Patna High Court
State Of Bihar And Ors. vs Oswal Chemicals & Fertilizers Ltd. And ... on 2 April, 2001
Equivalent citations: AIR2001PAT184, AIR 2001 PATNA 184, (2001) 2 PAT LJR 691, (2001) 3 BLJ 1, (2001) 2 EFR 630, 2001 BLJR 2 1101
Author: D.P.S. Choudhary
Bench: D.P.S. Choudhary
JUDGMENT Nagendra Rai, J.
1. The State of Bihar and its officers, namely, the Agriculture Production Commissioner and Director of Agriculture are the appellants and they have filed the present appeal under Clause 10 of the Letters Patent of the Patna High Court against the order dated 22-6-1999 (reported in AIR 2000 Patna 19) passed by a learned single Judge, by which, he has set aside the orders passed by the Registering Authority and the appellate-authority under the provisions of the Fertiliser (Control) Order, 1985, (hereinafter referred to as the 'Control Order'), cancelling the certificate of registration granted to the respondents to carry on the business of selling fertiliser under E.C.A, quota as wholesale dealer in the State of Bihar.
2. Respondent No. 1 is a Company registered under the Companies Act and respondents No.2 and 3 are the Director and employee of the said Company. They filed the writ application for quashing the order dated 29-3-1999 by appellant No. 2 the Agriculture Production Commissioner dismissing the appeal against the orders dated 18-1-1999 and 24-2-1999, passed by appellant No,3 Director of Agriculture, appointed as Registering Authority as well as Controller under the Control Order cancelling the Certificate of Registration granted to respondent No. 1 to sell the fertilisers as a wholesale dealer in the State of Bihar and the same has been quashed by the learned single Judge as stated above.
3. Respondent-Company has its registered office at Shahajahanpur and it set up a modern plant at Shahajahanpur in the State of Uttar Pradesh. One of the objects of the Company is to manufacture and sell urea fertilizer, for which it has set up a plant at Shahajahanpur itself. The respondent-Company applied for grant of Certificate of Registration for carrying on business in sale of fertilizers in statutory Form 'A' as provided under the Control Order. The Certificate of Registration in Form 'B' was granted on 10-5-1996 by the Registering Authority to deal in fertilizer under the E.C.A. quota is a wholesale dealer in the State of Bihar. The said Certificate of Registration was valid up to 31-3-1999.
4. The Central Government under the provisions of the Control Order fixes the prices of urea and also makes allocation of urea to different States in different seasons. The Central Government is also empowered to issue direction to the manufacturer to sell the fertilisers produced by it in quantity and in such States and within such period as may be specified thereunder, The Respondent-Company was directed to supply 90.000 M.T. of urea to the State of Bihar for the Rabi season 1998-99 i.e. October, 1998 to March, 1999. The Central Government, thereafter, issued different monthly movement orders under the provisions of the Fertiliser (Movement Control) Order, 1973 (hereinafter referred to as 'the Movement Control Order') for supply of urea by respondent-Company to the State of Bihar. Under Clause 3 of the Movement Control Order, direction was issued directing supply of quantity of urea mentioned therein to the State of Bihar. The movement order for the month October was issued on 30-9-1998. After receipt of such movement order/allocation order, the respondent-Company on 21-10-1998 submitted a districtwise allocation of urea to the Director of Agriculture-cum-Controller of Fertiliser, who is also the Registering authority against the 90,000 M.T. of Urea fertiliser allocated by the Central Government for the Rabbi season'. According to the allocation issued to the respondent-Company, it was intended to make through its dealership network. A copy of the said letter was appended as Annexure 4 to the writ application.
