P. V. Sivarajan v. Union of India and Another

#### (1) S.C.R. SUPREME COURT REPORTS 779 #### P. V. SIVARAJAN #### _v._ THE UNION OF INDIA AND ANOTH]}R _Dacemb1r_ _rz._ # (S. R. DAS, c. J., s. K. DAS, P. B. GAJENDRAGADKAR, #### K. N. W ANCHOO and M. HIDAYATULLAH, JJ.) _Coir_ _Industry, Regulation_ _and_ _Control of-Registration of_ _exporter and licensee-Quantitative test-Constitutional validity-Coir_ _Industry Act, z953_ _(45_ _of z953),_ _s._ _26,_ _rr._ _z8, z9, zo(z)(a),_ _ZI,_ _zz(a)_ _-Con$titution of India, Arts. z9, z4._, The petitioner, an unsuccessful applicant for registration as. an exporter and licensee for exporting coir products, challenged the _vires_ of the rr. 18, 19, 20(1)(a), 21 and 22(a) mad~ by the Central Government in exercise of its powers under sJ 26(1) of the Coir ·Industry Act, 1953 (45 of 1953). The Act had for its object the regulation and control of the Coir industry ih public interest. It was contended on his behalf that the iiµpugned rules, which prescribed the quantitative, and not the qualitative, test for registration of established exporters, were inc<ilnsistent with the provisions of the Act and as such, _ultra vires_ the Act and that they tended to create a monopoly in the expqrt trade of coir commodities and thereby destroy the business of small dealers and discriminated between those who carried on large scale business and those who carried on small scale business and thus impugned Art(>. 19 and l4 of the Constitution. _Held,_ that the contentions.were without substance an'1 must be negatived. There was no provision in the Coir Industry Act, 19$3· that excluded or prohibited the application of the quantitative test and the rules were in no way inconsistent with the A¢t nor in excess of the powers conferred on the Central Government by s. 26 of the Act. ' Where an Act sought to control an industry i!l public interest it would obviously be for the rule making authority to decide which rules and regulations would meet the reqqirement of public interest. Such rules and regulations, though reasonable within the meaning of Art. 19(6), might cause hardship to those who failed to comply with them. But once it was conceded that the regulation and control of the trade were justified im public interest, Art. l9(1)(g) could not be invoked to challenge the validity of the rules. Nor did the impugned rules violate Art. 14 of the Gonstitution. The classification of traders under rr. 18 and' 19 was clearly founded on an intelligible differentia that had a,rational relation to the object of the Act. The exemption made by the rules in favour of co-operative societies from some of the relevant tests indicated that the Legislature intended to encourage small 780 SUPREME COURT REPORTS [1959] Supp. traders. It was not, therefore, correct to say that the rules would lead to a monopoly in the trade. _**P. V. Siv<Jrajan**_ v. ORIGINAL JURISDICTION: Petition No. 121 of 1958. _Th• Union_ _of India_ Petition under Article 32 of the Constitution for _and_ _Another_ enforcement of Fundamental rights. _G._ _B. Pai_ and _Sardar Bahadur,_ for the petitioner. _M. G._ _Setalvad, Attorney-General for India, B. Sen_ and _T. M. Sen,_ for t'he respondents. #### 1958. December II. The Judgment of the Court was delivered by #### GajendfagadAa, J GAJENDRAGADKAR, J.-The petitioner has been do - ing business as an exporter of coir product.a to foreign countries for the last twenty years. On July 4, 1958, he applied to respondent 2, the Chairman, Coir Board, #### Ernakulam, requesting that he should be registered as an established exporter. This application was accom#### panied by an income-tax clearance certificate and attested copies of bills of lading. Respondent 2 #### declined to register the petitioner on the ground that his application was defective inasmuch as the requisite certificate regarding his financial status had not been produced and no evidence had been given to show #### that he had exported the minimum quantity required (500 Cwts.). The petitioner was told that unless he complied with the requirements asked for within seven days his application would be rejected without further #### notice. The petitioner found that he could not com ply with the directions issued by respondent 2 and so it became impossible for the petitioner to get registration and licence applied for by him. That is why he filed the present petition under Art. 32 of the Const.itution and prayed for the issue of a writ or order in the nature of mandamus to direct the second respondent to grant the