Case Summary
| Citation | Calcutta Gas Co. v. State of West Bengal AIR 1962 SC 1044 |
| Keywords | Harmonious rule of construction |
| Facts | The appellant was appointed as the Manager of the Oriental Gas Company, which operated an industrial facility for the manufacture and sale of fuel gas in Calcutta, under an agreement with the company. In 1960, the West Bengal Legislature enacted the Oriental Gas Company Act. According to Section 4 of this Act, the undertaking was to be transferred to the State Government for management and control for a period of five years. On October 3, 1960, the State Government issued a notification indicating that it would take over the management and control of the undertaking. In response, the appellant filed a writ petition challenging the constitutional validity of the Act and sought appropriate writs to prevent the State Government from enforcing it, as well as to quash the notification. The High Court dismissed the petition, ruling that the State Legislature had the authority to enact the impugned Act, and that its constitutional validity was not in question. As a result, the appellant filed an appeal in the Supreme Court of India against the High Court’s decision. |
| Issues | Whether the state legislature is competent to enact the Oriental Gas Company Act, 1960? |
| Contentions | Appellant’s contention: 1. The State Legislature lacked the authority to enact legislation concerning the “fuel industry engaged in the manufacture and production of gas,” as this matter fell under the Union List. Specifically, it relates to Entry 52, which states that control of certain industries by the Union is declared by Parliament to be expedient in the public interest under the Industries (Development and Regulation) Act of 1951. 2. Entry 25 of the State List, which deals with “Gas and gas-works,” was superseded by the Parliamentary Act under Entry 52 of the Union List. 3. The Act was essentially a law for the requisition of property and did not hold validity under Entry 42 of the Concurrent List. Respondent’s Contention: 1. The appellant has no legal standing to maintain the petition. 2. The appellant cannot question the validity of the Act on the grounds that its provisions infringe upon fundamental rights under Articles 14, 19, and 31, given Article 31A(1)(b) of the Constitution. 3. The West Bengal Legislature had the legislative competence to pass the impugned Act under Entry 42 of List III of the Seventh Schedule to the Constitution. 4. Entry 25 of List II also provides adequate authority and power to the State Legislature to make laws affecting gas and gas work. Even if the Act incidentally impacts any production aspect, the essence of the legislation pertains to gas and gas work within the meaning of Entry 25 of List II. |
| Law Points | The Court held that the State Legislature was competent to enact the law under Entry 25 of List II (State List), which specifically addresses “Gas and gas-works.” It emphasized that the entries in the legislative lists should be interpreted broadly and liberally. The Court found that Entry 25 specifically designated “Gas and gas-works” as distinct from the general category of “Industries” mentioned in Entry 24 of the State List. Applying the doctrine of harmonious construction, the Court interpreted the entries in the State List to ensure that Entry 24 (Industries, subject to entries 7 and 52 of List I) should be read in a manner that fully respects Entry 25 (Gas and gas-works). This interpretation clarified that the State had exclusive authority to legislate on matters related to gas and gas-works, except during instances of war or national emergency when Parliament might also hold power. The Court determined that the Industries (Development and Regulation) Act of 1951, enacted by Parliament under Entry 52 of the Union List, did not cover the gas industry in a way that would make the State law repugnant or beyond the State’s legislative competence. The Central Act focused on developing and regulating scheduled industries, and it did not explicitly address the gas industry to such an extent that it would negate the State’s authority under Entry 25. The Court concluded that the “pith and substance,” or the true nature and character, of the Oriental Gas Company Act was to regulate and manage a gas company within the State, which aligned perfectly with Entry 25 of the State List. It was not merely a law for the acquisition or requisition of property under the Concurrent List. Furthermore, the Court recognized that the Calcutta Gas Company had the legal standing to file the petition under Article 226 of the Constitution, as its contractual rights under the management agreement with the Oriental Gas Company were affected by the challenged Act. |
| Judgement | The Apex Court held that the Legislature of a State has the exclusive power to make law in respect of gas industry by virtue of entry 25 of List II, and that entry 24 does not comprehend gas industry. |
| Ratio Decidendi & Case Authority |
Full Case Details
