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Full Case Details
- In this Order unless there is anything repugnant in the subject or context
(a) ‘Coal’ includes coke but does not include cinder and ashes.
(c) “The Licensing Authority” means the District Magistrate of the District or any other
officer authorised by him to perform his functions under this Order and includes the District
Supply Officer of the district.
(d) ‘Licensee’ means a person holding a license under the provisions of this Order in Form
‘A’ or in Form ‘B’. - (1) No person shall stock, sell, store for sale or utilise coal for burning bricks or shall
otherwise dispose of coal in this State except under a license in Form ‘A’ or ‘B’ granted
under this Order or in accordance with the provisions of this Order.
(2) Nothing contained in sub-clause (1) –
(a) shall insofar as it relates to taking out a license for stocking or storing coal for their own
consumption, apply to the stocks held by persons or undertakings obtaining coal on permits of
the District Magistrate or the State Coal Controller for their own consumption.
(b) shall apply to any person or class of persons exempted from any provision of the above
sub-clause by the State Coal Controller, to the extent of their exemption.
4.(1) Every application for license under this Order shall be made in the form given in
Schedule I appended to this Order.
(2) A license granted under this Order shall be in Form ‘A’ or Form ‘B’ appended to this
Order and the holder of a license granted under this Order shall comply with any directions
that may be issued to him by the Licensing Authority in regard to the purchase, sale, storage
or distribution of coal.
(3) The Licensing Authority may grant, refuse to grant, renew or refuse to renew a license and
may suspend, cancel, revoke or modify any license or any terms thereof granted by him under
the Order for reasons to be recorded provided that every power which is under this Order
exercisable by the Licensing Authority shall also be exercisable by the State Coal Controller
or any person authorised by him in this behalf. - The State Coal Controller may by written order likewise require any person holding stock
of coal to sell the whole or any part of the stock to such person or class of persons and on
such terms and prices as may be determined in accordance with the provisions of clause (8). - (1) No licensee in Form ‘B’ and no person acting on his behalf shall sell, agree to sell or
offer for sale, coal at a price exceeding the price to be declared by the Licensing Authority in
accordance with the formula given in Schedule III.
(2) A licensee in Form ‘A’ or any other person holding stock of coal or any other person
acting for or on behalf of such licensees or person transferring or disposing of such stocks to
any person in accordance with clause 6 or clause 7 shall not charge for the coal a price
exceeding the landed cost, plus incidental and handling charges, plus an amount not
exceeding 10 per cent of the landed cost as may be determined by the Licensing Authority or
the State Coal Controller.
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Explanation.- (1) Landed cost means the ex-colliery price of the coal plus the L.D.C.C. and
Bihar sales tax plus middleman’s commission actually paid and railway freight.
Incidental and handling charges mean the cost of unloading from wagons, transporting to
stacking site, unloading at the stacking site, plus go down rent, plus choukidari charges, if
any, not exceeding Rs 8-8-0 per ton as may be determined by the Licensing Authority or the
State Coal Controller according to local conditions. - The District Magistrate shall within a week of the commencement of this Order prepare
and publish in a local paper a list of persons carrying on the business of sale of coal in his
district and upon the publication of the list, the persons included therein will be deemed for
purposes of this Order to be licensee until three months next following the publication of the
list in Form A or B as may be specified. - If any person contravenes any of the provisions of this Order, or the conditions of license
granted thereunder, he shall be punishable under Section 7 of the Essential Supplies
(Temporary Powers) Act, 1946, with imprisonment for a term which may extend to three
years or with fine or with both and without prejudice to any other punishment to which he
may be liable ….”
Schedule III referred to in the Order is as follows:
SCHEDULE III
(Formula for declaration of prices of soft coke/hardcoke/steam coal). - Ex-colliery price Actuals.
- L.D.C.C. and Bihar Sales Tax Actuals.
- Middleman’s commission Actually paid subject to the
maximum laid down under clause 6
of the Government of India Colliery
Control Order, 1945. - Railway freight Actuals.
- Incidental and handling charges including Maximum of Rs 8/8 per ton as may
(i) Unloading from wagons be determined by the Licensing
(ii) Transport up to premises of stacking Authority according to local
(iii) Unloading and stacking at the premises or conditions, provided that at places
(iv) Godown rent and chaukidari charges, if any. which are depot. extraordinarily (v)
Weighing charges, if any. distant from the railway head a
higher rate may be allowed by the
Licensing Authority. - Local taxes Octroi, etc. Actuals.
