# BADIU PRASAD AND ORS. ETC v. COLLECTOR OF CENTRAL EXCISE & ORS. ETC

- **Citation:** [1971] Supp. 1 S.C.R. 254
- **Court:** Supreme Court of India
- **Decided:** 1971-03-30
- **Case number:** Writ Petition Nos. 24 and 587 of 1970
- **Bench:** S. M. Snau, c. I .• G. K. MrrrER, K. s. IIEGDE, A. N. GllOVER, P. Jaganmohan Reddy
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/badiu-prasad-and-ors-etc-v-collector-of-central-excise-ors-etc-5520
- **Pages:** 22

## Headnote

Gold Control Act, 1969, ss. 4, 6, 8(1) and 16, 58, 71-Vires of-Provi·
sions of ss. 4, 6, 8 and 16 of Act do not constitute unreasonable restrictions
on right to carry on business and are not violative of Arts. 19 (/} and (g}-
Section 71 is ultra vires-Sections 6 and 16(1) do not encroach on field
covered by Andhra Pradesh (Andhra Ar.a) Pawn Brokers Act 23 of 1948
and Andhra Pradesh (Telangana Area) Money Lenders Act 5 of 1349F.
The petitioners and appellants carried on the business of Pawn brok•
ing and money lending inter alia on the security of gold articles and orna·
ments. They challenged the validity of different provisions o! the Gold
Control Act, 1969. The contentions that fell for consideration were: (i)
whether there was anything in the Act or the rules which constituted an
unrea~onable restriction on the part of a pawn broker to bold, acquire or
dispose of property or carry on his business of money lending within the
meaning of Art 19(1) (f) and (g) of the Constitution not saved by sub-els.
(5) and (6) thereof; (ii) whether in the absence of a provision for notice to
be given to him in case of any proceeding for confiscation the pawnee may
be prejudicially affected without a hearing being given to him; (iii) whether
s. 71 of the Act was ultra vires: (iv) whether the failure to make a distinction between 'article' and 'ornament' in the definition section was prejudicial to a dealer; (v) whether compliance with all the conditions laid down
in form GS Ill under r. 4 of the Act may be impossible in a number of
cases; (vi) whether it was difficult to comply with s. 16 of the Act as r:-
gards acquisition or transfer of gold as and when made, (vii) whether a
pawn-broker or money lender was entitled to hold primary gold; (vili)
whether certain government circulars had the effect of extending time for
filing of declaration under s. 16(1) beyond 28th February 1969; (ix) whether
s. 58(1) of the Act was violative of the Constitution and liable to be struck
down; (x) whether s. 16 (I) of the Act being a general provision could
not apply to pawn-brokers and money lenders who were governed by ss.
6, 10, 28; (xi) whether •· 16(1) was unreasonable as regards pawn brokers;
(xii) whether the impugned Act encroached upon the field exclusively occupied by Andhra Pradesh Act XXIII of 1943 and Andhra Pradesh Act
V of 1349F.
HELD: (i) If smuggling of gold into the country is to be checked by
the prevention of the conversion of smuggled gold into gold articles 01
ornaments, there is no unreasonableness in the State calling upon all pawn
brokers and persons who take pledges or hypothecation of ornaments to
furnish declarations so that the Administrator and the Gold Control Officer may keep an eye on the activities of such perwns and if necessary at
any point of time, ask for a return in terms of s. 6 and satisfy himself about
the legality of his acts by inspecting his accounts. It would not be difficult
for anybody carrying on or wanting to carry on business lawfully to insist on the pawnor producing the copy of the declaration in his possession
given to him after authentication by the Gold Control Officer in terms of
BADlll PaAl.\D r. COUl!CroR (JIUter,J.)
us
1ub-s. (8) of s. 16 in order to satisfy himself that there was no colllraven·
A
tion of the Act. The requirement of maldna a declaration as often u a
pwan broker acquires ownership possession, custody or control <>f aold
under &ub-s. (4) is to be read with sub·s. (10) and it is enouah for a pawn
broker to approach the Gold Control Officer with the full and detailed
statements of bis holding once a month. [2690-E, G]
As such it cannot be said that there is any unreasonable restriction in
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the said provisions on holding property or pursuing one's business in
terms of Art. 19(1) (f) or (g) of the Constitution. [269H]
(ii) The contention that there being no provision for notice to be
given to him in case of any proceeding for confiscation the pawnec may
be prejudicially affected without

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BADIU PRASAD AND ORS. ETC.
v.
COLLECTOR OF CENTRAL EXCISE & ORS. ETC.
March 30, 1971
[S. M. Snau, c. I .• G. K. MrrrER, K. s. IIEGDE, A. N. GllOVER
AND P. JAGANMOHAN REDDY, JJ.]