K. SUBBA RAO, J. – This appeal it raises the question of constitutional validity of Oriental Gas Company Act, 1960. Oriental Gas Company was originally constituted by a deed of settlement dated April 25, 1853, by the name of Oriental Gas Company, and it was subsequently registered in England under the provisions of the English Joint Stock Companies Act, 1862. By Act 5 of 1857 passed by the Legislative Council of India, it was empowered to lay pipes in Calcutta and its suburbs and to excavate the streets for the said purpose. By Acts of the Legislative Council of India passed from time to time special powers were conferred on the said Company. In 1946 Messrs Soorajmull Nagarmull, a firm carrying on business in India, purchased 98 per cent of the shares of the said Oriental Gas Company Limited. The said firm floated a limited liability company named Calcutta Gas Co. (Proprietary) Limited and it was registered in India with its registered office at Calcutta. On July 24, 1948, under an agreement entered into between Oriental Gas Company and Calcutta Gas Company, the latter was appointed the manager of the former Company in India for a period of 20 years from July 5, 1948. Oriental Gas Company is the owner of the industrial undertaking, inter alia, for the production, manufacture, supply, distribution and sale of fuel gas in Calcutta. Calcutta Gas Company, by virtue of the aforesaid arrangement, was in charge of its general management for a period of 20 years for remuneration. The West Bengal Legislature passed the impugned Act and it received the assent of the President on October 1, 1960. On October 3, 1960, the West Bengal Government issued three notifications – the first declaring that the said Act would come into force on October 3, 1960, the second containing the Rules framed under the Act, and the third specifying October 7, 1960, as the date with effect from which the State Government would take over for a period of five years the management and control of the undertaking of Oriental Gas Company for the purposes of, and in accordance with, the provisions of the said Act. The appellant i.e., Calcutta Gas Company, filed a petition under Article 226 of the Constitution in the High Court for West Bengal at Calcutta for appropriate writs for restraining the State Government from giving effect to the said Act and for quashing the said notifications. Respondents 1 to 4 to the petition were the State of West Bengal and the concerned officers, and Respondent 5 was Oriental Gas Company Limited. In the petition, the appellant contested the constitutional validity of the Act on various grounds, and in the counter-affidavit, the contesting respondents i.e., Respondents 1 to 4, sought to sustain its validity and also questioned the maintainability of the petition at the instance of the appellant. Ray, J., gave the following findings on the contentions raised before him: (1) The appellant has no legal right to maintain the petition; (2) the appellant cannot question the validity of the Act on the ground that its provisions infringed his fundamental rights under Articles 14, 19 and 31 in view of Article 31- A(l)(b) of the Constitution; (3) the West Bengal Legislature had the legislative competence to pass the impugned Act by virtue of Entry 42 of List III of the Seventh Schedule to the Constitution; (4) Entry 25 of List II also confers sufficient authority and power on the State Legislature to make laws affecting gas and gas-works; and (5) even if the Act incidentally trenches upon any production aspect, the pith and substance of the legislation is gas and gas- works within the meaning of Entry 25 of List II. The learned Judge rejected all the contentions of the appellant and dismissed the petition by his order dated November 15, 1960.
3. Learned Attorney-General, appearing for the appellant, has repeated before us all the contentions, except that relating to fundamental rights, which his client had unsuccessfully raised before the High Court. His contentions may be summarized thus: (1) The finding of the High Court that the appellant has no locus standi to file the petition cannot be sustained, as under the impugned Act the appellant’s legal rights under the agreement entered into by it with Oriental Gas Company on July 24, 1948, were seriously affected. (2) Under Article 226 of the Constitution Parliament has exclusive power to make laws with respect to any of the matters enumerated in List I: Parliament in exercise of the said power passed the Industries (Development and Regulation) Act, 1951, by virtue of Entry 52 of the said List; the two entries in List II, namely, Entries 24 and 25, cannot sustain the Act, as Entry 24 is subject to the provisions of Entry 52 of List I; and Entry 25 must be confined to matters other than those covered by Entry 24, and, therefore, the West Bengal Legislature is not competent to make a law regulating the gas industry. (3) Assuming that the State Legislature has power to pass the Act by virtue of Entry 25 of List II, under Article 254(1) of the Constitution the law made by Parliament, namely, the Industries (Development and Regulation) Act, 1951, shall prevail, and the law made by the State Legislature, namely, the impugned Act, shall be void to the extent of repugnancy and (4) the view of the High Court that the validity of the Act could be sustained under Entry 42 of List III is wrong, as under the impugned Act the State only takes over the management of the Company and manages it for and on behalf of the Company, whereas the concept of requisition under the said entry requires that the State shall take legal possession of property of the person from whom it is requisitioned, on its own behalf or on behalf of a petitioner other than the owner thereof.
