Madras High Court
Silver Cloud Tea Factory And Another vs Union Of India And Another on 21 December, 1993
Equivalent citations: AIR1994MAD283, AIR 1994 MADRAS 283, (1994) 2 MAD LJ 331
ORDER Somasundaram, J.
1. In all these writ appeals, the appellants are one and the same. These writ appeals have been filed against the common order dated 2-8-1987 dismissing writ petitions 1442 to 1444 of 1986. Writ petition No. 1444 of 1986 has been filed by the 1st appellant for a declaration that Section 30(3) of the Tea Act, 1953 (hereinafter referred to as the Act), is null and void. In W.P. No. 1443 of 1986 the prayer is one for certiorari to quash S.O. No. 313-E, dated 19-4-1984 on the file of the first responent, culminating in the issue of Tea Marketing Control Order, 1984 (hereinafter referred to as the Control Order). Writ Petition 1442 of 1986 has been filed by the 1st appellant for the issue of a writ of certiorari to quash the order dated 6-12-1985 of the Tea Board, the second respondent herein in reference No. 14(4) ML/84/12/Law/3295.
2. The case of the 1st appellant as disclosed in the affidavit filed in support of the above mentioned writ appeals is as follows ; The 1st appellant is a partnership firm established in 1950 registered under the Indian Partnership Act. The firm owns a tea factory, wherein tea is manufactured from green tea leaves and thereafter it is marketed. The partners of the firm are major shareholders in Silver Cloud Estate Private Limited, owning 200 acres of tea plantation, known as 'Silver Cloud Tea Estate' and 50 per cent interest in another 20 acres known as 'Bar-wood Estate'. Both these tea estates have no factory of their own and they supply their produce, green tea leaves to the appellant factory under a permanent arrangement. The 1 st appellant factory buys about 20% of their annual total green tea leaves from small growers in and around Gudalur. The normal channels for the marketing of the tea are :
(a) Through Public auctions in India and in London in the form of loose tea, i.e. tea packed in plywood cases;
(b) Sale in the domestic market ex factory or through retail depots or through depots in the same loose tea form;
(c) By direct exports to consuming countries aboad and marketing in foreign countries through auctions or forward contracts of sale or other direct means;
(d) Through consumer packages establishing brand names, etc. The 1st appellant's firm from the inception has been marketing tea in loose form ex factory in the domestic market. The main principle in marketing that the appellant has adopted has been to serve the ultimate consumer with good fresh tea at a reasonably stable and regulated price. In line with this policy, the 1st appellant's strategy has been to organise and widen the distribution network in keeping with the expanding production designed to reach the ultimate consumer as quickly and directly as possible with a particular steady, consistent and standard quality of tea at a reasonable price, containing the price fluctuations within a reasonable parameter, in order to produce a lasting adherance of the clientele to the appellant's tea. The 1st appellant has customers all over India. A majority of these customers buy from the 1st appellant at weekly intervals and some in biweekly intervals. By an order dated 19-4-1984 issued under Section 30(3) and (5) of the Act and published in the Government of India Gazette Extraordinary, titled "The Tea (Marketing Control) Order 1984", the Central Government has sought to regulate the marketing of tea in the domestic market. This control order prescribes that the manufacturers of tea should register themselves under the said order and has to furnish to the registering authority monthly returns in Form C prescribed therein. Under clause 17 of his Control Order, it is stipulated that every manufacturer of tea in the States of Assam, West Bengal, Tamil Nadu and Kerala has to sell in public auction not less than 70 per cent, or such other percentage as may be specifie from time to time by the Tea Board, of the tea manufactured by him. Such public auctions are to be conducted only by the licensed auctioneers as prescribed therein. Clause 17 stipulates relaxation of the provisions of this Order under certain conditions. By virtue of this clause of the order the registering auth-ority, viz. the second respondent is vested with discretion to relax all or any of the provisions of the control order if it is satisfied that any hardship will result to any manufacturer in complying with the order. By a subsequent order dated 22-3-1985 of the second respondent, the per centage of compulsory offering for auction sale has been increased from 70 per cent to 75 pr cent as and from 2-3-1985. In view of the abovesaid provisions, the 1st appellant has been placed under compulsion to sell 70% (presently 75%) of its produce at the public auction. The effect of this order on the 1st appellant's right to carry on a trade is tellingly disastrous. What is left after the compulsory sale is 25 per cent. This margin of 25 per cent available for private sales under the control order is no solace, because the meagre quantity will not and cannot satisfy all the retailers of the appellant, who are 93 in number. The control order came into force within 90 days from 19-4-1984. As per clause 17 the 1st appellant applied to the Registering Authority to grant relaxation, for which an application dated 11-7-1984 was filed. The 1st appellant had raised various grounds for relaxation. By a non-speaking order dated 21/22-8-1984 the Registering Authority rejected the 1st appellant's prayer for exemption. As a result, the 1st appellant filed W.P. Nos. 10110 of 1984 and 1493 of 1985. In the former writ petition, the 1st appellant prayed for a declaration that the Control Order dated 19-4-1984 is ultra vires of the Act. In the latter writ petition, the 1st appellant sought to quash the order dated 21/22-8-1984 passed by the Tea Board/2nd respondent declining to grant exemption. Both these writ petitions came to be disposed of by a common order dated 23-9-1985. The order of the second respondent dated 21/22-8-1984 was quashed, directing the reconsideration of the same and in view of this it was held that it was unnecessary to consider the merits of the writ petition No. 10110 of 1984 and was dismissed as withdrawn. Subsequent to this, on 11-7-1984 a petition was filed for exemption. An enquiry took place. The second respondent passed an order dated 6-12-1985 rejecting the 1st appellant's prayer for exemption. It is under these circumstances, the three writ petitions have come to be preferred.
3. In writ petition No. 1444 of 1986, the 1st appellant challenged Section 30(3) of the Act on the grounds stated in paras 15 and 16 of the affidavit filed in support of the writ petition in the following terms ;
"The matters provided in S. 30 relate to distribution of product of a controlled industry. In legislating upon the subject, parliament has delegated power to make subordinate legislation to the Government. There has been excessive delegation in this respect. The esgislative subject is distribution of the produce of controlled commodity. In the matter of distribution of such commodity S. 30(1) and (2) relate to fixation of price. Sub-section (3) of Section 30 relates to prohibition of disposal of the product and direction to dispose of the product and direction to disposet of product in a particular manner respectively. There is absolute prohibition and also an absolute direction contemplated therein. But such absolute prohibition and direction will come into play in certain 'circumstances under certain conditions. The language of Section 30(3) is clear in this behalf. Certain circumstances and conditions contemplated therein are left undefined to be legislated upon. This is an essential legislative function which cannot be delegated. In this submission Section 30 of the Tea Act 29 of 1953 and in particular S. 30(3), (a)(b) and (c) suffer from excessive delegation and are therefore void. Even otherwise S. 30 suffers from the vice of arbitrariness. S. 30(3) contemplates the prohibition of the disposal of the product of a controlled industry. It also contemplates to a direction to dispose of such product to a person or a class of persons. Such prohibition and the direction could however come into operation only under certain circumstances and under certain conditions. The prohibition is contemplated to be absolute under certain circumstances. Similarly, the direction to dispose of the produce in a particular manner is also absolute under certain circumstances. But the law as re-
gards what are the circumstances is left in-definitely and vague and is liable to be used in an arbitrary manner. It is significant that the prohibition and direction contemplated therein. In the absence of categorisation of those circumstances S. 30 of the Act in this respect is liable to be struck down as vague and arbitrary".
4. In writ petition 1443 of 1986, the 1st appellant challenged the validity of the Control Order, 1984 and contended that the said Control Order is invalid for the following reasons :
(a) Clause 17 of the Control Order provides that every registered manufacturer in the States of Assam, West Bengal, Tamil Nadu and Kerala shall sell not less than 70% or such higher percentage as may be specified from time to time by the Board, of tea manufactured by him in a year through public tea auctions in India, held under the Control Order or suspices of organisers of tea auction licenced to do so under the provisions of Order. The proviso to clause 17 enables the registering authority second respondent to relax any of the provisions of the Order. The provision in clause 17 that every registered manufacturer shall sell 70% of his produce at the public auction contains a prohibition that no manufacturer shall sell 70% (now 75%) of his produce otherwise than at the public auction. The balance of 25% does not take away the effect of the prohibition contained under clause 17. The right of a manufacturer to deal with his goods in a manner conducive to public interest outside the public auction has been hit at and the manufacturer's right so to do is deprived of. This provision in clause 17 is in excess of the power delegated to the Government under Section 30(3) of the Act.
