# l>R. INDRAMANI PYARELAL GTJP1 1A v. W.R. NATHU AND OTHERS

- **Citation:** [1963] 1 S.C.R. 721
- **Court:** Supreme Court of India
- **Decided:** 1963
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/l-r-indramani-pyarelal-gtjp1-1a-v-w-r-nathu-and-others-2632
- **Pages:** 57

## Headnote

•
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1 S.C.R .
SUPR.EME UOL
1RT REPORTS
721
l>R. INDRAMANI PYARELAL GTJP1
1A
v.
W.R. NATHU AND OTHERS.
- (B. P. SINHA, c. J., K. SUBBA RAO, N. RAJ.A.GOP.A.LA
AYYANG.A.R, J. R. MunHOLKAR and T. L.
VENXA.T.A.RA.M.A. A!Y.A.R, JJ.}
Forward Oontracts-Regulation of-Bye-laws empowering
cloaing out of hedge contracta--Validity of-If can operate
retrospectively-East India Ootton As1ociation Bye-laws cl.
62.A-Forward Contracts (Regulation) Act, 1962 (LXXIV of
1962), ss. 4, 11 and 12.
The appellants were members of the East India Cotton
Association which was an association recognised by the Cen•
tral Government under the Forward Markets Regulation Act,
1952. Prim to December 1955, they had entered into "hedge
contracts" in respect of cotton for settlements in February
and May 1956 in accordance with the bye-laws of the Associa·
tion. Towards tb.e end of 1955 it was apprehended that the
forward market in cotton was heading for a crisis aud the
Central Government issued notifications directing the Association to suspend business in hedge contracts for February
and May 1956 deliveries for short periods this did not improve
the situation. On January 21, 1956, the Central Govern·
ment, acting under s. 12 of the Act, made a new bye-law in
substitution of bye-Jaw 52AA of the Association which empowered the Forward Markets Commission, constituted under,
the Act, to issue a notification tlosing out all hedge contracts
at rates fixed by the Commission. On January 24, 1956, the
Commission issued a notification closing out all hedge contracts
including those subsisting on that date, and fixed the rates for
the settlement of such contracts. The appellants contended
that the amended bye.law 52AA was invalid as the power to
close out hedge contracts could not be conferred upon the
Commission and as the Association was in law incapable of
conferring such a power on the Commission or on any other
body and that in any cases the bye-law could not operate
retrospectively so as to affect existing contracts.
Held, (per Sinha, C. J., Ayyangar, Mudholkar and
Aiyar, JJ. Subba Rao, J. contra), that the amended bye-law
52AA was not ultra virc1 the Central Government and validly
empowered the Commission to close an hedge contracts in
cotton including existing contracts. Clause (f) of 1, .f. of the
Act provided that one of the functions of the Commission
~9G2
Dr. lnbom1r.i
p_,..,1.1 Gupta
v.
W.R. N itllu
722
SUPREME COURT REPORTS [1963]
shall be to perform such other duties and exercise such other
powers as may be assigned to the Commission "by or under
the Act, as may be prescribed". There was no limitation
upon the nature of the power that may be conferred under
cl. (f) except that . it must be in relation to the regulation of
forward trading in goods. It was not possible to place any
limitation on this power by invoking the rule of •jU11dt.m v•neri•
as there was no common positive thread running through
els. (a) to (e) of s. 4. To judge whether legally a rower could
be rested in a statutory body the proper rule o interpretation was that unless the nature of the power was such as to
be inconsistant with the purpose for which the body was
created or unless the particular power was contra-indicated
by any specific provisions of the Act, any power which fur·
thered the provisions of the Act could be legally conferred.
Judge by this test the power conferred by the bye-law could
be validly vested in the Commission. The power was one
conferred ''under the Act
0
•
The words "under the Act
0
signified a power conferred by laws made by a subordinate
Jaw-making authority which was empowered to do so by the
Act. The impugned bye-law was clearly well within the
bye-Jaw making power under ••· 11 and 12. The bye-law
did not contravene article.• 64 of the Articles of Association of
the Association as articles 64 applied only to the Board and
placed no restrictions on the power of the Association.
We•tern India Thtatro• Ltd. v. Municipal Oorporaticn o/
Poona, [1959]

## Text

_Characters 0–39,969 of 105,419. This is a partial read: ask again with offset=39969 for what follows._

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1 S.C.R .
SUPR.EME UOL
1RT REPORTS
721
l>R. INDRAMANI PYARELAL GTJP1
1A
v.
W.R. NATHU AND OTHERS.
- (B. P. SINHA, c. J., K. SUBBA RAO, N. RAJ.A.GOP.A.LA
AYYANG.A.R, J. R. MunHOLKAR and T. L.
VENXA.T.A.RA.M.A. A!Y.A.R, JJ.}
Forward Oontracts-Regulation of-Bye-laws empowering
cloaing out of hedge contracta--Validity of-If can operate
retrospectively-East India Ootton As1ociation Bye-laws cl.
62.A-Forward Contracts (Regulation) Act, 1962 (LXXIV of
1962), ss. 4, 11 and 12.