5. The fertilisers were to be moved in bulk from the manufacturing unit and the same were to be brought by Railway at different places and different districts and for that the Railway was requested to provide rakes, consisting of large number of wagons. Shahajanpur is connected with broad gauge and meter gauge. The Railway showed its inability to provide Railway rakes on broad gauge for carrying urea fertilisers for supply to the district of East Champaran and agreed to provide meter gauge Railway rake for the same to be delivered at rake points at Adapur and Raxaul. As there was demand of fertiliser in the peak season of December and as the movement order was already issued, the respondent-Company accepted the offer of the Railway for movement of urea from Shahajahanpur to Raxaul and Adapur on meter gauge Railway rake points. The respondent-Company informed the District Agriculture Officer on 8-12-1998 that rakes were to arrive at Raxaul and Adapur (Meter gauge) Railway rake points in the meantime, on 17-12-1998, the Registering Authority (the Director of Agriculture appellant No.3) issued an order (Annexure 6) indicating districtwise allocation of the fertilizers to be supplied by the respondent-company under E.C.A. quota and other manufacturers for the aforesaid Kharif season as well as the Railway rake points from where the supply has to be made to the different districts indicated therein. It also provided for buffer god owns at Railway rake points and prior approval of the authorities mentioned therein before receipt and sale of urea to the wholesalers. The respondent-Company was ordered to supply 1025 M.T. of urea to the East Champaran and Motihari was fixed as a rake point for supply of urea to the East Champaran and West Champaran. It is to be mentioned that so far as West Champaran is concerned, no allocation of supply of the urea was provided in the allocation order. A copy of the said order was appended as Annexure 6 to the writ petition.
5A. According to the respondent-Company, as the aforesaid direction was issued in the month of December by the Fertiliser Controller under the Control Order, by that time, urea was already despatched for the districts of East Champaran and West Champaran by the meter gauge and was to arrive at relevant rake points at Adapur and Raxaul and as such on 22-12-1998, the respondent-Company requested the Director of Agriculture to include these Railway rake points at Raxaul and Adapur as additional rake points. The respondent-Company is alleged to have supplied 3285.35 metric tons of urea in East Champaran, 1147.55 metric tons in West Champaran. Rakes arrived at Adapur and Raxaul near Nepal border on 16th and 24th December, 1998, which had left Sahjahanpur on 6th and 16th December, respectively. On 4-1-1999 the Director of Agriculture-cum-Controller of Fertiliser-cum-Registering Authority issued a show-cause notice to the respondent-Company and other two manufacturers for cancellation of their Certificates of Registration on the ground mentioned therein and also suspended the Certificate of Registration. A copy of the said show-Cause notice was annexed as Annexure 8 to the writ petition. In the show-cause notice, following grounds were given :--
(i) You have not informed the arrival of Rail Rakes of Urea in Rabi 1998-99 to the concerned authority.
(ii) You have failed to comply with the orders of Director of Agriculture, Bihar, Patna. regarding Rail points.
(iii) Without approval of the list of distribution of Urea by DM/DAU, East Champaran, you have distributed the same.
(iv) You have sold the Urea directly to the farmers making fake list of farmers.
(v) You have not maintained proper records.
(vi) You have violated the Rules of Fertiliser Movement Control Order.
(vii) You have furnished false information in return, declaration & records.
(viii) You have been found guilty for non-furnishing of returns statements and other information as required to the concerned authority.
(ix) You have been found guilty for non-functioning required information to the fertilizer Inspector.
(x) You have been found guilty for abetment to contravention of FCO-1985 etc."
6. Respondent-Company filed its show-cause and denied the allegations made therein. It was stated that the Railway offered to provide a meter gauge for transportation of Urea from manufacturing unit and rake points at Adapur and Raxaul, for which an information has already been to the authorities and the supplies were made to the dealers after information was given to the District Agriculture Officer and other authorities, It was also said that no sale was made directly to the agriculturists and it has maintained the proper records and furnished all informations as and when required by the authorities under the relevant provisions.
7. The Director of Agriculture-cum-Fertiliser Controller-cum-Registering Authority cancelled the certificate of registration and the said decision was taken on 18-1-1999, which was annexed as Annexure 12 and which was communicated to the respondent-Company by letter dated 4-2-1999. a copy of which was annexed as Annexure 10 to the writ petition.
8. The Respondent-Company preferred an appeal against the order dated 4-2-1999 and during the pendency of the appeal, a complaint was made by the respondent-Company that no reasons have been assigned in the impugned order. Thereafter, the appellate authority directed the Registering Authority to give a detailed order and then the Registering Authority informed that the matter has already been disposed of by a reasoned order dated 18-1-1999, which has also been challenged in the said appeal. The appeal was dismissed on 29-3-1999 by the Appellate Authority, a copy of which was appended as Annexure 14 to the writ petition.