Gold Control Act, 1969, ss. 4, 6, 8(1) and 16, 58, 71-Vires of-Provi·
sions of ss. 4, 6, 8 and 16 of Act do not constitute unreasonable restrictions
on right to carry on business and are not violative of Arts. 19 (/} and (g}-
Section 71 is ultra vires-Sections 6 and 16(1) do not encroach on field
covered by Andhra Pradesh (Andhra Ar.a) Pawn Brokers Act 23 of 1948
and Andhra Pradesh (Telangana Area) Money Lenders Act 5 of 1349F.
The petitioners and appellants carried on the business of Pawn brok•
ing and money lending inter alia on the security of gold articles and orna·
ments. They challenged the validity of different provisions o! the Gold
Control Act, 1969. The contentions that fell for consideration were: (i)
whether there was anything in the Act or the rules which constituted an
unrea~onable restriction on the part of a pawn broker to bold, acquire or
dispose of property or carry on his business of money lending within the
meaning of Art 19(1) (f) and (g) of the Constitution not saved by sub-els.
(5) and (6) thereof; (ii) whether in the absence of a provision for notice to
be given to him in case of any proceeding for confiscation the pawnee may
be prejudicially affected without a hearing being given to him; (iii) whether
s. 71 of the Act was ultra vires: (iv) whether the failure to make a distinction between 'article' and 'ornament' in the definition section was prejudicial to a dealer; (v) whether compliance with all the conditions laid down
in form GS Ill under r. 4 of the Act may be impossible in a number of
cases; (vi) whether it was difficult to comply with s. 16 of the Act as r:-
gards acquisition or transfer of gold as and when made, (vii) whether a
pawn-broker or money lender was entitled to hold primary gold; (vili)
whether certain government circulars had the effect of extending time for
filing of declaration under s. 16(1) beyond 28th February 1969; (ix) whether
s. 58(1) of the Act was violative of the Constitution and liable to be struck
down; (x) whether s. 16 (I) of the Act being a general provision could
not apply to pawn-brokers and money lenders who were governed by ss.
6, 10, 28; (xi) whether •· 16(1) was unreasonable as regards pawn brokers;
(xii) whether the impugned Act encroached upon the field exclusively occupied by Andhra Pradesh Act XXIII of 1943 and Andhra Pradesh Act
V of 1349F.
HELD: (i) If smuggling of gold into the country is to be checked by
the prevention of the conversion of smuggled gold into gold articles 01
ornaments, there is no unreasonableness in the State calling upon all pawn
brokers and persons who take pledges or hypothecation of ornaments to
furnish declarations so that the Administrator and the Gold Control Officer may keep an eye on the activities of such perwns and if necessary at
any point of time, ask for a return in terms of s. 6 and satisfy himself about
the legality of his acts by inspecting his accounts. It would not be difficult
for anybody carrying on or wanting to carry on business lawfully to insist on the pawnor producing the copy of the declaration in his possession
given to him after authentication by the Gold Control Officer in terms of
BADlll PaAl.\D r. COUl!CroR (JIUter,J.)
us
1ub-s. (8) of s. 16 in order to satisfy himself that there was no colllraven·
A
tion of the Act. The requirement of maldna a declaration as often u a
pwan broker acquires ownership possession, custody or control <>f aold
under &ub-s. (4) is to be read with sub·s. (10) and it is enouah for a pawn
broker to approach the Gold Control Officer with the full and detailed
statements of bis holding once a month. [2690-E, G]
As such it cannot be said that there is any unreasonable restriction in
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the said provisions on holding property or pursuing one's business in
terms of Art. 19(1) (f) or (g) of the Constitution. [269H]
(ii) The contention that there being no provision for notice to be
given to him in case of any proceeding for confiscation the pawnec may
be prejudicially affected without a hcarina being given to him bad no substance inasmuch as he will be the person presumed to be the owner in
terms of s. 99 and the gold can only be seized from his possession or
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custody. He can appear before the authorities and make his submissions
so that no penal action should be taken against him. [270A·B]
(iii) There is no justification for an order of confiscation of gold under
s. 71 of the Act merely because of a failure to comply with s. 16 relating
to declaration. It is no doubt true that the owner is to be given a hearing
in terms of s. 79 and he has a right of appeal under s. 80 but the provision
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of s. 73 which allows the levy of a fine in lieu of confiscation not exceed·
ing twice the value of the thing in respect of which confiscation is authorised appears to be unduly harsh and unconscionable. Under the Wealth
tax Act the penalty for failure to file a return is much lighter. Section
71 therefore appears to place an unreasonable restriction on the right of a
person to acquire hold and dispose of gold, articles or gold ornaments.
It may be applied indiscr.iminately and cannot therefore be upheld as sav·
ed by els. (5) and (6) of Art, 19 of Constitution. [270C·F]
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(iv) It cannot be said that the definition section does not make a clear
distinction between an 'article' and an 'ornament'. The explanation to c;.