The appellants were members of the East India Cotton
Association which was an association recognised by the Cen•
tral Government under the Forward Markets Regulation Act,
1952. Prim to December 1955, they had entered into "hedge
contracts" in respect of cotton for settlements in February
and May 1956 in accordance with the bye-laws of the Associa·
tion. Towards tb.e end of 1955 it was apprehended that the
forward market in cotton was heading for a crisis aud the
Central Government issued notifications directing the Association to suspend business in hedge contracts for February
and May 1956 deliveries for short periods this did not improve
the situation. On January 21, 1956, the Central Govern·
ment, acting under s. 12 of the Act, made a new bye-law in
substitution of bye-Jaw 52AA of the Association which empowered the Forward Markets Commission, constituted under,
the Act, to issue a notification tlosing out all hedge contracts
at rates fixed by the Commission. On January 24, 1956, the
Commission issued a notification closing out all hedge contracts
including those subsisting on that date, and fixed the rates for
the settlement of such contracts. The appellants contended
that the amended bye.law 52AA was invalid as the power to
close out hedge contracts could not be conferred upon the
Commission and as the Association was in law incapable of
conferring such a power on the Commission or on any other
body and that in any cases the bye-law could not operate
retrospectively so as to affect existing contracts.
Held, (per Sinha, C. J., Ayyangar, Mudholkar and
Aiyar, JJ. Subba Rao, J. contra), that the amended bye-law
52AA was not ultra virc1 the Central Government and validly
empowered the Commission to close an hedge contracts in
cotton including existing contracts. Clause (f) of 1, .f. of the
Act provided that one of the functions of the Commission
~9G2
Dr. lnbom1r.i
p_,..,1.1 Gupta
v.
W.R. N itllu
722
SUPREME COURT REPORTS [1963]
shall be to perform such other duties and exercise such other
powers as may be assigned to the Commission "by or under
the Act, as may be prescribed". There was no limitation
upon the nature of the power that may be conferred under
cl. (f) except that . it must be in relation to the regulation of
forward trading in goods. It was not possible to place any
limitation on this power by invoking the rule of •jU11dt.m v•neri•
as there was no common positive thread running through
els. (a) to (e) of s. 4. To judge whether legally a rower could
be rested in a statutory body the proper rule o interpretation was that unless the nature of the power was such as to
be inconsistant with the purpose for which the body was
created or unless the particular power was contra-indicated
by any specific provisions of the Act, any power which fur·
thered the provisions of the Act could be legally conferred.
Judge by this test the power conferred by the bye-law could
be validly vested in the Commission. The power was one
conferred ''under the Act
0
•
The words "under the Act
0
signified a power conferred by laws made by a subordinate
Jaw-making authority which was empowered to do so by the
Act. The impugned bye-law was clearly well within the
bye-Jaw making power under ••· 11 and 12. The bye-law
did not contravene article.• 64 of the Articles of Association of
the Association as articles 64 applied only to the Board and
placed no restrictions on the power of the Association.
We•tern India Thtatro• Ltd. v. Municipal Oorporaticn o/
Poona, [1959] Supp. 2 S.C.R. 71, Huhli Electricity Oo. Ltd. v.
Province of Bombay, 76 I.A. 57 and NarayanasUJamy Naidu v.
Krish11aMu,thi, I.L.R. 1958 Mad. 513, referred to.
'
Further, upon a proper construction of the amended
bye-law it applied not only to contracts to be entered into
in future but also to subsisting contracts. A statute which
could validly enact a law with retrospective effect could in
express terms v.alidly confer upon a rule making authority a
power to make a rule or frame a bye-law haviQg retrospective
operation. In the present case the power to make bye-laws
so as to operate on subsisting constracts followed as a necessary implication from the terms of s. I I. There was no contra
indication in the other provisions of the Act.
Per Subba Rao,J.-Under s. 12 (I) of the Act the
Central Governmei;it had no power to make a bye-law with
retrospective effect. The provision conferring rule making
power must be strictly construed and unless it expressly conferred a power to make a bye-law with retrospective effect, it
must be held that it was not conferred any such power. Evey
if it was permissible to inter such a power by nccessara
I • ' -·
1 S.C.R.
SUPREME COURT REPORTS
723
impl\cation,
it could
:r\ot be inferred
in the present
case. It co'uld not be said that i'mless retrospective operation
was gi·tren . to the provisions of s. 12, the object of the legislature would be defeated or the purposes for which the power
was conferred could not be fulfilled.
Further, the powers conferred on the Commission under
the impugned bye-law could not be performed by the Commission under cl. (f) of s. 4.
Clauses (a) to (e) of s. 4 showed
that the functions of the Commission were wholly supervisory
and advisory in nature; the functions described in cl. (f) were
analogous to these and could only be supervisory or advisory.
The Commission had no administrative functions or powers
of management or powers of interference in the il).ternal
management of registered association which were vested in the
Association.
The power conferred upon the Commission was
not conferred "under the Act". The words did not include a
rule or a bye-law, and applied only to an assignment made in
the exercise of an express power conferred under the Act.
The Central Government had no power under s. 12 to make a
bye-law assigning any functioa to the Commission.