(b) Under Section 30(3)(a) of the Act, the direction has to be issued in such circumstances and under such conditions as may be prescribed in the order. The order is silent about such circumstances and also the conditions under which such prohibition should operate. What is contemplated under Section 30(3)(a) is a situation which is abnormal and transient in nature and not perpetual. What is sought to be done under the Control Order is not for a temporary period but perpetual in time.
(c) Clause 17 results in roving the sale of tea through public auction wheres clause (b) of sub-section (3) of S. 30 contemplated sale to such persons or class of persons. In the absence of specification of a person or class of persons the provision in clause 17 has been made ultra vires the power of the Government/1st respondent delegated under Section 30(3). An auction purchaser cannot be said to be in consonance of S. 30(3) as it is not in express specification of a person or a class of persons.
(d) The order also suffers from the vice of arbitrariness. The order has not fixed any price for the sale of tea contemplated therein and has left the price to vagaries of the market conditions. There is no control over the fluctuation of the prices.
(d) The order is silent about the channel of distribution after the stage of public auction and has prescribed no control over marketing of tea once the auction is over. There is arbitrary exercise of power and undue preference shown to auctioneers.
(f) The impugned order also suffers from the vice of excessive delegation and want of guidelines.
(g) In its pith and substance the Tea Marketing Control Order imposes an unreasonable restriction on a Tea maufacturer to the effect that he should sell a certain percentage of his produce through one mode of sale. Allegedly purporting to provide relief for any hardship that may ensure by reason thereof, the power of granting relaxation is vested with an executive authority viz., the Tea Board, with no guidelines. The matter is left to the caprice of the executive with no control by way of appeal or otherwise.
(h) The Control Order infringes Articles 301 and 302 of the Constitution of India. The manufacturers of Tea in a selected territorial area of India are discriminated against in the matter of sales of their produce. Once the sale at the public auction is effected, the produce is left to all kinds of transactions in the sub-
sequent stages susceptible to all malpractices without territorial limitations. The genuine producer by reason of such limitation is disabled from marketing the produce outside the limited area whereas the same produce after such auction sale could be marketed freely throughout the country without any limitation or control.
5. In writ petition No. 1442 of 1986, the 1st appellant challenged the order of the second respondent dated 6-12-1985 rejecting the appellant's petition for relaxation under clause 17 of the Control Order on the ground the said order of the second respondent is not based on a proper and just appreciation of the appellant's contentions in support of its plea for relaxation under clause 17 of the Control Order.
6. The first respondent filed a common counter affidavit in the writ petition contending as follows :
(i) 98% of tea is grown in compact areas in the major producing states of Assam, West Bengal, Tamil Nadu and Kerala and to a small extent of 1.5% of the total production in scattered areas in the States of Karnataka, Tripura, Himachal Pradesh, U.P., Sikkim and Bihar. The auction centres in Calcutta and Siliguri, Guwahati, Cochin, Coimbatore and Coonoor have adequate facilities to handle arrivals of over 75% of Tea produced in these states. Auctions of Tea are held under the auspices of respective Tea Traders' Association. Facilities for sampling, testing, grading, valuation and cataloguing of Tea are available at these auction centres. Again the required professional expertise is readily available for such activities, there being in-frastructural facilities. The auction system was established in 1834 in London and the first auction centre in India was established in 1861 at Calcutta. Thereafter they spread to the other centres in course of time. Thus it is a well established system which has stood the test of time for long. If less quantity of Tea flows through auctions, there is a danger of hoarding and unbriddled speculative price rise, not only at wholesale but also at retail level. Tea is an essential commodity being the cheapest beverage drunk by an estimated 50% of Indians. Therefore, the tendency to bypass the auction system is considered an unhealthy development.
(ii) The Tea Marketing Control Order was issued with the overall object of monitoring the availability of tea, at fair and competitive prices in open transactions with facilities of grading, sampling, cataloguing etc. with the bulk of tea flowing through public auctions, there could be better correlation between auction prices and retail prices.
(iii) Tea auctions are established forums of disposal of tea in most Tea producing countries. Even before the Tea Marketing Control Order was issued, the bulk of the Tea produced in Tamil Nadu was sold through public auction.
(iv) The Control Order has been issued with a view to establish fair prices for tea both for the producers and the consumers by bringing the widest possible competition in operation. Clause 17 of the order itself provides for exempiion. Those exemptions are based on consideration of remoteness, inaccessability to auction centres, inadequacy of infrastructure to make possible disposal of tea, through auctions, for direct exports, for direct sales in consumer packs etc.
(v) The Control Order 1984 has been issued in exercise of the powers under S. 30(3)(a) and (v) and 30(5) of the Act. Section 30(3) cleariy empowers Government to regulate by licenses, permits or otherwise the production, storage, transport or distribution of tea, regulate the manner of its disposal and call for returns. The order is applicable only to Registered Manufcturers of tea in the State of Assam, West Bengal, Tamil Nadu and Kerala where tea is grown in compact and large areas and where there are adequate infrastructural facilities for despatching tea to auction centres which exist in all these four States. Such facilities are not sufficiently well developed in the other tea producing states and moreover, the tea estates are scattered and dispersed and do not possess adequate facilities for despatching tea to auction centres. No unreasonable restriction on trade have been imposed by this order nor can it in any way be said that the right of the manufacturers to deal with his goods in a manner conductive to his interests outside the auction has been hit if he adheres to an environment of free competition and fair business dealings. Right to sell tee directly in consumer packs is fully retained. The order also provides for exemptions for direct sales in consumer packs in which prices are marked (as approved by the Board) direct sale of instant tea, tea bags, aromatic tea and green tea. Direct exports are separately regulated under the Tea (Regulation of Export Licensing) Order. 1984. This ensures that contracted price is comparable with auction prices, exemption to consumer packs, instant tea, tea bags etc. have been given because they are associated with a brand name which can be related to a parti-cular quality by the consumer, requires marketing efforts, and offers assurances of uniform quality linked to price. Such teas are not dependent only on the value of tea but also the type of packing, promotional efforts, goodwill, brand, standardisation, and assurances of quality because of which the consumer is interested in such forms of tea. In the case of loose teas, prices are dependent purely on the quality of tea and thus competition in auction sales tend to provide better prices. Chances of admixture are also minimised when tea is sold in consumer packs or in auction after proper grading. The sale of loose tea outside auctions especially in the case of bought leaf factories (as in the case of the appellant) has resulted in a large number of complaints regarding adulteration and therefore requires strict regulation. The disposal of 75% of the production through public auctions has been able to ensure open competition, minimisation of malpractices and better correlation between auction prices and retail prices to the consumers. The organisers of auctions and brokers in tea auction are regulated under the said order. Moreover, auctions are conducted in an open manner in the presence of manufacturers/sellers and buyers or the agents which reduces the scope of manipulation. It would, therefore be seen that clause 17 has been framed in public interest. Section 30 of the Tea Act vestes in the Central Government the "power to control price and distribution of tea and tea waste". The power to control prices and distribution as can be seen from a reading of the section are independent of each other meaning thereby that the power to control distribution of tea or tea waste, does not automatically and necessarily require the Central Government to control prices.
(vi) The objective were primarily to monitor availability of tea and chaimelise majority of bulk teas upto a particular point in the channel of distribution (namely auctions), to ensure orderly marketing of tea at fair prices with assurance of quality, payments, standardisation, prevention and minimisation of malpractices, curbing of speculative tendencies and to have a close correlation between wholesale prices and retail prices through open competition and not price fixation. The appellant's business to manufacture and dispose of tea is not adversely affected by enforcing the provisions of the Control Order since it can continue with the manufacture of tea and its disposal in accordance with the provisions of the order. The Appellant can sell in consumer packs to enable them to get consumer loyalty. If they do not sell in consumer packs it is highly unlikely that they would be sold to get consumer loyalty, because the chances of other tea being sold off as appellant's tea at the retail level cannot be ruled out in the case of loose tea. This is also because such quality of tea as is being sold by the appellant, is easily and widely available in this area. Moreover, the Control Order does not completely prohibit disposal of tea to the extent of 25% outside the auction system through ex-garden sales and private sales to meet business emergencies. The Control Order only seeks to channelise quantitis of tea upto the auction point and not up to the retail point. This is because, competition after auction assures competitive prices on account of the large number of buyers and sellers at the retail level.