2(p) shows that nothing made of gold which resembles an ornament will
be deemed to be an ornament unless the thing (having regard to its purity,
size, weight, description or workmanship) is such as is commonly used
as ornament in any State. Clearly it is a question of proof as to whether
the thing passes as an article or an ornament in a particular state. (270GJ
(v) It cannot be said that compliance with all the conditions laid
down in form G. S. III under r. 4 of the Act is impossible. No doubt
there may be difficulty in some cases where an article contains metals other
than gold or precious stones, but a pawn broker who is asked to advance
money on the security of such an article can make a fairly accurate estimate
of the weight and value of the gold therein so as to be able to judge for
himself how much he can safely advance on the security of that article.
He is not called upon to give the exact purity of the gold content of the
article. He can only give an estimate of its purity. [271A-C]
(vi) There was no difficulty in regard to the primary gold found ill
possession of the petitioner in writ petition No. 24. Under s. 2(1) no person
can own or have in bis possession, custody or control, acquire or agree
to acquire ownership, buy, accept or otherwise receive any primary gold
except as provided in the Act and the pawn broker or money lender is not
such a person. (271 F]
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[1971] SUPP. s.c.Jl.
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(vii) The printed circulars to which attention was drawn did not show
that there was any extension of time with regard to declaratfons under s.
16(1) beyond 28th February 1969. Reference to certain circulars addressed only to Gold Oontrol Ollicers to the offect that no steps were to be
taken until after 30th April 1969 could not be availed of by the petitioner
who was not in a position to assert that the circular bad been publicly
advertised or that be himself bad received any copy of such circular.
[272B].
(viii) Section 58(1) of the Act which allows any Gold Control Officer
authorised by the Administrator to enter and search any business premises
if be bas reason to suspect that any provision of the Act was being or was
about to be contravened could not be struck down on the ground that
the power to search was Biven without the same safeauards as in the
Sea Cmtoms Act, 1882 the Customs Act, 1962 or the Code of Criminal
Procedure. There may be cases where it is necessary for the Gold Oon·
trol Ofllcer to act with expedition in the matter of search so that the infor·
mation that he is going to search a premises may not leak out and the
only safety in this re1ard is that the Gold Control Officer must be authorised by the Administrator in this behalf and he in his tum if ho is empowered by the Central Government may authorise other Government
Ofllcers to enter and search the premises. In the present case the counter·
aflldavit showed that the ofllcer searching bad information regarding the
contravention of the. provisions of the Act and the result of the search
showed that huge quantity of 10Jd was lying with the petitioner in respect
of which no declaration bad been made. The Gold Control Act is not
the only provisions of law where power to search on suspicion has been.
conferred on an officer. In this connection reference may be made to s. 41
of the Madras General Sales Tax Act I of 1959 which came up for consideration before this Court in the Commissioner of Commercial Taxes,
Board of Revenue, Madras v. Ramkishan Srikishan Thaver etc., C.A. Nos.
150/68 di. 9-8-1967. [2720-H]
(xi) Section 16 is not excluded in the case of money lenders or pawn
brokers. Any person who comes under the purview of s. 16(1) has to make
a decla,ation unless there is any provision to the contrary in that Chapter.
The only provision to the contrary is contained in sub-s. (5) which permits
of exemptions in respect of persons holding gold articles or ornaments up
to a specified limit. The provision in s. 6(1) empowerin& the Administrator to call upon any pawn broker to furnish a return does not do away
with bis obligation to file a declaration under s. 16(1). There is no question of duplication of declarations here. Every pawn broker will have to
file bis declaration under s. 16(1) and be would be obliged to make a
return only wben be is called upon to do so in terms of s. 6. If a number
of pawn brokers carry en business in partnership the declaration can be
made by any partner of the firm in terms of cl. (f) and if a company car·
ries on business of pawn broking any person in charge of tile management
of the affairs of the company can make the declaration. [274A·FJ
(x) There was no substance in the araument that a pawn broker only
kept things in bis safe custody and it would be very oppresive on him if
be bad the obligation to make a declaration as often as be got in a gold
article under a pledge or parted with it on redemption. A money lender.
specially a pawn broker who enters into a number of transactions of
pledge every day bas to maintain bis account books and be has to record
faithfully therein the articles he receives by way of pledge including their
weight and general description when be takes them in and making
a
declaration for the purpose of the Act cannot entail any hardship on s11cb
a person. [274G-275C)
BADRI PRASAD v. COLLECTOR (Mitter. J.)
257
Mohd. Hanif Quam/ii v. State of Bihar, [1959] S.C.R. 629, ~71, distA
inguished.
(xi) By the Gold Control Act Parliament only sought to control and
regulate the production, manufacture etc. use and possession of and the
business in gold. gold ornaments etc. ft' did not seek to disturb or annul
the provisions of the Andhra Pradesh Acts dealing with pawn brokers
and money lenders. The provisions of the State Acts are to have full play
and effect so long as the Gold Control Act is not violated. [275E)
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Accordingly, save that s. 71 of the Act is unconstitutional, the writ
petition and appeals must be dismissed.