Union of India v. Madan Gopal Kahra (1954) S.C.R. 541,
Modi Food Products Lt<i. v. Commissioner of Sales Tax, U .P.,
A.LR. 1956 All. 35, Strawboar<i Manufacturing Oo. Lt<i. v.
Gupta Mill Workers' Union, (1953) S.C.R. 439, India Sugar &
Rejineriu Lt<l. v. State of Mysore, A.I.R. 1960 Mys. 326,
O.W. Motor Service tP) Lt<l. v. State of Kerala, A.LR. 19)9
Kcrala 347, Howell v. Falmouth Boat Construction Co. Lt<l.
(1951) A.O. 837; The Western India TheatreJ Ltd. v. Municipal
Corporation onhe Oity of Poona, (1959) Supp. 2 S.C.R. 71 and
Hubli Electricity Oo. Ltd. v. Province of BomfJay ( 1948) 76 I.A.
5 7, referred to.
CrvIL APPELLATH JuRISDIOTION: Civil Appeal
No.109of1957.
Appeal by special leave from the judgment
and order dated March l, 1956, of the Bombay
High Court in Appeal No. 20 of 1956.
G. 8. Pathak, K. H. Bhabha, H. M. Vakeel and
I. N. Shroff, for the appellants.
0. K. Daphtary, 8olic£tor General of India,,
B. K. [(hanna and P. D. Menon, for tho respondonts.
1962
Dr. l ~dram11ni
Py4relal Ouph
"·
W.R. JV1J1hu
...
1?8B
Jlr, Jnirtm•n•
/'μ111•1 0.:1 ..
••
W.ft. N•thu
724
SUPREME COURT REPORTS ~1963]
0. K. Daphtary, Solicitor General of India,
S. N. Andley, Rameshwar Nath and P. L. Vohra, for
the Interveners.
196l. April 11. The Judgm<>nt of Sinha
C. J., Ayyangar, Mudholkar and Aiyar, JJ., "ll'as
delivered by Ayyangar, J., Subha Rao, .J. deli'f'ered.
a separate judgment.
AYYANGAR, J.-This is an appeal by epecial
leave from the judgment of a Division Bench of the
Bombay High Court affirming the judgment of a
learned Single Judge whereby a petition filed under
Article 226 of the constitution by the appellants
was dismisaed.
By their petition, the appellants
challenged the validity of a notification issued by
Forward Markets Commission a statutory body
created by the Forward Markets Regulation Act
1952 (LXXIV of 1952) (hereinafter referred to aa
the Act) to the authorities of the East India Cotton
Association, Bombay (which will be referred to as
the Association) intimating to them that the continuation of trading in certain types of forward contracts in cotton including that known as "hedge
contracts" was "detrimental to the interest of the
trade and the public interest and to the larger
interests of the economy of India" and directed
these contracts to be olo~ed out, to be settled at
prices fixed in the notification.
It is necessary tn set out briefly certain facts
in order to appreciate the points raised by the
appeal. The East India Uotton Association is an
"association" which has been recognised by the
Central Government under s. 6 of the Act. The
three appellants are members of the Association
carrying on business in partnership. The appellants had, prior to December 1955, entered into
•·hedges contracts" in respect with other membora
of the Asimciation for settlements in February and
May
l!)(i(j. There was no dispute that these
l S.C.R.
SUPREME COURT REPL>RTS
725
contracts were in accordance with the bye-laws of
the Association as they stood at the date when the
contracts were
entered into.
The terms and
conditions of forward contracts in cotton including
"hedO'e contracts", a.nd the mannEir of their implement~tion, were governed by the provisions contained in certain bye-laws of the Association and of
these that relevant to the consideration of the
matters in this appeal was bye-law 52AA which
on the date when the appellantis entered into their
contracts ran aR follows:-
"52-A.A. ( l l whether or not the prices at
which the cotton may be bought or sold are at
any time controlled under the provisions of
the Essential Commodities Act, 1955, if the
Textile Commissioner with the concurrence of
the Forward Markets Commission and after
consultation with the Chairman (of the Board),
be of opinion that the continuation of hedge
trading
i8
likely
to
result
in
a
sit~ation
deterimental
to
the
larger
interests of t.he economy of India and so
informs the Board, the Board shall forthwith
cause ~ notice to be posted on the Notice
Boa.rd to that effect and on the posting of
such notice and notwithstanding anything to
be contrary contained in these bye-laws or in
any hedge or on call contract made subject to
these Bye-laws, the following provisions shall
take effect.
(2) Every hedge contract and every on
call contract in so far as the cotton is uncalled
thereunder or "in so far as the price bas not
been fixed thereunder entered into between
a member and a member or between a member
and a non-member then outstanding shall be
deemed closed out at such rate, appropriate
~? s1:1ch
contr~c~ as shall be fixed by the
Iext1le Comm1ss10ner and
the
provisions
1962
Dr. lnd1•m•ni
,.y•rel.t Gu! tc
v.
W.R. N•ll'u
-
JOit
.Dt. lnlramani
P,.,,1al Gupta
••
W.R. N<tAu
..A.J:J•nt•t J.
