.. ..

I •

S.C.R. SUPREME COURT REPORTS 39

before the Tribunal was to produce the statements x959

recorded by the manager during what we have called Phulbari Tea Estati

investigation. This left the matters where they were v.

and Das had never an opport.unity of questioning the Its Workmen

witneRRes after knowing in full what they had stated

against, him. In these circumstances we are of opinion

that the fiw.ling of t.he •rrilmnal that the enquiry i11

this case was uot proper is correct and must Htand.

'Ve therefore dismiss tlw appeal. We should,

howeYer, like to make it elear tlrnt the order of tlw

Tribunal fixing grant of compcnsa,tion till the date of

payment must be taken to be limited to the sum of

Rs. 11,125, which has been deposited in this Court in

pursuance of this Court's order of April 22, 1957 and

Das will not be entitled t.o anything more, as further

stay of payment was pursuant to the order of this

Court. In the circumstances we are of opinion that

the parties should hear their own eosts of thits Court.

Appeal dismis8ed.

THE I.ORD KRISHNA SUGAR MILV3 LTD.,

AND ANOTHER

v.

THE UNION OF INDIA AND ANOTH"ll~R

(and connected petition)

(B. l:'. SINHA, .J AFER IMAM, ,J. L. KAP(TR, A. K. SARKAR,

SUH"HA RAO AND M. HIDAYATULLAH, ,TJ.)

Constitution--Fundami:ntal Rights-Rcsirictions on-Reason­

ableness, relei·anf. considerations for fudging-Enactment obliging

sugar manufacturers to s11.pply sugar for export ,,f loss-Notijicat-ion

tinder another enactment increasing price of sugar for internal sale

for recouping loss--Whether can be tulwn into consideration­

Discrimination-Sitgar Export Promotion Act, I958 (30 of I958),

ss. 5,

6, 7,

8, and 9-Constifation of India, Arts. I4 and I9-

Essential Commodities Act, I955 (IO of I955), s. 3--Sugar (Control)

Wanchoo J.

1959

May 6.

, • Order, I955. cl. 5·

The petitioners challenged the constitutionality of the Sugar

Export Promotion Act, 1958, which was enacted for the purpose

of exporting sugar with a view to earning foreign exchange. The

impugned Act imposed the following restrictions

on the owners of

40 SUPREME COURT REPORTS [1960(1))

z959 factories producing sugar by the vacuum pan process: (i) it

-. . obliged them to deliver to the export agency specified by the

The Lord E.rishna Central Government the quota of sugar allocated to them; (ii) it

Sugar Mills Ltd .• made them suffer a loss on this delivery of sugar; and (iii) it

and Another exposed them to a penalty in case the delivery \vas short of the

v. quota. By a notification issued under the Sugar (Control) Order,

Thi! trnion of India 1955, which was made under·the Essential Commodities Act, 1955,

and Another the Central Government increased the price of sugar for internal

sales by 50 nP. per maund to enable the owners to recoup the

loss suffered by them by the delivery of the sugar for export.

The petitioners contended

that it was not permissible to take the

notification issued under another statute into consideration and

that the impugned Act offended Arts. 14 and l9(1)(f) and (g) of

the

Constitution.

Held, (per Sinha, Imam, Kapur, Sobba Rao and Hidayatul­

lah,

JJ.,

Sarkar, J. dissenting) that the impugned Act was

constitutionally valid.

Per

Sinha, Imam, Kapur and Hidayatullah, JJ. The

restrictions placed by the Act upon the fundamental rights of the

petitioners under Arts. 19(1)(0. and (g) were not unreasonable as

arrangements \Vere made to save them frotn Joss by increasing

the price of sugar for internal sales, thus passing on the loss to

the consumers in India. The reasonablrness of the restriction

and not

of the law was to be

determined, and if the restriction

was

under one

la\v but countervailing advantages were created

by another law passed as part of the same legislative plan, the

Court must take that other law into account. The reasonableness

of

the restriction was to be judged at the time it was challenged

and in the context of the circumstances then existing. The

notification of the

Central Government increasing the price of

sugar to enable

the recoupment of the loss occasioned by the

export could be taken into consideration

in judging the

reasonableness of the restrictions.

State of Madras v. V. G. Row [ro52j S.C.R. 597; Virendra v.

The Slate of Pmijab, [1958] S.C.R. 308; Aru11achalam Nadar ''·

State of Madras, 1959 S.C.J. 297; Attorney-General for Alberta v.

Attorney-General for Canada, (1939) A. C. II7; Ladore ,., Bennet,

(1939) A.C. 468 and Pillai v. Mudanayake, (1953) A. C. 514, relied

on.

The foreign export served the national interest by stabilising·

the sugar market and stabilised national economy by earning

foreign exchange.

The loss, if any, was spread over many

factories and was so small as not to amount to an unreasonable

restriction.

The Act did not offend Art. r4 of the

Constitution in select­

ing sugar produced by

the vacuum pan process for export and in

leaving

out sugar produced by other methods and other

commodities from the mischief of the Act. The Government was

the best judge as to which commodities were most likely to earn

. '

·'

•

} .

I

I .

S.C.R. SUPREME COURT REPORTS

41

foreign exchange and the selection made was justifiable as a I959

reasonable classification which was related to the object of the

Act of earning foreign exchange. The Lord Krishna

Per Subba Rao, J. In testing the reasonableness of the Sugar Mills Ltd.,

restrictions imposed by the impugned Act it was not permissible and Another

to take into consideration the notification under the Sugar v.

(Control) Order, 1955, increasing the price of Sugar for internal The Union of India

sales by 50 nP. per maund. The test of reasonableness of one Act and A11other

could be made to depend upon the impact of another Act on it

only when the earlier Act was made part of later :\ct or when

both Acts were

parts of the same legislative scheme

t..r plan. To

go beyond this would be to destroy the stability of legislation

and to introtluce an uncertain element. To go further

and to

depend upon

a notification of a transitory

natui·e issued under an

unconnected Act would be to place

the statute in a fluid state.

The impugned Act and the Essential Commodities Act were

enacted for different purposes.

State of

Madras v. V. G. Row [1952] S.C..R. 597; Attorney­

General for Alberta v. Attorney-General for Canada (1939) A. C. u7;

Ladore v. Bennet (1939) A. C. 468 and Pillai v. Mudanaya/1e,

(1953) A. C. 514, distinguished.

The restrictions imposed by the impugned Act were not

unreasonable as the j_ct served the national interest by earning

foreign exchange for

the

State and building up foreign markets

for the future prosperity of the sugar industry.

Per

Sarkar, J. The impugned Act which made the petitioners

suffer a loss on the sale of a

part of their produce imposed

unreasonable restrictions on their fundamental right to carry on

their business and

was invalid. Though in deciding the

reasonablene1>s of the restrictions imposed by the impugned Act

all the prevailing conditions and circumstances

had to be

considered, the notification increasing the home price of sugar

could not

be taken into consideration. The impugned

Act neither

made

it obligatory on, nor empowered the Government to take

any steps

to recoup the loss caused to the petitioners. The

increase in the price dependetl solely on the arbitrary discretion

or generosity or sense of fair play of the Government. It would

be intolerable in

any legal system that a statute should be legal

when

the Government chose to do a thing and illegal when it

undid it and so on from time to time at the choice of the Govern­

ment. Besides, there was nothing

in the Essential

Commodities

Act or the Sugar (Control) Order which authorised the Govern­

ment to increase the price for the sake of recouping to the

manufacturers the loss caused to them

by the impugned Act, and

the

validity of the notification increasing the home price of sugar

was doubtful.

State of Madras v. V. G. Row [1952] S.C.R. 597, distinguished.

The impugned Act caused loss to the petitioners which was

not negligible and

thus imposed unreasonable restrictions on

6

42 SUPREME COURT REPORTS [1960(1 )]

'959

their right to carry on their business. The restrictions could not

be fustified on tlie ground til<:it they resulted in stablising the

The Lord J<rishn(' sugar industry as the industry did not require any stabilisation.

Sugar Mills Ltd., The export \Vas not to b<· n1adc out of the excess of production

and Another over internal consumption and in fact production in India had

v. al\vays been less than internal consumption.

The Union of Jndir'

and A no titer

0RIGINAI. ,JuRISDIC'rION: Petitions Nos. 9 and 14 of

1959.

Petitions under Article :J2 of the Constitution of

India for the enforcement of Fundamental Rights. . '

A. V. Viswa,'rw,thv Sastri, and G. C. "o/Iathur, for the

petitionern in Petition No. 9 of 1959.

31. C. Setalvad, Attorney-General of India, B. Sen

and R.H. Dhebar, for respondent No. 1 in both the

petitions.

J}[ .C. Setalvad, Attorney-General of Ind,ia, B. Sen

and B. P. Jlfaheshwari, for respondent No. 2 in Petition

No. 9 of 1959.

N. C. Chatterjee and G. C. jfathur for the petitioners

in Petition No. 14 of 1959.

B. Sen and B. P. Jlfahesk1m.ri, for respondent No. 2

in Petit-ion No. 14 of 1959.

1959. lay 6. The judgment of R P. Sinha, Jafar

Imam, J_ L. Kapur and l\L Hidayatul!ah, JJ,, was

delivered by M. Hidayatu!l,1h, .J. A. K. Sarkar, J.,

and K. Snbba Rao, J., delivered separate judgments.

Hidayatullah J-HIDAYATULLAH J.-W'rit Petition No. 9 of 1959

has been filed by the Lord Krishna Sugar Mills, Ltd.,

Saharanpnr and Shri Sushi! Kumar, a Director of the

said Mills. It was heard along with "' rit Petition

No. 14 of 1959, which has been tiled by Shiva Prasad

Banarsidas Sugar Mills, Bijnor, through Seth Munnalal

and also by him in his own name. These Mills are

hereinafter referred to as the L. IC S. Mills and S. P, R

Mills, respectively. The petitions raise the same con­

tentions,

but in

'Writ Petition No. 14 of 1959, there is

one more circumstance, which will be mentioned later.

The petitions are directed

against the Union of India

and the Indian Sugar M.ills Association (Export Agency

Division) Calcutta. The petitioners challenge inter alia

-'

S.C.R. SUPRE:\IE COURT REPORTS

the constitutionality of the Sugar Export Promo- z959

tion Act, 1958 (30 of 1958), which shall hereafter be

"' 1 J A "'h · l h 1 ]" The Lord Krishna

re1erre( to as t ie ct. _i. .ey quest10n a so t c ega Ity

Sugar Mills Ltd.,

of certain orders passed by the second respondent and Another

purporting to be under the Act. v.

Before describing how this matter came before the The Union °1 India

C

· · · · h J f' I A aud .lnnllter

ourt, It IS convenient to give t e RC rnmo o t 10 d.Ct

and to set out some of it8 provi,-;ions. On June 27, Hidayatul/ahf.

1958, the President promulgated the Snga.r Export

Promotion Ordinance, 1958, which wa.8 repealed by

and re-enacted as the Act on September 16, 1958.

The Ordinance was in the 8ame terms as the Act, and

it is not necessary to refer to the Ordinance separately.

more so because

bys. 14 of the Act which repealed

the Ordinance, anything done or any action taken

under the

Ordinance is rleemed to have been done or

taken under the Act, a.nd the Act itself is deemed to

have commenced on the 27th day of June, 1938.

Both the Ordinance and the Act were passed to

provide for the export of sug~ir in the pi.1blic interest.

and for t-he levy and collection in certain cirrumRtances

of an additional duty of excise on sugar prodneed in

India. To achieve this objective, the Act; :111thorises

the Centl'al Government (as did the Orcliuance pre­

viously) to specify an export agency to perform the

functions mentioned in the Ad., and the Central

Government by a not.ification issued the r-;amc day,

specified

the Indian Sugar

Mills Association (Export

Agency Division) Calcutta, as the export agency.

The Aet next provides that the Central Government

may by notification in the Officia.l Gazette, fix the

quantity of sugar to be . exported during any period

taking into consideration :

(a)

the quantity of sugar available in the country;

(b)

the quantity of sugar

rec1uired for consump­

tion in the country ; and

; (c) the necessity of exporting sugar with a view to

earning foreign exchange in the public interest,

but, so as not to exceed 20 per cent. of the quantity to

be produced in India in the season eudin,g with the

month of October falling within that year. The Central

44 SUPREME COURT R.EPORTS [1960(1)]

I959 Government fixed 50,000 tons as the quantity to be

- exported up to December 31, 1958, later extended to

The Lord Kriohna J 31 19"9 Th" ffi t" 1 · d

5

,.gar Mill' Ltd.. anJuary

27

,

195

n

8

.

IS

no 1 ca Ion was a so Issue

and Another O!l une ' ·

v. Section 5 of the Act enables the Central Govemment

The Union of India to apportion, by order in writing, the quantity to be

and Another exported among " owners " of factories, the word

Hidayatullah

1

. "factory" being confined to a factory where sugar is

produced

by the vacuum pan process. The term "owner " is defined to include transferees, and agents

and managers under Industries (Development and

Regulation) Act, 1951. The apportionment of the

quantity of sugar to be exported is to be in proportion

to the quantity of sugar produced or likely to be

produced

by the owners during the season referred to

earlier.

On the communication of the m-der to an

owner, the quantity so apportioned is deemed to be

the export quota for the factory ofthat owner.

Section 6 then provides that on demand by the

export agency, every owner shall deliver to it from

time to time, sugar procluced in his factory in such

quantities (not exceeding in the aggregate his export

quota fixed for the factory or group of factories, as the

case may be), of such grade, in such manner, within

such time and at such place, as may be specified by the

export agency in this behalf. If the sugar is delivered

by a:-1 owner in accordance with the provisions of this

section, he retains no rights in such sugar except his

rights to receive ·payment therefor under s. 9 of the

Act.