9. According to the Respondent-Company, the Director of Agriculture-cum-Fertiliser Controller-cum-Registering Authority under the Control Order has no power to issue directions as contained in letter dated 17-12-1998 regarding districtwise allocation of fertilisers, approval of the list of wholesalers and fixation of Hallway rake points under the provisions of the Control Order and as such the cancellation of certificate of registration for violation of the said directions is not valid in law. Further stand of the respondent-Company is that after allocation of Urea to be supplied by it to the State of Bihar and issuance of movement order by the Central Government, it took prompt steps and requested to provide rake for supply of urea to different districts of Bihar and the Railway offered only meter gauge rake points at Adapur and Raxaul for bringing the urea from the manufacturing unit for supply of urea to the districts of East Champaran and West Champaran and the respondent-Company taking into consideration the need of the farmers brought the fertilisers through meter gauge which were despatched before issuance of direction dated 17-12-1998 by the concerned authorities and as such there was no question of violating any such directions. It has acted in bona fide manner and the authorities should not have cancelled the Certificate of Registration for violation of the order/direction contained in letter dated 17-12-1998.
10. The stand of the appellant-State is that the urea is a controlled item under the Essential Commodities Act (hereinafter referred to as 'the Act') and the Director of Agriculture being the Registering Authority as well as the Controller under the Control Order has power to issue directions as contained in letter dated 17-12-1998 regarding districtwise allocation of urea, which the manufacturer has to supply in terms of the order passed by the Central Government under E.C.A. quota. He has also power to fix and specify the railway rake points for particular districts for receipt, unloading and storage of urea by such manufacturers. insist on buffer godowns at such authorised Railway rake points. In other words, 'directions with regard to districtwise allocation of urea as contained in the aforesaid letter dated 17-12-1998 were validly issued and non-compliance or violation of the same would result in cancellation of Certificate of Registration granted under the Control Order. Accordingly, the certificate was cancelled by the concerned authority. Further stand of the appellant-State is that the Rabbi crops are usually transplanted in Bihar after 15th November and the requirement of urea peaks up in the first fortnight of December and as such the directions were issued by the authorities on 17-12-1998. In fact, there was no delay in issuing such directions. Other manufacturers have obeyed the aforesaid directions but the respondent-Company did not obey the same. The assertion made by the respondent-company that it has already despatched the urea through the meter gauge prior to issuance of the aforesaid letter is only an excuse to justify the violations made by it of the aforesaid directions.
11. The learned single Judge quashed the order of cancellation of Certificate of Registration on the ground that the Director of Agriculture-cum-Fertilizer Controller-cum-Registering Authority has no power to issue directions as contained in letter dated 17-12-1998 and as such for violation of the same the Certificate of Registration cannot be cancelled under Clause 31 of the Control Order. In other words, it has held that the grounds of cancellation of Certificate of Registration were not covered by Clause 31 of the Control Order.
12. Before adverting to the respective submissions advanced at the Bar, it will be relevant to state in brief the provisions having relevancy to decide the question in controversy. The Parliament enacted the Essential Commodities Act (hereinafter referred to as the Act) in exercise of power vested under Entry No. 33, List-III of the Seventh Schedule of the Constitution for the control of the production, supply and distribution of and trade, and commerce in certain commodities in the interest of general public. Section 3 of the Act authorises the Central Government to issue an order, which provides for regulating or prohibiting the production, supply and distribution of essential commodities and trade and commerce, with the object for maintaining or increasing supplies of any essential commodity or for securing their equitable distribution and availability at fair prices mentioned therein. Sub-section (2)(1)(d) thereof authorises the Central Government to issue order for regulating by licences, permits or otherwise the storage, transport, distribution, disposal, acquisition, use or consumption of any essential commodities. In exercise of the power under the said Act, the Central Government has issued Control Order as well as the Fertiliser Movement Order. Sub-section (5) of Section 3 of the Act requires that the order of the general nature or effecting class of persons, be notified in the Official Gazette and Sub-section (6) thereof provides that every order made under the said section by the Central Government or by any officer or authority of the Central Government shall be laid before both the Houses of Parliament after it is made. Section 5 deals with the delegation of powers, under which the Central Government may delegate the power to any officer or authority subordinate to the Central Government or the State Government or an officer or authority subordinate to the State Government to make orders or issue notifications under Section 3 by a notified order with regard to the matter enumerated in the order on such conditions as may be specified in the notified order/direction. Admittedly, in this case no power has been delegated by the Central Government to issue any order or notification or direction to the State Government in exercise of delegated power.