726
SUPREME COlJRT REPORTS (1963J
of Clauses ( 3), (4) and (6) of Bye-laws 52A in
so far as they apply to hedge and on call
contracts, shall apply as if they formed part
of this Bye-law. After the affixation of the
said Notice on the Notice Board trading in
hedge and on call contracts shall be prohibited until the Textile Commissioner with the
concurrence of the Forward Markets Commission and after consultation with the Chairman,
permits resumption".
Towards the end of 1955 the Chairman of the
.Association appears to have apprehended that the
Forward Market in cotton was heading for a crisis
which was in part due to the transacting of unbridled option business, which though prohibited by the
Act and also by the bye-laws of the Association was
nevertheless indulged in on a large scale. The
chairman brought this situation to the notice of the
members of the Board of the Association at a
meeting held on December 16, 1955, and suggested
that they should give serious thought to this vital
problem. It may be mentioned that the government also were anxiously considering the steps to
be taken to solve or avert the crisiBI
The action
which the government took in this matter iA reflectad in a notification issued by them on December 23,
1955, by which in exercise of the powers conferred
on them bys. 14;of the Act they directed the Association to suspend its business in Indian cotton
hedge contracts for delivery in February 1956 and
May 1956 for a period of 7 days with effect from
the date of the notification. The situation did not
apparently improve as a result of this temporary
suspension so that before the expiry of the work
fortnight, action under the same provision was
again taken). under a notification dated December
:10. 1955, by which the period of 7 days was extended by a further period of 7 days i. e. till 6. 1. 56'
A meeting of the Board of .Association was held on
I
1 S.C.R.
SUPREME COURT REPORTS
727
January 6, 1956, i. e., the day on which the suspension of forward business expired 'when the following
resolution wa.s unanimously passed :-
"In view of the suspension of forward
trading by government the Boa.rd hereby /
resolves under bye-law 52 th!Lt an emergency
ha.a a.risen or exists and prohibits until further
notice, subject to the concurrence of the Forward Markets Commission as from Saturday,
the 7th January, 1956, trading in hedge contracts for February and May 1956, deliveries
above a maximum rate of Rs. 700/- per
candy".
Thereupon a suit (numbered as suit 2/1956) was
filed by a member of the AssoC'iation as repr~sen
ting himself and all other _members, on the original
side of the High Court, Bombay against the Association and its Board, challenging the validity of the
notification of Government suspending forward
trading, as also of the resolution of the Board, just
now extracted.
An application for the grant of
interim stay was made for restraining the Board
from giving effect to its resolution but this was
refused by the learned trial Judge and an appeal
was filed against the refusal.
While things were in this state the Central
Government, in exercise of the powers conferred on
them by s. 12 of the Act, made a new bye-law
which was published in a Gazette of· India Extraordinary dated January 21, 1956, jn substitution of
bye Jaw 52 AA set out earlier. The n~w bye-law
ran:-
"52 AA (1)
Whether or not prices at
which cotton may be bought or sold are at
any time controlled under the provisions of
the EQs mtial Commodities Act, 1955 if the
Forward Markets Commission is of the ~pinion
1111
Dr, fnd•11m1J11i
Pyar.Za( Gu;&•
v.
W.R. Nathu
.Ayyangar J.
IHI --
'Dr. lnt/raaai
,.,.,!./ c.,, ••
••
w.a. N1111ru
728
SUPREME COURT REPORTS [1963]
that continuation or trading in hedge oontrao·
ts for any delivery or deliveries is detrimental
to the interest of the trading or the public
interest or to the larger interests of the economy of India and so notifies the Chairman, then
notwithstanding anything to the contrary
contained in these bye-laws or in any hedge or
on call contract made subject to these bye·
laws the following provisiona shall take
effect.
(2) Every hedge contract and every on
call contract in so far as the cotton is uncalled
thereunder or in so far as the price has not
been fixed thereunder and relating to the
delivery or deliveries notified under clause (1)
entered into between a member and a member
or between a member and a non-member then
outstanding shall be dermed closed out at
such rate appropriate to such contract and
with effect from such date a<1 shall be fixed by
the Forward Markets Commission and the
provisions or clauses (3 ), (4) and (6) of Byelaws 52-A in so far as they apply to hedge and
on call contracts shall apply as if they formed
pa.rt of this Bye-law".
This bye law was oommunioated to the Board
of the Association on Ja.nul\ry 23, 1956.
We might here state that the validity of this
new bye-law has been impugned on various grounds
and the alleged invalidity of this bye-law serves as
the ma.in foundlltion for cha.llene:ing the validity of
the notification of the Forward Markets Cvmmission
issued under the powers conferred by it.
On January 24, 1956, the appeal from the
order refusing the interim injunction in Suit No. 2 of
1956 was settled between the parties on the1e
terms:
"(l) 'fhe impu~ued resolution dated January
6, 1956, declared to be valid,
1 S.C.R.
SUPREME COURT Rli:PORTS
729
(2) The Board of Directors to meet on Jann-
, &ry 25, 1958, and consider under bye-laws 52 (2)
--~
whether the rate of Rs. 700 fixed under the said
resolution should continue or whether it should be
waived. In considering the same the Board will
apply its own mind and exercise its own judgment".