Section 7 provides for levy of additional excise duty

on sugar despatched from the factory for consumption

in India, if the owner of a factory does not fulfil the

demands under s. 6. It provides:

"(1) Where sugar delivered ·by any owner falls

short of the export quota fixed for it by any quantity

(hereinafter referred to. as the said quantity), there

shall be levied and collected on so much of the sugar

despatched from the factory for consumption in India

as is equal to the said quantity, a duty of excise at

the rate of seventeen rupees per maund.

..

S.C.R. SUPREME corRT REPORTS 45

(2) The duty of excise referred to in sub-section (1) I959

shall be in addition to the duty of excise chargeable on -

d h 1

c th . b . . c The Lord Krishna

sugar un er an.y ot er aw ior e time emg 111 .iorce, Sugar Mills Ud.,

and shall be paid by the owner to such authority as and Another

may be specified in the notice demanding the payment v.

of duty and within such period not exceeding ninety The Union ~1 India

days as may be specified in such notice. and Another

(3) If any such owner does not pay the whole or Hid1iyatullah J.

any part of the duty payable by him within the period

referred

to in sub-section (2), he shall be liable to pay

in respect of every period of thirty days or part there-

of during which the default continues a penalty

which

may extend to ten per cent. of the duty outstanding

from

time to time, the penalty being adjudged in the

same manner

as the penalty to which a person is liable

under the rules made under the Central Excises and

Salt Act, 1944 (I of 1944), is adjudged."

By sub-s. (4) of this section, the provisions of the

Central Excises and Salt Act, 1944 and the rules made

thereunder are made applicable as far as may be,

including those relating

to refunds

·and exemptions

from

duty in relation to the duty mentioned in this

section

or any other sum due as a penalty.

Section 8 then deals with the export by the export

agency of sugar delivered to it. The section also

authorises

the sale of such sugar within India under

certain circumstances. The section may be

rcproducerJ

in full here, as its terms will torm the subject of con­

sideratfon in the sequel.

8(1) "The export agency shall take all practical

measures to

export sugar delivered to it under this

Act:

Provided that, if the export agency is of opinion

that having regard to the quality of the sugar

deliver­

ed to it by any owner, or to the expenses involved in

transporting. the sugar from one place to another, or

to the delay likely to be involved in exporting it,.or to

the conditions prevailing in the markets for sugar,

whether in or out of India, or to any other relevant

circumstance,

it is expedient so to do, the export agency

may sell the whole or any part of the sugar in India

46 SUPREME COURT REPOHTS [1960(1)]

'959 >md may, if it thinks fit, purchase such quantity of

- sugar as it may co1'.sider necessary for export at the -

TheLordf\.rishna · t t'' •

Sugar ,1till8 Ltd., <.1})J.)ro11r1a e .1n1e.

and Ano""' (2) l•'or the purposos of sub-section (1), the export

_ . v. . agency may itself sell sugar or permit the owner to sell

Tiu·""'"" of 1"'

1

'"the whole or >:Lny part of the export quotn. in his

aud Anolha . t . d t .· ' d ·1 •t } ' · h t h

cus .o y a a pnce approve )y 1 on cone 1t10n t a. t e

srilc-riroceeds arc' rniyable to it."

Hidayatullah ]. ~

Section 9 deals with payments to owners who have

delivered sugar for export. It provides n.s follows:

(l) "The export agency shn.11, at such time as it

thinks fit, make to the owners who ha.ve delivered

sugar to it urnler this Act, payments dc,tc.rmined in

accordance with the provisions hereinafter in this

section contained.

(2) From the tot.al sale-proceeds in respect of the

quantity fixed for export under sec1 ion 4 for any year,

there shall be deducted the total expenditure incurred

by tho export. agency in respect of the sugar, whether

by way of administrative expenses or otherwise, and

the balance shall be apportioned among the owners in

proportion to the quantity nf sugn.r deli\·ered by them

respectively during tlmt ye»1".

(3) In making any distribution under this section,

the export 1igency shall make such adjustments as

may he necessary having rc,gard to the grade of sugar

t!elivcred hy tiny owner, the >tdjustnwnts being made

on the basis of sugar of ISS-E-2fl grade and with

reference to the price difforential schedule for different

grades of sugar which the Central Government may,

by notification in the OJficial Gazette, publish in this

bC>half.

(4) Notwithstanding anything eontn.ined in this

section and subject to the rules which ma.y be nrnde in

this behn.lf, the export agency may make on account

payments to owners against documents of delivery of

sugar furnished by them, and such payments shall be

adjusted at the time of final payment."

In the remaining five sections, the Act provides for

aucilhtry matters, the hist (s. 14) incorporating the

repeal of the Ordinance and sa vmgs. Section 10

-

S.C.R. SUPl~EME COURT REPORTS 47

reserves to the Central Government the power to give x959

directions to the export agency, and s. 11 allows the

1 ' l (' d l b" d" · The Lord Krishna

ventra ..-overnment to e egate, su 1ect to c011 1t10ns

Sugar ill ills Ltd .•

if any, its functions under the Act to an officer or and Another

authority specified by notification. It may be pointed v.

out that the Chief Director, Directorate of Sugar and The i:nion of lndia

Vanaspati, Ministry of :Food ttnd Agriculture, was and Another

specified aH such in a notification issued on Juno 27,

c · f' l llidayatullah J.

1958. Section 12 provides ior protect10n o ant 10rities,

ands. 13 confers on tl].eCentral Government the power

to make rules and includes a power to make a breach

of any rule ·an offence punishable with fine extending

to five thousand rupees. All such rules must be laid

before Parliament, and may be modified by Parliament.

Xo rules, however, have been made.

We

next proceed to the facts of these two cases. By

an order No.

6(53)/58-SC, dated ,June 27, 1958, the

Chief Director, Directorate of Sugar and V anaspati,

fixed

461

·05 and 412·04 tons of sugar as the quantities

apportioned

to the L. K.

S. Mills and the S. P. B. Jills

respectively. On July 17, 1958 the export agency

wrote

to the two owners informing them of the quotas

and their equivalents in bags, intimating

nJ1m that the

supply would be required in Grade C-29, and/or Grade

D-29 and/or Grade E-29.

Inquiry was made as to the

grades and quantities in stock with them. It

was also

stated in these letters -that a further communication

would be sent in due course giving detailed despatch/

delivery/disposal instructions for

the export quota.

They were also informed

that the Central Board of

J{evenue had issued detailed instructions to the Collec­

tors of Central Excise, and that it had been agreed

that the order of the Chief Director (Sugar) served on

the owners with copy to the Central Excise Officer of

the fo,ctory concerned would also be the release order

from

the

Sugar Directorate.

Different replies were

sent by the two petitioners.

The L. K.

S. Mills replied that they had only sugar of

D-28 grade, while the S. P. B. Mills replied that they

had E-29. On August 24, 1958, the export agency wrote

to

them that the export quota was diverted for inter­

nal sale.

They were told that they were permitted to

48 SUPREME COURT REPORTS [1960(1)]

'959 sell the "quotn, sug:tr" for iuternal consumption at the

- price of Rs. 36, per maund for Grade D-29, fixed by

The LordKr;dma the Government. The export agency asked the two

5

"!:~~;:!;";:a., Mills to Jet it know by telegram the grade in which the

v. export quota was available, so that documents could

The un;on of 1n<1;a be sent to enable (,hem to deliver sugar to their

a11d A11othcr respective buyers. The export agency described the

documents as follows :

flidayatulla-11 J.

"(1) A delivery order authorising the Central

Excise Officer of your factory to deliver the quantity

sold.

(2) This delivery order will be sent through the

Punjab National Bank Ltd., attached to a demand

draft drawn on you for the tJ.mount of the sale proceeds

payable to us. Please pay this on presentation.

(3) The sale proceeds payable to us will be calculat­

ed as in the following examples :-

Sale price itt Rs. 36 per maund

D-29

Less Excise Duty to be paid by

you

Less 'on acco11nt' payment of

Rs. I 0 per rnaun<l

Amount for which draft will be

drawn on you

Rs.

After receiYing the delivery order you will pay the

Excise duty and deliYcr the sugar to the buyer. .

"

Gmde diffomntials

will be allowed as per the

Government Notification GSR. 661 d/30th July fixing

ex-factory prices.

The sale

tmnsaction will be as between you and

your buyer and the Export Agency cannot take any

responsibility.

\Ve now await to hear by telegram the grade avail­

n,ble. Please also S<iy in your telegram to which branch

of the Punjab National Bank we should send the

documents."

S.C.R. SUPREME COURT REPORTS 49

The facts from here progress differently with these r959

two petit~one.rs, and they are stated separa~e~y. !he The Lord -;rishna

L.K.S. Mills mformed the export agency their mab1hty Sugar Mills Ltd.,

to sell sugar at the controlled rate fixed by the Govern-and Another

ment by its notification of July 30, 1958, as the market v.

was very weak, and there were no purchasers of sugar The Union of India

at the controlled rate even out of the releases made by and Another

the Government for free sales. The export agency Hidayatullah J.

reminded the L.K.S. Mills that the industry had agreed

to finance the Export Agency Division by letting it

have the sale-proceeds of sugar diverted for internal

sale less Rs. 10 per maund as an "on account" pay-

ment. The

export agency offered to show

a concession

to the L.K.S. Mills, and asked them to sell sugar in

instalments of 1,500, 1,500 and 1,565 bags with a week's

interval between each. It asked the L.K.S. Mills to

co-operate and let the export agency send documents

for 1,500 bags at Rs. 35·69 nP. per maund ex-factory.

It appears that a mistake was made in putting down

1,000 bags, but the meaning was perfectly plain. The

L.K.S. Miils, however, insisted that they were unable

to sell sugar at the controlled rate, and that as they

were in financial difficulties, it was not possible to

honour the documents as suggested by the export

agency.

The L. K. S. Mills proving obdurate, the export

agency wrote on November 5, 1958, that it proposed to

send documents for the full quota of 4,565 bags at

Rs. 35·69 per maund. The L.K.S. Mills were requested

to retire the documents immediately, as funds were

needed urgently for purchase

of additional quantities

for

export to replace the quota diverted for

internal sale. It enquired the name of the bankers

to whom the documents might be sent by the agency.

The

L.K.S. Mills, it appears, did not agree to any of

the courses suggested, and the export agency wrote on

November 27, 1958, that the L.K.S. Mills were requested

to remit a sum

of Rs.

1,88,216·63 nP. being the amount

calculated at the rate of Rs. 35·69 nP. per maund in

respect of the total sugar quota, less excise duty to be

paid

by the

L.K.S. Mills and less "on account" payment

of Rs. 10 per maund as indicated in the e&rlier letters,

'(

50 SUPREME COURT REPORTS [1960(1)]

'959 It also stated that unless the remittance was received

The Lord Krishna by Decem?er 5, 1958, the permission to sell the quota

Sugar Mills Ltd., sugar for mternal consumption would be withdrawn.

aud Another Subsequent to this too, the export agency wrote to

. v. . the L. K. S. Mills saying that a demand draft for

The Union °1 India Rs. 61,845·57 nP. was being sent, to which was attached

and Another th d l" d dd d h c I E . e e ivery or er a resse to t e entra xcISe

Hidayatullah ]. Officer of the factory for releasing the first instalment

of 1,500 bags. The L.K.S. Mills were asked to pay the

excise duty and to clear the bags from bond and to

intimate to the agency that they had done so. Similar

documents were

prepared for the other instalments and

forwarded through the Bank. The L.K.S. Mills,

how­

ever, did not agree to this, and the export agency

thereafter on December 18, 1958, sent a telegram that

unless the drafts were retired immediately, the quota

sugar should be kept ready for despatch so that

delivery might be taken by the export agency. The

export agency also informed the L.K.S. Mills that

otherwise the name of the Mills would be communicat­

ed to the Chief Director, Sugar, as a defaulter. The

export agency also sent an order for delivery of the

quota sugar, and required the L.K.S. Mills to depatch

it by goods train, freight to pay, consigned to the

export agency. It also intimated that the Mills should

draw on the export agency for the amount of excise

duty paid by the Mills plus "on account" payment at

Rs. 10 per maund. Much was made of the error in

describing the quota as of D-29, but in view of what

· had already been understood, it cannot be suggested

that the L.K.S. Mills were in any way misled.

The L.K.S. Mills informed the export agency that

their bank position did not allow them to honour

the drafts, nor despatch the desired quantity of sugar

at the rates mentioned by the agency. They also

stated that they were not able to despatch more than ,

500 bags, as wagons over the Eastern Railway were •

limited.

The export agency, however, did not agree.

•

Finally, the export agency demanded remittance of

the sum of Rs. 1,88,216·63 nP. by the 25th January,

and gave the alternative to the L. K. S. Mills to

despatch the sugar by that date according to the

S.C.R. SUPREME COURT REPORTS 51

despatch instructions communicated earlier. The r959

L.K.S. Mills wired saying that the Banks were demand- Th L d K . h

ing interest and that the agency should instruct the su~a:~m;'~ 1

';,

Banks to forego interest. The export agency on and Another

January 29, 1959, wired as follows : v.

"Your tel. twentyninth without prejudice and to Ths Union of India

'd · l' t' · t t• b k · and Another

av01 serious comp ica ions we ms rue mg an waive _

interest. Regarding interest Committee will consider Hidayatullah

1

.

whose decision will be communicated in due

course."

'

The

petition (No. 9 of 1959) was, however, filed on

January 27, 1959, that is to say, two days earlier.

The facts relating to the S.P.B. Mills are as follows:

After

the letter of August 24, 1958 was sent, nothing

appears

to have been heard by the export agency.

On November 27, 1958, the export agency asked the

S. P. B. Mills to remit to it by December 15, 1959,

Rs. 1,69,524.

77 nP. being the amount calculated in

the same way as for the L.K.S. Mills.