4. The learned Advocate-General of West Bengal, and Mr Sen, who followed him, seek to sustain the validity of the impugned Act not only under Entry 25 of List II but also under Entries 33 and 42 of List III of the Seventh Schedule to the Constitution.
6. To appreciate the rival contentions in regard to the other points, it would be convenient and necessary to notice briefly the provisions of the Industries (Development and Regulation) Act, 1951, hereinafter called the “Central Act”, and the impugned Act. The Central Act was passed, as its long title shows, to provide for the development and regulation of certain industries. Under Section 2 of the Central Act, it is declared that it is expedient in the public interest that the Union should take under its control the industries specified in the First Schedule. Under Heading 2 of the First Schedule, Item (3) is “fuel gases — (coal gas, natural gas and the like)”. “Industrial undertaking” is defined to mean any undertaking pertaining to a scheduled industry carried on in one or more factories by any person or authority including Government; and “factory” is defined to mean any premises, including the precincts thereof, in any part of which a manufacturing process is being carried on or is ordinarily so carried on. Section 9 authorizes the Government to levy and collect access from the industries. Chapter III provides for the regulation of scheduled industries: Section 15 empowers the Government to make or cause to be made a full and complete investigation of the affairs of any scheduled industry, if it is of opinion that there is a likelihood of substantial fall in the volume of production or a marked deterioration in the quality of any article produced, or there is likely to be a rise in the price of any article produced therein, or that an undertaking is being managed in a manner highly detrimental to the scheduled industry concerned; and Section 16 authorizes
the Central Government, after making the said investigation to issue such directions to the industrial undertaking or undertakings concerned as may be appropriate in the circumstances in order to regulate the production of any article or articles and fix the standards of production, to require it to take such steps to stimulate the development of the industry, to prohibit from resorting to any act or practice which might reduce its production capacity or economic value, or to control the prices or regulate the distribution of articles produced therein. Chapter III-A confers power on the Central Government to assume management or control of an industrial undertaking in certain cases: Section 18-A enables it to take control of an industrial undertaking, and Section 18-B(1), inter alia, provides that on the issue of the notified order under Section 18-A, all persons in charge of management, including persons holding office as Managers or Directors of the industrial undertaking immediately before the issue of the notified order shall be deemed to have vacated their offices as such, and that any contract of management between the industrial undertaking and any managing agent or any director thereof holding office as such immediately before the issue of the notified order shall be deemed to have been terminated and the person or persons appointed under the Act shall be empowered to take over the management and conduct the affairs of the company in the place of the previous management. Chapter III-B enables the Central Government for securing the equitable distribution and availability at fair prices of any article or class of articles relatable to any scheduled industry, and for controlling and regulating the supply, distribution, and price of the said articles. Section 20 of the Act declares that after the commencement of the Act, it shall not be competent for any State Government or a local authority to take over the management or control of any industrial undertaking under any law for the time being in force which authorizes any such Government or local authority so to do. Briefly stated, the Central Act declares that it is expedient in the public interest to take under its control the scheduled industries; its provisions are designed to provide for the development and regulation of the said industries; it enables the Central Government, for the purpose of promoting and regulating the said industries, to investigate into the affairs of an undertaking, to regulate its production, supply and distribution, and, if necessary, to take over the management of the undertaking.