(vii) Auctions were held in full competitive conditions because of better interaction of demand and supply. Conversely, private sales suffer from absence of competitiveness, export facility of grading, catagloguing, and valuation, absence of knowledge regarding availability of tea in the market, all of which, lead to speculative tendencies and price fluctuations. The Control Order only aims at regulating the disposal of tea up to a certain point in the marketing of tea, i.e. auctions and not up to the retail level.
(viii) No injury or damage is likely to be caused to the appellant because of the operation of the Control Order since experience has shown that more and more tea is being sold through auctions and the auction system is a well established method of disposal in most of the tea producing countries. Moreover, the Control Order has been framed in the public interest for common good and individual interest cannot be allowed to prevail over public interest.
7. The second respondent filed a common counter affidavit in the writ petitions raising contentions similar to those raised in the common counter affidavit filed by the first respondent. The second respondent, further contended that hardships pleaded by the appellant in their application claiming exemption were duly considered by the second respondent in his order dated 6-12-1985 and the claim for exemption made by the appellant was rightly rejected and that there is no infirmity in the order of the second respondent dated 6-12-1986.
8. The learned single Judge, who heard the writ petitions, after considering the rival contentions of all the parties took the view that Section 30(3) of the Act does not suffer from the vice of excessive delegation or arbitrariness and therefore, said section is not liable to be quashed as null and void. The learned single Judge also held that clause 17 of the Control Order is not arbitrary in nature and does not suffer from the vice of excessive delegation and that the said clause 17 is valid. The learned single Judge further found that the second respondent properly considered the 1st appellant's claim for exemption under clause 17 of the Control Order and rightly rejected the petition for exemption by the order dt. 6-12-1985. Consequently, the learned single Judge by a common order dated 2-8-1987 dismissed all the writ petitions mentioned above. As already stated, these writ appeals are direcied against the common order of the learned single Judge dismissing the writ petitions.
9. Mr. T. S. Krishnamurthy Iyer, learned senior counsel for the appellants while reiterating the contentions raised in the writ petitions, summed before us, in the first place that S. 30(3) of the Act is invalid and is liable to be struck down on the following rounds.
(a) Section 30(3) of the Act sufffers from the vice of arbitrariness. Section 30(3) of the Act prohibits the disposal of tea or tea waste except in such circumstances and under such conditions as may be specified in the Order. As to what are the circumstances and conditions are not stated in the Act which means that legislative function has been given to the Government. Likewise clause (b) of Section 30(3) directs sale of tea or teas waste. The requirement is to sell the whole or part of the tea held in stock. Here again, the circumstances are not specified in clause (b). As the provision with regard to what are the circumstances is left undefined and vague, it is liable to be used is an arbitrary manner. In the absence of categorisation of these circumstances, S. 30(3) of the Act is liable to be struck down as vague and arbitrary.
(b) Clauses (a), (b) and (c) of sub-section (3) of Section 30 of the Act also suffer from the vice of excessive delegation, because the circumstances and conditions conlempiated in those provisions are left undefined to be legislated upon and such legislative function cannot be delegated. Therefore S. 30(3) of the Act is invalid,
10. Secondly, learned counsel for the appellant challenged the validity of the Control Order, contending that the provisions of the Control Order are invalid for the following reasons :--
(a) The provisions of the Control Order especially clause 17 are arbitrary in nature.
(b) The Control Order serves no purpose, it does not achieve any object and it does not operate for the benefit of any person.
(c) The provision in clause 17 of the Control Order is in excess of the power delegated to the Government under S. 30(3) of the Act.
(d) By reason of clause 17, the 1st appellant is not permitted to adopt a particular mode of sale of their produce. The appellants are deprived of their right to sell their produce in the open market and they are compelled to sell 75% of the tea manufactured by them ihrough auction. The restriction imposed by clause 17 is neither reasonale nor is in the interest of general public and that therefore, clause 17 of the Control Order is violative of Article 19(1)(g) of the Constitution and the provisions contained in part 13 of the Constitution.
11. Thirdly, the learned counsel for the appellants challenging the order passed by the second respondent dated 6-12-1985 on merits, submitted that very many valid points have been raised in the petition filed by the 1st appellant claiming exemption under clause 17 of the Control Order and that they have not been properly considered by the second respondent. The second respondent has merely stated that he would endeavour to find out whether they are special and unforseen circumstances which will result in hardship to the Appellants in selling 75% of their produce through auctions and ultimately held that there is no such undue hardship. As the case of the appellants for exemption was not properly considered by the second respondent the Order of the second respondent dated 6-12-1985 is invalid and liable to be quashed.
12. Per contra, Mr. P. Narasmihan, learned Senior Counsel for the first respondent submitted that tea had been under control right from the year 1933, that the Act which came into force on First April, 1954 is a comprehensive legislation. The learned counsel for the first respondent further contended that, assuming for a moment that S. 30(3) is capable of abuse, it does not make the section itself invalid. The learned counsel also contended that,
(a) the history of the legislation relating to tea,
(b) the scheme of the entire Act,
(c) the object of the legislation.
(d) the object sought to be achieved, and
(e) the manner in which the object is sought to be achieved will have to be taken into consideration and if all these aspects are taken into consideration, it cannot be said that S. 30(3) of the Act suffers from the vices of excessive delegation or arbitrariness.
The further contention of the learned counsel for the first respondent is that S. 30(3) does nothing more than prescribing the manner in which the Government can exercise the power of control with regard to the production, storage and distribution of tea, so as to subserve the object behind the Act. With regard to the provisions of the Control Order, the learned counsel for the first respondent submitted that, clause 17 of the Control Order does not suffer from the vice of excessive delegation. The learned counsel also submitted that the restrictions imposed by clause 17 of the Control Order are only reasonable restrictions in the interest of general public and therefore, clause 17 is not liable to be struck down on the ground that it is violative of Art. 19(1)(g) and the provisions contained in Part 13 of the Constitution.
13. Mr. S. Srinivasan, learned counsel appearing for the second respondent, in support of the order of the second respondent dt. 6-12-85 submitted that every pleaof the 1st appellant in support of his claim for exemption has been considered in detail in the impugned order dt. 6-12-1985 and that therefore, the order dt. 6-12-1985 is not liable to be quashed.
14. In the light of the rival contentions of the counsel for the appellants and respondents, the following points arise for consideration in these writ appeals:
(1) Whether S. 30(3) of the Act is unconstitutional and invalid on the ground that it suffers from the vices of excessive delegation and arbitrariness?
(2) Whether the provisions of the Control Order are liable to he struck down on the ground that they arc in excess of the powers delegated to the Government under Ss. 30(3) and 30(5) of the Act? and (3) Whether the provisions of the Control Order, particularly clause 17, directing the tea manufacturers to sell 75% of their produce only through auction, imposed an unreasonable restriction; whether they arc violative of Arts. 19(1)(g), 301 and 302 of the Constitution?, whether they can be said to be arbitrary or of offensive nature and on that ground whether the Control Order is liable to quashed?
(4) Whether the order of the second respondent dt. 6-12-85 rejecting the 1st appellant's petition for relaxation under clause 17 of the Control Order is invalid and liable to be quashed?
15. Point No. (1). Tea industry is a controlled industry and it comes under Entry 52 of List 1 of the Seventh Schedule of the Constitution. It also comes under Entry 33 of List III of the Seventh Schedule. The Act has been passed by virtue of Entry 52 in the First List read with Entry 33 in the Third List in Schedule Seven of the Constitution. It is clear from the preamble to the Act that it is an Act to provide for the Control by the Union of the tea industry including the control in pursuance of the International Agreement now in force of the cultivation of Tea in and of the Export of Tea from India and for that purpose to establish a Tea Board and levy a duly of excise on Tea Produced in India. Chapter II of the Act deals with the constitution of the Tea Board. Chapter III deals with the Control over the extension of tea cultivation. Chapter III-A deals with the management and control of tea undertakings. Chapter IV provides for the control over the export of tea and tea seeds, Chapter V deals with the finance, accounts and audit. Chapter VI deals with the control by the Central Government. Section 30 occurs in Chapter VI and it deals with the power to control price and distribution of tea or tea waste. Subsections (1) and (2) of S. 30 relate to fixation of price. Sub-section (3) deals with the prohibition of disposal of tea or tea waste and direction to dispose of them in a particular manner. Section 30(3) reads thus :
"(3) The Central Government may, by general or special order :--
(a) Prohibit the disposal of tea or tea waste except in such circumstances and under such conditions as may be specified in the order;
(b) direct any person growing, manufacturing or holding in stock tea or tea waste to sell the whole or a part of such lea or tea waste so grown or manufactured during any specified period, or to sell the whole or a part of the tea or tea waste so heid in stock, to such person or class of persons and in such circumstances as may be specified in the order;
(c) regulate by licences, permits or otherwise the production, storage, transport or distribution of tea or tea waste."