On December 14,

1958, in continuation

of this letter a despatch order

for

the entire quota was sent in the same terms as in

the other case. In reply, the S.P.B. Mills pointed out

that they were working the Mills as short-term lessees,

having obtained

the lease from the High

Court of

Allahabad on payment of Rs. 6,10,000 as lease money

and Rs. 1,00,000 as security on August 6, 1956. They

also pointed out that they were required to purchase

additional machinery, stores etc., for a sum

of Rs.

5

lakhs, and that a sum of Rs. 3,43,500 was spent in

connection with the repairs to the factory and wages

for

the period during which the factory was re-started.

They further pointed out that they had suffered a loss

of Rs.

2,40,000 in the last season and another loss of

Rs. 50,000 on account of the strike of cane-growers in

March, 1958;

that all their sugar stock was pledged

with

the Punjab National Bank, Bijnor, against an

advance of 75 per cent. of the price; and that there

were

arrears of cess amounting to about Rs.

5,50,000

and that the lease money amounting to Rs. 6,10,000

for the next season was also due. They therefore,

expressed

their inability to send any sugar: They also

stated that if they redeemed the pledged sugar even

after

paying the

"on account" money to the Bank,

52 SUPREME COURT REPORTS [1960(1))

z959 the Bank would be receiving Rs. 15-2-0 per maund

- less than the controlled price· of sugar. They further

Ts"' LoMrd Ku,.,L· htdna stated that it was not possible for them to sell sugar

ugar ' s ., 1 . fi b h . d

and Another at the contro led pnce xed y t e Drrectorate an

v. ended by saying that they were not in a position to

The Union of India despatch sugar, pointing out at the same time that

and Another the Act was unconstitutional and not binding on them.

Hidayotullah ],

The export agency, however, was not agreeable, and

it asked the S.P.B. Mills either to deliver the export

quota or pay the net sale-proceeds for the same,

pointing

out that the Mills ran the risk of liability for

the additional excise duty of Rs.17 per maund.

While matters stood at this stage

~nd the S. P. B.

Mills had neither paid the amount demanded nor

agreed to despatch the sugar, a petition was filed in

this Court and a temporary stay was obtained.

The questions that have been raised in these peti­

tions

are many, but they can be grouped under two

heads, viz., the vires of the legislation and the propriety

of the action taken under it. The argument about

the vires challenges the Act as a whole and also clause

by clause. In regard to the vires of the Act, the peti­

tioners

draw attention to the statement of objects and

reasons, incorporated in one of the affidavits in the

case. According to them, the declared object of the

Act is to earn foreign exchange. They contend that

if foreign exchange is so urgently needed, there should

have been uniform legislation compelling other sugar

manufacturers, who do not manufacture by the vacuum

pan process, also to export sugar. This argument is

based on alleged discrimination

and on Art. 14 of the

Constitution. The petitioners further contend that

manufacturers of commodities other than sugar are

not compelled to export in a like manner, and thus

there is further discrimination.

In our opinion, this argument is without substance.

The power of Parliament to make laws in relation to

foreign exchange is manifest. Entry No. 36 of the

Union List specifically confers jurisdiction on Parlia­

ment to legislate in relation to foreign exchange. That

Entry, if interpreted widely, would embrace within

J

S.C.R. SUPREME COURT REPORTS 53

itself not only laws relating to the control of foreign I959

exchange but also to its acquisition to better the n L --;;~ . h

economic stability of the country. The need for s~~ar

0

~1;u;~,;.:

foreign exchange to finance the various development and Another

schemes was, very properly, not disputed. It is thus v.

plain. that the object of the Act is in the public interest. The Union of India

If we are to exist as a progressive nation, it is very and Another

necessary that we carve out a place for ourselves in Hidayat,.llah J.

the International market. The beginning has to be

made,

and many a time, it is at a great loss. That the Central Government has selected the sugar industry

for an export programme does not mean that it cannot

make a classification of the commodities, bearing in

mind which commodity will have an easy market

abroad for the purpose of earning foreign exchange.

During the Suez crisis, sugar was exported in large

quantities from

this country, and earned

12·4 crores

as foreign exchange. There is nothing on the record

to show that export of other commodities was not also

undertaken,

though it was pointed out in arguments

that manganese ore was also exported in a similar

manner to earn foreign exchange. It is quite obvious

that the

Central Government cannot order the export

of all and sundry manufactured commodities from the

country, without being assured of a market in foreign

countries. Necessarily,

the Government can only

embark upon an export policy in relation to these

products, for which

there is an easy and readily

available

market abroad.

For this reason also, sugar

produced by the vacuum pan process may have been

selected, because such sugar is

perhaps in demand

abroad and not.sugar produced by any other process.

It must be realised that goods manufactured in our

country have to stand heavy competition from goods

produced abroad,

and even this export can only be

made at great sacrifice, and is made only to earn

foreign exchange, which would not, otherwise, be

available.

In this view of the matter, it cannot be said that

there is discrimination in so far as sugar manufacturers

by the vacuum pan process are concerned.

Govern­

ment is the best judge as to which commodities are

54 SUPREME COURT REPORTS [1960(1))

z959 most likely to earn foreign exchange, and the selection

- . thus made is justifiable as a reasonable classification

TheLordKrishna • h · 1 h b" f h A 1 h

Sugar Mills Ltd., wh1c is re ated tot e o iect o t e ct, name y, t e

and Another earning of foreign exchange.

v. The next contention is under Arts. 19(1) (f) and (g)

The Union of India and also 31 of the Constitution. The petitioners

and Another

Hidayatullah ].

contend that the whole export programme in respect

of sugar amounts to an infringement of their fund­

amental rights under Arts. 19(1) (f) and (g), and

amounts also to a compulsory acquisition of their pro­

perty without payment of compensation. The peti­

tioners analyse the scheme of the Act, and state that

it amounts to taking sugar from owners for sale abroad

at such price as it may fetch, the owners being paid

when such money is received, after deducting the

expenses of the export agency and the cost of export.

They state that the owners stand to lose, because,

admittedly, sugar is going to be exported at a loss,

and the loss is to fall on the owners of factories. They

further state that if the necessity for foreign exchange

was felt,

the loss entailed in the earning of foreign

exchange should be borne

by Government or be

distri­

buted among all industries, or at least among all the

sugar producers in the country. It is urged that the

Act is an unreasonable restriction upon the fund­

amental rights to hold, acquire, and dispose of pro­

perty and to carry on occupation, trade or business.

In reply, the learned Attorney-General on behalf

of the Union as well as the Directorate of Sugar refers

to the negotiations which took place between the

Government and the sugar industry and the arrange­

ments which were made to save owners of factories

from

the loss which is inevitable as a result of this

export programme. We were taken through the

various Control

Orders which were passed by Govern­

ment under the Essential Commodities Act about this

time, fixing the. price of sugar for internal consump­

tion. In particular, referenee is made to the Sugar

(Control) Order, 1955, Notification No. G. S. R. 661/

ESS. Com/Sugar dated July 30, 1958. It is pointed

out that by that Notification the price of sugar was

increased by 50 nP. per maund on all internal sales

..

-

. ,

I

S.C.R. SUPREME COURT REPORTS 55

to enable the factories giving their export quota to z959

recoup themselves for the loss, which might be entail-The Lord :.rishna

ed. It was anticipated that the loss would be recouped sugar Mills Ltd.,

if there was an increase of 50 nP. per maund in and Another

the price of sugar for internal consumption and the v .

export quota was fixed at 2i per cent. of •the total The Union of India

production of a factory for 1957 -58. The loss, it was and Anoth.,

expected, would be more than set off by the excess Hidayatullah J.

price which the producers would be able to get for

every 20 maunds sold for internal consumption. It

is also pointed out that Government at that time did

not wish to take over the work of export on itself

and specified as the export agency, the Indian Sugar

Mills Association, a body composed

of 95 per cent. of

the sugar mills in the country. The learned Attorney-

General also points

out that more than 95 per cent.

of the mills have stood by this arrangement, and did

either supply

their quota of sugar or sold it in the

internal market and made available the money for

purchase

of sugar for export. Only a few mills in the

country resorted to these devices to get out of the

commitment which the industry as a whole had

entered into. The learned Attorney-General also

contends

that the petitioners had obtained favourable

prices for sale

of sugar in the country but were not

willing to honour their other commitments which,

after the agreement of the sugar industry, were given

legislative form.

Learned counsel for

the petitioners contends that

the vires of the Act should be considered without

reference to

other circumstances such as the

agree­

ments, price adjustments and price control, as they

have no bearing upon the resonableness of the legis­

lation. In State of Madras v. V. G. Row (

1

), this Court

laid down that in judging the resonableness of a

restriction upon fundamental rights,

the surrounding

circumstances can be looked into.

Patanjali Sastri,

C.J., observed as follows :

" It is important in this context to bear in mind

that the test of reasonableness, wherever prescribed,

should be applied

to each individual statute impugned,

(1) [1952J

s.c.R. 597, 607.

56 SUPREME COURT REPORTS [1960(1)]

'959 and no abstract standard, or general pattern of reason-

Th L . ableness can be laid down as applicable to all cases.

su~a:':ti~;·1;~~ The nature of the right alleged to have been infring­

and Another ' ed, the underlying purpose of the restrictions im-

v. posed, the extent and urgency of the evil sought to be

The Union of India remedied •thereby, the disproportion of the imposition,

and Another the prevailing conditions at the time, should all enter

Hidayatullah J. into the judicial verdict. In evaluating such elusive

factors

and forming their own conception of what is

reasonable,

in all the circumstances of a given case,

it is inevitable that the social philosophy and the

scale of values of the judges participating in the deci­

sion should

play an important part, and the limit to

their interference with legislative judgment in such

cases can only be dictated by their sense of respon­

sibility

and self-restraint and the sobering reflection

that the Constitution is meant not only for people of

their way of thinking but for all, and that the major­

ity of the elected representatives of the people have,

in authorising the imposition of the restrictions, con­

sidered

them to be

reasonable."

In Virendra v. The State of Punjab (

1

), S. R. Das,

C.J., again reaffirmed this approach. See also Aruna­

cha'la Nadar v. State of Madras(').

It is, however, contended that though one can look

at the surrounding circumstances, .it is not open to

the Court to examine other laws on the subject, unless

those laws be

incorporated by reference. In our

opinion, this i.s a fallacious argument. The

Court in

judging the reasonableness of a law, will necessarily

see,

not only the surrounding circumstances but all

contemporaneous legislation passed

as part of a single

scheme.

The reasonableness of the restriction and not

of the law has to be found out, and if restriction is

under one law but countervailing advantages are

created by another law passed as part of the same

legislative plan, the

Court should not refuse to take

that other law into account.

The existence of such other law is not difficult to

establish. The Courts can take judicial notice of it. As

was

laid down by the

Privy Council in Attorney-General

(1) [1958] S.C.R. 308, 318. (2) 1959 S.C.J. 297, 299-301,

S.C.R. SUPREME COURT REPORTS 57

for Alberta v. Attorney-General for Canada (

1

), the z959

Courts in determining the effect of legislation, do take Th L. dK . h

• • eor nsu

into account, Sugar Mills Ltd.,

"any public general knowledge of which the andAnot/ur

Court would take judicial notice, and may in a proper .v. .

case require to be informed by evidence as to what The U~·~·

0

{h India

the effect of the legislation will be. Clearly, the Acts an no er

passed by the Provincial Legislature may be conside- Hidayatullah J.

red, for it is often impossible to determine the effect

of the Act under examination without taking into

account

any other Act operating, or intended to oper-

ate,

or recently operating in the

Province."

No doubt, this was laid down in a case falling within

ss.

91 and 92 of the British North America Act, but

the general proposition is equally applicable where the

effect of the legislation on those governed by it has to

be measured. In the same connection, their

Lord­

ships looked into the historical background of legii;i­

lation to find out the materials which were coni?idered

before the legislation was promoted in the legislature.

See also Ladore v. Bennett (

2

). This Court also in

Arunacluila Nadar v. State of Madras(

8

), examined the

' historical background ' and discovered the object of

the Act, "from the circumstances under which it was

passed."

That other oontemporaneous legislation passed as

part of a legislative plan can be ex11-mined was clearly

laid down

by the

Privy Council in Pillai v. Muda­

nayake ('). In that case, the question was whether

the Ceylon Citizenship Act (18 of 1948) and the

Ceylon (Parliamentary Elections) Amendment Act

(48

of 1949) were valid, or were ultra

vires the

Ceylon Parliament, being void under s. 29(2) of the

Ceylon (Constitution and Independence) Order-in­

Council, 1946 (as amended). Under the first two Acts,

the Indian Tamils were denied as a community, the

right of franchise unless they came within the terms

of the first Act. They were thus subjected to dis­

abilities and restrictions which were prohibited by

(1) (1939) A.C. u7, 130.

(2) (1939) A.C. 468, 477.

8

(3) ~959 S.C.J. 297, 299-301.

(4) (1953) A.C. 514.

58 SUPREME COURT REPORTS (1960(1)]

'959 s. 29(2) of the Order-in-Council. During the course of

Th L d K . h arguments, their Lordships' attention was drawn to a.