[275GJ
ORIGINAL JURISDICTION : Writ Petition Nos. 24 and 587 of
1970.
Petitions under Art. 32 of the Constitution of India for the
enforcement of fundamentiW rights and Civil Appeal No. 1613
of 1970.
Appeal by special leave from the judgment and order dated
December 26, 1969 of the Andhra Pradesh High Court in Writ
Petition No. 3047 of 1969 and Civil Appeal No. 1659 of 1970.
Appeal by special leave from the judgment and order dated
the December 26, 1969 of the Andhra Pradesh High Court in
Writ Petition No. 3008 of 1969.
Writ Petition No. 24170.
C. K. Daphtary, /. B. Bajpai, P. C. Bhartari, /. B. Dadachanji, 0. C. Mathur and Rav.inder Narain, for the petitioner.
Jagdish Swarup, Solicitor General, M. C. Setalvad and B. D.
Sharma, for the respondents.
Writ Petition No. 587-of 1970.
C. K. Daphtary, P. C. Bhartari, Ravinder Narain and J. B.
Dadachanji, for the petitioners.
M. C. Sefalvad, and R. N. Sachthey for the respondents.
Civil Appeal No. 1613 of 1970.
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B. R. L. Iyengar and P. Parameshwara Rao, for the appellants.
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Jagdish Swar"f}, Solicitor General, I. M.
Mukhi and B. D.
Sharma, for the respondents.
Civil Appeal No. 1659 of 1970.
S. V. Gupte, P. Parameswara Rao and K. C. Dua, for the
appellants.
17-1 S.C. lndia/71
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SUPREME COURT REPORTS
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Jagadish Swarup, Solicitor-Oeneral, and B. D. Sharma, for the
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respondents.
M. Natesan and R. Gopalakrishnan, for the interveners.
The Judgment of this Court was delivered by
Mitter, J.-The petitioner in Writ Petition No. 24 of 1970,
a citizen of India who has been carrying on business inter alia
of money lending against pledge of gold ornaments, challenges
the vires of the Gold Control Act, 1969 read with the rules made
thereunder and in particular sections 6, 8 and 16(1) of the Act.
The facts on which the petition is based are as follows. The
petitioner has a fairly extensive business of money lending in
Etawah in U.P. In pursuit of his business he advances moneys
to a large number of persons who pledge ornaments made
of gold or containing gold and other precious stones, or silver.
It includes a seasonal business of agriculturists taking loans from
him in the sawing season and repaying the same with interest by
redeeming the pledged ornaments. According to the petition
such Joans are not always redeemed quickly and there are instances
of ornaments lying with him under pledge for 10 to 15 years. He
also owns along with other members of his family substantial
quantities of gold ornaments. As he has a strong room for
keeping these valuables his friends and relations also are in the
habit of keeping their gold ornaments and articles with him for
safe custody. The purity of the gold content of the ornaments
varies from 10-12 carats to 22-24 carats. The content of the gold
is difficult to estitnate in some cases where they are pieces containing more than one metal and set with stones. In all such G:Ues a
rough and ready estimate of their value is made whenever possible
by the indigenous method of determining the purity on a touch
stone and loans are advanced to the extent of SO to 1S per cent
of the value of the pledged goods. Over the last 8 to 10 years
the petitioner claims to have come into possession of such pledged
ornaments and articles which have not been redeemed since their
first pledge woighing 81'Proximately 42,989 grams. On an average
he entertains about 25 transactions of pledge or redemption in a
day and the total number of ornaments and articles pledged with
him over a year varies from 15,000 to 20,000 pieces. Hlis entire
belongings of gold including those of the members of his family
are kept in a strong room along with the pledged goods.
The petitioner's grievance is based on a raid which took
place at his place of business on March 26, 1969 by the Inspectors of Excise under the authority of the Collector of Central
Excise. The raid was completed on 9th April, 1969 and a large
BADlll PRASAD v. COWCTOR (Mitter, J.)
number of ornaments and articles of gold were seized from his
premises. According to the petition the condition precedent to
the exercise of such power i.e. that the officer concerned should
have a reasonable belief that the provisions of the Act have been
violated was non-existent and in any event the Act did not permit
Inspectors of Customs or Central Excise to carry out the search
or seizure. The validity of the search and seizure is also challenged on the ground that inasmuch as the time to furnish declaration under s. 16 of the Act had been extended since the commencement of the Act from time to time up to the 30th April
1969 the search which took place on March 26, 1969 was unjustified.
The different ptoVisions of the Aet and the grounds .of attack
on them lll8IY be sumlilarised as foll<>WB :-
(a) Sections 4, 6, 8(1), 16 read with 71, 74 and 86 are bad
in law as outside the competence of Parliament and/ or in violation of the Constitution. Section 6 and 16(1) ate impugned on
the ground that Patliament had no competence to encroach on
the field of money lending and money lenders which is covered
by a State· itelil of legislation iii the Seventh Schedule.