16. The contention of Mr. T. S. Krishna-murthy Iyer, learned senior counsel for the appellants is that S. 30(3) prohibits disposal of the product and directs the disposal of the same in a particular manner, that the prohibition and direction contemplated in S. 30(3) of the Act is absolute that such absolute prohibition and direction contemplated in S. 30(3) will come into play in certain circumstances and certain conditions, that the circumstances and conditions contemplated in S. 30(3) are left undefined to be legislated upon, that such essential legislative function cannot be delegated and that therefore, S. 30(3) of the Act is unconstitutional as it suffers from the vice of excessive delegation. In other words, it is contended by the learned counsel that the expressions 'in such circumstances and under such conditions' occurring in S. 30(3))a) show that there is excessive delegation of legislative power itself to the executive because, the circumstances and conditions contemplated in S. 30(3)(a) are left to the discretion of the executive. The learned counsel also contended that, since the power given to the Government under S. 30(3) is completely unfettered and unchannelised power without any guidelines, the said section is unconstitutional as it suffers from the vice of excessive delegation and arbitrariness. In support of the contention that the legislative power of framing policy cannot be delegated, the learned counsel for the appellant relied on the decision in A. N. Parasuraman v. State of Tamil Nadu and Ramesh Birch v. Union of India . We are unable to accept the above contentions of the learned counsel for the appellants. Tea Industry had been under the control of the Central Government from 1933. Originally Central Act (25 of 1933), called Indian Tea Control Act was enacted. That was a temporal v enactment and it lapsed by efflux of time. Thereafter, a permanent enactment, Central Act (7 of 1938) was passed. The object of Centra] Act (7 of 1938) was the control of the export of tea and the control of the ex tension of the cultivation of tea. Then came the Tea Board Act, 1949 and the object of the Tea Board Act, 1949 was the development of the Tea Industry under the Central Government's Control. Since the object of the 1938 Act and 1949 Act were interrelated it was proposed that there should be a single Act containing the provisions of 1938 Act and 1949 Act. With a view to achieve the said object, the Tea Act, 1953 (Act 29/1953) came to be passed on 28-5-1953. From the statement of objects and reasons, it is clear that what were contained in the two legislations, namely, Indian Tea Control Act, 1938 and the Central Tea Board Act, 1949 came to be covered by a comprehensive legislation. S. 2 of the Act declares the Tea Industry as a controlled industry and it reads thus :
"2. Declaration as to expediency of control by the Union. -- ft is hereby declared that it is expedient in the public interest that the Union should take under its control the tea industry."
Section 4 provides for the establishment and constitution of the Tea Board. S. 10 of the Act deals with the functions of the Tea Board. Sub-sec. (2)(f) of S. 10 refcrrs to regulating the sale and export of tea. Sub-sec. (2)(j) of S. 10 relates to improving the marketing of tea in India and elsewhere. As rightly pointed out by the learned single Judge, S. 30(3) cannot be read in isolation, It has to be read along with the other provisions of the Act. We have to see the objects of the legislation, as set out in the preamble and how these objects are sought to be achieved through the various other provisions of the Act, while deciding the question, whether S. 30(3) of the Act suffers from the vices of excessive delegation and arbitrariness. On a careful examination of the various provisions of the Act and the subject of the legislation as set out in the preamble, we are satisfied that the guidelines for the exercise of the power under S. 30(3) are contained in the preamble to the Act and the other provisions of the Act. Further, it must be remembered that Cl. (1) of sub-sec. (3) of S. 30 empowers the Government to pass an order prohibiting the disposal of Tea or Tea waste, except under certain conditions and under certain circumstances. Cl.(b) of sub-sec. (3) gives power to the Central Government to issue directions in the matter of sale and disposal of tea to any person or class of persons in such circumstances as may be specified. Sub-clause (c) gives power to the Central Government to make any order to regulate by licences permits or otherwise, the production, storage, transport or distribution of Tea or Tea Waste. It is impossible for the Parliament to envisage all the situation and pass a legislation so as to comprehend every situation. Therefore, Cls. (a), (b) and (c) of sub-sec. (3) of S. 30 expressly give the general power to the Government to pass an order prohibiting the disposal of tea or tea waste. What is delegated under Cls. (a), (b) and (c) of sub-sec. (3) of S. 30 to the Government is only the power to workout the details as to the circumstances under which and the conditions on the fulfilment of which the power under Cls. (a) and (b) can be exercised by the Government. In other words, Cls. (a), (b) and (c) of sub-sec. (3) of S. 80 confers upon the Central Government, the powers to comprehend the situation and exercise the powers depending upon the circumstances and conditions. Such delegation of power to the Government under sub-sec. 30(3) of the Act, in our view, will not amount to delegation of essential legislative function as contended by the learned counsel for the appellants.
17. Again, the exercise of power by the Government under S. 30(3) is subject to judicial review and orders passed by the Government, whether general or special under sub-sec. (3) of S. 30 can be scrutinised to find out whether the power has been exercised by the Government properly. The validity or constitutionality of S. 30(3) cannot be judged on the assumption that the execu- tive will act in an arbitrary manner in the exercise of the power conferred upon it by the said section. If the executive in exercise of the power conferred under S. 30(3), acted in an arbitrarry manner, its action would be bad in law and liable to be struck down by the Courts. However the possibility of abuse of power cannot invalidate S. 30(3). The above position is clear from the following observations of the Apex Court in D. K. Trivedi & Sons v. State of Gujarat (AIR 1986 SC 1323) (at p. 1350):
"50. Where a statute confers discretionary powers upon the executive or an administrative authority, the validity or constitutionality of such power cannot be judged on the assumption that the executive or such authority will act in an arbitrary manner in the exercise of the discretion conferred upon it. If the executive or the administrative authority acts in an arbitrary manner, its action would be bad in law and liable to be struck down by the courts but the possibility of abuse of power or arbitrary exercise of power cannot invalidate the statute conferring the power or the power which has been conferred by it."
18. In Globe Theatres Ltd. v. The State of Madras , a Division Bench of this Court while, holding that merely because, the section lends room for abuse, it does not mean the section is invalid and it is only the particular action that will have to be rendered invalid, rather than the section observed as follows :--
"The net result of these three decisions of the Supreme Court appears to me to be this. If the policy and object of the Act can be discovered within the four corners of that Act, including the preamble, and discretion is vested in the Government to make a selection in furtherence of that policy and object for the application of the Act, then the provision conferring such power is not void as offending Art. 14 of the Constitution. If such power is improperly exercised in any particular case, that is, not in furtherance of the policy and object of the Act, but arbitrarily, then the Court can strike down the exercise of such power on every such occasion."
19. In Indian Express Newspapers v. Union of India the Supreme Court while dealing with the scope of subordinate legislation has held as follows :--
"A piece of subordinate legislation does not carry [he same degree of immunity which is enjoyed by a statute passed by a competent legislature. Subordinate legislation may be questioned on any of the grounds on which plenary legislation is questioned. In additions it may also be questioned on the ground that it does not conform to the statute under which it is made. It may further be questioned on the ground that it is contrary to some other statute. That is because subordinate legislation must yield to planary legislation. It may also be questioned on the ground that it is unreasonable, unreasonable not in the sense of not being reasonable, but in the sense that it is manifestly arbitrary. In England, the Judges would say, "Parliament never intended authority to make such rules. They are unreasonable and ultra vires." The present position of law bearing on the above point is stated by Diplock L.J. in Maxnam's Properties Ltd. v. Chcrlayo Urban District Council, thus :
The various special grounds on which subordinate legislation has sometimes been said to be void..... can, I think, today be properly regarded as being particular applications of the general rule that subordinate legislation, to be valid, must be shown to be within the powers conferred by the statute. Thus, the kind of unreasonableness which invalidates a bye-law is not the antonym of 'reasonableness' in the sense in which that expression is used in the common law, but such manifest arbitrariness, injustice or partiality that a Court would say: 'Parliament never intended to give authority to make such rules; they are unreasonable and ultra vires'..... if the courts can declare subordinate legislation to be invalid for 'uncertainly' as distinct from unenforceable .... this must be because Parliament is to be presumed not to have intended to authorise the subordinate legislative authority to make changes in the existing law which are untertain."