5,.~.:~m;•;_,;~ later Act, intituled the Indian and Pakistani Residents

and Another (Citizenship) Act (3 of 1949), under which the Indian

v. Tamils and others were entitled to get themselves

The Union °! India registered a.s the citizens of Cey Ion on proof of

anti Another sufficient connection with Ceylon. It was argued by

Hidayati<llah

1

Mr. Pritt, Q.C., before the Privy Council that the later

Act could not be read to justify the earlier Act, because

if the impugned Citizenship Act were bad when it was

passed,

it could not be 'brought back to light' by the

enactment of the subsequent Act. Their Lordships

did

not accept this argument and read the later Act

with

the previous. They observed :

" It was argued that sections 4 and 5 of the

Citizenship Act made it impossible that the descen­

dants, however remote, of a person who was unable to

attain citizenship himself. could ever be able to attain

citizenship in Ceylon no matter how long they resided

there,

but their Lordships' attention was subsequently

drawn

to the Indian and Pakistani Residents

(Citizen­

.ship) Act, No. 3 of 1949, by which an Indian Ta.mil

could

by an application obtain citizenship by

registra­

tion and thus protect his descendants, provided he had

a certain residental qualification. It was suggested

on

behalf of tho appellant that this Act might itself

be ultra

vires as conferring a privilege upon Indian

Tamils within s. 29(2)(c) of the Constitution Order-in

Council, and that i herefore it was inadmissible to

rebut the inference that the legislature had intended

by the Citizenship and Franchise Acts to make Indian

Tamils liable to dis>il>ilities within the meaning of

s. 29(2)(b), but their Lordships cannot accept this

argument. If there was a legislative plan the plan

must be looked at as a whole, and when so looked at

it is evident, in their Lordships' opinion, that the

legislature did not intend to prevent Indian Ta.mils

from

attaining citizenship provided that they were

sufficiently connected with

the island.

"

It is not necessary to speculate as to the remedies of

the sugar dealers if the Sugar Control Order, or the

notification were varied or abrogated in future. The

S.C.R. SUPREME COURT REPORTS 59

reasonableness of the restriction is to be judged today z959

and in the context of the circumstances now existing. The Lord Krishna

It cannot but be accepted that the Government sugar Mills Ltd.,

made adequate arrangements to recoup the sugar and Another

industry for the loss which it might suffer in giving .y. .

the export quota. For that purpose though the The Union °1 Ind"'

fi d 2

1 ' f h . and Another

export quota was xe at

2 per cent. o t e total

quantity produced by a factory, the loss which was Hidayatullah J.

expected to be Rs. 10 per maund was spread over the

remaining sugar to be sold in the country and was

recouped

at

50 nP. per maund. We are unable to

accept th~ plea that the petitioners were not able to

sell sugar

at the controlled price, because the price was

fixed too high. Learned counsel for

the petitioners

contend

that by fixing a ceiling there is no guarantee

that the commodity will be sold at the ceiling price

and not at a lower rate. It is a well-known proposi-

tion

that when commodities are controlled by fixation

of price, the commodities sell only at the controlled

price

and not less. Economists have complained that

the worst fault of price control is that the price does

not fall below the controlled rate. There is nothing

in the record of the case to show that the Mills were

not able to sell their sugar at the controlled price.

We are satisfied

that the object of the Act does not

infringe the fundamental rights of the petitioners. To

prevent any loss to the petitioners, countervailing

additional prices were allowed on

sales of sugar for

internal consumption.

The petitioners did not stand

to lose ultimately. The quota was fixed at

2! per cent.

of their total production, and it is inconceivable that

they are unable to sell sugar in the open home market.

This suggestion

of the petitioners that they are unable

to sell sugar at the controlled price has not been

substantiated

by the production of a single document

to show what they held in stock and what they had

sold. The balance sheet produced by the

S. P. B. Mills

shows

that they were able to sell more than

a lakh of

bags in eight months, as against the quantity of 4,079

bags for export.

It is obvious that the plea that the Mills are unable

to sell sugar at the controlled price is a mere sham.

60 SUPREME COURT REPORTS [1960(1)]

r959 Indeed, an examination of the correspondence in the

first case clearly demonstrates that the Mills were

The Lord K rislina

devising one excuse or another to a void the liability

Sugar Ii-fills Ltd.,

andAnother to supply the quota of sugar. ]'irst, they raised the

v. contention that they did not have the requisite grade.

The Union of !>ldia Then they raised the contention that they could not

and Another sell sugar. Thereafter they asked for supply in instal-

Hidayatullah J. ments, and when instalments were fixed, they put

forth the excuse of there being no wagons available.

They next urged that the Bank was charging interest,

and that interest should be waived before the docu­

ments would be retired. When interest was waived,

they filed the petition iu this CouJ.lt. In these

circumstances, in our opinion, there can be no ground

for holding that there has been an infringement of the

fund,imental rights of the petitioners. The restriction

was

not unreasonable, because arrangement was made

to save the owners of the factories from loss, and the loss entailed by the export of sugar was to be borne

by the consumers in India and not by the producers.

There is oue more circumstance which may be

considerecl.

The foreign export served the national

interest

by staqilising the sugar market so that the

production of sugarcane niay be maintained at a

rea,;onable level. It also stabilised national economy

by earning foreign exchange. The loss, if any, was

comparatively small

and was spread over many

factories. Apart from the very real possibility of its

being recouped by sales in the country, the loss itself

was so small as not to amount to an unreasonable

restriction.

The petitioners next challenge the Act in its parts

to show that there is infringement of fundamental

rights or, in the alternative, compulsory acquisition of

their property without compensation. In this

connec­

tion, ss. 5 to 9 are challenged. Section 5 only permits

the Central Government to fix the quota leviable from

different factories.

If the object and purpose of the

Act is valid and also is in the public interest, there

being no disadvantage to the owners ultimately, s. 5

which fixes

the quota for export from sugar produced

by

a. factory cannot be challenged sepa.ra.tely •.

S.C.R. SUPREME COURT REPORTS 61

Section 6 makes it incumbent on the owner to supply z959

that! sugar on demand and further provides that after Th L d K .

11

deli~ery of sugar, the owner retains no rig~t exc~pt ~o su;a,

0

~; 11;:_,;;:

receive payment therefor under s. 9. This sect10n is andAnother

criticised on the ground that delivery of goods and v.

paym.ent of the price should be concurrent conditions, The Union of India

that is to say, that the buyer should be ready and andAnother

willing to pay the price in exchange for possession of Hidayatullah

1

.

the goods. If the Government

w~s buying sugar, the

provisions of

s. 32 of the Indian Sale of Goods Act,

which is

apparently relied upon here, might have been

invoked.

The object and purpose of the Act is to

export sugar and to divide the receipts less expenses,

among

the owners who supply sugar for export. The

argument over16oks

the scheme that export

is made

by a Central Agency for the industry as a whole, and

the prices obtained abroad are payable, and they are

less

than those at which sugar of various grades sells

within

the country. The section does not suffer from

any infirmity, if the object and purpose of the Act is,

as has been found above, valid and constitutional. It

must not be forgotten that during the time payment

was due, the owners were getting an additional 50 nP.

on every maund sold by them in the country. Deferred

payment is not deprivation of property, nor an en-

croachment upon fundamental rights.

The affidavits

show

that the entire

quota of 50,000 tons has been

exported,

that it has earned Rs.

2·4 crores in. foreign

exchange,

and that the exporters have been paid

except for a small balance.

Section 7 is

the penalty section. We heard

consi­

derable argument as to whether the section would

apply to a case where no delivery was at all made, in

view of the words :

"where sugar delivered by any owner falls short

of the export quota."

No action has yet been taken against the Mills under

the section ; nor has any penalty been imposed. The

question whether

the section is ultra vires the

legisla­

ture need not be considered here.

Section 8 deals with export of sugar or its sale by

the owner or the export agency. It is stated that the

62 SUPREME COURT REPORTS [1960(1)]

z959 section deals with sugar delivered to the export agency,

T1"LordKrishna and.here.there ~as no sugar delivered. The first otidb­

Sugar Mills Ltd.. section <1eals with export, and the export agency can

.,.d Another only export sugar delivered to it. The second sub-

. v. . section authorises the export agency to sell the sugar

Th• Umon °! Ind•a for reasons given in the first sub-section. It also

and Another authorises the export agency to permit the owner to

Hidayatullah

1

.

sell sugar in his custody. In the present cases, there

was a demand for delivery of the sugar of the quota,

and that has not been met. Whether the petitioners

have exposed themselves

to any penalty can only be

considered when penalty

is actually imposed on them.

The condition

that the sale-proceeds are payable to

the export agency is perfectly valid, regard being had

to the scheme of the export and the advantage allowed

on all sales

in India. The owners having obtained that

advantage cannot claim to keep the proceeds of such

sales,

by which the export policy is to be run.

Out of

the 50,000 tons, about half was sold in India, and with

the sale-proceeds other sugar was bought and exported,

and this would not be possible if the export agency

were required

to make a spot cash payment. Section 9 provides how payments to owners are to

be made. Since the export was by a non-profit-making

agency composed

of the sugar industry, it is obvious

that the payments could not be made forthwith. As

explained already, the owners received

payment after

the sale prices were received from abroad. Necessary

deductions

of expenses have to be made, and the

proceeds are then distributed. No doubt, such payment

is likely to be somewhat delayed but looking to the

small quantity involved (i.e. not more than 20 per cent.

under

the Act and in actuality, only

2i per cent.) it was

not likely to make it very hard for the owners, who

were

in the meantime breaking this loss at the rate of

50 nP. for every maund of sugar sold in India. In our

opinion, none

of the sections considered here, even

viewed separately, is

ultra

vires.

The petitioners did not cliallenge the action taken

by the export agency as being contrary to the Act. No

argument can be considered in view of the want of a

plea to this effect in the two petitions. In the petition

-

S.C.R. SUPREME COURT REPORTS 63

by the S. P. B. Mills, the petitioner did not invite any r959

decision on the correctness of the demand for the The Lord Krishna

additional excise duty, because no such duty has, in Sugar Mills Ltd.,

fact, been demanded. The main contention of the and Another

Mills was that all sugar was pledged with banks. The . "· .

pleadings

on this part of the case are far from clear or The

Union of India

ffi

· Th 1 c · l tt h. J • and Another

su 01ent. . e on y re~erence is to a e er, w IC 1 1s

insufficient. ·However, in view of the fact that learned

counsel reserved

this point to be raised for exemption

from

payment of additional duty, we

say nothing

about it.

The result is that both the petitions fail, and are

dismissed

with costs.

SARKAR J.-I think these two applications should Sarkar].

succeed. They raise the question whether the Sugar

Export Promotion Act, 1958 is invalid as imposing

an unreasonable restriction on the petitioners' right to

carry on their trade.

Some of the petitioners are owners of factories

manufacturing sugar

by a process called the vacuum

pan process and they carry on business as manufac­

turers

of and dealers in sugar. For the purposes of

this judgment these persons may be taken to be the

petitioners. The principal respondent in these applica­

tions is

the Government of India. The other respon­

dent is the Indian

Sugar Mills Association, an associa­

tion of manufacturers of sugar by the vacuum pan

process.

On June 27, 1958, the Government had promulgated

an Ordinance. The impugned Act was passed on

September 16, 1958 repealing the Ordinance and re­

enacting

its provisions and also providing that anything

done under the

Ordinance would be deemed to have

been done under the Act as if it had come into force

when

the

Ordinance had been promulgated.

As appears from its preamble,

the Act was intended

to provide for the export of sugar in public interest and it set up a machinery for that purpose. I will

summarise here

the main provisions of the Act.

Sec­

tion 3 empowers the Central Government to specify a

company or other body corporate as the export agency

to perform

the functions of that agency under the Act.

64 SUPREME COURT REPORTS [1960(1)]

r959 The respondent Indian Sugar Mills Association was

The Lord Kdsh"a specified as the export agency under this section.

sugar Mill., Ltd., Section 4 authorises the Central Government to fix the

and Anotha quantity of sugar that may be exported during any

. v. . period, but the quantity so fixed for a year is not to

The Umon of India exceed twenty per cent. of the quantity of sugar

and Another produced in India upto the month of October in that

Sa>kar

1

.

year.

8eotion 4 also provides that. "in fixing such

quantity the Central Government shall have regard to

-(a) the quantity of sugar available in India, (b) the

the quantity of sugar which, in its opinion, would be

reasonably required for consumption

in India, (c) the

necessity for exporting sugar with a view to earning

foreign exchange in the public

interest." Section 5

requires

the

Central Government to apportion the

quantity fixed under s. 4 among the owners of factories

producing

sugar by the vacuum pan process in

pro­

portion to the quantity produced or likely to be

produced by them respectively, during the season. The

quantity so apportioned to each factory is called its

export quot:t. Section 6 provides that every owner of

a factory shall, on demand by the export agency

deliver to it sugar upto its export quota and on delivery

" the owner shall retain no rights in respect of such

sugar except his right to receive payment therefor

under section 9." Section 7 makes provision for an

additional excise duty being levied in certain circum­

stances on the quantity of sugar by which the sugar

delivered by the owner of a factory falls short of its

export quota. Section 8 states that the export agency

shall export the sugar delivered to it, provided that in

certain circumstances specified, the export agency may

sell that sugar in India and may if it thinks fit pur-·

chase other sugar for export and for this purpose permit

the owner to sell the whole or part of its export .quota

at a price approved, on condition t.hat the sale proceeds

are paid to it. The provisions of s. 9 are important

and will be set out later. It is not necessary to refer

to the other provisions of the Act.

Soon after the Ordinance had been promulgated the

Government started taking action under it. By a

notification dated June 27, 1958, 50,000 tons of sugar

•

S.C.R. SUPREME COURT REPORTS 65

was fixed under s. 4 as the total quantity for export

1

959

for the period ending October 31, 1958. Export quotas

~ The Lord /{rish11a

were duly fixed for all factories including those of the suxar Mills Ltd.,

petitioners. The petitioners were thereafter asked by and Another

the export agency to sell the sugar and pay the sale- v.

proceeds to it.. This they failed to do. It is said by Thr Uuion °! India

the respondents that the petitioners were also asked to and ~tlier

deliver the sugar and this also they failed to do. The

Sarkar].

petitioners spt, up various reasons justifying their failure

to sell or deliver the requisite quantities of sugar. rt

is unnecessary to refer to theRe reasons for if thn Act

is invalid, as 'the petitioners contend the orders could

not be made and no question would arise as to whether

the petitioners had valid reasons for not carrying them

out. It appears that t.l1e export agency felt that the

petitioners were neither going to sell the sugar and pay

the sale proceeds nor to deliver the sugar and it there-

upon pointed out to the petitioners that they were hy

their conduct exposing themRelves to the risk of

having to pay the additional excise duty under s. 7. It

was then that the present applicationR for appropriate

writs restraining the respondents from taking steps

under the Act were launched by the petitioners on the

ground inter alia that the Act was invalid as it

unreaRonably restricted the petitionerR' right to carry

on their trade. I now proceed to examine the ,-alidity

of this contention.