13. Clause 3 of the Control Order authorises the Central Government to fix the prices of fertilisers. Clause 6 provides that the Central Government may, with a view to securing equitable distribution and availability of fertilisers to the farmers in time direct any manufacturer/importer to sell the fertilisers produced by him in such quantities and in such State or States and within such period as may be specified in the notification published in the Official Gazette. The Central Government has power to appoint the Controller of Fertiliser and the Registering Authority is appointed under Clause 26 by the State Government by notification published in the Official Gazette. Clause 8 provides for application for registration. Every person desiring to obtain Certificate of Registration under the Control Order for selling fertilisers, whether in wholesale or retail or both, has to make an application before the Registering Authority and the Certificate of Registration is granted under Clause 9. Under Clause 27, there is a provision for appointment of Inspectors by the State or Central Government. The Inspectors have power to make search, seizure and to require the manufacturers, dealers etc. to give any information in his possession with respect to the manufacture, storage and disposal of any fertiliser manufactured or, in any manner handled by him and other duties. Clause 31 contains a provision with regard to suspension/cancellation of certificate of registration and Sub-clause (1) thereof is relevant, which provides that after giving an opportunity of hearing, the certificate of registration may be suspended or cancelled on the two grounds : (a) that such certificate has been obtained by mis-representation as to material particulars; and (b) that any of the provisions of this Order or any of the terms and conditions of such certificate has been contravened or not fulfilled. The certificate of registration is granted in Form 'B', in which a description of the place and type of business has to be mentioned. Location of sale depot and the location of godowns attached to the sale depot have to be made in the Certificate of Registration. Terms and conditions of certificate of registration are as follows :-
"(1) This certificate of registration shall be displayed in a prominent and conspicuous place in a part of the business premises open to the public.
(2) The holder of the certificate shall comply with the provisions of the Fertilizer (Control) Order, 1985 and the notification issued thereunder for the time being in force.
(3) The certificate of registration shall come into force immediately and be valid up to .....
UNLESS PREVIOUSLY CANCELLED OR SUSPENSED (4) The holder of the certificate shall from time to time report to the Registering Authority any change in the premises of sale depot and godowns attached to the sale depot.
(5) The wholesale dealer/retail dealer shall submit a report to the Registering Authority, with a copy to the Block Development Officer or such other officer as the State Government may notify, in whose jurisdiction the place of business is situated, by the 5th of every month, showing the opening stock, receipts, sales and closing stocks of fertilisers in the preceding month. He shall also submit in time such other returns as may be prescribed by the Registering Authority.
(6) The industrial dealer shall submit a report to the Central Government by the 15th of April for the preceding year, showing the opening stocks as on 1st of April of the reporting year, sourcewise receipts during the year, sale and closing stock of fertilisers along with the sourcewise purchase/sale price.
(7) The wholesale or retail dealer, except where such a dealer is a State Government, a manufacturer. importer or a pool handling agency, shall not sell fertiliser for industrial use and, as the case may be, an industrial dealer for agriculture use."
14. Movement Control Order under Section3 of the Act has been issued by the Central Government to secure equitable distribution of fertilizers in the States of India. According to the said provision, the movement of fertilisers from one State to other State has to be made in terms of the aforesaid provisions.
15. Learned counsel for the appellants raised two points. Firstly he submitted that the direction as contained in the letter dated 17-12-1998 (Annexure 6 to the writ application), making districtwise allocation and providing other conditions have been issued under Section3 of the Act and as such the violation of the same will be a ground to cancel the licence under Clause 31 of the Control Order. The learned single Judge has wrongly held that the Registering Authority has no power to issue such directions. Secondly, he submitted that even assuming that the said directions have not been issued under Section3 of the Act, the directions issued by the Registering Authority are not in the nature of restrictions to carry trade and business by the respondent-Company which is a fundamental right as guaranteed under Article 19(1)(g) of the Constitution of India, but the said directions are regulatory in nature and issued in public interest and as such they cannot be held to be ultra vires or unauthorised in law.
