Madras High Court
Association Of Lubricants Dealers & ... vs The Union Of India Rep. By The Secy. To The ... on 30 July, 1998
Equivalent citations: 1998(3)CTC551
ORDER
1. The writ petition has been filed by the Lubricants Dealers and Processors Association for declaring the Lubricating Oils and Greases (Processing, Supply and Distribution Regulation) order 1987 as unconstitutional. The members of the petitioner's association are carrying on business of processing, manufacturing, blending, compounding, packing, refining, re-refining and sale of any lubricating oil greases. The members of the petitioner's association can be broadly classified into three categories namely, (1) Processor - the term processor includes the manufacturer and blender (2) Dealer - who sells the product to the ultimate consumers (3) Refining or re-refining - this category consists of those who refines or re-refines the waste oil procured from various persons.
The lubricating oil as well as the greases are normally used for metal working operations and for quenching purposes in the hydrolic machines. Certain type of oil is used as the engine oil. The manufacturer or the blender who is called as the processor normally mixes different types and grades of oils in any particular ratio to attain a particular specification to suit a particular type or usage. Sometimes additives are added to impart special purpose to the lubricating oils for being put to a specific use. The re-refiners procure waste oil from the market and treat them in the manner required by chemical methods and the same is sold to the customers. The Indian Standard Institution has given a standard specification for these products which are only the specification without prescribing any particular mode of manufacturing or blending of the lubricating oils. The processor is preparing oils as per the prescription given by the customers. Normally, processor would keep unfinished product in their factory premises and convert it into a finished product soon after receiving specific orders with required specification to suit the means of the customers. The impugned control order has been brought into force to prevent the so called adulterated lubricating oils and greases without taking into consideration of the certain practical aspects of the trade and moreover the order has been issued under the delegative power of legislation, amount to excessive delegation, since the subject of quality control will not form one of the subject matter of section 3(1) of the Essential Commodities Act (hereinafter referred to as the Act). Invoking of section 3 of the said Act for the purpose of passing the impugned order, the first respondent has manifestly exercised its powers of subordinating the legislature for a purpose totally different from that contemplated under section 3 of the said Act and as such the exercise of the power by the first respondent is clearly a colourable exercise of power and as such the impugned order has to be declared as unconstitutional.
2. The respondents have not filed any counter in this writ petition. However since the constitutional validity of the order, mostly depends upon the power of the legislative competence of the first respondent, this court felt that the matter can be disposed of without adjourning the same for filing counter, especially when the matter is pending for nearly 8 years.
3. The learned counsel for the petitioner raised the following questions:
(1) under the provision of section 3 of the abovesaid Act, the Central Government is entitled to pass an order for regulating or prohibiting the production, supply and distribution of the essential commodities. The impugned order is not intended for any one of the purposes mentioned in section 3 of the said Act.
(2) Section 3(6) of the said Act requires the impugned order to be placed before both the houses of Parliament, since the same has not been complied with the impugned order is unconstitutional and cannot be enforced.
(3) Clause 2(c) of the impugned order defines the processor excluding the oil companies specified in schedule 1 to the order. Some of the oil companies specified in schedule 1 are owned by the Government companies and some by Government themselves. Those oil companies also deal with the same product as dealt by the petitioner and as such the members of the petitioner's Association and the oil companies specified in schedule 1 are similarly situated and as such the exemption granted to the companies specified under schedule 1 will amount to violation of Article 14 of the Constitution of India. The Government owned companies as well as the companies owned by the Government undertakings have been treated on a different footing without any reasonable classification. In the impugned order, the power of seizure from the premises of the processor or the dealer, has been given to the Officer and the first respondent has nominated the oil companies which would have been covered by the impugned order, but for the exclusion of the same, as the laboratories for testing the seized samples which means the competitors of the petitioners have been vested with the power to render the reports. Hence the impugned order is arbitrary and violative of Article 14 of the Constitution of India.
4) 2(d) of the impugned order states that the lubricating oil or grease shall be deemed to be adultemative, if the same does not meet the specifications declared therefor by the processor. The processors are supplying the products as per the prescription of the customers and as such it is not the choice of the processor to have the specification with the regard to this product. Hence the restriction on dealings by imposing various specifications for the product would be a bar for free trade and as such the same is violative of Article 19(f) of the Constitution of India and 301 of the Constitution of India.
