# • MANICK CHAND PAUL & OTHERS ETC v. UNION OF INDIA AND OTHERS

- **Citation:** [1984] 3 S.C.R. 461
- **Court:** Supreme Court of India
- **Decided:** 1984
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/manick-chand-paul-others-etc-v-union-of-india-and-others-8619
- **Pages:** 21

## Headnote

461
•
MANICK CHAND PAUL & OTHERS ETC ..
v.
UNION OF INDIA AND OTHERS
Aptil 17, 1984
~\ (V.D .• TULZA¥URKAR, V. BALAl:R!SHNA BRAD! AND D.P. MADON, JJ.]
Gold Control Act 1968, Sections 16(7), 52, 79, JOO read with rule 3(1) Qf the
Go:/d Control (lden~ific.ation of· Customers) Rule1, 1960,. whet he~. violatt~e of the
provisions of Articles U,19(1)(/l), 301anl.302 of the Constitution.
.
.
Gold Control (Forms, Fees and Misce/lane1us Mattefs)· Rules, 1968-For11t1·
GS,J J and GS 11 as amended are unworkable anti require modification-,.-Govern··
1nel/t of India's Letter of Instructions ani the Trade Notices withdrawint the-·
faciility of sale by licensed traders throuzh their trflvtlli111 sales1nen whether 1•islativ~ Articles U, 19(/)(t) and 301 ofrhe &nstituti1n.
In Harak Chand Rotan ChanJ Bamhia's c.u [1~70] I SCR 479, where tao
Gold (Control) Act, 1969 and some of its provision; prioi to the amendment by·
Act 26 of 1969 were challenged, the Supreme Court poiilted out that even tho,P&h.'
import of Gold into India had been banned, considerable quantities ·Of contrab&,nd glod were findinii. their \Vay into the cciuntry through illei!al channels;..
affecting the national economy and hamperin: the country's economic- stability
and progress, th!!:t the Customs . DCpartment was not in ·a position to effectively
combat the sn1ugglinu over the long borders and coast lines, that, therefore,
anti-smugglinu measur~ l'iad to be supplemented by a detailed •ystem of control
over internal transaclions and that the Gold (Contro1) Act, 1968 was passed for
this purpose. In other words, the several restrictions that have be-en put oll the·
activities of the trad!rs doing business in e01d, go Id orname'nts and articles of
gold, will have to be viewed frbm the aforesaid perspective. The Court further
held the enactment to be within _the Jegl.slative compeie_nce of P.1rliamen.f:and
out of the several provisions that were challenged only ss. 5(2)(b), 27(2)(d), 27(6),
32, 46. 8-8 and lOO were invalid. As a result of the aforesaid~decisions and,the
obServations made by this Couft therein t
0
he Act of 1968 was suitably amended
by Gold Control (Amendment) Act (i6) of 1969. These amended provisions, the
Gold Control (Identification of Customers) Rules, 1969, th~ Gold Coritrol
(Forms, Fees and Miscellaneous Matters) Rules 1968 are chaJ!enged by the Writ
Petitioners as being: violative of the provisions. of Article 14, 19(r)(g), 301,_ and
302 of the Constitution. Some of the pet_itioners including the petitioners in
S.L.P. Civil 5J8 of 1973 have also challenged the Govern1nent of lndia·s Letter
of Instructions and the Trade Notices withdrawing the facility of permitting
Jicensed dealers to send ~naments for. sale through their travelling salesmen,
on t~e same grouds.
Dismissin&: the petit!ons, the~Court
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462
SUPREME COURT REPORTS
(1984] 3 $.C.R.
_-\
HELD: 1:1, Section 16(7) of the Gold (Cootrol) Act, 1968 as .amended is
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constitutionally valid. [269E, 47IB]
'
1:2. The counter·affidavit of the Urilon. of India not merCiy furrilshes the
inteI!igible classification ffiade betw~en the.licensed dealers and non-dealers and
non·rCfiners~ but .. also shows th.at the 'ctassitic3.tioil has a reaSonable nexus with
the object of the Act and the reasons for denying e>.emption limil~'tO liceriscd
deJ.Jers or refiners are also valid and r.eferable to the Object of the ~ct, namely
"to provlde, in the economic· arid financial intefests of thC co'nimunity, for the
confroJ of production, m·anufacture, supply· distribution, ~se and poss::ssion of'
and business in, gold ornaments and articles of goid a·nd for matters connectCd
t~erewith ~r incid~ntal thereto:; [t69F, 4700-E}
~ .\Vhile.ordinary citizens (non··dealers and. non.rCfinCrs) are ·pot premitted-by -
Jaw to have any primary gold in their possession• a deah:r or a, refiner 1s permit·
tej under the law to have unlimited quantity of primary rold in hi..; poss.:ssion
and therefore, it is tasr ·for a dealer or a r

## Text

_Characters 0–39,561 of 57,203. This is a partial read: ask again with offset=39561 for what follows._