petitioner registration and licence as applied for by him and to prohibit or restrain the said respondent from acting on, or implementing, the rules issued under the Coir Industry Act, 1953, by issue of a writ of certiorari, prohibition or such other writ or order appropriate to protect his rights. The petitio### ner also prayed that "if found necessary " the said (1) S.C.R. SUPREME COURT REPORTS 781 i rules should be declared to be ultra vires the powers _r958_ of the Central Government and invalid being ln viola- . _/_ [. ] tion of the fundamental rights guaranteed by Arts. 14 _P._ [1 ] - _Siva•a;an_ and 19 of the Constitution. The Union of In~ia has _The_ Uni:~ _of India_ been impleaded as respondent 1 to the petition. _and Anothe•_ Before dealing with the points raised by the petition it would be necessary to refer briefly to the provisions _Gajendra:adkar_ _J._ of the Coir Industry Act, 1953 (45 of 1953), heteinafter called the Act, and the rules framed under it in 1958. This Act w.as enacted by the Parliament because it #### was thought expedient in the public interest that the Union should take under its control the coir industry (s. 2). Section 4 of the Act provides for the establishment and constitution of the Coir Board and s~ 10 enumerates its functions and duties. Under s. 10(1) it shall be the duty of the Board to promote by such measures as it thinks fit the development under the control of the Central Government of the coir industry. Sub-section (2) enumerates the measure~ which the Board may take with the object of developing the coir industry without prejudice to the generality of the provisions of sub-s. (1). Amongst the measures thus enumerated, sub-s. (2) (b) refers to the regulatiqn under the supervision of the Central Government of the production of husks, coir yarn and coir products ~y registering coir spindles and looms for manufacturing coir products, as also manufacturers of coir products, licensing exporters of coir, coir yarn and coir products and taking such other appropriate steps as; may be prescribed. Sub-section (2)(g) refers to the promotion of co-operative organisation among produpers of husks, coir fibre and coir varn and manufacturers of coir products, and sub-s. ·(2)(i) refers to the 11icensing of retting places and warehouses and otherwise regulating the stocking and sale of coir fibre, coir )'larn and coir products both for internal market and for exports. Section 26(1) confers on the Central Government power to make rules for carrying out the purposes of the Act subject to the condition of previous publication. Sub-section (2) enumerates the matters in respect of which rules may be made, in particular and without prejudice to the generality of the power 782 SUPREME COURT REPORTS [1959] Supp. _'95_ _[8 ]_ conferred by sub-s. (1). Sub-section (2) (k) refers inter _P._ _v._ _SivarajP•_ alia to the registration of manufacturers of coir pro v. ducts and the conditions for such registration and the _Th• Union of India_ grant or issue of licences under the Act; and sub-s. _and_ _Another_ (2)(1) deals with the form of applications for registra. - tion and licences under the Act and the fee, if any, to _Ga1endragadhor_ _J._ be paid in respect of any such applications. Under the powers conferred by s. 26 the Central Government framed rules in 1958. For the purposes #### of the present petition it would be relevant to refer to rr. 17 to 22. Rule 17 deals with registration and #### licensing of exports; and it provides that no person shall, after the coming into force of the rule, export coir fibre, coir yarn or coir products unless he has been registered as an exporter and has obtained .an export licence under these rules. The proviso deals with exemptions with which we are not concerned. Rule 18 #### lays down that any person who has .in any of the three years immediately preceding the commencement of the .rules exported not less than twenty-five tons of coir yarn or coir products other than coir rope, or ex. ported any quantity of coir fibre or coir rope, may be registered an an exporter of coir yarn, coir products other than coir rope or coir fibre or coir rope as the case may be. Rule 19 provides for the registration of persons other than those covered by r. 18 and it lays down inter alia that such persons may be registered as exporters _of coir yarn if, during the period of twelve months immediately preceding the date of application, #### a minimum quantity of twenty-five tons of coir yarn had been rehanked or baled in a factory owned or otherwise possessed