7. Coming to the impugned Act, its provisions are confined only to the affairs of Oriental Gas Company Limited. Its long title shows that it was passed to provide for the taking over for a limited period of the management and control, and the subsequent acquisition of the undertaking of Oriental Gas Company Limited. Its Preamble says that it was thought expedient to provide for the increase of the production of gas and improving the quality thereof for supply to industrial undertakings, hospitals and other welfare institutions, to local authorities for street lighting and to the public in general for domestic consumption and for that purpose to provide for the taking over for a limited period of the management and control, and the subsequent acquisition, of the undertaking. Under Section 4, with effect from the appointed day and for a period of five years thereafter the undertaking of the company shall stand transferred to the State Government for the purpose of management and control. Under Section 6, the undertaking of the company shall be run by the State Government and shall be used and utilised by the State Government for purposes of production of gas and supply thereof to public institutions mentioned therein and for other purposes. Sections 8 and 9 provide for payment of compensation for taking over the said management. It would be seen that the impugned Act intends to servo the same purpose as the Central Act, though its operation is confined to Oriental
Gas Company. Both the Acts are conceived to increase the production, quality and supply pertaining to an industry, and for that purpose to enable the appropriate Government, if necessary, to take over the management for regulating the industry concerned to achieve the said purposes. The impugned Act occupies a part of the field already covered by the Central Act. The question is whether the State Legislature has the constitutional competency to encroach upon the said field.
8. At this stage it would be convenient to read the relevant articles of the Constitution.
“246. (1) Notwithstanding anything in clauses (2) and (3) Parliament has exclusive power to make laws with respect to any of the matters enumerated in List I in the Seventh Schedule (in this Constitution referred to as the ‘Union List’).
(3) Subject to clauses (1) and (2), the legislature of any State has exclusive power to make laws for such State or any part thereof with respect to any of the matters enumerated in List II in the Seventh Schedule (in this Constitution referred to as the ‘State List’).
List I – Union List
Entry 7. Industries declared by Parliament by law to be necessary for the purpose of defence or for the prosecution of war.
Entry 52. Industries, the control of which by the Union is declared by Parliament by law to be expedient in the public interest.
List II – State List
Entry 24. Industries subject to the provisions of Entries 7 and 52 of List I.
Entry 25. Gas and gas-works.
Entry 26. Trade and commerce within the State subject to the provisions of Entry 33
of List III.
Entry 27. Production, supply and distribution of goods subject to the provisions of
Entry 33 of List III.”
Before construing the said entries, it would be useful to notice some of the well settled rules of interpretation laid down by the Federal Court and this Court in the matter of construing the entries. The power to legislate is given to the appropriate legislatures by Article 246 of the Constitution. The entries in the three Lists are only legislative heads or fields of legislation: they demarcate the area over which the appropriate legislatures can operate. It is also well settled that widest amplitude should be given to the language of the entries. But some of the entries in the different Lists or in the same List may overlap and sometimes may also appear to be in direct conflict with each other. It is then the duty of this Court to reconcile the entries and bring about harmony between them. When the question arose about reconciling Entry 45 of List I, duties of excise, and Entry 18 of List II, taxes on the sale of goods, of the Government of India Act, 1935, Gwyer, C.J., in In re Central Provinces and Berar Act 14 of 1938 [(1939) FCR 18] observed:
“A grant of the power in general terms, standing by itself, would no doubt be construed in the wider sense; but it may be qualified by other express provisions in the same enactment, by the implication of the context, and even by considerations arising out of what appears to be the general scheme of the Act.”
The learned Chief Justice proceeded to state:
“… an endeavour must be made to solve it, as the Judicial Committee have said, by having recourse to the context and scheme of the Act, and a reconciliation at empted between two apparently conflicting jurisdictions by reading the two entries together and by interpreting, and, where necessary, modifying the language of the one by that of the other. If indeed a reconciliation should prove impossible, then, and only then, will the non obstante clause operate and the federal power prevail.”
The Federal Court in that case held that the entry “taxes on the sale of goods” was not covered by the entry “duties of excise” and in coming to that conclusion, the learned Chief Justice observed:
“Here are two separate enactments, each in one aspect conferring the power to impose a tax upon goods; and it would accord with sound principles of construction to take the more general power, that which extends to the whole of India, as subject to an exception created by the particular power, that which extends to the province only. It is not perhaps strictly accurate to speak of the provincial power as being excepted out of the federal power, for the two are independent of one another and exist side by side. But the underlying principle in the two cases must be the same, that a general power ought not to be so construed as to make a nullity of a particular power conferred by the same Act and operating in the same field, when by reading the former in a more restricted sense effect can be given to the latter in its ordinary and natural meaning.”