On the same day, i.e. January 24, 1956, the
Forward Markets Commission took action under the
,_,,
powers vested in them under the new bye· law 52 AA
which had been made by government three days
earlier. By a communication addressed to the
Chairman of the Association, the Commission
stated:
"In pursuance of cl.
(l) of the bye-law
52AA of the Bye-laws of the E.I.C.A. Ltd.,
Bombay I hereby notify to you that the Forward Markets Commission is of the opinion
that continuation of trading in the hedge
contracts for Febr1rnry and May 1956 delivery
is detrimental to the intPrests of the trade and
the public interest and the larger interest of
the economy of India and fixed under cl.
(2)
of the said bye-law; that the rates prevailing
at the time at which the trading in the said
contracts clos·.'d on January 24, 195fi, viz.,
Rs. 700/- for February and Rs. 686 /8/- for
May delivery as tbB rates at which and January 25, 1956 as the date with effect from
which the hedge contracts and on call ccntracts in eo far as the cotton is uncalled thereunder or in so far as the price has not been
fixed thereunder relating to the said delivery
shall be deemed to be closed out".
Thereupon the three appellants who are partners cirrying on business in cotton und(•r the name
and st,yle of Indramani Pyarelal Co- moved the
. High Court of Bombay by a petition und 'r Art. 226
.,. of the Constitution on January 27, 1956, for a writ
bf mand'1.1nus or a direction in the nature of
111!
Dr. lndrmfl•z'
'l'.JGr1lal G1111tc
"
WR. Nathu
1962 -
Dr. lntlrnt.ni
r,,...i.1 au;r.
v.
W.R. Nalflu
4yJa,,;01J.
730
SUPREME COURT REPORTS [1963]
mandamu,, against the members of the Forward
Markets Commission who were individually impleaded as respondents to the petition, ordering them to
ca.noel or withdraw the notification dated Ja.nuary
24, 1956, whose validity was impugned on varions
grounds.
The petition was beard by a learned
single Judge who dismissed it by his order dated
February 23, 1956. An appeal was filed therefrom
to a Bench of the High Court and when this was
also dismissed the petitioners moved for & certificate
of fitness to appeal to this Court but the same having been rejected, they applied for and obtained
special leave from this Court, and that is how the
matter is now before us.
The submissions of Mr. Pathak learned Coun11el
for the appellant in support of the appeal may be
classified under three main heads : (l) The not ifiration dated 24th Jann&ry, 1956, served 'ln the Board
of the Association bv the Forward Markets Commission was ultra vires for the reason that bye-law
52AA as amended by the Central Government on
January 21, 1956, was invalid. (2) Assuming the
byelaw to be valid it oould not operate rfltrospectively or be availed of retrospectively so as to affect
rights under existing contracts subsisting on the day
the amended bye-law was notified in the Gazette but
that it could if at all. be validly applied only to
Forward hedge contracts entered into thereafter.
(3) The notification by the Forwa.rd Markets
Commission was improper and ma.la.fide and was
therefore invalid.
It would be convenient to deal with these
points in that order: (1) The first of the points
raised raises the question of the validity of bye-law
52 AA as amended by the Central Government on
Ja.nuary 21, 1956.
Learned Counsel divided his
submission on this matter into two sub·hea.ils: (a)
that the Forward Markets Commission could not, on
a proper construction of the Act, be validly vested
1 s.c.R.
SUPREME OOURT REPORTS
731
with the power with which it was clothed by the
amended bye-law, and (b) that it was beyond the
power of the Association to have conferred the
power which it purported to do under the amended
bye-law 52AA. Put in other words, the objections
were that the Forward Markets Commission could
not, having regard to the terms of the statute under
which it was created, be a proper recipient of the
power with which it was vested by the bye-law and
secondly that the Association was in law incapable
of conferring that power on the Forward Markets
Commission or on any other body.
We shall first take up for consideration the
argument that the Forward Markets Commission
was in law incapable of being the recipient of the
power conferred by the bye-law under which it was
empowered to issue the impugned notification. For
this purpose it is n"'cessary to examine in detail
the rt>levant provisions of tbe Act. Section 2 (b)
defines 'Commission' as meaning "The Forward
Markets Commission" established under s. 3. Section
3 ( I ) enacts :
"3. (1) The Central Government may, by
notification in the Official Gazette establish a
Commission to be called the Forward Markets
Commission for the purpose of exercising such
functions and discharging such duties as may
be assigned to the Commission by or under
this Act."
The point urged by learned Counsel was that the
function or the duty cast upon it by the amended
bye-law 52 AA was not such as could be assigned
to the Commission "by or under this Act." The
meaning of the words 1by or under' and the extent
and nature of the duties assigned to the Commission
by the Act will therefore i:eqnire careful examination. Section 4 relates to the functions of the
Commission and it is the l1roper com~truction of this
1962
Dr. 1nd1amani
Pyartlal Gupta
v.
W.R. N Chu
Ayyan7ar '·
196t
Dr. lntlramani
Pyar1/ol Gupta
v.