From the provisions of the Act earlier set out, it is

quite clear

that it requires the owner of .a sugar factory

to part with a portion of the

produce of his factory in

exchange for

an amount to he fixed under the

provi­

sions of s. 9. The Act therefore restricts his freedom

of trade; it takes away his right to trade with the

whole of his merchandise in any manner he likes. The

question is, is such restriction reasonable ? .

It is necessary now to set out the terms of s. 9 of

the Act which fixes the amount which a manufacturer

of sugar in entitled to receive in respect of the sugar

delivered by him. Only sub-ss. (1) and (2) of this sec­

tion need' be set out and they are as follows :

Section 9.-(l) The export agency shall, at such

time

as it thinks fit, make to

the owners who have

9

66 SUPREME COURT REPORTS [1960(1))

'959 delivered sugar to it under this Act, payments deter-

T

'· L dK. h mined in accordance with the provisions hereinafter in

,~ or ris Ha th' . . d

Sugar Mills Ltd., IS sect10n contame .

and Anothtr (2) From the total sale-proceeds in respect of the

. v. . quantity fixed for export under section 4 for any year,

Th• a~'';n1,~;ut,. there shall be deducte~ the total expenditure incurred

by the export agency m respect of the sugar, whether

Sarkar J. by way of administrative expenses or otherwise, and

the balance shall be appportioned among the owners

in proportion to the quantity of sugar delivered by

then respectively during that year.

The substance of the matter then is that an owner

of a sugar factory gets in exchange for the sugar deli­

vered by him under the Act, a proportionate share of

the sale-proceeds less the Pxpenses. He has no hand

in deciding at what price the goods would he sold by

the export agency. If they are sold for a very low

p;ice, he has no right to complain. Neither has he any

power to control the expenses. The exchange value

that a sugar manufacturer is entitled to get under the

Act for sugar delivered by him, therefore, depends

entirely on the export agency. Again, under sub­

sec. (1) of s. 9, the export agency need pay the manu­

facturer only at such times as it thinks fit. It may he

difficult

to say that all these terms are reasonable.

However

that may be, there is another aspect of the

question which in my view decides it. It is quite plain

that as things are,

sugar can be sold abroad only at a

loss.

That clearly appears from the materials on the

record and is not indeed disputed. I think it enough to

refer to the

Objocts and Reasons of the Act and to a

statement in the affidavit of Shri K. P. Jain, Chief

Director, Directorate of Sugar, affirmed on February 13,

1959

and filed on behalf of the Government, to show

that the Act contemplated that the export of sugar

made under it would result in

a loss. In the Objects

& Reasons of the Act it is stated,

"With a view to earning foreign exchange it is

necessary

to promote export of sugar. The export of

sugar, however, involves

a loss, even if excise duty

and cane cess are remitted."

S.C.R SUPREME COURT REPORTS 67

In paragraph 22 of Shri Jain's said affidavit it is z959

stated, T' .

"If h h th t' h . d iieLordKf<shM

urt er Ray t at... e en ire sc eme envisage sugar Mills Ltd.

in the Act depends on the pooling of the losses on and Another '

export by all sugar factories in India, in proportion to v.

their export quota.'' The Union of India

We then get to this that on the respondents' own and Another

case the exports under the Act can he made only at a· Sakrar J.

loss. The result therefore is that the Act compels the

p()titioners to part with a portion of their merchandise

at' a loss. Can the restrictions so put on the petitioners'

trade by the Act then be said to be reasonable ? I

conceive

it is impossible to do so. It is said that the

Act was passed with a view to earn foreign exchange

by export of sugar. Indeed so it appears from the Objects & Reasons of the Act earlier set out and the

provisions of s. 4 earlier quoted. I will agree that

earning of foreign exchange is essential for the country.

But I do not see that that justifies the enactment of a

legislation which imposes a loss

on a sugar manufac-

turer.

It is not as if foreign exchange could not be

earned without inflicting loss on

the manufacturers of

sugar. That indeed is not the respondents' case. The

loss might have been avoided if for example, the

exports were made by the grant of a subsidy, a course

in fact adopted by the Government in the year 1951-52.

It.has not been said that there was any diffieulty in

granting the subsidy for the exports under the

Act. A

reasonable restriction on a citizen's right to carry on

his

trade which alone is permitted by Art. 19(6) of the

Constitution, must be, as Mahajan, J., said in

Chintaman

Rao v. The State of Jl;Jadhya Pradesh(

1

), a restriction

"which reason dictates", which "unlei;s it strikes a

proper balance between

the freedom guaranteed in

article

19(1) (g) and the social control permitted by

clause (6) of article 19, must be held to be wanting in

that

quality." Here I do not find the balance struck

nor the infliction of the loss a course which reason

dictates.

The loss which the restrictions imposed by

the Act on the petitioners' trade caused to them, was

by no means such as could only have been avoided by

incurring

a greater loss.

(1) [1950] S.C.R. 759, 763.

68 SUPREME COURT REPOH.TS [1960(1))

'959 I also think it clear that an object however laudable,

cannot by itself and without more, make a restriction

The Lord Krishna

S«gar Mills Ltd .. put on a citizen's right to carry on a trade for attain-

and Another ing that.object, reasonable. A restriction on a per-

v. son's right to carry on his trade does not become

The Unio11 of Indio reasonable, simply because it had been imposed on

and Another him to achieve an object of great necessity and un­

. doubted merit.

The

reasonablent>SS has to be judged

Sarkar].

in ;111 the circumstances of the case and the object to

be attained is only one of such circumstances. This,

in

my view,

is too clear to require elaboration.

It is not neeessary for me to pursue the matter

further for it is not the respondents' contention that

the 1·estrictio11s are reasonable notwithstanding that

they <'anse loss. On the other hand, the contention of

the respondents is for reasons to be presently stated that

the Act really caused no loss and that being so the

restrictions imposed by it cannot he said to be un­

rea.sonable. I proceed now to consider t.he respondents'

rea.son for saying that the Act imposes 110 loss on the

sugar manufacturers including the petitioners.

It is fi1·st s;1id that though the exports result in n

loss now, it may in future bring in profits. That hope

is dearly only a pious hope. Aud whaf" is more, it is

not a hope which has even been expressed in the

nffidavits filed. on behalf of the respondents. On the

contrary, these affidavits make it perfectly plain that

in the foreseeable future there is no hope of export of

sugar being made at a profit. Indeed, it is said in

these affidavits that the scheme of the Act is bnsed on

the pooling of the losses caused by the exports made

under it. It is hardly neeessary to point out that if

the exports con kl be expected t.o prnduce a profit in

in the near future, the nocrcivc machinery of the Act

for making the exports would he unnecessary. There

is no bn,is whntcver for snying that in some years the

export may result in a profit. Indeed on the respon­

dents' own affidavits it is not open to them to say

that they hope that it may be possible in future to

make a profit oil export of sugar.

Then it is said that the export quota. fixed for

1957-58 is only 2! per cent. of the production of each

S.C.R. SUPREME COURT REPORTS 69

factory. The point sought to be made is that, there-I9.S9

fore, the amount of the loss would be very small. Now

The Lord Krishna

2l per cent. of the produrtion of the factory of the Sugar Mills Ltd.,

petitioners in Writ Petiti

01n No. 9 of 1959 is 12,533 and Another

maunds. It is stated by t.he respondents in the sup- v.

plementary affidavit of Shri Jain affirmed on March 11, The Union of India

1959, that on the export the loss will be in the region and Another

of Rs. 10 per maund. On this basis the loss to the Sarkar J.

petitioners in that petition would be Rs. 1,25,530.

The loss to the petitioners in Writ Petition No. 14 of

1959 would be slightlY. less. I for myself would hesitate

to say

that losses in such amounts are negligible. The

export quota for 1958-59 has been fixed at 5

}Jer cent.

of the production. Naturally, the loss would be much

larger.

The Government have the right under the

Act to increase the quota upto

20 per cent. The loss

if the quota i;:; increased to the utmost would be for-

midable.

In the cases of factories with larger produc-

tion

the losses would be much larger than the peti-

tioners losses. And of course the reasonableness of

the restrictions imposed by the Act has to be tested

generally

and without reference to any particular sugar

mannfacturer. I

am also unable to agree to the

proposition

that the reasonableness of a restriction

depends on

the

quantum of the loss it produces. Even

a small loss may conceivably make a restriction caus-

ing it, unreasonable. The

quantum of the loss cannot

by itself decide the reasonableness of the restriction.

Does reason dictate

that a small loss shall be inflicted?

Nothing

that has been said in this case leads me to

hold

that.

It is then said that the loss caused by the Act was

recouped

by an order made by the Government in­

creasing the home price of the sugar and therefore in

fact

the manufacturers suffered no loss. The process

of recoupment was thus stated in paragraph 14 of the

said main affidavit of Shri Jain: " The incidence of loss on the first quota of 50,000

tons fixed by the Government was assessed and when

the Central Government fixed the price of sugar for

internal consumption under

the provisions of the

Essential

Commodities Act and the Sugar (Control)

70 f;UPREME <'OORT HEPOHTS [i!l60(1)]

Order, 1955, they gave adjustment in price by adding

50 nP. per nrnuud in the ex-factory prices of sugar for

The Lord Krishna

internal s:iles."

I959

Sugar J.1.,Jills Ltd.,

and Anoth" It is said that the increase so made in the home price

v. of sugar would completely wipe out the loss incurred

The Union vf In.i;a on the export under the Act of 2~ per cent.. of thl'

and Anothu produce of a factory. I will accept this as a correct

S1irkar J.

estimate. I will also ignore the petitioners' contention

that they had not been able to Hell the sugar in the

home m,trket at t,hc incre•tsed price. ·

The argument then is that though the impugned

Act produces a loss, that loss can he ignored because

the Government has taken steps under another Aut to

recoup the loss so occasioned. It is s1tid that in the

circumstances that prevail, namely, the increase in the

homo price, the restrictions imposed by the impugned

.\ct cannot he said to be unreasonable, for on the whole

they occasion no loss. This is indeed the principal

contention of the respondents to establi"h tfoit t.lie

restrictions are not unreasonable.

Now a reference to the Essential Commodities Act

under which t,he home price was increased ha" to be

made, Jt. wa" passed in Hie year 1955. It was not

intended to ont·n foreign exchange; indeed it had

nothing to do with foreign exchange or with helping

the sugar industry. Section 3 of this Act provides:

"Section 3. (l) If the Central Government is uf

opinion that it is necessary or expedient so to do for

maintaining or increasing supplies of any essential

commodity

or for securing their equitable distribution

and availability at fair prices, it may, by order, provide

for regulating or prohibiting the production, supply

and distribution thereof and trade

,i,nd commerce

therein.

(2) Without prejudice to the generality of the

powers conferred by sub-section (l), an order made

thereunder may provide

(c) for controlling the price

at which any essential

commodity

may be bought or

sold."

Sugar is an essential commodity within the meaning

of that term in the Act. Under the powers conferred

S.C.R. SUPREME COURT REPORTS 71

by the section quoted above, on August 27, 1955,. the z959

Government passed an ordf;lr called the Sugar (Control) The Lord Krishna

Order, 1955. Clause 5 of that order provides that, Sugar Mills Ltd.,

"(1) The Central Government may from time to and Another

time, by notification in the Official Gazette, fix the . v. .

price or the maximum price at which any sugar may The UdniAon °

1

1hlndsa

b Id Sh

.. ,. annner

e so . . . . . . . . . . . . . . . . . . . . . . . . uc price or maximum price

shall be fixe<l with due regard to the price or minimum Sarkar J.

price fixed for sugar cane, manufacturing cost, taxes,

reasonable margin of profit for producer and/or trade,

and any incidental charges.

(2} Where the price or the maximum price has

been so fixed no person shall sell or purchase

........... .

any sugar at a price in excess of that fixed under

sub­

clause (l)."

It was under this Order that the Government issued a

Notification on July 30, 1958, enhancing the home

price

of sugar by 50

nP. per maund which it is said

wipes

out the loss caused by the impugned Act.

I

will assume that the Notification increasing the

price was issued with the object of recouping the loss

caused by

the impugned Act as stated in the affidavit

of

Shri ,Jain, though the Notification itself does not

say so. The question then is, is the increase in the

home price

of sugar made by the Government by

a

Notification issued under the powers given to it by

another Act which has the effect of wiping out the loss

inflicted by the impugned Act, a circumstance which

makes

the restrictions imposed by the latter Act

reasonable?

It

is said that this is so ; that in judging the reason­

ableness of the restriction imposed by one Act, it is

permissible to consider an order made by the executive

Government under another Act. We were referred

to

the observations of Patanjali

Sastri, C. J., in State of

Madras v. V. G. Rao (1). The learned Chief Justice

there stated

at p.

607:

"The nature of the right alleged to have been

infringed,

the underlying purpose of the restrictions

imposed,

the extent and urgency of

the evil sought

to be remedied thereby,

the disproportion of the

(1) (1952) S.C.R.

597·

72 SUPREME COURT REPORTS [1960(1)]

'9

5

9 imposition, the prevailing conditions at the time, should

TlieLm·d lfri.<lmn all enter into the judicial verdict."

SuKar Mill.< Ud., I respectfully agree with all that the learned Chief

and A.wt'"' Justice sairl, but 1 am unable to see that this advances

Tl U

.

v.

11 1

. the present contPution of the respondents. W'hat is

1e 11u111 o 1u 1a II

1

. . . .

and Auniher rea Y re w1l upon 18 that port10n of the learned Cluef

Justice's obs<'rvation where he snid tha.t the pre\•ailing

Sarlw J. conditions nt the time should be taken in into account.