The rule of construction adopted by that decision for the purpose of harmonizing the two apparently conflicting entries in the two Lists would equally apply to an apparent conflict between two entries in the same List. Patanjali Sastri, J., as he then was, held in State of Bombay v. Narothamdas Jethabai [(1951) SCR 51], that the words “administration of justice” and “constitution and organization of all courts” in Item 1 of List II of the Seventh Schedule to the Government of India Act, 1935, must be understood in a restricted sense excluding from their scope “jurisdiction and powers of courts” specifically dealt with in Item 2 of List II. In the words of the learned Judge, if such a construction was not given “the wider construction of Entry 1 would deprive Entry 2 of all its content and reduce it to useless lumber”. This rule of construction has not been dissented from in any of the subsequent decisions of this Court. It may, therefore, be taken as a well settled rule of construction that every attempt should be made to harmonize the apparently conflicting entries not only of different Lists but also of the same List and to reject that construction which will rob one of the entries of its entire content and make it nugatory.
With this background let us construe the aforesaid entries. There are three possible constructions, namely, (1) Entry 24 of List II, which provides for industries generally, covers the industrial aspect of gas and gas-works leaving Entry 25 to provide for other aspects of gas and gas-works; (2) Entry 24 provides generally for industries, and Entry 25 carves out of it the specific industry of gas and gas-works, with the result that the industry of gas and gas-works is excluded from Entry 24; and (3) the industry of gas and gas-works falls under both the entries, that is, there is a real overlapping of the said entries. Having regard to the aforesaid principle,
while giving the widest scope to both the entries, we shall adopt the interpretation which reconciles and harmonizes them.
9. The first question that occurs to one’s mind is, what is the meaning of the expression “industry” in Entry 24 of List II? Is it different from the meaning of that expression in Entry 52 of List II? Whatever may be its connotation, it must bear the same meaning in both the entries, for the two entries are so interconnected that conflicting or different meanings given to them would snap the connection. Entry 24 is subject to the provisions of Entry 7 and Entry 52 of List I. Entry 7 of List I provides for industries declared by Parliament by law to be necessary for the purpose of defence or for the prosecution of war, and Entry 52 for industries the control of which by the Union is declared by Parliament by law to be expedient in the public interest. Therefore, ordinarily industry is in the field of State legislation; but, if Parliament by law makes a relevant declaration or declarations, the industry or industries so declared would be taken off its field and passed on to Parliament. In the premises, the expression “industry” in all the entries must be given the same meaning. Now, what is the meaning of the word “industry”? In Tika Ramji v. State of U.P. [(1956) SCR 393], the expression “industries” is defined to mean the process of manufacture or production and does not include the raw materials used in the industry or the distribution of the products of the industry. It was contended that the word “industry” was a word of wide import and should be construed as including not only the process of manufacture or production but also activities antecedent thereto such as acquisition of raw materials and subsequent thereto such as disposal of the finished products of that industry. But that contention was not accepted. It is not necessary in this case to attempt to define the expression “industry” precisely or to state exhaustively all its ingredients. Assuming that the expression means only production or manufacture, would it take in its sweep production or manufacture, of gas? Entry 24 in List II in its widest amplitude takes in all industries, including that of gas and gas-works. So too, Entry 25 of the said List comprehends gas industry.