20. In Delhi Municipality v. B.C.S.& W. Mills , the Supreme Court has held as follows (at p. 1244):--
"Where the legislative policy is enunciated with sufficient clearness or standard is laid down, the Courts should not interfere. What guidance should be given and to what extent and whether guidance has been given in a particular case at all depends on a consideration of the provisions of the particular Act with which the Court has to deal including its preamble. Further it appears to us that the nature of the body to which delegation is made is also a factor to be taken into consideration in determining whether there is sufficient guidance in the matter of delegation."
21. Further we must point out that the power has been entrusted to the highest authority, namely, the Central Government and that itself would constitute a safeguard The Central Government, which is empowered to exercise the power under S. 30(3) is expected to act reasonably. Even in cases where the power conferred under S. 30(3) is improperly exercised, it is that individual action or order which is liable to be struck down and not the provision which confers the powers. Thus even on the view taken in the decisions of the Supreme Court relied on by the learned counsel for the appellants that the legislative power of framing policy and guidelines cannot be delegated, S. 30(3) of the Act must be held to be valid having regard to the object and purpose sought to be achieved by that provision. Further, there is enough guidelines found in the relevant provisions of the Act and the very scheme of the Act. In view of the above legal and factual position, it has to be held that S. 30(3) of the Act docs not suffer from the vices of excessive delegation of legislative power or arbitrariness and therefore, it is not liable to be struck down. Point No. I is answered accordingly.
22. Point No. 2 : The contention of the learned counsel for the appellant is that the provisions of the Control Order, particularly Cl. 17 arc ultra vires the powers given under Section 30(3) and S. 30(5) of the Act, that Cl. 17 of the Central Order is not contemplated under S. 30(3) of the Control Order and therefore, the said provisions of the Control Order are liable to be struck down. It is seen from the counter affidavit filed on behalf of the first respondent and the press note issued along with the Control Order, 1984 that the Control Order is introduced with the objective of obtaining more remunerative price for tea and better monitoring of the distribution of lea in the domestic market and improvement in the conduct of public auctions in India. The Control Order is also designed to reduce the scope for malpractices and arresting the decline in offerings to the auction centres. The Control Order has been made by the Central Government in exercise of the powers conferred by Sub-sec. (3) and sub-sec. (5) of S. 30 of the Act. C1. 3(1) of the Control Order provides that no manufacturer shall carry on the activities of manufacturing tea except under a valid registration obtained under the Control Order in respect of each factory owned or controlled by him. Cl. 6 of the Control Order obliges the organisers of the Tea auction to obtain a licence. Similarly a Broker in tea auction has to take a licence under Cl. 7 of the Control Order. The important clause in the Control Order is Cl. 17 which deals with the sale of Tea through public auctions. Cl. 17 reads thus :
"17. Every registered manufacturer in the States of Assam, West Bengal, Tamil Nadu and Kerala shall, on and from the date of commencement of this Order, sell not less than 70% or such higher precentage as may be specified from time to time by the Board, of tea manufactured by him in a year through public tea auctions in India held under the control or auspices of organisers of tea auction licenced to do so under the provisions of this Order.
Provided that the registering authority may, on an application submitted by a registered manufacturer, if satisfied that in enforcing compliance with any provisions of this order undue hardship would result to any manufacturer, for reasons to be recorded in writing, relax any of the provisions of this Order.
Provided further that a manufacturer owning more than one manufacturing unit ., shall sell not less than the specified percentage through public auctions instead of the specified percentage of production of each tea unit separately.
Clause 19 of the Control Order deals with exemption for other categories of tea which reads thus :
"19. Any tea marketed directly by the manufacturer in the form of-
(a) Consumer packs/approved by the Board;
(b) instant tea;
(c) tea bags;
(d) armotic tea;
(e) green tea; and
(f) tea exported pursuant to contracts registered under Cl. 4 of the Tea (Regulation of Export Licensing) Order, 1984.
Shall be excluded while computing the total production for purposes of paragraph 17 of this order.
Now let us examine whether the provisions of the Control Order are in excess of the powers delegated to the Government under S. 30(3) and S. 30(5) of the Act? Chapter VI of the Act, in which S. 30 occurs deals with the control by the Central Government. By the Chapter heading ilself, the Parliament had made their intention clear that under this Chapter and sectons, therein they intend to delegate powers concerning production, distribution and fixation of price of tea to the Central Government for the purpose of achieving the object of the legislature. S. 30 deals with production, distribution, fixation of price and prohibition of disposal of tea and tea weste and powers dealing with these matters have been vested in and are intended to be exercised by the Central Government.
23. Section 30 contains 5 sub-sections. Sub-sec. (1) deals with the powers that have been vested by the legislature to be exercised exercised by the Central Government in respect of fixation of maximum and minimum prices of tea which may be charged by growers of tea, manufacturers or dealers within the domestic market ot for export and the maximum quantity which may be sold in one transaction to any person. Under sub-sec. (2) of S. 30 the legislature has vested in the Central Government the powers to fix prices for such tea differently indifferent localities or for different classes of dealers or manufacturers. Sub-sec. (3) of S. 30 gives ample powers to the Central Government and it must be pointed out that it is under this subsection the Central Government has issued several other Control Orders apart from the Control Order in question. The intention of the legislature to vest the Central Government with adequate powers with regard to the control on production, distribution and disposal of tea has been made clear in the express words found in sub-clauses (a), (b) and (c) of sub-sec. (3) of S. 30. Cl.(a) of S. 30(3) says that the Central Government may be general or special Order prohibited the disposal of tea except in such circum-stances and under such conditions as may be specified. Sub-clause (b) related to the directives in the matter of sale and disposal of tea to any person or class of persons and in such circumstances as may be specified. Sub-clause (e) relates to the powers vested in the Central Government to make any order for regulation by licences permits, or otherwise the production, storage, transport or distribution of tea or tea waste. As already pointed out sub-clauses (a), (b) and (c) of S. 30(3) entrust with the Central Government, the powers depending upon the circumstances and conditions.
24. Sub-section (5) of S. 30 gives the Central Government the power to issue any order for and on the subject appearing in sub-sections (1) and (3). Sub-sec. (5) is therefore, linked with sub-sec. (3). Matters which could not be covered under sub-sec. (3) would be covered by sub-sec. (5). Thus the legislature itself equipped the Central Govern-ment with the ample powers so that for the Control and regulation of production, transport, distribution of tea, the Central Government can exercise the power under sub-sec-
tions (3) and (5) without any hindrance and for proper implementation of the provisions of the Act. in view of the express and specific powers conferred under sub-sections (3) and (5) of S. 30 of the Act referred to above, the appellants cannot contend that the provisions of the Control Order, particularly Cl. 17 of the said Order are ultra vires the powers of the Government under S. 30(3). Therefore. we| have no hesitation in holding that the provisions of the Control Order are not liable to be struck down on the ground that they arc in excess of the powers delegated to the Government under Ss. 30(3) and 30(5) of the Act.