W.R.Nathu
•
732
SUPREME C()URT REPORTS (1963)
se~tion. that has loomed ]urge in the arguments on
this pomt. It is, therefore, necessary to set this out
in full :
"4. The functions of the Commission
shall be-
(a) to advise the Central Government in res·
pect of the recognition of, or the withdrawal
of recognition from any association or in respect of any other matter arising out of the
administration of this Act ;
(b) to lrnep""forward markets under observation and to draw the attention of the Central
Government or of any other prescribed autho.
rity to any development taking place, in or
in relation to, surh markets which, in the
opinion of the commission is of sufficient
importance to deserve the attention of the
Central Government and to make recommen·
dations thereon ;
(c) to collect and whenever the Commission
thinks it necessary publish information regarding the trading conditions in respect of goods
to which any of the provisions of this Act is
made applicable, including information regarding supply, dt>mand and prices, and to
submit to the Central Government periodical
reports on the operation of this Act and on
the working of forward markets relating to
to snt'h goods ;
(d)
to make recommendations generally with
a view to improving the organisation and
working of forward markets ;
( e) to undertake the
inspection of the
accounts and other documents of any reoognished association whenever it considers it
neceSBary ;"and
1 S.C.R.
SUPREME COURT REPORTS
733
(f) to perform such other duties and exercise
such other powers as may be assigned to the
Commission by or under this Act, or as may
be prescribed''.
Pa.using here it is neceBBary to add that the
expression "prescribed" fouud at the end of cl. (f)
has been defined by s. 2(h) of the Act to mean
''Prescribed by rules made under the Act".
Before considering the points urged as regards
the oonstruotion of this section taken in conjuction
with the terms of s.3(1) we shall refer to a few other
proyisions which are of some relevance in the present context. Section 3(2) which confers power on
the Central Government to call for periodical
returns from
Recognised Associations and to
direct such enquiries as they consider necessary to
be ma.de, empowers the government to direct the
Commission to inspect the accounts and other
documents of any recognised Association or of any
of its members and submit its rAport thereon to the
Central Government [vide s. 3(2) (c)].
Sub·s. ( 4) of
this section enacts :
"8(4 ).
Every
recognised association
and
every member thereof shall maintain suoh
books of account and other documents ad the
Commission may specify and the books of •
account and other documents so specified
shall be preserved for such period not exceeding three years as the--Commission may specify
and shall be subject to inspection at all reasonable t.imes by the Commission".
- Section 28 reads :
"28. (l) The Central Government may, by
notification in the Official Gazette ma.ke rules
for the purpose of carrying into ~ff Pct the objeote of this Act,
1961
Dr lndramani
Pyarelal Gupta
v.
W.R.Nalhu
.dyyangarJ.
-
JHB __ ,
Dr. lodramaol
P:1ar1lal l1uplo
v.
W.R.Natlia
734 SUPREME COURT REPORTS (1963]
(2)
In particular, and without prejudice to
the generality of the foregoing power, such
rules may provide for-
( a) the terms and conditions of service of
members of the Commission ;
(b) the manner in whioh applications for
recognition may be made under section 5 and
the levy of fees in respect thereof ;
(c)
the manner in which any inquiry for the
purpose of recognising any association may be
made and th<> form in which recognition shall
be granted;
(d) the particulars to be contained in the
annual reports of recognised associations ;
(e) the manner in which the bye-laws to be
made, amended or revised under this Act
shall, before boing so marie, amended or
revised be published for criticism ;
(f) the constitution of the advisory committees established under section 26, the terms of
office of and the manner of filling vacancies
among membPrs of the committee ; the interval within which meetings of the advisory
committee may be held and the procedure to
be followed at suoh meetings ; and the matters
which may be referred by the Central Government to the advisory committee for advice ;
(g) any other matter which is to be or may
be prPscribed."
The argument on this part of the case was brieCJy
t.his : The Forward Markets Commission is a
statutory body specially created for the purposes of
the Act. The powers which may ho conferred upon
the Commission and the duties which it may be
called on to discharge are therefore subject to the
provision~ of the Act. No more power can be
conferred upon this body than what the Act allows
1 s.c.R.
SUPREME COOH.1' REPORTS
735
and the power under the a.mended bye-law 52AA is
n<>t one which is contemplated by the Act as conferable on it. Section 4 <le fines the functions of the
Commission under five general heads (a) to (e) with
a. residuary clause contained in cl. ( f ). The powers
or duties dealt with in els. (a) to {e) are in their
essence either recommendatory or advisory. In
the context therefore ''the other" duties or "other"
powers which may be assigned to the Commission
under cl. ( f) must be either efuesdem ge:neri.-J with
advisory or recommendatory powers or of a nature
similar to those enumerated in the previous subclauses.
In support of t.hese submissions learned Counsel invited our attention to several decisions in
which ancillary powers which might be implied from
the grant of certain express powers were referred
to. In particular it was submitted that the Court
would not imply a power which it was not absolutely necessary to 'effectuate on express grant or was
need to prevent the nullification of an express
power that was granted. In our opinion, these decisions afford no assistance for resolving the controversy before us. There is no question here of deducing an implied power from the grant of an express
one. What we a.re concerned with is the scope of
an express power or rather whether the grant of the
power conferred upon the Commission by the bye·
law could be held to be a power which could be
assigned to the Commission under cl. (f). So far as
the terms of cl. ( f) are concerned, there is no limitation upon the nature of the power that might be
conferred except, of course, that which might flow
from its having to be one in relation to the regulation of forward-trading in goods which the Act
is designed to effectuate. Any limitation therefore
would have to be deduced from outside ol.(f) of s. 4.