Ruppnrt. is sought a.lso from a.noth0r observation of

the learnPd Chi<'f .Tnstice at t.\w snme pagP which 1

lrn ve not quotPd, to the effect t !mt. reasonableness has

to be decided in all the circumstances of a givPn case.

It is said that the prm·ailing conditions anrl the cir­

cumstances of the case would inclrnfo 1-hc orrler increas­

ing the home price of sugar made under the Essential

Commorlit.ies Act. 1 am entirely unable to 11grec that

suuh n thing was in the contemplation of the learned

Chief ,Jnsticn. The case before him was uomplctely

different. He <.'as not co!lsidning the reasomtbleness

of one Ad. bv refrrPnce to an order made hr the

Govcl'nment u;1der another. The learned Chief lustiee

was considering whether a certain Act had placed un­

reasonable restrictious on the firnrlamental right to

form associations. The Act had given t.hc C:.overnment

the right to dechirl' an association an unlawful associa­

tion on cprt>tin specified grounds. In holdi11g the

restrictimrn imposed by the Act nmmsona.hle, the

learned Chief .J m<tice observed 11t p. 608, "The formula

of snbjPC'tive ~>ttisfad.ion of the Covernnwnt or of its

officers, with an Ad \'isory Board thro\Yll in to review

the materials on which the Government sePks to over­

ride a bnsic freedom !!Uaranteed to the citizen, may he

viewt'd as reasonable only in very exceptional circum­

stances and within the narrowest limits and cannot

receive judicial approval as a general pattern of

reasonable restrictions on fundamental rights." I do not

at all set' that the respondents can derive any support

for their present contention from anything that

Patanjali Sastri, C.J., said.

I entirely agree that in deciding the reasonableness

of the restrictions imposed by a statute, all the prevail­

ing conditions and all the circumstances of the case

S.C.R. SUPREME COURT REPORTS 73

have to be considered. But I am wholly unable to see r959

that the conditions or circumstances, which seem to -K. h

h

. . l d h h" h TheLord ris na

me to mean the same t m_g, can .me u. e t at w IC Sugar Mills Ltd.

depends solely on the arbitrary discretion or generos- and Another

ity or the sense of fair play of another. That, in my v.

view, is not permissible. That is not a reasonable The Union of India

and Another

test. It is not reasonable to say that the validity of a

statute would depend on something which the execut­

ive Government

may do or

undo at any time. The

statute imposing the restrictions does not give any

right that the Government would do something to

make the restrictions reasonable. How can such a re­

striction be reasonable? How can

an Act which is

prima facie unreasonable-and it is on that basis that

the present argument arises-be held to be reasonable

because

of something to which it gives no right and

the existence of which depends entirely on the choice

of the executive Government ? Is it to be said that the

restrictions imposed by a statute are reasonable

because

the Government has, when the question crop­

ped up, done something which makes

the restrictions

reasonable

though it was not bound to do that and

though it is free to undo that which it has done ? To

say that would be to say that the Act is valid because

the Government has for the time being chosen to

make

it so. This seems to me to be against all known

principles

of law.

Furthermore,

if the respondents' contention was

right

a statute would then be legal when the Govern­

ment chooses to do a thing and illegal when it undoes

it and so on from time to time at the choice of the

Government. That would be intolerable in any legal

system.

It was said that this is unavoidable and may

happen in many cases. The following illustration was

given.

Suppose in famine conditions a statute was

passed controlling free sale

of foodstuff. Assume that

the prevailing conditions made the restrictions put on

free sale reasonable. Later. normal conditions returned

which made

the control

of sales of foodstuff unneces­

sary and therefore unreasonable. The Act would

thereupon become invalid.

But further suppose that

after sometime the famine conditions returned. The IO

Sarkar].

74 SUPREME COURT REPORTS [1960(1))

'959 validity of the Act would then be restored. Hence, it

T

-

is said that there would be nothing unusual in the Act

'"Lord Krishna b . rd d . ]"d f t" t t" B t •t

Sugar Mills Ltd., emg va 1 an mva. 1 . rom 1me o 1me. u . l

and Another seems to me that thIS IS no analogy. The famme

v. conditions imagined do not depend on the choice of

The Union of India the Government. So, assuming that the appearance

and Another and disappearance of famine conditions from time to

time made the Act o~ce valid and again invalid-as to

Sarkar].

which I do not feel c lled upon to say anything now-

that does not justify' the adoption of a rule which

would make

the validity of an Act depend on the

choice of the Government. If fluctuating validity is

the result in one case, it does not follow that the same

consequence would occur in

another and a totally

different case.

Again

the validity of the Notification enhancing the

home price seems to me to admit of grave doubt. I

find

nothing in the Essential Commodities Act nor

naturally in the Sugar (Control) Order, 1955, which

would authorise

the Government to increase the

price simply for the sake of recouping to the

manu­

facturers the loss caused to them by the impugned

Act. I

have earlier set out the relevant provisions of

the Essential Commodities Act. The power to fix

the prir

~ of sugar given thereby can be exercised " for

maintaining

or increasing the supplies of any essential

commodity

or for securing their equitable distribution

and availability at fair prices". That power cannot

therefore be exercised for recouping loss caused to a

manufacturer

by another Act, the object of which is to

earn foreign exchange. If it is said that the

Notifica­

tion was issued for the purposes mentioned in the

Essential Commodities Act, it becomes at once apparent,

that the price fixed under it has no relation to the

impugned Act and may have to be altered irrespective

of the latter Act. I find it impossible to say that a

Notification fixing the price of sugar on different condi­

tions can be taken into account in deciding the

reasonableness of the impugned Act which is entirely

unconnected with these considerations.

For all these reasons I am unable to agree that the

Notification increasing the home price can be taken

S.C.R. SUPREME COURT REPORTS 75

into consideration in deciding the reasonableness of the z959 ..

restrictions imposed by the impugned Act. It follows The Lord Kmr.na

th t th t

. . d l t

tl

St<gar Mills Ltd.,

a ese res notions o cause oss o lC sugar and Anothtr

manufacturers and there is nothing to show that the v.

restrictions are even so reasonable. The Union of India

Then it is said that the Indian ~ugar Mills Associa-and •

1

"

01

ner

tion of which the petitioners <1l'e Raid to be members, Sarkar J.

wanted that arrangements for export. of sugar abroad

be made

and it was for that reason that the impugned

Act was passed.

It was suggested that

the Association

agreed

to the Act being passed. It is therefore contend-

ed

that the restrictions imposed by

the Act must be

presumed

to be reasonable and the petitioners cannot

be heard to say that they are not. Now the request

by or the agreement of the Association is of course

not the request by or the agreement ofthe petitioners.

The Association has no authority to bind the peti-

tioners

by any request or agreement. The fact that

the petitioners were members of the

Association if

that were so, does not give the Association the

authority. There is no evidence that the petitioners

had assented to the Association making the request or

the agreement. l!'or all that is known the petitioners

may have been agaim;t the As::;ociation making any

request to the Government to take steps for export or

agreeing to the passing of the Act. Therefore, it

seems to me that the petitioners' rights are not affected

by anything which the Associctt.ion might have done.

I

think it/ right also to say that there

is no material

on the record whatever to lmtd to the conclusion that

the Association had agreed to the Act being passed in

the form in which it stands. And of course it is only the

Act with which we arc concerned. It is true that the

Association had suggested that the Government should

take steps for export of sugar. That would a.ppra.r

from the minutes of various meetings annexed to thl'

affidavits used on behalf of the Government. But there

is

nothing in these minutes nor anywhere else in the

records which would indicate

tlrnt the Association

wanted that sugar should be exported though that

might put the manufacturers to a loss. The position

appears to have been this. In the yaar 1951-52 the

76 SUPREME COURT REPORTS [1960(1))

'959 sugar manufacturers were placed in a difficult position

The Lo"l Krishna because of competition from khandsari and gur

sugar Mills Lid.. manufacturers, who could buy sugar cane for their

and Another manufactures at a low price in the open market, while

v. the sugar manufacturers were compelled to buy cane at

The Union °! India prices fixed by the Government which were high. So

and Another some of them, as appears from Annexure "A" to

Sarkar J. Shri Jain's said affidavit, made the following sugges­

tions to the Government in March 1952 to give them

relief:

" (a) The price of cane be reduced to Re. 1 per

maund.

(b)

The sugar manufactured from the lower priced

cane be 'frozen'

and kept as

a national Reserve for

Export or for such other purposes as the Government

may consider desirable.

(c) To reduce the accumulation of stocks in the

factories and to make room for further storage, and to

liquidate the stocks into cash, serious efforts be made

either from Government to Government or through

trade channels to export out at least 2 lakh tons: Alter­

natively, the State Governments be asked to take

delivery of the quantities from the factories and store

them in their own godowns.

(d)

If there is any 'profit' in the export of such

quantities

the same may be utilised either for giving

a.

'bonus' to the cane growers or in lowering the price of

sugar for home consumption."

It is clear from the suggestions thus made by the

manufacturers that they wanted the burden on them

to be relieved and export at Government's cost. In

that year the Government in fact permitted an export

of 10,000 tons and gave a subsidy of Rs. 2 per maund

to cover the loss on the export. Later in the same

year tho Government reduced the price at which the

sugar manufacturers could purchase the cane.

In the years 1952-53 to 1955-56 India imported large

quantities

of sugar and did not export sugar at all.

It also appears that during these years the

consumpt.ion

of sugar in India was much more than the production.

Hence, obviously

the need for the import.

So clearly

in these years

the sugar manufacturers did not need to

S.C.R. SUPREME COURT REPORTS 77

export their sugar. The respondents do not say that x959

during these years the sugar m~nufacturers had asked Tlie Lord Krishna

for arrangements for export bemg made. 1956-57 was S1t•ar Mills Ltd.,

the year of the Suez crisis. In this year a substantial :nd Another

quantity was exported and large profits could be made . v. .

because price of sugar in some of the markets abroad Tho Umon °1 India

h d d th

. . d b th ~ •t 1md Another

a gone up ue to e crisis cause y e •:iuez s1 ua- _

tion. The proposition then is that between 1952-53 Sarkar J.

and 1956-57 the industry was doing very well and had

no need to ask for Government's intercession to enable

it to export.

There is no evidence

that in 1957 -58 there was. any

over-production. The figures for this year in tons are

production-19,75,000,

consumption-20,14,000 and

export-50,000, the figure for export being that fixed

under the Act. It appears however that various

representatives

of the Government and the sugar

manufacturers

met and decided upon the idea of

export­

ing sugar for earning foreign exchange in Government's

inkrest and getting a foothold in the world market in

the int~rests of the manufacfurers. It was realised

that the export would result in a loss but the manu­

facturers agreed to export provided they were allowed

to make up the loss from the internal market. For

this purpose the imggestion made as appears from

annexute "D" to the affidavit of Shri Jain, was as

follows:

"The internal market will be Jen free as at present.

However to provide

an element of stability to the

market releases for internal sale shall be regulated by

Government of India in active consultation with the industry."

So what the trade had agreed to was that they

would be prepared

to export sugar provided they were

left free to recoup from

the internal sales the loss

caused

by the export. This is very different from

agreeing to the Act which made no provision for

recouping the loss from

the internal sales. The

sugar

manufacturers did not approve of the Act, being con­

tent to depend on the Government's sense of fair play

to relieve the hardship caused by it.

78 SUPltEME COURT REPORTS [1960(1)]

'959 There remains one other contention to deal with.

Th< Lord Krishna It · 'd th t th · t' bl ' h

5

M .

11

Lid 1s sa1 · a · e restrw 1011s are reason a e smce t ey

"!:i A:o;h., ·· result in stabilising the sugar industry. Apart from

v. saying that the Act would stabilise the sugar industry,

The Union of India the affidavits used on behalf of the respondents do not

and .1no1hu show how that would be done or that there was any

Sarkar].

need for it. From what I have earlier stated it does

not

appear to me that the industry needed any

stabi­

lisation. The figures given earlier show that produc­

tion has always been less than internal eonsumption,

excepting for

the year 1951-52. But it appears from

one

of the annexurcs to the affidavit of

Shri Jain that

even 'then the difficulty was only temporary. It is

there

stated : "Again in 1952-53 it was decided to export upto

2 lakh tons. But only about 10,000 tons could be

exported as in the meantime there was an appreciable

rise

in the sugar

prices and the surplus stock was

consumed

in the home

m>trket."

The estimated figures for th11 Y'"" 19:38-59 in tons

appear to be as follows: production-· 19,00,000 con­

sumption-21,00,000, export-1,00,000. It would thus

appear that the sugar industry in India has always

been stable and did not require any export to make it

stable.

What I think however puts the matter beyond

tlou bt

is

s. 4 of the Act. Under that section, in fixing

the total quantity of wgar to be exported in any

season regard is to be had only to the quantity avail­

able in India, the quantity required for consumption

in

India

and the necessity of earning foreign exchange.

l:;o in deciding the quantity to be exported no question

of stabilising the industry or prices arises. Again, it

is not out of the excess of the production over the

internal consumption alone that the exports are to be

made.

In fact there has never really been any excess

of production over consumption requirements. Indeed

it is plain that if sufficient sugar were left to meet the

home consumption, then the. increased price would not

help the industry to recoup the loss. If supplies were

adequate to meet the demand the price cannot be

forced up.

'

S.O.R. SUPREME COURT REPORTS 79

I therefore come to the conclusion that the Act I

959

which makes the petitioners suffer a loss on the sale The Lord Krishna

of a part of their produce imposes a restriction on Sugar Mills Ltd.,

their right to carry on their business which cannot in and Another

the circumstances of this case he said to be reasonable v.

1

-~·

d

'

th

" ' l'd The Union o lnuia

an IS · ereiore inva 1 • and Another

I may also mention that the learned counsel for

the petitioners had taken certain other objections to

thP validity of the Act but in the view that I have

earlier indicated I do

not. consider it necessary to

discuss the other objections.

