoked-We will presently examine it-then the State law may still prevail since the assent of the President has been obtained for the Debt Act. Thirdly, the doctrine of 'occupied field' does not totally deprive the State Legislature from making any law In the event of a plain conflict, . the incidentally referable to gold. State law must step down unless, as pointed out earlier in the previous passage, Art. 254(2) comes to the rescue. Many ~ore decisions were brought to our notice bearing ·paramountcy, 'occupied field,' repugnancy and inconsistency. They were elaborated by counsel sufficiently to convince us that lawyer's law is divorced from plain semantics and common understanding of Constitutional pr_ovisions becomes a casualty when doctrinal complexi ties are injected. May be every profession has a vested h1terest in the. Law, in the adl learned art of incomprehensibility for the laity. ministration of which the Bench and the Bar are partners, probably liYes up kl this reputation. F G H All these questions become academic for two reasons. Firstly, there is no conflict between the Gold Control Act and the Debt Act. 'Secondly, the subjects of both the legislations can be traced to Concurrent List and Art. 254(2) validates within the State the opera tion of the Debt Act. We are of the vciew,· as earlier discussed, and without citing further cases on the point, that the State's legislative power, save un:Jer the Entry 24 of List II, is not denuded. Nor i~ there any _conflict bet ween the two Acts. A detailed study, sect10n by section. of boili the legislations, has convinced us that they can stand t?gether that the two authorities and modalities do not contradict each oilier aud iliat, by elementary comity, a modus viv, endi betwe~~ the. Gold The prov1s1ons m the Act and the Debt Act can be worked out. Gold Act for declarations and other formalities may not collide with the obligations and applications under the Debt Act. We have no doubt that the authorities charged with enforcement under the statutes will understand the sense and spirit of the provisions and • ·i •. FATEHCHAND HIMMATLAL v. MAHARASHTRA (Krishan /yer,1.) 859 i see that the object of the Debt Act is not frustrated or its processes A paralysed. Indeed, the learned Attorney General showed how by reading to gether the two Acts and remembering their respective pur poses a viable resolution of possible imbroglios is simple, although -officialdom is not unfamiliar with the art of embroilment where artless customers are involved or ulterior ends are to be served. The State, through an effective programme of legal aid and advice and other prompt instructions to the agencies involved, should avoid harass- ments, hold-ups and red-tapes which are the bane of processual justice. The jurisprudence of remedies is stil' a Cinderella of our system. The' Advocate General of Maharashtra assur~d the Court that in the enforcement of the. law and the follow-ur \~f creating alternative credit agencies his client will take quick and impartial care. . B The learned Attorney General, it may be mentioned before wind- C ing up this part of the. discussion, did draw our attention to Art. 254(2) whicl}_ is self-explanatory. The State law will prevail in the State, even if there be repugnancy with a Central or existing law, given Presidential assent-provided both the legislations fall under they? He says, yes; and points, inter alia, Concurrent List. Do lo bntry 6 (transfer of property) and Entry 7 (contracts) . Of course, the law of contracts deals with pledges; so does the Gold Con- D trol Act. The latter does not prohibit pawns where gold is involved, but policies it to prevent evils by prescribing special modalities. The Debt Act relates to contracts and has fulfilled the requirement in Art. 254(2). We have nearly come to the end of the judicatory jourliey and. nave reached the constitutional conclusion that Trade and Commerce and Intercourse shall be free does not necessi tate that the little lendee shall remain unfree. Article 301 does per- mit, in our view, legislative action to break agrarian indebtedness and urban usurious bondage lest social disorder disruptive of Trade, break ·OUt. the guarantee E The impugned Act is a partial implementation of the economia thesis of Adam Smith when he wrote, two hundred obsolescent years ago: F "No society can surely be flourishing and happy, of which by far the greater part of the numbers are poor and mi9ir able." We are in a Republic with social justice as its indelible signature. G And the measure under challenge promotes social justice, social order and better conditions for the business of healthy money lending. The appalling indebtness which cripples our people is an unhappy l1eritage of our economic system. The bonded yesterday, the yoke cf today, and the hope of tomorrow obligate the State to spell out the future tense of the rural human order and to focus on the legis lative strategies of alleviation before the backlash of social confusion begins, and to administer, ·through working mechanisms, and direct, 7-206SCI/77 .;'ve111h H A B c D E F G H 860 SUPREME COURT REPORTS [1977] 2 s.c.R. preserved through social cybernetics, our disenchanted society into fresh formu lations of a free future. Without such governmental measures rural regeneration even the good moneylenders may have to fold up and the better businessmen wind up. The larger interests of Trade, Commerce and Intercourse whose freedom is a constitutional norm demand that social order shall be legislative methodology, now radical, now reformatory but always motivated and moderated by the felt necessities of the times. To come to humane terms with harsh realities by subjecting itself to the reasonable, though unpalatable, regulations of the Debt Act and like measures or face the adaptational breakdown where law may fail to keep order against those who have nothing to lose except their chains-this is 'money-lenders' the sort of sociological Robson's choice before the of Maharashtra.· The option is obviously the former and that the constitutional vindication of the impugned legislation. All these laws, in themselves marginal, are part of the programschrift for a Ne.w Deal which is the cornerstone of the Co11stitution. through We have been addressed many minor criticisms which chopped little logic and made out small discriminations but serious constitutional decisions go on major considerations, not gossamer-web flimsiness. We have listened to these meticulous submissions but are not persuaded that we should even mention them in our longish judgment. A concluding caveat. The poignant purpose of ending exploita- tive rural-urban lending to the weaker members of society is validating v:irtue of this legislation, viewed from the constitutional angle. But, as Shri Nariman at some stage mentioned-and the learn ed Attorney General also concurred-mere farewell to existing debts is prone to prove a teasing illusion or promise of unreality unless the Administration fills the credit gap by an easy, accessible and need based network of humane credit agencies, coupled with employment opportunities for the small man. The experience of the past has not inspired adequate confidence. Authoritative official pronouncement, however, owns that "Arrangements so far made to give credit and inputs (for rural credit) have had only limited impact. The pro blem is a vast one and seems to be growing in size. Rural banks, credit societies, farmers' service societies-all these have to be strengthened and their activities expanded. To give purposeful direction to this task and to ensure that the interests of agriculturists .and farmers, especially the small farmer, are looked after, there is need for an Apex Agricul tural Development Bank in India." ' ,. - The legislation we uphold is' an added responsibility on the State. the victim class, it shall be vigorously enforced with sympathy for lest the progressive measure prove a paper tiger. The cadres charg ed with enforcement must have right orientation correct grasp and social activism, if this 1'aw is not to leave a yawning implementation FATEI-lCHAND HIMMATLAL v. MAHARASHTRA (Krishan Iyer,!.) 861 gap. Heroics in court and hortation in the House must be followed by effective enforcement in the field. We state this not because the State is not in great earnest-it is-but because many a welfare legis lation in the country reportedly remains a cloistered virtue or slum brous in effect. disciplines life and matches promise with performance. On this note of hopeful valediction we wind up . The finest hour of the rule of law is when We dismiss the appeals and the writ petitions, leaving the parties . to bear their costs, although we had at least on one occasion, suffi cient provocation to make a different direction. A B P.H.P. Appeals dismissed • ' ...