- Shortage Not exceeding 3½ maunds per ton in
the case of soft coke and 2 ½
maunds in the case of hard coke and
steam coal as may be determined by
the Licensing Authority. - Profit At 10 per cent on total Items 1 to 6
above except Item 5.
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The petitioners were a firm of traders carrying on the business of retail sellers of coal at a
coal depot held by them in the town of Kanpur. The District Magistrate of Kanpur as well as
the District Supply Officer had been for a considerable time past issuing directives upon the
petitioners as well as other coal depot holders of the town, imposing restrictions of various
kinds upon the sale of coal, soft coke, etc. Prior to the 14th of February, 1953, the prices that
were fixed by the District Officers left the coal dealers a margin of 20 per cent profit upon the
sale of soft coke and 15 per cent profit on the sales of hard coke and steam coal, such profits
being allowed on the landed costs of the goods up to the depot. The landed costs comprised
several items and besides ex-colliery price, the middleman’s commission and the railway
freight, there were incidental expenses of various kinds including labour duty, loading and
unloading charges, cartage and stacking expenses. After making a total of these cost elements,
an allowance was given for shortage of weight at the rate of 5 Mds. and odd seers per ton in
the case of soft coke and 3 Mds. and odd seers in the case of hard coke and steam coal, and it
was on the basis of the net weight thus arrived at that the price was calculated. On the 14th of
February, 1953, the District Supply Officer issued a directive reducing the selling prices of
coke, coal, etc., much below the existing rates. This reduction was effected in a three-fold
manner. In the first place, the allowance for shortage of weight was made much less than
before; secondly, a sum of Rs 4-12-0 only was allowed for all the incidental expenses, and
thirdly, the margin of profit was cut down to 10 per cent. On the 22nd of May, 1953, a
representative petition was filed by seven colliery depot holders of Kanpur including the
present petitioners challenging the validity of the executive order, dated the 14th of February,
1953, mentioned above inter alia on the ground that it infringed the fundamental rights of the
petitioners under Articles 14 and 19 of the Constitution. There was an application for ad
interim stay in connection with this petition which came up for hearing before the learned
Vacation Judge of this court on the 1st of July, 1953. On that day an undertaking was given
by the State of Uttar Pradesh to the effect that they would withdraw the order of the 14th
February, 1953, and apparently the consideration that weighed with the State in giving this
undertaking was that it was a purely executive order without any legislative sanction behind
it. The order of the 14th February was in fact withdrawn, but on the 10th of July, 1953, the
State of Uttar Pradesh promulgated by a notification an order entitled “The Uttar Pradesh
Coal Control Order, 1953” purporting to act in exercise of the powers conferred upon it by
Section 3(2) of the Essential Supplies Act, 1946, read with the notified order of the
Government of India issued under Section 4 of the Act. As the constitutionality of this Coal
Control Order is the main object of attack by the petitioners in the present proceeding, it
would be convenient to set out the material provisions of that order in respect of which the
controversy between parties primarily centers:
On 16th July, 1953, Respondent issued a declaration whereby he fixed the retail rates for
the sale of soft coke, coal, etc. at precisely the same figures as they stood in the directive
issued on 14th February, 1953. The result allegedly was that the selling prices were reduced
so much that it was not possible for the coal traders to carry on their business at all. In
accordance with the provision of clause 11 of the Control Order, the petitioners’ name
appeared in the list B of license-holders and they did apply for a license in the proper form as
required by clause (4). The license was prepared, though not actually’ delivered over to the
petitioners. By a letter dated the 3rd of October, 1953, the Area Rationing Officer, Kanpur,
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accused the petitioners of committing a number of irregularities in connection with the
carrying on of the coal depot. The charges mainly were that there were two other depots held
and financed by the petitioners themselves in the names of different persons and that the
petitioners had entered into agreements for sale of coal at more than the fixed rates. The
petitioners submitted an explanation which was not considered to be satisfactory and by an
order dated 13th October, 1953, the District Supply Officer, Kanpur, cancelled the
petitioners’ license. The petitioners challenged the validity of the Coal Control Order of the
10th of July, 1953, the declaration of prices made on 16th July and also the order cancelling
the petitioners’ license on the 13th of October, 1953.