4. On the contrary, the learned counsel for the first respondent contended that section 3 of the above said Act provides for the regulation of quality also, since the subjects mentioned in section 3 is not an exhaustive one. Further the imposing of restriction in the trade by invoking section 3 of the the said Act is a policy decision of the Government in the public interest and as such the same cannot be questioned before the court. Moreover the court also do not have jurisdiction to have a judicial review of the Government policies. The companies mentioned in schedule 1 of the impugned order are the Government companies which are standing on a different footing. Normally, the companies owned by the Government cannot be treated as private companies and treated on par with the same. The two are different and distinct classes by themselves and as such there cannot be any comparison between the two in order to attract Article 14 of the Constitution of India. Schedule 2 specifies the laboratories in which the specification can be tested. The companies mentioned in schedule 1 do not have any control over the laboratories mentioned in schedule 2 and as such it cannot be said that the companies mentioned in schedule 1 that the competitors of the trade have been conferred with the power of testing the product and giving the report therefor.
5. Finally, the non-placement of the order before the Houses of Parliament in accordance with section 3(6) of the above said Act do not make the impugned order unconstitutional as the direction is not mandatory and only directory in nature.
6. So far as the first contention of the learned counsel for the petitioner is concerned, it is his case that section 3 of the Essential Commodities Act empowers the Central Government to pass an order for regulating or prohibiting the production, supply and distribution of the essential commodity, i.e., an order can be passed by the Central Government if it is of the opinion that it is required to (a) maintain or increase the supplies of any essential commodity (b) for securing their equitable distribution and availability at fair prices (c) for securing any essential commodity for the defence of India or the efficient conduct of military operations. Since the quality control could not fall under any one of the above mentioned objects, it is not open to the Central Government to invoke section 3 of the Essential Commodities Act in order to legislate the impugned order and as such the same is excessive delegation of the legislative competence, which makes the impugned order unconstitutional. Section 3 of the Essential Commodities Act reads as follows:
"3. POWERS TO CONTROL PRODUCTION SUPPLY DISTRIBUTION ETC OF ESSENTIAL COMMODITIES:
(1) If the Central Government is of opinion that it is necessary or expedient so to do for maintaining or increasing supplies of any essential commod-ity or for securing their equitable distribution and availability at fair prices or for securing any essential commodity for the defence of India or the efficient conduct of military operations it may, by order, provide for regulating or prohibiting the production, supply and distribution thereof and trade and commerce therein"
7. In considering the need for passing any orders under the Essential Commodities Act, it is just and necessary to realise the purpose of the order and the intention of the Government. The object of section 3 of the said Act is for maintenance and increase in supplies, equitable distribution and availability at fair price, and with that object in view, the Government has to take measures for regulating the production or manufacture of any essential commodity and for controlling the price at which such commodity may be sold. These measures are taken obviously in the interest of the consumers which is a paramount consideration. The interest of the producer or the manufacturer of an essential commodity is no doubt a factor to be taken into consideration, but surely it is of much lesser importance and must yield to the interest of the general public who are the consumers. In no case, the interest of the industry can be given preference and predominant consideration. This is clear from sub section 2 of section 3 of the said act. Clause (a) of sub section 2 of section 3 reads as follows:
"3(2)
(a) without prejudice to the generality of the powers conferred by sub section 1, an order made thereunder may provide - (a) for regulating by licences; permits or otherwise the production or manufacture of any essential commodity"
Sub section 2 of section 3 makes it clear that sub-section (1) of the section 3 of the said Act specifies the general powers which means that the subjects mentioned therein are not exhaustive. If that be so, it is open to the Government to pass any incidental order in respect of the subjects mentioned in section 3(1) of the said Act. More so, sub clause (a) of sub section 2 of section 3 provides for the power to regulate by licences, permits or otherwise the production or manufacture of any essential commodity.
8. The Supreme Court while dealing with section 3(c) of the above said Act in a case reported in 1990 S.C. 1276 has construed that the Government is empowered to take into account of the matters not only mentioned in clauses (a) to (d) therein but also the other relevant factors, as there is no restriction on the Government in the expression 'having regard to'. In fact, the Supreme Court has held that instead of 'having regard to' if the legislature intended to restrict the power of the Government, then they would have used the words 'having regard only to'. The relevant passage is as follows:
"29. We may in this connection point out that the petitioners have not furnished any data as to how that the prices determined by the Government would have been different had the ingredients of clauses (a) to (d) of the sub-section been examined with reference to each individual producer instead of a representative cross section of manufacturing units, Be that as it may, the expression 'having regard to' must be understood in the context in which it is used in the statute. See Union Of India v. Kamalabai Harjiwandas Parekh, . These words do not mean that the Government cannot, after taking into account the matters mentioned in clauses (a) to (d) consider any other matter which may be relevant. The expression is not "having regard only to" but "having regard to".