16. Learned counsel for the respondent-Company reiterated the same very submission, which was urged before the learned single Judge. He submitted that the directions issued by the Registering Authority under the Control Order cannot be treated as a direction under Section 3 of the Act for the reason that no notification of the Central Government has been brought on the record under Section 5 of the Act authorising the State Government or the Registering Authority being the Director of Agriculture to issue directions with regard to the Control Order. He further submitted that, the Registering Authority under the Control Order has no power to issue such directions and the respondent-Company has not violated any terms and conditions of the registration and as such cancellation of licence on the ground of violation of directions contained in letter dated 17-12-1998, which were issued by an authority having no competence to issue the same, was rightly quashed by the learned single Judge.
17. Article 19 of the Constitution of India guarantees rights of freedom regarding the matters enumerated therein, including the right to practice any profession or to carry on any occupation, trade or business. However, Clauses (2) to (6) of the said Article permit the legislature to make law imposing restrictions in exercise of the fundamental rights of freedom guaranteed under the aforesaid Article. With regard to trade, profession or business, Clause (6), inter alia, provides that a reasonable restriction may be put on the exercise of the aforesaid rights of carrying trade and business in the interest of general public.
18. In the case of Narendra Kumar v. Union of India, reported in A.I.R. 1960 SC 430, a Constitution Bench held that the law can be made putting a restriction which in some cases may amount to prohibition with regard to the fundamental rights guaranteed under the aforesaid Article provided the same is reasonable and is in interest of the general public. In applying the test of reasonableness, the Court has to consider several relevant factors including the evil that was sought to be remedied by such law, ratio of the harm caused to individual citizens by the proposed remedy, to the beneficial effect reasonably expected to result to the general public. It is relevant to quote paragraphs 18 and 19 of the said judgment as follows :--
"18. As it was to remedy the harm that would otherwise be caused by the provisions of Article 13, that these saving provisions were made, it is proper to remember the words of Art. 13 in interpreting the words, "reasonable restrictions, on the exercise of right used in Clause (2). It is reasonable to think that the makers of the Constitution considered the word "restrictions" to be sufficiently wide to save laws "inconsistent" with Article 19(1) or "taking away the rights" conferred by the Article, provided this consistency or taking away was reasonable in the interest of the different matters mentioned in the clause. There can be no doubt, therefore, that they intended the word "restriction" to include cases of "prohibition" also. The contention that a law prohibiting the exercise of a fundamental right is in no case saved cannot, therefore, be accepted. It is undoubtedly correct, however, that when, as in the present case, the restriction reaches the stage of prohibition special care has to be taken by the Court to see that the test of reasonableness is satisfied. The greater the restriction, the more the need for strict scrutiny by the Court.
19. In applying the test of reasonableness, the Court has to consider the question in the background of the facts and circumstances under which the order was made, taking into account the nature of evil that was sought to be remedied by such law. The ratio of the harm caused to individual citizen by the proposed remedy to the beneficial effect reasonably expected to result to the general public. It will also be necessary to consider in that connection whether the restraint caused by the law is more than was necessary in the interests of the general public."
19. The same view has been reiterated in the case of Bishamber Dayal Chandra Mohan v. State of U.P., reported in AIR 1982 SC 33, wherein it has been held that the fundamental right to carry on trade and business guaranteed under Article 19(1)(g) must yield to the common good. The Court must balance the individual's rights of freedom of trade and the freedom of inter-State trade and commerce as against the national interest and a reasonable restriction can be imposed on a person in enjoyment of the right. The test of reasonable restriction should be applied to each individual Statute and no abstract standard, or a general pattern of reasonableness can be laid down as applicable in all cases. The restriction which arbitrarily or excessively invades the right cannot be said to contain the quality of reasonableness and unless it strikes a proper balance between the freedom guaranteed under Article 19(1)(g) and the social control permitted under Clause (6) of Article 19, it must be held to be wanting in that quality. However, such restrictions or social control must be made by a law or order having a statutory force and not by a mere executive or departmental instructions (See Bijoe Emmanuel v. State of Kerala, reported in AIR 1987 SC 748).