(b) .Sections 4 and 16 read with the power of search ·and
seizure, impositions of fine and penalty and power of prosecution
etc. confer arbitrary powers upon the respondents ~ble of in·
discriminate use and as. such are violative of Art. 14.
(c) The expmsion "possession", custody and control in s
16 is vague and uncertain incapable of any objective assessment.
(d) The provisions of s. 8(1) of the Act are violative of the
petitioner's fundamental right to acquire, hold or dispose of property in the form of primary gold as it is not in the interest of
general public. The section is also impugned as affecting the
possession by the j)ctitionec of primary gold found which he has
been holding for many years past. It is also attacked on the
ground that thti Gold Control Officer can always treat a particular
piece of ornament as primary gold, the acquisition and disposal
of which was prohibited under the Act.
(e) It is imposSible for anyone to comply strictly with the
form GS Ill prescribed under the rules. In order to comply with
the strict statutory obligations the petitioner would have to incur
huge expenses for maintaining the necessary staff and undertaking
scientific assessment to ascertain the purity, weight and value of
gold content in each and t:YerJ ornament.
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SUPREME COURT REPORTS
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(f) The obligation to furnish declarations in respect of every
pledge and/ or redemption of the ornament would be incapable
of compliance as on an average be enters into about 100 transactions of this character in a ~. It was also quite impracticable
to comply with the provisions of s. 16(4) and (10) to furnish repeated declarations for every acquisition and/ or redemption of the
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pledge of the ornaments.
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The petition was affirmed on January 13, 1970 and on the
19th January this Court granted interim stay of further proceedings in pursuance of search and seizure.
In the counter affidavit of the Assistant Collector of Central
Excise reliance is placed on the following facts :-
1. The total quantity of gold seized in the course of the
search of the petitioner's premises which started on the 26th
March 1969 and ended on 9th April 1969 was 95,793.995 gms.
of the approximate value of Rs. 14,47,300/-.
This included
gold with foreign marking weighing 3,539.842 gms. other primary
gold without marks 212.865 gms., gold coins weighing 85.53 gms.
and ornaments weighing 91,9555.753 gms. Two show ca.use notices
were issued one for contravention of the provisions of the Act
aond the other for contravention of the provisions of the Foreign
Exchange Regulations Act read with the provisions of the Customs Act and the Imports and Exports Control Act.
2. The petitioner took an inordinately long time to seek
legal redress : he waited from April 1969 to January 1970 before
complaining of the search and seizure. The petitioner never
attempted to avail himself of the opportunity of having a personal hearing before the competent authority i.e. the Collector of
Central Excise, Kanpur.
3. On or about March 25, 1969 on receipt of information
and being satisfied that the provisions of the Act as also those
of the Customs Act and the Foreign Exchange Regulations Act
and Imports and Exports Control Act were being contravened,
the Superintendent, Central Excise, Manipuri authorised the
Inspectors of Central Excise Department to enter and search the
premises of the petitioner and to seize any offending gold. gold
articles or gold ornaments. The authorisation of the Inspectors
was under powers conferred by s. 58(2) of the Act and s. 105 of
the CUJtoms Act, 1962.
4. The Income-tax Officer Etawab issued an order under s.
132(3) of the Income-tax Act, 1961 restraining the Superintendent,
Central Excise, from removing, parting with or otherwise dealing
llADRI PRASAD '· COUECTOR (Mitter, J.)
with the gold and gold ornaments seized by the Inspectors of
Central Excise.
5. Among the things seized were 30 biscuits of gold includ·
ing one of foreign marking which was primary gold the possession
of which by itself was a contravention of s. 8(1) of the Act
Neither at the time of the seizure of the gold nor during the course
of the investigation the petitioner indicated as to how ·many and
which of the ornaments were his own and how many of them
belonged to the various members of his family : no such details
have been given in the. petition.
6. All the allegation regarding the vires of the Act or the
Rules were disputed. The dilliculty if complying with the provi·
5ions of the Act was also denied and the justification for the rotention of the seized articles was ba6ed on the powers conferr~
under the different Acts.
In the counter affidavit affirmed by the Secretary to the Government in thC Ministry of Finance, Department of Revenue and
lnsurace. a claim is made that the subject matter of the Act does
not encroach on the power of the State Legislature to legislate
with respect to money lending or money lenders.
It however
contains provisions prohibiting ·persons from obtaining loan on
the hypothecation, pledge or mort@lllge of prim81'}' gold which is
a reasonable restriction on the flpldamental right of a citizen.
It is also asserted that no provision of the Act is vague or uncertain or difficult of compliance.