I would allow

the petitions with costs.

SuBBA

RAO J.-J have had the advantage of SubbaRaof.

perusing the judgment prepared by my learned

brother, Hidayatullah, J. I agree with his conclusion

but would prefer to give my own reasons. The only

justification for me to write a separate judgment is my

inability to persuade myself

to agree with one of the

reasons given by

Hiday~tullah, J., for his conclusion.

That reason involves a principle of far-reaching

importance, namely, whether,

in ascertaining the

reasonableness of restrictions imposed by a statute on

a fundamental right, it is permissible to rely upon a

notification issued

by Government in exercise of power

conferred on

it by another Act unconnected with the

impugned one.

·

Before I embark upon the merits of the case it would

be convenient

at the outset to clear the ground by

expressing my view on the said question. The facts

of the case have been fully stated by my learned

brother in his judgment, and I need not restate them

except

to notice a few relevant

and material facts. The

Essential Commodities Act, 1955 (Act 10 of 1955), was

enacted for

the purpose mentioned in the preamble to

that Act. In exercise of the powers conferred by s. 3

of the said Act, the

Central Government issued an

order dated August 27, 1955, called the Sugar(Control)

Order, 1955. Under r. 5 of the said order, the Central

Government is empowered, inter alia, to fix the price

or the maximum price at which any sugar may be sold

or delivered, having regard to the price or minimum

80 SUPREME COURT REPORTS [1960(1)]

'

959

price fixed for sugar.cane, manufacturing cost, taxes,

The Lord Kri>hna reasonable margin of profit for producer and/or trade,

Sugar Mills Ltd., and any incidental charges. In exercise of powers con­

and Anothn ferred on the Central Government under s. 3 of the

he . v. Ind. said Act and cl. 5 of the said order, the Central

T a~;·~;:,~'"' '"Government issued a notification dated July 30, 1958,

fixing

the ex-factory price for Indian sugar Standard

subba Rao J. (ISS) D-29 grade. A few days before the said order

was issued i.e., on .June 27, 1958, the

Central Govern­

ment promulgated an Ordinance called the Sugar

Export Promotion Ordinance, and it was subsequently

converted

into an Act

(30 of 1958), which received the

assent of the President on September 16, 1958. It is

said that the Central Government in fixing the price

for

sugar produced during the season 1957-58, in

vacuum pan sugar factories situate in the areas

speci­

fied in the order had taken into account the possible

loss

the exporters might incur by reason of the

applica­

tion of the provisions of the impugned Act. Shri

K. P. Jain, Chief Director in the Directorate of Sugar&

Vanaspati, Ministry of Food and Agriculture (Depart­

ment of Food), in his affidavit says that the ex-factory

price

of sugar per maund fixed by the

said order was

made up of the following items:

Average cost of production

including

margin of profit.

Excise

duty.

Cane cess.

Loss

on exports.

Total

Rs.

22·91

Rs. 10·70

Rs. 1·89

Rs. 0·50

Rs. 36·00

It is explained therein that the factories are expected

to realise actually on their internal sales Rs. 22·91 as

their cost of production including margin of profit and

Rs. 0·50 to cover losses of export which work out to

approximately Rs. 10, per maund of sugar exported.

For every one maund of sugar exported, the factories

have for sale in the internal market 20 maunds of

sugar, and on this, on account of the price fixed, they

would realise 0·50 nP. per maund i.e., on 20 maunds

Rs. 10, which covers the export loss. The effect of the

S.C.R. SUPREME COURT REPORTS 81

said order is that the possible loss to the sugar export- z959

ers is off-set by the fact that they can recoup their

l

· h · · 1 t d The Lord Krishna

oss m t eir mterna ra e.

5

M'll Ltd

ugar i s .,

The learned Attorney-General sought to justify the and Another

restrictions imposed by the impugned Act , on the v.

ground, among others, that the Court should rely upon The ,union °! India

the said order in determining whether the restrictions and Another

imposed by the impugned Act are reasonable within Subba Rao

1

.

the meaning of Art. 19 of the Constitution. In support

of this contention, he relied upon the decision of this

Qourt in State of Madras v. V. G. Row (

1

). That decision

was concerned with

the question whether s. 15(2)(b) of

the Indian Criminal Law Amendment Act, 1908 (14 of

1908), as amended by the Indian Criminal Law Amend-

ment (Madras) Act, 1950, was unconstitutional and

void. It was contended in that case that the said

provision fell within

the limits of constitutionally

permissible legislative abridgement

of the fundamental

right conferred on the citizens under Art. 19(l)(c) of

the Constitution. The said limits are defined in cl. 4

of the said article whereunder:

"Nothing in sub-clause (c) of the said clause shall

affect

the operation of any existing law in so far as it

imposes, or prevent the States from making any law

imposing, in

the interests of public order or morality,

reasonable restrictions on the exercise

of the right

conferred

by the said

sub-clause."

In discussing the said question, Patanjali Sastri, C.J.,

observed at p. 607 :

" It is important in this context to bear in mind that

the test of reasonableness, wherever prescribed, should

be applied

to each individual statute impugned, and

no abstract standard, or general pattern of

reasonl:!oble­

ness can be laid down as applicable to all cases. The

nature of the right alleged to have been infringed, the

underlying purpose of the restrictions imposed, the

extent and urgency of the evil sought to be remedied

thereby,

the disproportion of the imposition, the pre­

vailing conditions

at the time, should all enter into the

judicial verdict. In evaluating such elusive factors

(I)

{1952]S.C.R. 597,

II

82 SUPREME COURT REPORTS [1960(1))

'959 and forming their own conception of what is reason-

- able, in n,ll the circunrntn,nces of n, given case, it is

The Lo•d J{,;sr.na . . l I h 1 . I I "l 1 d I I f

Sug"' Mills Lid., 111ev1ta ' e t '1t ~ ie socm )J u osop iy. an . t 1e sea. e. o

and Anvlher values Of the ]Udges partw1p1ttillg Ill tne deern1011

v. should play an important part, mid the limit to their

The Unfon of India interference with legislative judgment in such cases

and Another can only be dictat.ed by their sense of responsibility

and self-restraint 1tnd the sobering reflection that the

Sublia Rao j.

Constitution is meant not only for p<>ople of their way

of thinking but for all, and that the mnjority of the

elected representatives of the people have, in authoris­

ing the imposition of the restrictions, considered them

to be reasonable."

If I may say so with respect, this passage summarizes

the law on the subject folly and precisely. "Vhat is

reasonable

in a

pnrticular set-up may be unreasonable

in a society with a different background. The learned

Counsel relying upon

the words

"prevailing conditions"

and the subsequent words "in all the circumstances of

a given case" contai1rnd in the above observation of

Patanjali Sastri, C. J., contended that the said words

were comprehensive enough to

take in notifications

issued

by

the Government., and, therefore, the said

order of the Central Government fixing the rate would

be one

of the elements

to be taken into consideration

in

testing

the reasmmbleness of the impugnl'd Act. I

find

it difficult to

accept this <ugmnent. The learned

Attorney-General has not been itble to place before us

any decision which "·ent to the length of holding that

such notifications could enter the judicial verdict. It

is truii that the prevailing conditions at the time the

Act was nmde should be taken into considt,ration, for

the effectiveness of <1 restriction imposed for a parti­

cuhu purpose depends upon the said conditions. In a

society addicted to opium, the legislature has to make

a law imposing severe restrictions on the right to

conwme the same. In a society where a particular

vice i8 rampant, any restriction imposed to eradicate

that Yi<>e has to be moulded in accordance with the

needs of the time. During times of stress and strain,

such as war or pestilence, greater restrictions may be

imposed on a fundamental right to do business in

-

S.C.R. SUPREME COURT REPORTS 83

public interest. But the same restriction may be I959

unreasonable in norm&l times. Even in normal times,

The T.ord !( ri.>/ma

the urgency of a social or economic reform, having sugar .lli!ls Ltd ••

regard to the sub-normal stancfards of human existence, and Another

may demand more stringent restrictions on funda- v.

mental rights than during times of prosperity. The The U

11

i

011 0

1 India

l d Cl

· f J · } f" · l • J · • l · a ud ~ not/1•r

earnc ue ustice, t iere ore, m 11s grap uc t escrip- · ·

tion of the test of reasonablenefi!s, in my view, was suhl>a Rao

1

.

not stating any thing more than the obvious, for the

standard of reasonableness is inextricably conditioned

by the state of society

and the urgency for eradicating

the evil sought. to be remedied. But I am clear in my

mind that·the validity of an Act shall not be made to

depend upon another Act unconnected with the

impugned Act or power conferred thereunder, which

.might,

if properly exercised,

off.set the evil tendency

or

the vice of the impugned Act. If the validity of

an Act is

made to depend upon such a foundation, a

super-structure

will have been built on shifting sands.

To do that is to destroy the stability of legislation and

to introduce an uncertain element therein. If two or

more Acts were parts of the same scheme or plan, to

implement the same or common objective, or if the

impugned Act, though it was not originally conceived

at the time when the earlier Act was passed, was only

an extension or a further step by legislature for

implementing

the object of the earlier Act or if the

legislature by express reference incorporated in the

impugned Act the provisions of the earlier Act, it

would

be permissible to rely upon the said provisions

of the earlier Act, not because they formed part of the

prevailing ·conditions but because either the earlier

Act formed part of the impugned Act by reference or

both of them formed part of the same legislative plan.

The illustrations are not exhaustive, but they all fall

under one or other of the following two categories :

(i)

an earlier Act is made part of a new Act; and (ii) both Acts are parts of a legislative scheme or plan where

both of them were conceived at the inception but

passed in stages, or conceived at different times on the

basis of experience gained but passed in furtherance

of the same scheme. In such cases, the test of

84 SUPREME COURT REPORTS [1960(1)]

'959 reasonableness in regard to one Act may be made to

- depend upon the impact of the other on it. But to go

~~;;,

0

~,~;~:;.~ beyond_ this is to destroy t~e stability of legislation

and Another and to mtroduce an uncertam element. To go further

v. and to depend upon a notification of a transitory

The Union of India nature issued under an unconnected Act is to place

and Another the statute in a fluid state. In such a situation its

validity would depend . upon a statutory order of

Subba Rao

1

· temporary duration; 4t would change colour with the

changing attitudes of an authority empowered to issue

the order. It would also mean that a Court will have

to embark upon a roving search of all Acts and

notifications which may, by design or accident,

alleviate or mollify the evil consequences of an

impugned Act. Such a result cannot be contemplated.

The learned Attorney-General has not placed before us

any decision in support of his broad propositian; but

I find in the judgment of my learned brother,

Hidayatullah, J., a few decisions which, it is said, go to

the full length of supporting the argument of the

learned Attorney-General. I have carefully perused

the said decisions and I do not find anything said gr

implied therein to support the said contention. The

decision in Attorney-General for Alberta v. Attorney­

General for Ca:nada (1) was concerned with a conflict

between

the jurisdictions of the Dominion and Provin­

cial Legislatures under ss. 91 and 92 of the British

North America Act, 1867, The Legislative Assembly

of the Province of Alberta passed an Act respecting

the taxation of banks' and imposed thereunder on

every corporation or joint stock company other than

the Bank of Canada, incorporated for the purpose of

doing banking or savings bank business in the

Province, an annual tax, in addition to any tax

payable under any other Act. Defaulters of payment

of tax were to be visited with penalties, and the

payment of either tax or penalty could be enforced

by distress and sale of goods and chattels, or by

action for civil debt. It was contended before

the Privy Council that the proposed taxation was

not in its true sense taxation in order to the raising

(I) (1939) A.C. II7.

S.C.R. SUPREME COURT REPORTS 85

of a revenue for Provincial purposes so as to be within r959

the exclusive legislative competence of the Provipcial

Legislature, but was merely part of a legislative plan The Lord Krishna

Sugar Mills Ltd.,

to prevent the operation within the Province of those and Another

banking institutions which had been called into exist- v.

ence and given the necessary powers there to conduct The Union of India

their business by the only proper authority, the

and Another

Parliament of the Dominion, under s. 91 of the British

Subba Rao].

North America Act, and the Bill was therefore ultra

vires the Provincial Legislature. The Privy Council

accepted

the contention.

:For the purpose of ascertain­

ing the true plan underlying the bill, the Judicial

Committee compared

the

relative legislative lists, took

judicial notice

of other Acts and the object and purpose

of the Act in question. Having regard to the said

consideration,

it came to the conclusion that it was

a colourable legislation aimed

at to prevent the

operation within the province of the aforesaid banking

institutions.

When a statute is attacked on the ground

that it is a colourable legislation, i.e., it assumed a

form

apparently faliing within the legislative

compet­

ence of the legislature but in effect and substance

intended to reach institutions beyond its legislative

competence,

it is obvious that all the surrounding

circumstances, including

other acts operating in the

Province, have to be scrutinized to unravel the fraud

on power.

This decision, in my view, cannot be

invoked

to serve the present purpose. Nor does the

decision of the Judicial Committee in

Lad,ore v.

Bennett (

1

) carry the matter further. The question

in

that case was whether the Provincial legislation in

question did

not encroach upon the exclusive

legis­

lative power of the Dominion Parliament in relation

to bankruptcy and insolvency, interest or pr iv ate rights

outside

the Province. For ascertaining the pith. and

substance of the impugned statutes, the Judicial

Committee relied upon

th.e report of the Royal

Commission appointed to enquire into municipal and

other affairs of the four municipalities in question. At

p. 477, it is observed:

" Their Lordships do not cite this report as

evidence of the facts there found, but as indieating the

(1) (1939) A.C. i68.

86 SUPREME COURT REPORTS [1960(1)]

'959 materials which the (~overnment of the Province had

--_ . before them before promot.ing in the Legislature the

~Jte f.Ol'(i_.] nsJina ~t.atllte 110'-"' itll pugned."