These words are not a fetter; they are not words of limitation, but of general guidance to make an estimate. The Government must, of course, address itself to the questions to which it must have regard, and, having done so, it is for the Government to determine what it is empowered to determine with reference to what it reasonably considers to be relevant for the purpose. The Judicial Committee in Commr. of Income-Tax v. Williamson Diamonds Ltd. 1958 AC 41, 49 observed with reference to the expression "having regard to":
"The form of words used no doubt lends itself to the suggestion that regard should be paid only to the two matters mentioned, but it appears to their Lordships that it is impossible to arrive at a conclusion as to reasonableness by considering the two matters mentioned isolated from other relevant factors. Moreover, the statute does not say "having regard only" to losses previously incurred by the company and to the smallness of the profits made. No answer, which can be said to be in any measure adequate, can be given to the question of "unreasonableness" by considering these two matters alone..."
See Commr. of Income-Tax, West Bengal, Calcutta v. Gungadhar Banerjee and Co. (P) Ltd., . See also Samswathi Industrial Syndicate Ltd. v. Union of India, . In State of Karnataka v. Rangantha Reddy, this court stated:
The content and purport or the expressions "having regard to" and "shall have regard to" have been the subject matter of consideration in various decisions of the courts in England as also in this country. We may refer only to a few. In Illingworth v. Welmsley, 1900 (2) QB 142 it was held by the court of appeal to quote a few words from the judgment of Romer C.J. at page 144: "All that clause 2 means is that the tribunal assessing the compensation is to bear in mind and have regard to the average weekly wages earned before and after the accident respectively. Bearing that in mind, a limit is placed on the amount of compensation that may be awarded..." In another decision of the Court of Appeal is Perry v. Wright, 1908 (1) KB 441 Cozens- Hardy M.R. observed at page 451: "No mandatory words are there used; the phrase is simply "regard may be had". The sentence is not grammatical, but I think the meaning is this: Where you cannot compute you must estimate, as best as you can, the rate per week at which the workman was being remunerated, and to assist you in making an estimate you may have regard to analogous cases." It is worthwhile to quote a few words from the judgment of Fletcher Moultol L.J. at page 458. Under the phrase "Regard may be had to" the facts which the court may thus take cognizance of are to be "a guide, and not a fetter." This court speaking through one of us (Beg, J., as he then was) has expressed the same opinion in the case of Saraswathi Industrial Syndicate Ltd. etc. v. Union of India, . Says the learned Judge at page 959 (of SCR): at p. 462 of AIR: "The expression " having regard to" only obliges the Government to consider as relevant data material to which it must have regard."
In state of V.P. v. Renusagar Power Co., , one of us (Mukharji, J., as he then was) observed: "The expression "having regard to" only obliges the Government to consider as relevant data material to which it must have regard......"
In O'May and Ors. v. City of London Real Property Co. Ltd.. 1982 (1) All ER 660 at 665 H.L. Lord Hailsham stated:
"A certain amount of discussion took place in argument as to the meaning of "having regard to" in S. 35. Despite the fact that the phrase has only just been used by the draftsman of S.34 in an almost mandatory sense, I do not in any way suggest that the court is intended or should in any way attempt to bind the parties to the terms of the current tenancy in any permanent form..."
30. The words "having regard to" in the sub-section are the legislative instruction for the general guidance of the Government in determining the price of sugar. They are not strictly mandatory, but in essence directory."
9. As already pointed out, section 3(2) itself makes it clear that whatever mentioned in section 3(1) of the said Act is the general power of the Government. Section 3(1) does not restrict the power of the Government only with regard to the three subjects mentioned therein i.e. to maintain or increasing supplies of any essential commodity; for securing the equitable distribution and availability at fair prices and for securing the essential commodity for the defence of India or the efficient conduct of military operations. When there is no restriction in the provision, then it cannot be said that the provision fetters the powers of the Government in taking into consideration of the other questions or factors in the public interest or in the interest of the consumers.