There is, therefore, an apparent conflict between the two entries and they overlap each other. In such a contingency the doctrine of harmonious construction must be invoked. Both the learned counsel accept this principle. While the learned Attorney-General seeks to harmonize both the entries by giving the widest meaning to the word “industry” so as to include the industrial aspect of gas and gas-works and leaving the other aspects to be covered by Entry 25, learned counsel for the contesting respondents seeks to reconcile them by carving out gas and gas-works in all its aspects from Entry 24. If industry in Entry 24 is interpreted to include gas and gas-works, Entry 25 may become redundant, and in the context of the succeeding entries, namely, Entry 26, dealing with trade and commerce, ant Entry 27, dealing with production, supply and distribution of goods it will be deprived of all its contents and reduced to “useless lumber”. If industrial, trade, production and supply aspects are taken out of Entry 25, the substratum of the said entry would disappear: in that event we would be attributing to the authors of the Constitution ineptitude, want of precision and tautology. On the other hand, the alternative contention enables Entries 24 and 25 to operate fully in their respective fields: while Entry 24 covers a very wide field, that is, the field of the entire industry in the State, Entry 25, dealing with gas and gas-works, can be confined to a specific industry, that is, the gas industry. There may be many good reasons for the authors of the Constitution giving separate treatment to gas and gas-works. If one can surmise, it may be that, as the industry of gas and
gas-works was confined to one or two States and was not of all-India importance, it was carved out of Entry 24 and given a separate entry, as otherwise if a declaration by law was made by Parliament within the meaning of Entry 7 or Entry 52 of List I, it would be taken out of the legislative power of States. Be it as it may, the express intention of the Constitution is to treat it, in normal times, as a state subject and it is not in the province of this Court to ascertain and scrutinize the reasons for doing so. It is suggested that this interpretation would prevent Parliament to make law in respect of gas and gas-works during war or other national emergency. Apart from the relevancy of such a consideration, the apprehension has no justification, for under Article 249 Parliament is enabled to take up for legislation any matter which is specifically enumerated in List II whenever the Council of States resolves by two-thirds majority that such a legislation is necessary or expedient in the national interest. So too, under Article 250 Parliament can make laws with respect to any of the matters enumerated in the State List, if a proclamation of emergency is in operation. Article 252 authorizes the Parliament to legislate for two or more States, if the Houses of the legislatures of those States give their consent to the said course. Subject to such emergency or extraordinary powers, the entire industry of gas and gas-works is within the exclusive legislative competence of a State. It is, therefore, clear that the scheme of harmonious construction suggested on behalf of the State gives full and effective scope of operation for both the entries in their respective fields, while that suggested by learned counsel for the appellant deprives Entry 25 of all its content and even makes it redundant. The former interpretation must, therefore, be accepted in preference to the latter. In this view, gas and gas-works are within the exclusive field allotted to the States. On this interpretation the argument of the learned Attorney-General that, under Article 246 of the Constitution, the legislative power of State is subject to that of Parliament ceases to have any force, for the gas industry is outside the legislative field of Parliament and is within the exclusive field of the legislature of the State. We, therefore, hold that the impugned Act was within the legislative competence of the West Bengal Legislature and was, therefore, validly made.
10. In this view the alternative argument advanced on behalf of the State, namely, that the impugned Act was made by virtue of Entry 33 and Entry 42 of List III need not be considered. We should not be understood to have expressed our view one way or other on this aspect of the case.
11. Nor is the contention of learned Attoney-General that Section 20 of the Central Act would still be valid vis-a-vis gas industry has any force. Under Section 20 of the Central Act,
“After the commencement of this Act, it shall not be competent for any State Government or a local authority to take over the management or control of any industrial undertaking under any law for the time being in force which authorizes any such Government or local authority so to do.”
We have expressed the view that the legislature of a State has the exclusive power to make law in respect of gas industry by virtue of Entry 25 of List II, and that Entry 24 does not comprehend gas industry. As we have indicated earlier, the expression “industry” in Entry 52 of List I bears the same meaning as that in Entry 24 of List II, with the result that the said expression in Entry 52 of List I also does not take in a gas industry. If so, it follows that the Central Act, insofar as it purported to deal with the gas industry, is beyond the legislative
competence of Parliament. Section 20 is an integral part of the Central Act, and if it is taken out of the Act, it can only operate in vacuum. The said section was introduced for the effective implementation of the provisions of the Central Act. It was also enacted by virtue of Entry 52 of List I of the Seventh Schedule to the Constitution. If the Act was constitutionally void insofar as it purported to affect the gas industry, for the aforesaid reasons, Section 20 would equally be void to the same extent for the same reasons. In this context two decisions of this Court, namely, Raghubir Singh v. State of Ajmer [(1959) Supp (1) SCR 478] and State of Bihar v. Umesh Jha [AIR 1962 SC 50] may usefully be consulted, for in the said decisions this Court held that ancillary provisions enacted for carrying out the objects of a main Act would fall with the main Act on the ground that they were enacted only to subserve the purpose of the main Act. Section 20, therefore, will not avail the appellant to question the validity of the State action.
12. In the result, we agree with the High Court that the impugned Act was within the legislative competence of the West Bengal State Legislature and was validly made. The appeal fails and is dismissed.