by the applicant and registered ### under the Indian Factories Act, 1948, or, if the applicant has had a total purchase turnover of one hundred tons of coir yarn. The proviso to this rule authorises the Chairman by notification to exempt from the operation of this rule any co-operative society the members of which are owners, of industrial establishments or any Central Co-operative Ma:rketing l::lociety. Rules 20 and 22 prescribe the mode of making au application for registration as an exporter and for licence respectively while r. 21 provides for the (1) S.C.R. SUPREME COURT REPORTS 783 cancellation of registration. The present petition does _z95B_ not challenge the validity of any of the provi~ions of the Act. It, however, seeks to challenge the vires of _P._ _v._ _Sivarajqn_ v. rr. 18, 19, 20(1)(a), 21 and 22(a). _The Union_ _of India_ #### There i8 no doubt that coir and coir products play a"d Another an important role in our national economy. They are commodities which earn foreign exchange, th,e total _Gajendragadhar_ _J._ value of our exports in these commodities being of the ### order of Rupees Ten Crores per year. It was found #### that several malpractices had crept in the ·export trade of these commodities such as non.fulfilment of contracts, supplying goods of inferior qualities and cut-throat competition; and these in turn considerably affected the volume of the trade. That is why Parliament thought it necessary that the Union should take under its control the coir industry in order to rt;igulate #### its export trade. It is with the object of developing the coir industry that the Coir Board has been established and the registration and licensing of exporters has been introduced. The petitioner does not qispute this position and makes no grievance or complaint against the relevant provisions in the Act. ### It is, however, urged that the relevant rules which prescribe the quantitative test for the registration of established exporters are ultra vires becausii the introduction of the said test is inconsistent with the #### provisions of the Act. In this connection Mr. Pai, for the petitioner, sought to rely on the report subJillitted by the Ad-Hoc Committee for external marketing which the Coir Board had appointed on August 20, #### 1954. His grievance is that the report of the said Committee does not recommend the adoption of the quantitative test, but seems to suggest that a qqalitative test would be more appropriate; and that, according to Mr. Pai, also indicates that the quantitative test had been improperly prescribed by the rules. We #### are not impressed by these arguments. It is clear that there is no provision in the Act which excludes Of prohibits the application of the quantitative test in making rules for registration of exporters or for istming #### licences for export trade. In fact the Act has deliibera tely left it to the rule-making authority to frame .rules 784 SUPREME COURT REPORTS [1959] Supp. _1958_ which it ma.y regard as appropriate for regulating the #### trade ; and so it would be impossible to accept the **.p.** _**V.**_ _**Sivarajan**_ h h l k" #### v. argument t at t e ru e-ma mg authority was bound _The Union_ _of India_ to prescribe the qualitative rather than the quantita _aud_ _Another_ tive test. Besides, it does not appear that the report #### . of the Committee on which Mr. Pai relied definitely _Ga1eudragadkar_ _J._ indicated its partiality for the adoption of the qualita#### tive test. Indeed Appx. XI to the said report would suggest that the Committee in fact was not averse to the adoption of a quantitative test; but even if the Committee had expressly recommended the adoption of a qualitative, not a quantitative, :test, it would be idle to suggest that the Coir Board was bound to accept the said recommendation or that the Central Government was not competent to make rules contrary to the recommendations of the Committee. The validity of the rules can be successfully challenged if it is shown #### that they are inconsistent with the provisions of the Act or that they have been made in excess of the powers conferred on the rule-making authority by #### s. 26 of the Act. In our opinion, no such infirmity has been established in respect of the impugned rules. ### It is then contended that the relevant rules would ultimately tend to establish a monopoly in the export trade of coir commodities and would thereby extinguish the trade or business of small dealers like the peti### tioner. It is also contended that the application of the