25. Point No. 3. With regard to Point No. 3, the contention of the learned counsel for the appellants is that the restriction imposed by Cl. 17 of the Control Order requiring tea manufacturers to sell 75% of their produce through public auctions is not a reasonable restriction, that it is violative of Art. 19(1) of the Constitution and therefore, it is liable to be struck down. The learned counsel further contended that the Control Order is prejudicial to the consumers, and the fact that there is no monitoring either at the time of auction or after auction shows that the Control Order is not in the interest of the consumers, but it will benefit only persons who buy tea in the auctions. The learned counsel also contended that the provisions of the Control Order are not regulatory in nature but are only restrictions that they are arbitrary and of excessive nature that they serve no purpose that the Control Order does not achieve any object and that the said Order does not operate for the benefit of any person. In support of this contention, the learned counsel for the appellant relied on the following observations of the Supreme Court in Peerless General Finance and Investment Co. Limited v. Reserve Bank of India, :
"49. The question emerges whether paragraphs (6) and (12) are altra vires Articles 19(1)(g) and 14 of the Constitution. Article 19(1)(g) provides fundamental rights to all citizens to carry on any occupation, trade or business. Cl.(6) thereof empowers the State to make any law imposing, in the interest of the general public, reasonable restrictions on the exercise of the said rights. Wherever a statute is challenged as violative of the fundamental rights, its real effect or operation on the fundamental rights is of primary importance. It is the duty of the Court to be watchful to protect the constitutional rights of a citizen as against any encroachment gradually or stealthily thereon. When a law has imposed restrictions on the fundamental rights, what the Court has to examine is the substance of the legislation without being beguiled by the mere appearance of the legislation. The legislature cannot disobey the constitutional mandate by employing an indirect method. The Court must consider not merely the purpose of the law but also the means how it is sought to be secured or how it is to be administered. The object of the legislation is not conclusive as to the validity of the legislation. This does not mean the constitutionality of the law shall be determined with reference to the manner in which it has actually been administered or operated or probably been administered or operated by those who are charged with its implementation. The Court cannot question the wisdom, the need or desirability of the regulation. The Stale can regulate the exercise of the fundamental right to save the public from a substantive evil. The existence of the evil as welt as the means adopted to check it are the matters for the legislative judgment. But the Court is entitled to consider whether the degree and mode of t he regulation is in excess of the requirement or is imposed in an arbitrary manner. The Court has to see whether the measure adopted is relevant or appropriate to the power exercised by the authority or whether it overstepped the limits of social legislation. Smaller inroads may lead to larger inroads and ultimately result in total prohibition by indirect method. If it directly transgresses or substantially and inevitably affects the fundamental right, it becomes unconstitutional, but not where the impact is only remotely possible or incidental. The Court must lift the veil of the form and appearance to discover the true character and the nature of the legislation, and every endeavour should be made to have the efficicy of fundamental right maintained and the legislature is not invested with unbounded power. The Court has, therefore, always to guard against the gradual encroachments and strike down a restriction as soon as it reaches that magnitude of total annihilation of the right.
50. However, there is presumption of constitutionality of every statute and its validity is not to be determined by artificial standards. The Court has to examine with some strictness the substance of legislation to find what actually and really the legislature has done. The Court would not be over persuaded by the mere presence of the legislation.
In adjudging the reasonableness of the law, the Court will necessarily ask the question whether the measure or scheme is just, fair, reasonable and appropriate or is it unreason-able, unnecessary and arbitrarily interferes with the exercise of the right guaranteed in part III of the Constitution."
Applying the ratio of the above decision, we arc of the view that restriction imposed by clause 17 of the Control Order is only a reasonable restriction in the interest of the General Public and that it is not violative of Article 19(1)(g) of the Constitution for the following reasons.
(a) The Control Order envisages that the manufacturers are under obligation to offer for sale at public auction 75% of their produce and hence the manufacturers have the option of selling 25% of Tea produced by private sale. Again the above restriction applies only in respect of the tea sold in the form of loose tea and it will not apply to the tea sold in other forms.
(b) Tea marketed through consumer packs will not come within the purview of obligatory sale through auction prescribed in Clause 17 of the Control Order and therefore, the manufacturer of tea is free to sell any quantity of tea manufactured by him through consumer packs.
(c) Similarly, (i) tea exported pursuant to contracts registered under Clause 4 of the Tea (Regulation of Export Licensing) Order 1984;
(ii) Instant tea;
(iii) tea bags;
(iv) aromatice tea and
(v) green tea also will not come within the purview of obligatory sale through auction as they are excluded while computing the total production for the purpose of clause 17 of the Control Order :
(d) There is a provision, to relax the condition of compulsory sale of 75% of the produce of tea manufacturers in appropriate cases, made in clause 17 of the Control Order. This power of relaxation has been left to the statutory authority, the Tea Board on the ground that there could be some tea gardens. Where remoteness or inaccessability may involve hardship in sending the tea to auction centres or because of unforeseen circumstances like strike, landslides, disruption in transport or non-availability of warehousing facilities, labour problems, etc.
26. Therefore, the restrictions contained in clause 17 of the Control Order requiring the tea manufacturers to sell 75% of their produce through auction cannot be considered as arbitrary and unreasonable.
Having regard to the purpose and object of the legislation, it must be held that the restrictions imposed by the Control Order are reasonable within the meaning of Article 19(6) of the Constitution. Again, it must be remembered that pursuit of any lawful trade or business may be subject to such conditions and restrictions as may be considered essential by the legislature in the interest of general public. The restrictions imposed in clause 17 is in the interest of the producers of tea as they can get the best competitive price in the auction sale. In the case of auction sale, the sale and purchase of tea is being supervised under the control of auction committee with the guidance of the Tea Board and therefore, the sale of tea through auction is advantageous to the producers. This is because the competitive price, use of standard weight, qualitative test of sample, etc., eliminate the possibility of the seller being victimized by mal practices. The organisers of auctions and brokers in tea auctions are regulated under the said Order. Moreover, auctions are conducted in an open manner in the presence of manufacturers, sellers and buyers or their agents which reduce the scope of manipulation. It would therefore, be seen that the provisions of Control Order including clause 17 have been framed in public interest. The Control Order does not impose any unreasonable restriction and therefore it does not offend Article 19(1)(g) of the Constitution.
27. In this context, it is also relevant to refer to the facts which warranted the issue of control order, stated in paragraphs 3, 4, 5, 6 and 7 of the counter-affidavits filed on behalf of the first respondent, which are as follows:--
"4. I submit that the public auctions have been historically and traditionally accepted by tea industry and trade as the most reasonable method for disposal of hulk tea from the point of view of both producers as well as consumers, since auctions allow price of formation on the basis of open competition between a larger number of buyers and sellers. Auctions are held under the auspices of respective Tea Traders' Associations. Facilities for sampling, testing, grading, valuation and cateloguing of tea are available at these auction centres and the required professional experties is readily available for such activities, because these auction centres have over a period of time acquired infrastructural facilities to cater and meet the requirements both of producers and the trade. There is an assurance of payments and reliability in dealings. The auction system is a long established method for disposal of tea the world over, The first auction centre was established in 1834 in London and the first auction Centre in India was established in the year 1861 at Calcutta. Other auction centres were subsequently set up at Cochin in 1947, Coonoor in 1963, Amritsar in 1964, Gauhati in 1970, Siliguri in 1976 and Coimbatore in 1980. Tea is sold through auctions in other parts of the world also, such as Colombo, Mombassa, Chit-
tagong Jakarta and Limbe. Viewed in this context, disposal of tea through public auctions in a well established method, and has also stood the long test of time. It is also pertinent that these auction centres have been established by the producers, buyers and sellers of tea in different parts of the world and have been developed over a period of time through the active participation and efforts of the producers and traders.
5. The disposal of bulk tea other then by way of public auctions, suffers from certain draw backs such as lower realisation to producers, lack of uniformity and guarantee of quality to the buyers because of non-standardisation, speculative transactions, absence of a system of monitoring quality, price and availability of tea and possibilities of malpractices such as (sic) conclusive transactions, evasion of taxes, adulteration, cheating of consumers etc. The circumstances in which private sale could perhaps be considered more advantageous to the producer would be the sale of very exclusive (sic) teas produced in very small quantities which forms a very small percentage of produce of a very few gardens and which are meant only for exports. For such teas certain foreign buyers catering to specialist requirements are willing to pay much higher price than in the auctions provided they are assured of getting the full quantity required. Obtaining definite quantities could not be assured (since total production of exclusive tea is very small) if these were sold through auctions. Such exclusive teas are also not available round the year but only from the pluckings in particular months. Such consideration could not reasonably apply to even very good teas but only to very exclusive qualities. Such exclusive quality teas could conceivably fetch price higher than the auction prices.
Notwithstanding the consideration mentioned supra, it is pertinent to note that world record prices of tea of Rs. 1,460/ - per kg. was obtained in a Calcutta auction in mid 1985 for a consignment of 2nd flush Dafgeeling tea from Castleton Tea Estate.
6. In India traditionally around 70% of the Bulk tea used to pass through public auctions which had gradually come down to a considerable extent before the order was issued. It is important to remember that for an agro based commodity like tea, the production of which depends on agro climatic factors, fluctuation of price at the wholesale and retail levels may depend not only in actual or perceived shortfall in production but on speculation and hoarding. The possibility of manipulating retail prices through hoarding, speculation and such like anti-social behaviour is considerably minimised when the overall availability of lea is known.