5,, .. ,,, M.tl.< Ud., Tl . d . . h l' l

and Aavtlwr 118 Cai"\C Of"S 11ot, Ill ll1,V VJe\Y, t TO\Y R.11}' tg 1t Oil

v. question raised in the present case. The decision of

The i·uio11 of India the Privy Council in Pillrti v. J.lfudanayake(

1

) is also

""a Auntl•n not. of much relevance to the present case. The

constitutional validity of the citizenshiJJ. Act, 1948, of

S11h!m Rao J. -

Ceylon, was questioned in tlrnt case. It was contended

therein that the main object of that Act was to prevent

the Indian Tamils from obtaining citize1rnhip of Ceylon

am! that the Act was part. of a plan to effect indirectly

something \·hich the legislature had no power to

achit>\'e directly. The Judicial Committee pointed out,

at p. 528:

"It. must be shown ~iffirmatively by the party

challenging a statute which is upon its face intra vires

that it was e.nacted as part of phtn to effect indirectly

something which the legislature had no power to

achieve directlv."

TJ1e Judicial Committee relied upon the Inclian and

Pakistani R(•sidPnts (Citizenship) Act, Xo. 3 of 1949,

by which an Indian Tamil would b.'' an application

obtain citizenship by registration and thus protect his

descendante, provided lH• lmd a eertain residential

qualification. \Ylwn objection \·as taken against the

Court rel.ving upon the stiic! Act, their Lordships

disallowed the objection \·ith the following remarks,

at p. 529:

"If there was a legislati,-e plan the plan must be

looked at as a whole, and when so looked at it is

evident, in their Lordships, opinion, tlrnt. the legis­

lature did not intend to prevent Indian Tamils from

attaining citizenship provided that they \·ere suffi­

dently connected with the island."

In this case also the reliance on a subsequent Act

was only to unravel the pl\in attributed to the Legisla.

ture of Ceylon to deprive the Indian Tamils of citizen.

ship by passing the impugned Act. The said three

decisions, therefore, are not, and cannot be, authorities

for the proposition now contended. To unravel a plan

(1) (1953) A.C. 514.

S.C.R. SUPREME COURT REPORTS 87

of fraud on powern, it would he necessary to scrutinize r959

all the documents, whether legislative or otherwise,

1

1. T!te Lord I<ris!tna

which hel1) to ascertain the truth. It may a so ue

Sugar ;lfilts Ltd.,

necessary to look into another Act to ascertain the etnd Another

pith and imbstance of an impugned Act. But the same v.

principle cannot be invoked for a,scertaining the The Union of India

reasonablenoHs of legislative restl'idiom; on fundarnen-and .luot!tcr

tal rights. subba Rao J.

Now t·oming to the factR of the present case, it is not

suggrRtcd that the Es;;;ential Commoditi~;;; Aet, 1955,

and t.lw impugned Act form part of one scheme of

legislation. Indeml the E;;;sential Commodities Act waH

enacted to provide in the i11tore:-1t of the gen<:'ml publie

for control of production, :rnpply and di:;trihution of,

and trade and commerec in, certain commodities. The

provisions of the Act di,;clo;;c that tho ohjcct of the

Aet was to nrninta.in or to inerca,;e :mpplies of essential

commoditir's and to secure their equitable di;;tribution

and availability at fair prices. It was not one of itH

objAct;;; to stimnlate foreign trarle or to earn foreign

exchange.

It

is said that the notification issued by

the Central Government under s. 3 of that Act and r. 5

of the Order made thereunder was to off-;;et the loss

expected

to be incurred under the Ordinance, and

therefore, the Act whi('h supplanted

the Ordinance,

must be deemed to have been pn,ssed on the basis of

that notification. To put it in other words, though

the impugned Aet docs not confer any power or imposn

a

duty on the

Uoveriiment to off-set tlte·loss by fixing

the rates of sugar, having regn,rd to the expected losR,

the mere fact that it could fix the rn.tes mHkr Home

other Act would make the Act good though otherwi;;;o

bad. If this argument be accepted a:; correct., even if

the notifioation was not issued, the existence of such a

power under some other Act would be enough to

validate the impugned Act, for, thongh the notifimt­

tion was not issued, it may be issued at n. laier siltgP.

'l'his argmncnt, if accepted, would leave the im pngnl.'d

statut.e . in it tl uid state, its validity or ot horwise

depending upon the changing attitude of the authority

concerned. I cannot, therefore, accept this rnntention.

88 SUPREME COURT REPORTS [1960(1)]

'959 Let me now consider the reasonableness of the

- restrictions imposed by the Act, excluding the notifica-

The Lord Ifrishna t' . d b h G'' I . d

Sugar Mills Ltd., 10n . issue y t e overnmen.t. t .is . enacte to

and Another provide for the export of sugar m pubhc mterest, and

v. for the levy and collection, in certain circumstances,

The Union of India of an additional duty of excise on sugar produced in

and Another India. Section 4 enables the Central Government, by

notification in the Official Gazette to fix from time to

Subb,-i Rao].

time the quantity of sugar which may be exported

during any period, and, in fixing such quantity, the

Central Government should have regard to the

quantity of sugar available in India, the quantity of

sugar which, in its opinion, would be reasonably

required for consumption in

India, and the necessity

for

exporting sugar with

a view to earning foreign

excl;iange in the public interest. In exercise of that

power, the Central Government should not fix the

quantity of sugar for export as to exceed in any year

in the aggregate twenty per cent. of the quantity of

sugar prorlnced in India in the season ending wit.h the

month of October falling within that year. Under s. 5,

the Central Government is empowered to apportion

the quantity of sugar fixed from time to time for.

purposes

of export under s. 4 among the owners in

proportion to the quantity of sugar produced, or likely

to be produced, by them respectively during the season

referred to above.

:'-iection 6 enjoins on the owners of

sugar factories to deliver to the export agency,

appointed under the Act, the sugar produced in their

factories in such quiintities, of such grade, in such

manner, within such time and iit such place, as may

be specified hy the export agency in that behalf.

When such delivery is made, the owner ceases to have

any more right over the sugar except to receive

payment ·therefor. Section 8 empowers the export

agency, after taking delivery, to export the sugar or

permit the owner to sell the whole or any part of the

export quota in his custody at a price approved by it

on condition that the sale-proceeds are payable to it.

Section 9 directs the export agency to make payments

to the owners, who had delivered sugar to it, in the

manner prescribed by the section. Out of the total

S.C.R. SUPREME COURT REPORTS 89

sale-proceeds, the total expenditure incurred by the z959

export agency in respect of the sugar exported should --

b d d d d l b 1 h ld b

· d The Lord Krisllna

e e ucte an tie a ance s ou e apport1one

5

, M'lt Ltd

h

. • h t" f "~ar ' s .,

among t e owners m proportion to t e quan 1ty o and Another

sugar delivered by them for export during the year. v.

It also enables the export agency to make payments TkUnion of India

to owners on account against documents of delivery of and Another

sugar furnished by them, and to adjust such payments Sub;;;: Rao J.

at the time of final payment. Section 10 confers

power on

the Central Government to give directions

to the export agency in discharge of its functions

under the Act. Section 7 deals with a situation when

the

~ugar is not delivered, and it reads:

"S. 7(1): Where sugar delivered by any owner

falls

short of the export quota fixed for it by any

quantity (hereinafter referred to as the said quantity),

there shall be levied and collected on so much of the

sugar despatched from the factory for consumption in

India as is equal to the said quantity, a duty of excise

at the rate of seventeen rupees per

maund."

Sub-ss. 2, 3 and 4 provide for a machinery for

imposing

the penal duty and collecting the same from

the defaulting owners of sugar. The scheme of the

Act, therefore, is a self.contained one. The object is

to provide for the export of sugar in the

interest of

public and that object is sought to be achieved by

fixing the quota of sugar for export and distributing

the same among the owners of factories; subject to the

condition that in no case it should exceed twenty per

cent.

of the quantity of sugar produced in India in a

particular season. The quantity is also fixed

\vit.hout

detriment to the requirements for internal consump­

tion. The apportionment of the quota among the

various factories is objectively and impartially made.

The quota delivered, or in case the owner is allowed to

sell the sugar himself, the sugar purchased from the

sale-proceeds, is· exported, and the nett sale-proceeds

are distributed among the owners in proportion to the

quantity of sugar delivered by them for export. The

Act enables the Government to make payments on

account. The Government also retains an over-all

12

90 SUPREME COURT REPORTS [1960(1)]

,

959 control presumably to see that no injustiee is done to the

parties concerned. The short question is whether the

Th• Lord Krishna said restrictions on the freedom of the petitioners to

Sngar Milts Ltd .• acquire, hold and dispose of property, and carry on

and Anoth.e1

v. trade or business, are reasonable within the meaning of

Th• Unfon of India clauses (5) and (6) of Art. 19 of the Constitution. The

and Anoth<r restrictions must have a reasonable relation to the

object which the legislature seeks to achieve and must

Subba Rao f. not go in excess of that object. What is the object of

the legislature ? The object of the legislature is to

provide for the export of sugar in public interest. It

cannot be, and indeed it is not, denied that at the

time the Act was passed there was a sincere and serious

national effort to industrialize our country with the

avowed object of raising the economic standards of

our people. One of. the necessary conditions for

industrializing our

eountry is to start heavy industries,

and that cannot be done unless the country

earn8

foreign exchange to enable it to import plants for

starting the same. It is also self-evident that it would

be in

the interests of sugar industry to build up a

foreign

market for that commodity. The object of the

Act was, therefore,

demorrntrably to serve the national

interest and the scheme evolved certainly had relation

to the object sought to he achieved, for all the pro­

visions of the Act were conceived in :t glmuine attempt

to induce foreign export in sugar by co-operative effort.

If so, the only ohjcetion to t.he rnstrictions imposed

can be

on the

basis that the fr••edom w11,s abridged or

curtailed unduly or arhitmrily. But for the Act, the

petitioners could have Kold their sugar in the open

market without exceeding the rnkK fix.,d under the

Essential Commodities Act, l!.J!i5. The correspondence

filed in the case, marked '" 1tn11exures A, H and C,

clearly demonstrates that both the irnlustry :i.s well as

the 8tate were equally interested to stimulate foreign

trade and build up a foreign market. Under the

scheme embodied in the Act, three restrictions are

imposed on the owners of factories: (i) They must

contribute to the stock for export,. not exceeding

twenty per cent. of the quantity produced in their

factories; (ii) they are paid only their proportionate

S.C.R. SUPREME COURT REPORTS 91

share of the nett sale-proceeds realised in the foreign r959

market; and (iii) a penal cess is imposed on those - .

who

make default in supplying the goods. When once

The Lord Krishna

. . d d h t h A t . h , l ·. t Sugar Mills Ltd.,

it is conce e t a t e c serves t e nat10na m erest, and Another

I find it not possible to hold that the restrictions v.

are unreasonable or excessive. The three restrictions The Union of India

are really the props of the scheme. If there was no and Another

statutory compulsion on the owners of factories to

l bl f

· f th d d . Subbn Rao],

supp y a reasona e ract1on o e sugar pro uce m

their factories, the export agency would not get the

requisite quantity of sugar for export. If there was

no provision imposing a penal cess on defaulters,

there would be no sanction to compel them to deliver

their quota of sugar. Though the final payment was

deferred

till the nett sale-proceeds were realised, they

would be paid the price for the sugar supplied, at the

rates fetched in the foreign market.

It is common

case

that at present the export trade in sugar ends in

loss;

but it cannot be predicated that it will be a

chronic feature

and there will not come

a time. when

the export trade in sugar will earn profits. It may be

that a better scheme migl).t have been evolved by the

legislature or it might be more beneficial from the

standpoint of owners of factories if t.he State purchas-

ed the exportable <1uantity for ready cash and exported

the same on its own account. But it is not for this

Court to evaluate the comparative merits of different

schemes so long

it is satisfied that the scheme actu-

ally evolved

stands the test of reasonabless. The

correspondence between the

State and the industry

shows that the industry as a whole co-operated with

the State in evolving the scheme, which culminated in

the passing of the Act. The State as well as the

industry are equally interested to stimulate foreign

trade and build up foreign market. To capture foreign

market or to have a substantive share therein is not

an easy task, as it depends upon many imponderables,

namely,

the availability of sugar, its demand, its

comparative

ID;erit,s with the sugar produced in other

markets, transport facilities, mutual agreement requift

ments, international affiliations etc. Initial loss

must have to be borne to get a ~oothold and the clear

92 SUPREME COURT REPORTS [1960(1)]

z959 objective will have to be pursued purposrifully and tena-

- . ciously. To achieve the said objective, with the consent

The Lord Krishna of the industry and on the basis of past experience,

S<1gar Mills Ltd •• th A t d b th p l" t Th b fi . 1

and Another e c was passe y e ar 1amen . e ene ma

v. results flowing from the Act are significant. The

The Union of India State earns foreigu exchange, and a foreign market is

and Another gradually built up for the future prosperity of the

sugar industry.

Subba Rao].

In the affidavit filed on behalf of the respondents

an attempt was made to support the Act on the

ground that it was intended to serve a dual purpose

of stablising the internal market and earn foreign

exchange for

the country. An attempt was also

made to link the one with the other, but the learned

Attorney-General

did not pursue that line in his

argument, and I have, therefore, considered the ques­

tion only from the st.andpoint of the compelling need

of the State to earn foreign exchange, and the long

range aim of the industry to build up a foreign market.

I therefore, hold that the restrictions imposed by the

statute on the furnlamental rights of the petitioners

are not arbitrary, and .are reasonable within the mean­

ing

of Art. 19 of the Constitution.

I agree

with my learned brother, Hidayatullah, J.,

on the other questions raised in this case. In the

result, the petitions are dismissed with costs.

ORDER.

In view of the opinion of the majority

these peti­

tions

are dismissed with costs.