S. 8(1) of the Act is sought
to be justified on the ground that this provision had been inserted
in the· statute with a. view to eliminating the chances of false defonces being ·raised on the d.:tection of smuggled gold and a period
of six months from !st March 1967 bad been allowed under the
Defence of India Rules to enable persons who might have gold
in their possession to dispose of it either by sale or delivery for
conversion into ornaments to licensed dealer or by certified gold·
5miths. Stress was also laid on the legislation . on the subject by
which control of gold was first made law as Part XIHAl (of the
Defence of India Rules) promull!lllted under the Defence of India
Act followed by the Gold Control Act, 1967, the Gold Control
Ordinance, 1968 and the Gold Control Act of 1969. It was submitted that the object of this series of legislation was with a view
to prevent smuggling of gold into India and of the dissemination
thereof which results in the loss of Rs. 100 crores of foreign exch·
ange per annum. This object could not be achieved unless there
was restriction on the manufacture and sale of new ornaments,
declaration of holdings of gold other than ornaments, regulation
of the business of gold including the activities of -gold refiners
and goldsmiths. The impracticability of estimating the purity of
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gold ornaments was also disputed on the assertion that any experienced goldsmith can easily assess the purity of gold in an ornament by rubbing it on a touch stone. A time limit of 30 days
had been given from the commencement of the Defence of India
(4th Amendment) Rules, 1966 to persons owing ornaments in
excess of the specified limits for making declarations. The petitioner should therefore have made a. declaration of ornaments
in his possession, custody or control. In writ petition filed before
the present series of petitions, an undertaking had been given to
this Court in those petitions that no action would be taken under
s. 16(7) and 16(1) and 100 of the Act and the time for making
declarations under s. 16 was extended till 28th Februacy 1969
and suitable instructions had been issued to the field staff to
comply with the above. The time liniit for filing the declaration
under s. 16(7) had been extended up to 30th June but it was
denied that the period of making a declaration under s. 16(1) had
been extended up to 30th April, 1969.
Before examining in detail the relevant provisions of the
Act and the contentions founded thereon, it may be noted that
this Act had been challenged by
se~eral writ petitions to this
Court immediately after it was put on the sta.tute book in Sept~
mber 1968.
The questions which fell for consideration in that
series of petitions· included :
(a) Whether the Act was w1thm the legislattve competence
of Parliament under Entry 52 of List I and Entry 33 of List III
of the Seventh Schedule, or
(b) Whether it fell within the exclusive competence of the
State Legislatures under Entry 27 of List II.
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A large variety of propositions wa.s there advanced to declare
the Act as beyond the competence of Parliament. It had been
argued inter alia that section 4(4), 4(5), 5(1), 5(2)
27(2)
(d),
27(6), 16(7), 32 read with 46, 88 and 100 were unreasonable and
not in public interest and so were violative of Art. 190)(0 and
(g) of the Constitution. Violation of Art. 14 was also urged.
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Being of the view that the attack on some of the provisions
was justified but the provisions which were found to be invalid
not being so inextricably bound up with other parts as to render
the whole Act unconstitutional, this <.:ourt held that several provt·
sions, namely, sections 5(2)(b), 27(2)(d) 27(6), 32, 46, 88 and
I 00 were invalid. It is worthy of note that although challenge
was directly made to the validity of s. 16(7) the Court did not
express any opinion thereon. The said provision cannot therefore be assumed to have been struck down.
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BADRl PRASAD V., COLLECTOR (Miller, J.)
The matters with which we are not concerned not only
include (!) Writ Petition No. 24/1970 of which details have been
given above, but (2) Writ Petition No. 587 /1970 the petitioners
in this petition having come before this Court on an earlier
occa~ion and (3) two Appeals 1613 /70 and 1659 /70. The petitioners in the two petitions mentioned as well as the appellants
in the appeals are all persons who carry on the business of pawn
broking and money lending inter alia, on the security of gold
~·rticles and ornaments and the common grievance of all these
persons is against some of the proviSions of the Act, the appeals
involving a further question as .to the impact of the Act on several
State Acts dealing with money lending and money lenders and
pawn broking and pawn brokers.
The impugned Act, as is shown by its preamble, is to provide
for the economic and financial interests of the community, for
the production, manufacture, supply, distribution, use and possession, of and business in, gold, ornaments and articles of gold and
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for matters connected therewith or incidental thereto. As is well
known the object of the Act is to make it difficult, if not impos·
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sible, for gold which is smuggled into the country from being
circulated evidently with the object of checking smuggling of
gold or rendering the same unprofitable and so avoiding a loss of
foreign exchange to the country.
Although there is no definition of pawn broker in s. 2 of the
Act there can be no doubt that some of the provisions of the Act
are designed to restrict the use of gold by way of pledge or
hypothecation for securing loan.
S. 2(b) of the Act defines an
''article" as anything (other than ornament) in a finished form,
made of. manufactured from or containing, gold a.nd includes
~·DY gold coin and broken pieces of an article, but does not includ~
primary gold.