There is a real danger that with less quantity flowing through auction, of hoarding and unbridled speculative price rise not only at the wholesale but also retail level. The high price at retail level can continue even after production is restored since the availability of tea cannot be properly assessed. Another advantage of the bulk of tea flowing through auctions was even when there is short production, the extent of availability could be assessed properly thus minimising speculative price rise. Teas is an essential commodity being the cheapest beverage drunk by an estimated 50% of Indians the tendency to by pass the auction system is considered an unhealthy development. Complaints were received about adulteration, profiteering, and other malpractices and Government had to intervene through a series of measures, one of them being the Tea Marketing Control Order, 1984.
7. I submit that the Tea Marketing Control Order was issued with the overall objective of monitoring availability of tea, orderly marketing of tea at fair and competitive prices in open transactions with facilities of grading, sampling, cataloguing etc., at nominal and standardised service charges, assurance of fair prices, quality and standardisation, prevention and minimisation of malpractices, assurance of payments, reliability in business dealings and curbing of speculative tendencies and minimisation of malpractices relating to tax evasion and under invoicing.
Also with the bulk of tea flowing through public auctions there could be better correlation between auction prices and retail prices."
28. In Sreenivasa General Traders v. State of Andhra Pradesh, the constitutional validity of the provision contained in sub-section (6) of Section 7 of the Andhra Pradesh (Agricultural Produce and Livestock) Markets Act, which prohibits the purchase or sale of agricultural produce, livestock and products of livestock in a notified market area outside market in that area, was challenged on the ground that the said provision is vioiative of Article 19(1)(g) of the Constitution. The Apex Court while holding that the restriction imposed by the Subsection (6) of Section 7 of the A. P. (Agricultural Produce and Livestock) Markets Act is a reasonable restriction, held as follows (at p. 1256) :
"16. The contention (is) that the provision contained in sub-section (6) of Section 7 of the Act which prohibits the carrying on of any transaction of purchase or sale of agricultural produce, livestock or products of livestock in a notified market area, outside the market in that area, infringes the right of a citizen to trade "as and where he wills" and therefore must be struck down as obnoxious to Article 19(1)(g) of the Constitution. It is urged that the limitation which arbitrarily Or excessively invades the right cannot be said to contain the quality of reasonableness and unless it strikes a balance between the freedom guaranteed in Art. 19(1)(g) and the social control permitted by clause (6) of Article 19, it must be held to be void. The contention is obviously based on the following passage in Halsbury's Laws of England, 3rd Edn. Vol. 32, P. 15 para 9 which explains what freedom of business signifies :
"It is the general principle of the common law that a man is entitled to exercise any lawful trade or calling as and where he wills; and the law has always regarded jealously any interference with trade, even at the risk of interference with freedom of contract, as is public policy to oppose all restraints upon liberty of individual action which are injuries to the interests of the State."
17. The fundamental right of all citizens to practice any profession or to carry on any occupation or trade or business guaranteed under Art. 19(1)(g) has its own limitations.
The liberty of an individual to do as he pleases is not absolute. It must yield to the common good. Absolute or unrestricted individual rights do not and cannot exist in any modern State. There is no protection of the rights themselves unless there is a measure of control and regulation of the rights of each individual in the interests of all.
18. In order to determine the reasonableness of a restriction imposed upon the right guaranteed by Article 19(1)(g), the Court must have regard to the nature and the conditions prevailing in that trade. It is-obvious that these factors must differ from trade to trade and no hard and fast rules concerning all trades can be laid down. In other words, the pursuit of any lawful trade or business may be made subjecl to such conditions and restrictions as may be in the interests of the general public. Sub-section (6) of Section 7 undoubtedly restricts the freedom of a citizen to trade "as and where he wills", indeed it was enacted for the very purpose of controlling business in agricultural produce, livestock and products of livestock by the establishment of regulated mar-kets in connection therewith. It is difficult to conceive how the restriction imposed by subsection (6) of Section 7 which interdicts that no person shall purchase or sell any notified agricultural produce, livestock and products of livestock in a notified market area, outside the market in that area, can be said to be arbitrary or of an excessive nature beyond what is required in the interests of the community. In Arunachala Nadar's case, (supra), the Court repelled the contention based on a similar provision that a person who is having a licence to irade in or about the place where the market is fixed, will be deprived of his livelihood unless he resorts to the market and therefore, it was an unreasonable restriction upon his right to do business. It was observed that such a provision was necessary for preventing the business in such agricultural produce being diverted to other places and the object of the scheme being defeated.
19. It is obviously in the interests of the producers of agricultural produce that they can get the best competitive prices in an open market and that they have not to pay the middlemen. Sale or purchase of agricultural produce in such a market under the supervision and control of the market committee is likely to be in ready cash and therefore, advantageous to the producers and the use of standard weights must eliminate the possibility of his being victimized by malpractices, supervision of the operations in the notified market area can be more conveniently done if business is carried on in a specified area or areas intended for that purpose. That Act is an integrated one and it regulates the buying and selling of notified agricultural produce, livestock and products of livestock from a centralized place. The petitioners being licensed traders under sub-section (1) of Section 7 are bound by sub-section (5) thereof to comply with the provisions of the Act, the rules and the bye-laws framed thereunder. They are therefore, subject to the restriction contained in sub-section (6) of Section 7 of the Act. The non-obstante clause in sub-section (6) of Section 7 provides that no person shall purchase or sell any notified agricultural produce, livestock and products of livestock in a notified market area, outside the market in that area. Having regard to the purpose and object of the legislation it must be held that the restriction imposed by sub-section (6) of Section 7 of the Act is a reasonable restriction within the meaning of clause (6) of Article 19 on the fundamental rights of a citizen to carry on trade or business under Article 19(1)(g)."
The ratio of the above decision applies to the facts of the present case.
29. Learned counsel for the appellant contended that the Control Order is silent about the channel of distribution after the stage of public auction and has not prescribed any monitoring or control over marketing of tea once auction is over, that the buyers at the auction are mostly whole-salers or blenders, that to put the produce in the hands of the whole-salers and the blenders and to stop with that is not to achieve the object of ensuring fair price to the end consumer but would just have contra result and therefore, there is arbitrary exercise of power and undue pre-
ference shown to the auctioneers. There is no merit in the above contention of the learned counsel for the appellant. As pointed out in the counter-affidavit of the first respondent, the control order only seeks to channelise quantities of tea up to the auction point and not up to the retail point and this is because, competition after auction assures competitive prices on account of the large number of buyers and sellers at the retail level. This is obvious from the fact that practically every grocery shop sells tea. Further, we must point out that there are other control orders in force dealing with and taking care of the distribution and control over marketing of tea, namely.
(a) The Tea (Distribution and Export) Control Order, 1957.
(b) The Tea Waste (Control) Order 1959; and
(c) Tea (Registration of Dealers and Declaration of Slocks) Order, 1984.
Tea has been declared as an essential commodity by the Government of India under Notification dated 10-12-1978 under the Essential Commodities Act, 1954. In the year 1957, in exercise of the powers conferred by sub-sections (3) and (5) of Section 30 of the Tea Act, the Tea (Distributions and Export) Control Order, 1957, came to be issued. That order required inter alia the distributors and exporters of tea to obtain licence. The Tea Waste (Control) order was issued in the year 1959, again by the exercise of same powers conferred under Sections 30(3) and (5) of the Act. Here again, with regard to the manner of disposal of tea waste no person was enabled to dipose of the tea waste, except in the manner set out under clause (4) of the said order and the system of licensing was also introduced by it. On 7-1-1984 the Tea (Registration of Dealers and Declaration of Slocks) Order 1984, came to be issued. The preamble itself sets out the purpose of the order thus :
"Whereas the Central Government is of opinion that it is necessary and expedient so to do for maintaining supplies of tea, an essential commodity, and for securing its equitable distribution;
Now, therefore, in exercise of the powers conferred by Section 3 of the Essential Commodities Act, 1955 (10 of 1955), the Central Government hereby makes the following Order namely: -- Tea (Registration of Dealers, etc.) Order, 1984."
Clause 3 of the Order specifically overrides the State Order, stating as follows :--
"Registration of dealers:-- Notwithstanding anything contained in any State Order after the expiration of a period of 38 days from the coming into force of this Order, no person shall if the stocks of tea in his possession exceed 1000 kilograms, carry on business as a dealer unless he is registered as such in accordance with the provisions of a Slate order."
As to what is meant by a "State Order" is defined under clause 2(c) as under :
" "Stale Order" means any order issued by any State Government or Union Territory Administration under the provisions of the Essential Commodities Act, 1955 (10 of 1955) in relation to tea and in force for time being."