20. Thus, the fundamental right of trade and business is not absolute and the law permits a social control under Clause (6) of Article 19 of the Constitution. However, such restrictions should be reasonable and in public interest and to decide the question as to whether the particular Statute is reasonable or not relevant factors; such as evil sought to be remedied, the benefit available to the public and other relevant factors have to be considered.
21. The law is well settled by catena of judgments of the Apex Court that restrictions to the freedom guaranteed under Article 19 of the Constitution must be by a law or order having statutory force and not by executive instructions.
22. The first question for consideration is as to whether directions contained in the letter dated 17-12-1998 are the directions issued under Section3 of the Act or not ? Nothing has been brought on behalf of the appellant-State to show that the Central Government by a notified order has delegated the power to the Director of Agriculture or the Registering Authority to issue any direction under the Control Order. In that view of the matter, the said directions cannot be said to have been issued under the Act. In absence of any delegation, the Registering Authority has no power to issue any such directions under Section 3 of the Act.
23. Next question for consideration is as to whether the Registering Authority has power under the Control Order to issue any such order or not ? Under the Control Order, the Registering Authority has power to grant or refuse Certificate of Registration in Form 'B' and the terms and conditions of Form 'B' have already been enumerated above. The Registering Authority has power to suspend and cancel the Certificate of Registration on two grounds as mentioned above. The relevant ground for the purpose of this case is Clause 31(l)(b) of the Control Order, which provides that the registration may be cancelled on the ground of contravention or non-fulfilment of any of the provisions of the Control Order or under the terms and conditions of the certificate. Thus, the Control Order does not authorise the Controller to issue any direction.
24. Now, it has to be seen as to whether the terms and conditions of registration as provided in From 'B' authorise the Registering Authority to issue directions as contained in the aforesaid letter. From a perusal of the terms and condition as enumerated above, the Registering Authority has no power to issue directions allocating districtwise supply of urea by manufacturer or incorporating other terms and conditions regarding rake points without the prior approval of the authority before sale etc.
25. Learned counsel for the appellants however submitted that condition No. 5 authorises the Registering Authority to issue such direction. Condition No. 5 only provides that the dealer has to submit return showing opening of stock, receipt, sales and closing stock of fertiliser in the preceding month and to submit other returns as may be specified by the Registering Authority. Submission of the return with regard to stock etc. cannot authorise the Registering Authority to issue directions controlling the movement of the fertiliser. As such, the Registering Authority has no authority in law to issue the directions as contained in the letter dated 17-12-1998.
26. Learned counsel for the appellants further submitted that in the registration Form 'B', location of godowns attached to the sale depot has to be given, and as at Adapur and Raxaul, where the Railway rakes were received, the respondent-Company has no godown there was violation of the terms and conditions of the licence justifying the cancellation.
27. The said point would have some merits if it would have been found that the fertilisers received at Adapur and Raxaul were disposed of by the respondent-Company at that places. There is no such material on the record nor is evident from the order passed by the authority. The learned single Judge has rightly held that there is no requirement in Form 'B' that the godowns must be located at places where the Railway rakes are received.
28. Learned counsel for the appellant-State also submitted that the directions are not restrictions on trade and business of the respondent-Company but they were regulatory in nature and such regulatory directions can be issued by the authority for the purpose of carrying out the object and purposes of the Act. Such directions cannot be struck down on the ground of lack of authority and in the support of the same he relied upon the decision of the Supreme Court in the case of Bishamber Dayal Chandra Mohan (AIR 1982 SC 33) (supra).
29. I am unable to agree with the aforesaid submission, in the said case, the State Government issued certain directions to secure compliance of the provisions of the orders issued under the Essential Commodities Act and the Apex Court held that the State in exercise of executive power can issue such directions. In this case, the directions contained in letter dated 17-12-1998 even if treated to be regulatory in nature with a view to achieve the object of the Control Order have not been issued by the State Government, but by the Registering Authority, who under the Control Order has no such power.
30. Thus, there is no merit in this appeal and the same is dismissed.