B.K. MUKHERJEA, J. – This is an application presented by the petitioners under Article 32
of the Constitution, complaining of infraction of their fundamental rights guaranteed under
Article 14 and clauses (f) and (g) of Article 19(1) of the Constitution and praying for
enforcement of the same by issue of writs in the nature of mandamus. - The constitutional validity of the Uttar Pradesh Coal Control Order has been assailed
before us substantially on the ground that its provisions vest an unfettered and unguided
discretion in the licensing authority or the State Coal Controller in the matter of granting or
revoking licenses, in fixing prices of coal and imposing conditions upon the traders; and these
arbitrary powers cannot only be exercised by the officers themselves but may be delegated at
their option to any person they like. It is argued that these provisions imposing as they do
unreasonable restrictions upon the right of the petitioners to carry on their trade and business
conflict with their fundamental rights under Article 19(1)(g) of the Constitution and are hence
void. With regard to the order dated the 16th of July, 1953, by which the prices of coke, coal,
etc. were fixed, it is pointed out that it was not only made in exercise of the arbitrary power
conferred upon the licensing authority by the Coal Control Order, but the prices as fixed, are
palpably discriminatory as would appear from comparing them with the prices fixed under the
very same Control Order in other places within the State of Uttar Pradesh like Allahabad,
Lucknow and Aligarh. The order of the 13th October, 1953, cancelling the petitioners’ license
is challenged on the ground that the charges made against the petitioners were vague and
indefinite and that the order was made with the ulterior object of driving the petitioners out of
the coal business altogether. It is said further that as a result of the cancellation order, the
petitioners have been made incapable of disposing of the stocks already in their possession,
though at the same time the holding of such stock after the cancellation of their license has
become an offence under the Coal Control Order. - It is not disputed before us that coal is an essential commodity under the Essential Supplies
(Temporary Powers) Act of 1946, and by virtue of the delegation of powers by the Central
Government to the Provincial Government under Section 4 of the Act, the Uttar Pradesh
Government was competent to make provisions, by notified order, for regulating the supply
and distribution of coal in such a way as they considered proper with a view to secure the
objects as specified in Section 3 of the Act. All that is necessary is that these provisions
should not infringe the fundamental rights of the citizens guaranteed under Part III of the
Constitution and if they impose restrictions upon the carrying on of trade or business, they
must be reasonable restrictions imposed in the interests of the general public as laid down in
Article 19(6) of the Constitution.
78 - Nobody can dispute that for ensuring equitable distribution of commodities considered
essential to the community and their availability at fair prices, it is quite a reasonable thing to
regulate sale of these commodities through licensed vendors to whom quotas are allotted in
specified quantities and who are not permitted to sell them beyond the prices that are fixed by
the controlling authorities. The power of granting or withholding licenses or of fixing the
prices of the goods would necessarily have to be vested in certain public officers or bodies
and they would certainly have to be left with some amount of discretion in these matters. So
far no exception can be taken; but the mischief arises when the power conferred on such
officers is an arbitrary power unregulated by any rule or principle and it is left entirely to the
discretion of particular persons to do anything they like without any check or control by any
higher authority. A law or order, which confers arbitrary and uncontrolled power upon the
executive in the matter of regulating trade or business in normally available commodities
cannot but be held to be unreasonable. As has been held by this court in Chintaman v. The
State of Madhya Pradesh [1950 SCR 759], the phrase “reasonable restriction” connotes that
the limitation imposed upon a person in enjoyment of a right should not be arbitrary or of an
excessive nature beyond what is required in the interest of the public. Legislation, 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 by clause (6) of Article 19, it must be held to
be wanting in reasonableness. It is in the light of these principles that we would proceed to
examine the provisions of this Control Order, the validity of which has been impugned before
us on behalf of the petitioners. - The provision contained in clause 3(1) of the Order that “no person shall stock, sell, store
for sale or otherwise utilise or dispose of coal except under a license granted under this
Order” is quite unexceptional as a general provision; in fact, that is the primary object which
the Control Order is intended to serve. There are two exceptions engrafted upon this general
rule: the first is laid down in sub-clause (2)(a) and to that no objection has been or can be
taken. The second exception, which is embodied in sub-clause (2)(b) has been objected to by
the learned counsel appearing for the petitioners. This exception provides that nothing in