Under s. 2(j) 'gold' means · gold including its
alloy (whether virgin, melted or re-melted, wrought or unwrought)
in any shape or form, of purity of not less than nine carM.~ and
includes primary gold, article and ornament. 'Ornament' is
defined as a thing in a finished form meant for personal adorn·
ment or for the adornment of any idol, deity or any other object
of religious worship, made of, or manufactured from gold, whe·
ther or not set with stones or gems etc. The definition contains
an Explanation whereby a thing made of gold though resembling
an ornament is not to be deemed to be an ornament unless it is
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.. used as such in any pa.rt of the country. Primary gold is defined
in s. 2(4) as meaning gold in any unfinished or semi-finished form
including ingots. bars, billets etc. S. 2(i) defines a 'declaration' as
one which is required by the Act or was required by rule 126-1 of
the Defence of India Rules; 1962 or the Gold (Control) Ordinance,
1'6~ to be made with regard to the ownership, possession, custody
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or control of gold. Under s. 4(1) the Central Government bas to
appoint an· Administrator for carrying out the purposes of the
Act. Sub-s. (2) gives the Central Government power to appoint
Gold Control Officers for enforcing the provisions of the Act.
Section 6(1) empowers the Administrator to require any
person who lends money on pledge, hypothecation etc. of any
article or ornament to furnish a return giving full particuhtrs of
the things given by Wlllj of security and the persons who gave the
security. Sub-s. (2) of this section authorises the examination of
accounts of persons lending money on the security of gold articles or ornaments and declares that any gold which is not entered
in the accounts or found to be in excess of the quantity shown
in the accounts and it is not otherwise accounted for to the
sa.tisfaction of the examining officer is to be deemed to . be in
possession of such person in contravention of the provisions of
the Act. Chapter Ill of the Act containing sections 8 to II deals
with restrictions relating to the manufacture, acquisition. possession, sale, transfer or delivery of gold. S.ub-s. (!) of 1. 8 forbids
any person from owning or having in his possession. custody or
control or acquiring or agreeing to acquire the ownership, possession, custody or control or buying, accepting or otherwise receivmg or agreeing to buy, accept or otherwise receive anY primary
gold save as otherwise provided in this Act. In other words, there
is a complete bar to anybody having possession of primary gold.
In this connection it may be noted that there was a notificar
tion under the Defence of India Rules requiring the conversion
of primary gold either into cash or into ornaments within the time
specified therein which had expired long before the Gold Control
Act was put on the statute book. Sub-s. (4) of s. 8 Js aimed at
preventing any person from delivering, selling or disposing of
etc. of any article to a person who is not a licenced dealer or refiner except as provided in the Act. Sub-ss. (3) and (4) have a
qualification in sub-s. (5) as regards the person accepting or transferring by way of gift or exchange gold coins not exceeding five in
number. Sub-s. (6) empowers the Administrator to make exemption from the above provisions in special circumstances. Section
10 provides as follows :
"No person shall obtain from any other person any
loan .or advance on the hypothecation, pledge, mortgage
or charge of-
(a) any primary gold, or
(b) any article or ornament which is required to be
included in a declaration unless such article or
ornament has been so included :
Provided that, in the case of an article which is not
required to be included in a declaration, no transfer or
;
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BADRI PRASAD •• COLLECTOR (Mitter, J.)
delivery thereof shall be made unless such transfer or
delivery has been intimated in writing to the Adminis·
trator."
S. 11 contains prohibitions regllll'ding making, manufacturing etc.
of primary gold articles except under authorisation by the Administrator.
Chapter IV deals with possession of gold by public religious
institutions, disposal of gold received by way of offerings, submission of monthly accounts and responsibility of the person in
charge of the mana.gement of any public religious institution in
1egard to such gold or gold ornaments. S. 16 which has no less
than 13 sub-sections provides for the making of declarations for
all practical purposes by every person who owns or possesses or
deals with or disposes of gold subject to the exemption created
in su~. (5). · Under sub-s. (!) every person who owns or is in
possession, custody or control of a•ny article or ornament at the
.::ommencement of the Act, or acquires the ownership, possession
etc. thereafter must make within 30 days from such commence·
ment or from the acquisition, as the case may be or within such
further time as the Administrator may allow a declaraition in the
prescribed form as to the quantity, description and other prescribed particulars of a,ny article or ornament or both, owned, posses·
sed, held or control by him. Such declaration however is not required to be made by any person who has before the commencement of the Act already made a declaration in relation to the
article or ornament or both. Sub-s.(2) specifies a number of
.:ases from clauses (a) to (!) of persons who have to make the
declarations in such cases and its opening words are as follows
"For the removal of doubts, it is hereby declared that
the declaration referred to in this section 1hall be made
in relation to any article, or ornament, or both ...... " '
Clause (a) deals with minors and lunatics the declaration hav·
ing to be. made by the guardia,n or manag~r. Cl. (b) deals with
ow~ers of idols or deities; cl. (c) deals with properties of a person
which are under the management of an administrator or receiver;
clause (d) with a person whose properties are under the manage·
ment of the Court of Wairds; cl. (e) relates to articles or things
vested in an executor or an administrator of a will or other testamentary disposition; cl. (f) deals with the case of firms; cl. (g)
with the case of a Hindu undivided family; cl. (h) with the Clllle
<>f a private or a. public trust; cl. (i) with the case of a company
whether incorporated in or outside India: cllluse (j) with a
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temple, church, mosque, gurdwara or any other religious institution; cl. (kl deals with wakf property and cl. Ol deals with societies, clubs or other associations. a. (ml deals with other persons
owning, possessing or holding of gold as may be prescribed for
them. Sub-ss. (!) and (2) of section 16 make it quite clear that
every person who owns or is in possession, custody or control
of any article or ornament, no matter whether he is or is not.