10. Moreover, sub clause (a) of sub-section 2 empowers the Government to make an order providing for the regulation of the production or the manufacturing of the essential commodities by licences, permits or otherwise. If we take the object of the impugned order, it is clearly mentioned that the impugned order has been made with a view to check the marketing of spurious/sub- standard lubricating oils and greases in the country, the question of issuing a quality control order to ensure against the manufacture, blending, refining or re-refining, storing, transporting and selling of these oils without a valid licence from the competent authority. Hence the Government has got power to regulate the production and manufacture of the essential commodity by the licences and in the impugned order it is only prescribed that the dealer, manufacturer, refiner or re-refiner must possess a licence. The production or manufacture occurring in sub clause (a) of sub section 2 would envisage that there should not be any adulterated or spurious manufacture or production and this should fall under the clause of prohibiting the production, supply or distribution of the adulterated essential commodities.
11. So far as the second contention of the learned counsel for the petitioner is concerned, it is true that sub section (6) of section 3 of the Essential Commodities Act requires that every order made in section 3 of the said Act shall be laid before both the Houses of Parliament. The said section is as follows:
"3(6) every order made under this section by the Central Government or by any Officer or authority of the Central Government shall be laid before both the Houses of Parliament, as soon as may be, after it is made."
The learned counsel for the petitioner stressed relying upon the word "shall occurring in the section and contended that every order under section 3 must be placed before both the Houses of Parliament. It is unnecessary to discuss in detail on this question in view of the precedents of various High Courts. The learned Single Judge, has held as follows: In Priti Singh v. Union of India Case, AIR 1959 Mani. 45 "12. It will be thus clear that the sub section does not provide for the result that will follow, if the provisions of that sub-section are not compiled with. In such a case it cannot be said that the provisions are mandatory, which means that they are only directory. It does not appear that this contention was raised in the trial court, and the presumption would also be, that the duty cast by that sub- section, was duly complied with. But in any case it will not have the effect of making the Act void, and of no force.
The question was considered in Krishnan, D.K. v. Secy. Regional Transport Authority Chitoor, (s), AIR 1956 And. 129, I am in respectful agreement with the view taken in that case. The view finds support from the observations in State of U.P. v. Manobodkan Lal Srivastava, (s) , and Pratap Singh v. Shri Krishna Gupta, (S) also. I must therefore with great respect differ from the view taken in AIR 1956 Mani. 25, and find that the order in question cannot be challenged on the ground."
A similar view had been expressed by a Division Bench of Andhra High Court in a judgment reported in Krishnan v. Secy. R.T. Authority, AIR 1956 A.P. 129, wherein it is stated as follows:
"38. The aforesaid discussion in the text books and the case law indicate the various methods adopted by the Parliament or legislature to control delegated legislation. That control is sought to be effected by directing the rules or regulations made by the delegated authority to be laid before the parliament.
But the statutory provisions made in the different acts with regard to the laying of delegated legislation before the Parliament adopted different phraseology leading to different results. A correct summary of the different modes of phraseology adopted by the Parliament has been given at page 277 of Craies on Statute Law which we have already extracted supra.
The following briefly are the principal kinds of statutory instruments (1) those which are subject to negative resolution, (2) those which are subject to affirmative resolution, (3) those which are required to be laid before Parliament but are not payable and (4) those in regard to which Parliament in clear terms made laying of the rules "as a condition precedent or a condition subsequent specifying the consequences of its non- compliance.
The same variations of Parliamentary control are also adopted in the Indian Statutes. Where the statute makes the laying of the rules before parliament a condition precedent or the resolution of the Parliament a condition subsequent, there is no difficulty as, in the former case, the rule has no legal force at all till the condition precedent is complied with and in the latter case, it ceased to have force from the date of non-compliance with the condition subsequential.
Nor can there be any difficulty in a case where the Parliament or the legislature, as the case may be, specifically prescribes the legal effect of non-compliance with that condition. But more important question arises when the Parliament directs me laying of the rules before the Parliament without providing for the consequences of non-compliance with the rule.
As aforesaid, learned authors are inclined to take different views on the effect of non-compliance with such a rule. We must concede there is force in the view expressed by Bernard Schwartz in this book on "The Law and Executive in Britain" that the rule is mandatory.
But, after considering the question carefully, we are inclined to adopt the view that in the case of a statute directing rules to be laid before the parliament or the Legislature without any condition attached, the rule is only directory. Though the statute says that the rules shall be laid before the Parliament as the provision in the statute is conceived in public interests, the declaration of the duty by the Minister or other officer concerned in not following the procedure should not be made to affect the members of the public governed by the rules.
It may be asked and legitimately too that when the Parliament to keep its control over delegated legislation directs that the rule shall be laid before the Parliament and if that rule is construed as directory, the objects itself would be defeated. But the Parliament or the legislature, as the case may be if they intended to make that rule mandatory, they would have clearly mentioned the legal consequences of its non-compliance as they have done in other cases.