clause 3(1) shall apply to any person or class of persons exempted from any provision of the
above sub-clause by the State Coal Controller, to the extent of such exemption. It will be seen
that the Control Order nowhere indicates what the grounds for exemption are, nor have any
rules been framed on this point. An unrestricted power has been given to the State Controller
to make exemptions, and even if he acts arbitrarily or from improper motives, there is no
check over it and no way of obtaining redress. Clause 3(2)(b) of the Control Order seems to
us, therefore, prima facie to be unreasonable. We agree, however, with Mr Umrigar that this
portion of the Control Order, even though bad, is severable from the rest and we are not really
concerned with the validity or otherwise of this provision in the present case as no action
taken under it is the subject-matter of any complaint before us. - The more formidable objection has been taken on behalf of the petitioners against clause
4(3) of the Control Order which relates to the granting and refusing of licenses. The licensing
authority has been given absolute power to grant or refuse to grant, renew or refuse to renew,
suspend, revoke, cancel or modify any license under this Order and the only thing he has to
do is to record reasons for the action he takes. Not only so, the power could be exercised by
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any person to whom the State Coal Controller may choose to delegate the same, and the
choice can be made in favour of any and every person. It seems to us that such provision
cannot be held to be reasonable. No rules have been framed and no directions given on these
matters to regulate or guide the discretion of the licensing officer. Practically the Order
commits to the unrestrained will of a single individual the power to grant, withhold or cancel
licenses in any way he chooses and there is nothing in the Order which could ensure a proper
execution of the power or operate as a check upon injustice that might result from improper
execution of the same. Mr Umrigar contends that a sufficient safeguard has been provided
against any abuse of power by reason of the fact that the licensing authority has got to record
reasons for what he does. This safeguard, in our opinion, is hardly effective; for there is no
higher authority prescribed in the Order who could examine the propriety of these reasons and
revise or review the decision of the subordinate officer. The reasons, therefore, which are
required to be recorded are only for the personal or subjective satisfaction of the licensing
authority and not for furnishing any remedy to the aggrieved person. It was pointed out and
with perfect propriety by Mr Justice Matthews in the well-known American case of Yick Wo
v. Hopkins,118 US 356 at 373, that the action or non-action of officers placed in such position
may proceed from enmity or prejudice, from partisan zeal or animosity, from favouritism and
other improper influences and motives which are easy of concealment and difficult to be
detected and exposed, and consequently the injustice capable of being wrought under cover of
such unrestricted power becomes apparent to every man, without the necessity of detailed
investigation. In our opinion, the provision of clause 4(3) of the Uttar Pradesh Coal Control
Order must be held to be void as imposing an unreasonable restriction upon the freedom of
trade and business guaranteed under Article 19(1)(g) of the Constitution and not coming
within the protection afforded by clause (6) of the article. - As this provision forms an integral part of the entire structure of the Uttar Pradesh Coal
Control Order, the order cannot operate properly unless the provision of clause 4(3) is brought
in conformity with the constitutional requirements indicated above. The license of the
petitioners having been cancelled in pursuance with the above clause of the Control Order, the
cancellation itself should be held to be ineffective and it is not necessary for us to enquire
further whether or not the grounds upon which the licensing authority purported to act were
vague or indefinite or could constitute proper grounds for cancellation. - The two other clauses of the Control Order to which exception has been taken on behalf
of the petitioners are clauses (7) and (8). Clause (7) empowers the State Coal Controller to
direct, by written order, any person holding stock of coal to sell the whole or any part of the
stock to such person or class of persons and on such terms and prices as may be determined in
accordance with the provision of clause (8). Clause 8(1) provides that no licensee in Form ‘B’
shall sell or agree to sell coal at a price exceeding the price to be declared by the licensing
authority in accordance with the formula given in Schedule III. With regard to both these
clauses, the contention of the petitioners’ counsel, in substance, is that the formula for
determining the price, as laid down in Schedule III, is per se unreasonable as it is made
dependent on the exercise of an unfettered and uncontrolled discretion by the licensing
authority. An unfair determination of the price by the licensing authority, it is argued, would
be totally destructive of the business of the coal traders and the grievance of the petitioners is