In the State of Tamil Nadu. the Tamil Nadu Tea (Registration of Dealers and Declaration of Stocks) Order, 1984, came to be issued. Here again, it was in exercise of the powers conferred by Section 3 of the Essential Commodities Act, 1955. In 1984 in exercise of the powers conferred under Section 17 read with sub-section (3) of Section 30 of the Tea Act, the Tea (Regulation of Export Licensing) Order, 1984 came to be passed. The object of this Order is to see that no tea be exported unless covered by a licence, and requiring the registration of export contracts and submission of such contracts to the licensing authority. The said order which came into force on 22-2-1984 covers the field of export. Thereafter the Control Order in question viz., the Tea (Marketing) Control Order, 1984, came into force on 19-4-1984 seeking to channelise the quantities of Tea up to auction point.
30. The contention of the learned Senior Counsel for the appellant that the provisions of Control Order infringes Articles 301 and 302 of the Constitution, also cannot be countenanced. No doubt, the object of Article 301 is to ensure economic unity of the country unobstructed by internal barriers. This, how-
ever, does not mean, that the regulations such as those contained in the Control Order are violative of the freedom contained in Article 301. It is an accepted principle of taw that regulations which facilitate the free move-ment of trade and commerce cannot be challenged as violative of Articles 301 and 302 of the Constitution. The Control Order seeks to maintain regular flow of tea through auction centres, which is a competitive channel for both producers/manufacturers and buyers with the object of assuring fair and remunerative returns to the manufacturers of tea and fair prices to the consumers. The Control Order cannot be treated as a restriction on the flow of trade and commerce and it can be considered only as a legitimate regulation for ensuring a belter trading environment without infringement on the freedom declared in Articles 301 and 302 of the Constitution.
31. No doubt Clause 17 of the Control Order restricts the freedom of the tea manufacturer to sell their produce "as and where he wills". However, it must be remembered that the Control Order was issued with the objective of better monitoring of the distribution of lea in the domestic market, improvment in the conduct of public auctions in India, and with the further objective of reducing the scope of malpractices in the interest of producers of tea. as they can gel competitive price in the auction sale, and arresting the decline in offerings to the auction centres. In these circumstances, it is not at all possible to conceive how the restriction imposed by Clause 17, can be said to be arbitrary or of an excessive nature beyond what is required in the interest of the general public. It must be pointed out that such a provision like Clause 17 compelling the manufacturer of tea to sell 75% of their produce through auction is necessary for preventing the decline in offerings to the auction centres, and the object of the Control Order being defeated. In sub-siance the Control Order only regulates the buying and selling of 75% of tea in the loose form through auction centres in the interest of general public. As already pointed by us, having regard to the purpose and object of the Control Order, it has to be held that the restriction imposed by Clause 17 is a reasonable restriction within the meaning of clause (6) of Article 19 of the Constitution of India.
In these circumstances, we have no hesitation in holding that the provisions of Control Order, particularly, clause 17 are not violative of Article 19(1)(g) of the Constitution of India and that they cannot be said to be arbitrary or of excessive nature. Point Number 3 is answered accordingly.
32. Point No. 4: The attack of the learned Senior Counsel for the appellant on the order of the second respondent dated 6-12-1985 rejecting the appellant's application for relaxation under Clause 17 of the Control Order is that, there has been no proper consideration of the various grounds mentioned by the appellant in their application claiming exemption from the operation of the Control Order. The learned Senior Counsel further contended that the second respondent has failed to examine the legal objection raised by the appellant in respect of the first proviso to Clause 17 of the Control Order and, therefore, the impugned order dated 6-12-1985 is invalid and it is liable to be quashed. The appellant factory in their application for granting exemption under the first proviso to Clause 17 of the Control Order prayed for exemption from sending any tea to the auctions as required under Clause 17 of the Control Order on the following grounds.
(i) That the application of the Tea (Marketing) Control Order would be fatal to their existing business.
(ii) That the diversion of any part of their production for the auctions would hamper the bona fide interest of the Appellate Factory and their dealers.
(iii) The dealers of the Appellant Factory would be deprived of their gainful employment if they cannot sell the loose tea of the Appellant's factory, as the dealers are stated to be dependent of their livelihood on the sale of the loose tea of the Appellant Factory.
??? (Images Appear) During the personal hearing of the matter by the second respondent, the following grounds were also urged on behalf of the appellants in support of their claim for exemption under the second proviso to clause 17.
(a) That the sale is not guaranteed in the Auction Centre.
(b) Price is not assured in the Auction.
(c) If the tea is not sold in the Auction what will be the fate of the accumulated stock.
(d) Identification of their tea would be lost.
(e) There are intermediaries in the auction sales.
On a consideration of the entire materials available on record, the second respondent in paragraphs 2 and 3 of the order dated 6-12-1985 found that tea has been sold in auctions at far more remunerative and higher prices than the tea sold by the appellant privately to their dealers in the following terms :
"The contention of the petitioner that the Tea manufactured by them if sold through Auctions will not fetch remunerative price according to their quality, does not appear to be correct. It may be seen from the statement of sales of the petitioner that the petitioner sold tea to their dealers at the average rate of approximate price per Kg. Rs. 14.50, 15.50, 17.00. 19.00 in the month of January, February, March. June of 1983 and Rs. 14. Rs. 14.00 and 14.50 in July, November, 1982 whereas the average price per Kg. for the corresponding month of 1983, 1984 in the Auction Centres of South India were as follows :
4. It may, therefore, clearly be seen that the tea has been sold in Auctions at far more remunerative and higher prices than the Tea sold by the petitioner to their dealers in the corresponding months of the years before and after promulgation of the Tea (Marketing) Control Order. ...."
The second respondent also found that the appellant's contention that sending of Tea manufactured by them and selling of Tea through auction centres have caused or would cause any undue hardship to them is not - sustainabte and that the appellant factory have failed to satisfy the second respondent that the diversion of the 75% of their product through auction sales in terms of Clause 17 of the Control Order would in anyway affect their manufacturing business or cause any undue hardship to them. The second respondent also found that the diversion of any part of their production for the obligatory sale through auctions would not hamper the bona fide interest of the 1st appellant factory and that the dealers of the 1st appellant factory would not be deprived of their gainful employment if they cannot sell the loose tea of the 1st appellant factory. Dealing with the defects and disadvantages in the auction system as pointed out by the appellants the second respondent held that the appellant:
(a) did not send their tea for auction;
(b) in auction centres valuation of the tea is made by the brokers according to its quality;
(c) there is little chance of accumulation of tea brought for sale in the auction centres;
(d) identification of tea will arise only when it is sold by brand name; and.
(e) the organisers and brokers holding licence from the authority under the provisions of the Control Order will organise and help the buyers to purchase tea in bulk.
33. The first proviso to Clause 17 of the Control Order says that the registering authority may, on the application submitted by a registered manufacturer, if satisfied that in enforcing compliance with any provisions of the Control Order, undue hardship would result to the manufacturer, for reasons to be recorded in writing, relax any of the provisions of the Control Order. The appellants have not produced any acceptable material before the second respondent to establish that undue hardship would result to the appellants in enforcing compliance with the provisions of Clause 17 regarding obligatory sale of 70% (now 75%) of their manufactured tea through auction. The grounds stated in the application submitted by the appellants before the second respondent for the grant of exemption will not come within the purview of undue hardship as contemplated in the first proviso to Clause 17 of the Control Order. We are unable to accept the contention of the learned Senior Counsel for the appellants that the second respondent had not given proper consideration to the various aspects of the matter. On a careful consideration of the entire facts and circumstances of the case and the various submissions made on behalf of the appellants the second respondent by the order dated 6-12-1985 rightly held that the 1st appellant factory have failed to establish that any undue hardship would be caused to them on account of the obligation imposed by Clause 17 of the Control Order. In these circumstances, we see no infirmity in the order of the second respondent dated 6-12-1985, refusing to grant exemption to the appellant under the first proviso to Clause 17 of the Control Order and therefore, the said order of the second respondent is not liable to be quashed.
34. For all the reasons stated above, we cannot take exception to the conclusions arrived at by the learned single Judge. We see no infirmity in the Common Order of the learned single Judge under Appeal warranting interference in these Writ Appeals. There is no merit in those Writ Appeals and they are liable to be dismissed. Accordingly the writ appeals are dismissed. However, there will be no order as to costs.
35. Writ appeals dismissed.