Ta.king ea.ch of the clauses (a) to (e), it is not possible to put them positively unuer one genus in order
1961
Dr. Indramani
PyartlaZ Gupla
v.
W.R. '1upta
--
A)')langat' J.
111111
Dr, lntlramani
Pp1lal Gup'a
••
W.R • .Nathu
dpcng,. J,
736
SUPREME COURT REPORTS (1963)
that there might be scope for the application of the
ejusdem generis rule of construction. Negatively, no
doubt it might be said that none of these five clauses
confer an executive power such as has been vested
in them by the amended bye-law 52AA but this cannot be the foundation for attracting the rule of
construction on which learned Counsel relies. On
the other hand, if there is no common positive
thread running throogh cls.(a.) to ( e) such as would
bring them under one genus and negatively they do
not expressly include any administrative or executive functions, that itself might be a reason why
the expression "other" occurring in cl.(f) shoud receive the construction that it is intended to com·
prehend such a function. Learned Counsel further
suggested that even if the rule of ejusdem generis did
not apply, the allied rule referred to at page 76 of
the report of Western Jndi,a Theatres Ltd. v. Municipal Corporation of Poona, that the matters expressly
rflferred to might afford some indication of the kind
and nature of the power, might be invoked, but we
consider that, in the context, there is no scope for
the application of this variant either. What we a.re
here concerned with is whether it is legally competent to vest a particular power in a st!ttutory body,
and in regard to this the proper rule of interpretation would be that unless the nature of the power is
such as to be incompatible with the purpose for
which the body is created, or unless the particular
power is contra-indicated by any specifio provision
of the enactment bringing the body into existenoe,
any power which would further the provisions of
the Act could be legally conferred on it. Judged by
this test it would be obvious that the power conferred by the bye-law is one which could be validly
vested in the Commission.
A more serious argument was advanced by
learned Counsel based upon the submission that a
I S.C.R.
SUPREME COURT REPORTS
737
power conferred by a bye-law framed under s. 11
or 12 was not one tha.t was conferred "by or under
the Act or a.s m 1.Y be prescribed". Lea.rned Counsel
is undoubtedly right in his submissil)n tha.t a power
conferrAd by a. bye-law is not one conferred "by
the Act", for in the context the expression "conferred by the Act'' would mean "conferred expressly
or by necessary implication by the Act itself". It
is also common ground that a bye-law framed under
s. 11 or 12 would not fall within the phraseology ''as
may be prescribed", for the "expression" 'Prescribed'
has been defined to mean "by rules under the Act",
i.~., those framed under s. 28 and a bye-law is certainly not within that description.
The question
therefore is whether a power conferred by a bye-law
could be held to be a power ''conferred iinder the
Act". The meaning of the word "under the .A.at" is
well-known. 1'By" an Act would mean by a provision
directly enacted in the statute in question and which
is ga.therable from its express language or by necessary implication therefrom. The words "under the
Act'' would, in that context, signify what is not
directly to be found in the statute itself bu1; is conferred or imposed by virtue of powers enabling this
to be done; in other words, by laws made by a subordinate law-making authority which is empowered
to do so by the pa.rent Act. . This distinction ia thus
between what is directly done by the enactment
and what is done indirectly by rule-making authorities which are vested with powers in that behalf by
the Act. (vide Hubli
Ekotricity
Oompony Lt,d.
vs. Province of Bombay, and Narayanaswami Naidu
vs. Kriskna-Murthi.) That in such a sense bye-laws
would be subordinate-legislation ''under the Act"
is clear from terms of ss. 11 and 12 the:mselves.
Section 11 (1) enacts:
"l l. ( l) Any recognised association may,
subject to the previous approval of the Central
(1) 76 l.~. 57, 66.
(2) I.L.R. 1958 Mad 513, 547,
1962
Dr. fndramani
Pyarelal Gupta
"·
W.R. Nathu
Ayyangaf", J,
1962
Dr. lndramari
Pyarelol Gupra
v.
W.R.No.tlu
A)'yangar, .'
738
SUPREME COURT REPORTS [1963]
Government. make bye-laws for the regulation
and control of forward contracts'',
and sub-s.
(2) enumerates the matters in respect of
which bye-laws might make provision. Sub-s. (3)
refers to the bye-laws as these made under this section
and the provisions of sub-s. ( 4) puts this matter
b~yond doubt by enacting:
"ll (4) Any bye-laws made under this
.•ection shall be subject to such conditions in
regard
to
previous publication as may be
prescribed, and when approved by the Central
Government, shall be published in the Gazette
of India r.nd also in the Official Gazette of
State in which the principal office of the
recognised association is situate ;
,,
Section 12 under which the impugned bye-law was
made states in sub-s. (2) :
"12 (2) where, in pursuance of this
section, any bye-laws have been made or
amended, the bye-laws so made or amended
shall be published in the Gazette of India
and also in the Official Gazette of the State
in which the principal office of the recognised
association is situate, and on the public&tion
there0f in the Gazette of India the bye-laws
so made or amended shall have effect as if
they had been made or amended by the
recognised association",
and in suh-s. (4):
"12. (4). The making or the amendment
or revision of any bye-laws under this section
shall in all cases be subject to the condition
of previous publication",
"
............................................................