the owner thereof, is under a duty to make a declaration with
respect to all his holdings of gold articles or ornaments. Oause
(5) ~xempts persons holding or owning gold only within up to
certain limits from making such declarations. Under cl. (3l any
person who did not own, possess, hold or control any ,quantity of
gold in excess of the quantity specified in sub-s. (5) before the
commencement of the Act but acquires after such commencement
the ownership thereof whether by succession, intestate or testamentary or otherwise, must make a declaration if as a result of
such acquisition the total quantity of gold which comes to be
held or possessed or controlled by him exceeds the limits specified. Sub-s. (4) of the section makes it incumbent on all persons
who have made declarations either under the Defence of India
Rules or the Gold Control Ordinance or under sub-s. (1) to make
a further declaration as often as he acquires ot paris with the
ownership, possession etc. of such gold giving prescribed particulars thereof. Sub-s. (7) makes it obligatory on every licensed
dealer or refiner to m!lke a declaration as therein specified. Under
sub-s. (8) every . declaration required under this Section is to be
made in triplicate of which one copy is to be authenticated and
signed by the Gold Control Officer and to be returned to the
person making the declaration and the copy so returned is to be·
retained by such person as evidence of the declaration made by
him under this stiCtion. Under sub-s. (10) a person who acquire
or parts with ownership, possession, custody or control of gold'
after he has made a declaration to endorse within 30 days from
the date of such· acquisition or parting with of gold i11 such moo--
ner as may be prescribed on the copy of the declaration retained
by him and to produce such copy within 7 days from the date·
of such endorsement before the Gold Control Officer who has to
make necessary changes in the register referred to in sub-s. (9)
a.nd also in the copy of the declaration kept in his safe custody.
Under sub-s. (11) no person shall own or have in his possession.
custody or control any quantity of .gold which is required·
to be included in a declaration unless such gold has been included in a declaration or further declaration as the case may be.
It is to be noted however that no restriction has been placed on
a pawn broker on recehring articles or ornaments of gold by way
of pledge and advancing loans thereon. Chapter XII of the Act
deals with entries. search. seizure and arrest for the purposes ol
the Act.
S. 58(1) and (2) empower any Gold Control Oflicer
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BADRI PRASAD v. COLLECTOR (Mitter, J.)
authorised by the Administrator to enter and search any premises, refinery etc. if he has reason to suspect that any provision
of the Act ha& been or is being or is about to be contravened.
S. 59 empowers any Gold Control Officer authorised in this behalf by the Administrator to .detain and search any person or
thing if he has reason to suspect that any person has secreted
about his person or in any other thing ainy gold in respect of
which contravention of the Act is suspected or any document
which in his opinion will be useful or relevant to any inquiry or
proceedings in relation to the contravention of any provision of
the Act S. 60 deals with the conditions under which a search
is to be conducted. S. 66 gives any Gold Control Officer if he
has reason to believe that in respect of any gold any provision
of this Act has been or is being or is attempted to be contravened, the power to seize such gold along with the package, covering
or receptacle or 11ny other goods in which any quantity of such
gold has been .mixed.
S. 68 contains the power of arrest in
certaiin circumstances. Under s. 69 the provisions of ss. 102 and
103 of the Code of Criminal Procedure relating to search and
seizure are made applicable as far as possible.
Chapter XIII
deals with confiscation and pena.Jties.
S. 71 which is the opening section of the Chapter runs as follows :-
"(!) Any gold in respect of which any provision in
this Act or any rule or order made thereunder has been,
or is being, or is attempted to be, contravened, shall be
liable to co!lfiscation.
(2) Any packaige, covering or receptacle (including
its other contents) in which any gold liable to confiscation under sub-section (!) is found shall also be liable
to confiscation.
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(3) Where any gold liable to confiscation under subJi'
section (!) is mixed with other goods in such manner
that such gold cannot be separaited from those other
goods, the whole of such goods shal! be liable to confiscation.
(4} Any .gold which is liable to confiscation under
sub-11ection (1), shall be so liable notwithstanding any
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S. 72 provides for confiscation of conveyances or animals etc.
~y means of wltich any provision of tile A,ct is s?ugh~ to be
contravened.
Under s.