quantitative test discriminates between persons carrying on business on a large sea.le a.nd those who carry #### on business on a small scale. That is how Arts. 19 and 14· of the Constitution are invoked and the validity of the· relevant rules is challenged on the ground that they violate the fundamental rights of the petitioner under the said Articles. We think there is no substance in this contention. ## If it is conceded that the regulation of the coir industry is in the public interest, then it would be difficult to entertain the argument that the regulation or control must be introduced only on the basis of a ### qualitative test. It may well be that there are several difficulties in introducing and effectively enforcing the ### qualitative test. It is well-known that granting #### (1) S.C.R. SUPREME COURT REPORTS 785 permits or licences to export or import dealers on the _x958_ #### basis of a quantitative test is not unknown in regard P v . _5 ._ ## to export and import of essential commodities. It · · ;~araJan would obviously be for the rule-making authority to _The Union_ _of India_ decide which test would meet the requirem~nts of _and_ _Another_ public interest and what method would be most . expedient in controlling the industry for the 1'ational _Ga1endragadkar_ _J._ good. Besides, even the adoption of a qualitative test may tend to extinguish the trade of those who do not #### satisfy the said test; but such a result,cannot obviously be treated as contravening the fundamental rights under Art. 19. Control and regulation 'of any trade, though reasonable within the meaning of Art. 19, sub-Art. (6), may in some cases lead tq hardship to some persons carrying on the said tnade or business if they are unable to satisfy the requirements of the regulatory rules or provisions validly introduc#### ed ; but· once it is conceded that regulation of the trade and its control are justified in the public inter~st, it would not be open to a person who fails to satisfy the rules or regulations to invoke his fundamental . right under Art. 19(l)(g) and challenge the validity of the #### regulation or rule in question. In our opinion, therefore, the challenge to the validity of the rules on the ground of Art. 19 must fail. The challenge to the validity of the said rulE~s on the ground of Art. 14 must also fail, because the classific~tion of traders made by rr. 18 and 19 is clearly rational and is founded on an intelligible differentia distinguishing persons falling undev one #### class from those fa.Hing under the other. It i~ also clear that the differentia has a rational relation to the object sought to be achieved by the Act. As we have already pointed out, the export trade in coir commodities disclosed the existence of many malpractices which not only affected the volume of trade but also the reputation of Indian traders ; and one of the main #### reasons which led to this unfortunate result was that exporters sometimes accepted orders far beyond their capacity and that inevitably led to non-fulfi.lmeht of #### contracts or to supply of inferior commodities. In _99_ 786 SUPREME COURT REPORTS [1959] Supp. _z958_ order to remedy this position the trade had to be ### P v . regulated and so the intending exporter was required _5 ._ - · ~~ara;an to satisfy the test of the prescribed minimum capacity _The_ _Union_ _of India_ and to establish the prescribed minimum status before #### and Another his application for registration is granted. In this connection it may also be relevant to point out that _Gajendragadkar_ _J._ the rules seem to contemplate the granting of exemp tion from the operation of some of the relevant tests #### to co-operative societies ; and that shows that the intention of the Legislature is to encourage small traders to form co-operative societies and carry on #### export trade on behalf of such societies; and so it would not be possible to accept the argument that the impugned rules would lead to a monopoly in the trade. ## It is thus clear that the main object which the rules propose to achieve is to remove the anomalies and malpractices prevailing in the export trade of coir commodities and to put the said trade on a firm and enduring basis in the interest of national economy. #### We are, therefore, satisfied that the challenge to the impugned rules on the ground of infringement of Art. 14 of the Constitution must also fail. #### In the result we hold that there is no substance in ### the petition. It accordingly fails and is dismissed with costs. #### _Petition dismissed._