In such a case, the Parliament may assume that the Minister discharges the duty entrusted to him and ordinarily, except perhaps by oversight or mistake, there is no reason to apprehend that a responsible Minister or his subordinates will neglect the duty cast on them. If there is any such dereliction of duty, Parliament or the Legislature can always take appropriate action against the Minister or the officer concerned.
We have come to this conclusion rather reluctantly as in our country, which has recently adopted the democratic constitution, there is greater reason that Parliamentary control should be more effective than in England where Parliamentary institutions have been in existence for a long time.
This defect perhaps may be cured by the Indian Parliament or the Legislature, as the case may be, making a law similar to the Statutory Instruments Act, 1946 made in England prescribing definitely the conditions, the period and the legal effect of the laying of the rules before the Parliament or me Legislature,"
In the above case, the Andhra Pradesh High Court has considered the validity of Rule 134-A of the Madras Motor Vehicles Rules. 1940.
11. From the above said judgments, it is clear that to consider the validity of the impugned order, first of all we have to consider as to whether section 3(6) of the said Act is mandatory. The Statute may require that the Rules made under it shall be laid before the Houses of Parliament "as soon as may be", if the Statute expressly provides that if the rules are not laid before the Parliament, they shall have no effect and then the requirement of the section may become mandatory. The present section 3(6) of the above said Act merely states that the order shall be placed before both the Houses of Parliament. But the section does not prescribe any consequence with regard to the non-compliance of the requirement. When the non-compliance has not been specified, it cannot be construed as mandatory, making the order in effective, but it is only a direction and as such the non-placement of the order is of no consequence. Hence it cannot be said that the order is unconstitutional or ultrawires, as the same was not placed before the Parliament as required under section 3(6) of the said Act.
12. So far as the third contention of the learned counsel for the petitioner is concerned, the same cannot be countenanced. Rule 5 of the impugned control order requires any person deciding to carry on business of a processor to have a licence. Hence only the processors as defined in sub clause (c) of Rule 2 are liable to take licence. As already pointed out, the purpose of the impugned order itself is to regulate the manufacture and sale of the lubrication oil and greases to avoid the adulteration or spurious marketing of the product. It is the contention of the learned counsel for the petitioner, that the refiners or re-refiners as well as the manufacturers are keeping the oil without any specification as the same is required to be supplied to the customers at their specifications. It is clear that the lubrication of the oil and greases are being used on the industrial side as well as for transport vehicles. It cannot be said that each customer will give the special specification and demand the product in accordance with the specification from the processor. It is the well-known fact that the lubricating oil as well as the greases in different grade are being kept ready for sale and the customers according to their need and the purpose, purchase the product. In fact it is an admitted fact that sometimes the petitioners supply their product to the companies mentioned in schedule 1. When it is said that they are supplying to the companies mentioned in schedule 1, then it cannot be said that those companies are competitors of the petitioner's Association in trade. The companies specified in schedule 1 are being supplied by the petitioner's association and that may also be a reason for imposing the quality control by the Government. When these orders are in the interest of the consumers, the interest of the consumer is the pre-dominant one comparing with the welfare of the industry.
13. Article 14 of the Constitution of India can be attracted only if a group of persons are differently treated from another group of persons who are similarly placed. Here the petitioner's association cannot be equated with the companies specified in schedule 1, of the impugned order because they are either owned by the Government themselves or the Government undertakings. Naturally, neither the Government, nor the Government undertaking can be similarly treated with that of the companies of firms owned by the individuals. Hence it cannot be said that the impugned order violates Article 14 of the Constitution of India. Further clause 5 of the impugned order prescribes for the issue of licence and clause 6 of the impugned order provides for the cancellation of the licence and clause 7 provides an appeal against those orders of refusal Of licence or the cancellation of the licence, since the order prescribes only that the licence has to be taken for the trade in order to have a check in marketing of spurious or sub-standard lubricating oils and greases, it cannot be said that imposing of the condition of taking licence will amount to the violation of Article 19(f) of the Constitution of India. Sub clause (a) of sub section (2) of section 3 of the said Act empowers the authorities to regulate the trade by licence or permit and the restriction of the trade by the requirement of the licence at any rate is only to have the quality control in the interest of the consumers and this cannot be said to be in violation of Article 14 and Article 19 of the Constitution of India.
14. For all the reasons stated above, there is no merit in the above writ petition and it is accordingly dismissed, with costs Rs. 500.