Having regard to these provisions it would not be
I S.C.R.
SUPREME COURT REPORTS
739
possible to contend that not .vithstanding that the
bye-laws are rulos made by an Association under
s. 11 or compulsorily m·t.de by the Central Government for the Association as its bye-laws under s. 18,
they a.re not in either case :)ubordinate legislation
under s. 11 or 12 as the case may be, of the Act and
they would therefore squarely fall within the words
'·under the Act" in s- 4(f). Indeed, we did not understand Mr. Pathak to dispu~e this proposition.
His contention however was that when cl. (f)
specifically made provision for powers conferred by
"rules" by the employment of the phrase ''or as may
be prescribed" and, so to speak, took the "rules"
out of the reach of the words "under the Act" it
must necessarily follow that every power confered by
Subordinate law-making body must be deemed to
have been excepted from the content of that expression and that consequently in the Content the word
"by the Act'' should be held to mean "directly by
the Act'' i.e., by virtue of positive enactment, of
the words "under the Act" should be held to be a
reference to powers gatherable by necessary implication from the provisions of the Act. As an
instance learned Counsel referred us 'to the power
of the Central Government to direct the Commission
to inspect the accounts and other doeuments of any
recognised association or of any of its members and
submit its report thereon to the Central Governm<'nt under s. 8 (2)(c) and suggested that this would
be a case of a power or duty which would be covered
by the words ''under the Act". We find ourselves
wholly unable GO accept this. If without the reference to the phrase "as may be prescribed'' the
words "under the Act" would comprehend powers
which might be conferred under ''bye-laws" as well
as those under "rules'' we are unable to appreciate
the line of reasoning by which powers conferred by
bye-laws have to be excluded,
becau<ie of the
specific reference to powers conferred by "rules".
1962
Dr. Ind amani
Py12r1l I Gupta
v.
W.R. Nathu
A1yangar, J,
1961
Dr. lndramani
P.)11 rtlal Guptn
v.
W.R. Nathu
740
SUPREME-COURT REPORTS [1963]
Undoubtedly, there is some little tautology in the
use of the expression "as may be prescribed"
after the comprehensive reference to the powers
conferred ''under the Act", but in order merely to
avoii redundancy you Jannot adopt a rule of construction which cuts down the amplitude of the
words used except, of course to avoid the redundancy.
Thus the utmost that could be that though normally
and in their ordinary signification the words •'under
the Act" wou Id include both "rules" framed under
s.28 as well as "bye-laws" under s. 11 or 12, the
reference to "rules" might be eliminated as tautlogous since they have been specifically provided by
the words that follow.
But beyond that to claim
that for the reason that it is redundant as to a part,
the whole content of the words "under the Act"
should be discarded, and the words "by the Act"
should be read in a very restricted and, if one may
add, in an unnatural sense as excluding a power confered by necessary implication, when such a power
would squarely fall within the reach of these words
would not, in our opinion, be any reasonable oonstruotion of the provision. We need only add that
the construction we have reached of s.4 (f) is reinforced by the hnguage of s. 3 ( 1) which is free from
the ambiguity created by the occurrence of the
expression "as may be prescribed" in the former.
We have therefore no hesitation in holding that
there was no incompetency in the Forward Markets
Commission being the recipient of the power which
was conferred upon them by bye-law 52AA as
amended.
The next pa.rt of the enomission in relation to
this matter was that it was not competent for the
Association to have framed this bye-law and that
the powers of the Central Government under s. 12
and of the Association under s. 11 in regard to the
framing of
bye-law
being co-extensive, the
bye-law framed was not competent to confer any
power on the commission.
I s.c.R.
SUPREME COURT REPORTS
741
This contention was urged with reference to
two considerations:
(a) that a bye-law of the type now in controversy was llOt within s.11 of the Act, and ( lJ)
that haviug regard to the provision contained
in the Articles of Association of the Association the bye-law was beyond the powers of
the Association to frame. These we should
deal in that order.
The first objection naturally turns upon whether the bye-Jaw is one which could be comprehended with s. 11 of the Act.
Its first sub-section
enacts;
. "11(1) any recognised association may, subject to
the previous approval of the Central Govern·
ment, make bye-laws for the regulation and
control of forward contract."
That the impugned bye-law is one for the regulation and control of forward contracts cannot be
disputed, and the terms being very general would
include a bye-law of the type now impugned. In.
this connection reference may be made to byela.w 52AA which the impugned bye-law amended,
under which power was vested in the Textile
Commissioner with the concurrence of the Forward
Markets Commission, (though after consultation
with the Chairman of the Board) to direct the enclosure of hedge contracts and fix the 1~ates at
which such oontracts might be closed out -a provisi Jn whose validity was not impugned in the pres ~nt proceedings. Mr.