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that that is exactly what has been done by the declaration of prices made on the 16th of July,
1953. - We have examined the formula given in Schedule III to the Control Order with some care
and on the materials that have been actually placed before us, we are not in a position to say
that the formula is unreasonable. The prices, as said already, are calculated on the basis of the
landed costs of coke and coal up to the depot, to which a profit of 10 per cent is added. The
landed costs comprise seven items in all which are enumerated in Schedule III. With regard to
Items 1, 2, 3, 4 and 6 of the Schedule the actual costs are taken into account and to that no
objection can possibly be taken. The entire dispute is with regard to incidental charges
specified in Item 5 and the allowance for shortage which forms Item 7. So far as incidental
charges are concerned, the Schedule allows a maximum of Rs 8/8 per ton to be determined by
the licensing authority according to local conditions. The rates undoubtedly vary according to
local conditions and some amount of discretion must have to be left in such cases to the local
authorities. The discretion given to the licensing authority in fixing these rates is, however,
not an unlimited discretion, but has got to be exercised with reference to the condition
prevalent in the locality with which the local officers must be presumed to be familiar. The
grievance of the petitioners is that in the declaration of 16th of July, 1953, the licensing
authority allowed incidental charges only at the rate of Rs 4/12/- per ton and that is grossly
unfair. It is pointed out that at Lucknow, Aligarh, Allahabad and other places much higher
rates were allowed, though the local conditions of these places are almost identical; and there
has been consequently discrimination in this respect which makes the declaration void
altogether. The statements that have been made by the petitioners in this connection are not
supported by any affidavit of any person who is familiar with the local conditions in the other
places and on the materials that we have got here we are unable to say that the rates fixed by
the licensing authority of Kanpur are really discriminatory. It is certainly not open to us to
substitute our own determination in the matter of fixing the prices for that of the licensing
authority and provided we are satisfied that the discretion that has been vested in a public
officer is not an uncontrolled discretion and no unfair discrimination has resulted from the
exercise of it, we cannot possibly strike down as illegal any order or declaration made by such
officer. - The same reasons apply, in our opinion, to the seventh item of Schedule III which relates
to allowances for shortage of weight. Here also the Control Order specifies a maximum and
the determination of the allowance in particular cases have been left to the discretion of the
licensing authority. We are not satisfied from the materials placed before us that this
provision is unfair or discriminatory. The formula allows a profit of 10 per cent upon the cost
items with the exception of Item 5 which relates to incidental charges. We do not know why
this item has been omitted and Mr Umrigar, appearing for the respondents, could not suggest
any possible reason for it. But even then, the result of this omission would only be to lower
the margin of profit a little below 10 per cent and nothing more. If the other traders in the
locality are willing to carry on business in coal with that amount of profit, as is stated on the
affidavits of the respondents, such fixation of profit would undoubtedly be in the interests of
the public and cannot be held to be unreasonable. The counsel for the petitioners is not right
in his contention that the Control Order has only fixed the maximum profit at 10 per cent and
has left it to the discretion of the licensing authority to reduce it in any way he likes. Schedule
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III fixes the profit at 10 per cent upon the landed costs with the exception of Item 5 and as this
is not the maximum, it would have to be allowed in all cases and under clause 8(1), the ‘B’
licensees are to sell their stocks of coal according to the prices fixed under Schedule III.
Clause 8(2) indeed is not very clearly worded, but we think that all that it provides is to
impose a disability upon all holders of coal stocks to charge prices exceeding the landed costs
and a profit upon the same not above 10 per cent as may be determined by the licensing
authority. The determination spoken of here must be in accordance with what is laid down in
Schedule III and that, as has been said above, does specify a fixed rate and not a maximum
and does not allow the licensing authority to make any reduction he likes. On the whole we
are of the opinion that clauses (7) and (8) of the Control Order do not impose unreasonable
restrictions upon the freedom of trade enjoyed by the petitioners and consequently the
declaration of the 16th of July, 1953, cannot be held to be invalid. The result is that, in our
opinion, clause 4(3) of the Control Order as well as the cancellation of the petitioners’ license
should be held to be invalid and a writ in the nature of mandamus would issue against the
respondents opposite parties preventing them from enforcing the cancellation order. The rest
of the prayers of the petitioners are disallowed. We make no order as to costs.