461
•
MANICK CHAND PAUL & OTHERS ETC ..
v.
UNION OF INDIA AND OTHERS
Aptil 17, 1984
~\ (V.D .• TULZA¥URKAR, V. BALAl:R!SHNA BRAD! AND D.P. MADON, JJ.]
Gold Control Act 1968, Sections 16(7), 52, 79, JOO read with rule 3(1) Qf the
Go:/d Control (lden~ific.ation of· Customers) Rule1, 1960,. whet he~. violatt~e of the
provisions of Articles U,19(1)(/l), 301anl.302 of the Constitution.
.
.
Gold Control (Forms, Fees and Misce/lane1us Mattefs)· Rules, 1968-For11t1·
GS,J J and GS 11 as amended are unworkable anti require modification-,.-Govern··
1nel/t of India's Letter of Instructions ani the Trade Notices withdrawint the-·
faciility of sale by licensed traders throuzh their trflvtlli111 sales1nen whether 1•islativ~ Articles U, 19(/)(t) and 301 ofrhe &nstituti1n.
In Harak Chand Rotan ChanJ Bamhia's c.u [1~70] I SCR 479, where tao
Gold (Control) Act, 1969 and some of its provision; prioi to the amendment by·
Act 26 of 1969 were challenged, the Supreme Court poiilted out that even tho,P&h.'
import of Gold into India had been banned, considerable quantities ·Of contrab&,nd glod were findinii. their \Vay into the cciuntry through illei!al channels;..
affecting the national economy and hamperin: the country's economic- stability
and progress, th!!:t the Customs . DCpartment was not in ·a position to effectively
combat the sn1ugglinu over the long borders and coast lines, that, therefore,
anti-smugglinu measur~ l'iad to be supplemented by a detailed •ystem of control
over internal transaclions and that the Gold (Contro1) Act, 1968 was passed for
this purpose. In other words, the several restrictions that have be-en put oll the·
activities of the trad!rs doing business in e01d, go Id orname'nts and articles of
gold, will have to be viewed frbm the aforesaid perspective. The Court further
held the enactment to be within _the Jegl.slative compeie_nce of P.1rliamen.f:and
out of the several provisions that were challenged only ss. 5(2)(b), 27(2)(d), 27(6),
32, 46. 8-8 and lOO were invalid. As a result of the aforesaid~decisions and,the
obServations made by this Couft therein t
0
he Act of 1968 was suitably amended
by Gold Control (Amendment) Act (i6) of 1969. These amended provisions, the
Gold Control (Identification of Customers) Rules, 1969, th~ Gold Coritrol
(Forms, Fees and Miscellaneous Matters) Rules 1968 are chaJ!enged by the Writ
Petitioners as being: violative of the provisions. of Article 14, 19(r)(g), 301,_ and
302 of the Constitution. Some of the pet_itioners including the petitioners in
S.L.P. Civil 5J8 of 1973 have also challenged the Govern1nent of lndia·s Letter
of Instructions and the Trade Notices withdrawing the facility of permitting
Jicensed dealers to send ~naments for. sale through their travelling salesmen,
on t~e same grouds.
Dismissin&: the petit!ons, the~Court
c:
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462
SUPREME COURT REPORTS
(1984] 3 $.C.R.
_-\
HELD: 1:1, Section 16(7) of the Gold (Cootrol) Act, 1968 as .amended is
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constitutionally valid. [269E, 47IB]
'
1:2. The counter·affidavit of the Urilon. of India not merCiy furrilshes the
inteI!igible classification ffiade betw~en the.licensed dealers and non-dealers and
non·rCfiners~ but .. also shows th.at the 'ctassitic3.tioil has a reaSonable nexus with
the object of the Act and the reasons for denying e>.emption limil~'tO liceriscd
deJ.Jers or refiners are also valid and r.eferable to the Object of the ~ct, namely
"to provlde, in the economic· arid financial intefests of thC co'nimunity, for the
confroJ of production, m·anufacture, supply· distribution, ~se and poss::ssion of'
and business in, gold ornaments and articles of goid a·nd for matters connectCd
t~erewith ~r incid~ntal thereto:; [t69F, 4700-E}
~ .\Vhile.ordinary citizens (non··dealers and. non.rCfinCrs) are ·pot premitted-by -
Jaw to have any primary gold in their possession• a deah:r or a, refiner 1s permit·
tej under the law to have unlimited quantity of primary rold in hi..; poss.:ssion
and therefore, it is tasr ·for a dealer or a refinC:r to acquire !rpugg!ed rold and
\\-ith a vi~w to preventing" det~1.:tion of such golJ, to convert .1he same into or.na·
.
'
.
.
ments and to claint such ornaments as his personal property. This necessitated
a provision for a dcdaration cf all ornaments and articles, owned, possessed.
h~ld or controlled by th!m ~o lha,t they_could not _c~aim any clandestinely manu.
factured oranaments, when· detected to be their p!rsonal property and that is
,- \\;hy it has been provid~d in S.t6(7) i1;at e'veiY- liCensed ·dealer or refiner ~hould
declare all g6Td articles arid ornaments which belong to h1m or Which are in his
custody; posssC'sion o.r control, and that is why it has been further.provided
that th~ e.o.:cmption limit-> permissibl~ ·for general public in rel::uion to the
requir~ment of.declaration of articles and ornaments shouid not be available lO
the dealers and refinerS: [469G-H, 470B-D]
1 :3. 1 hC provi5ion in section 16(7) could not be regarded as unnecessary or "
one ·,-\lhich c3.sts an unrea!iOnable burden on the licensed dealer or refiner. The
reasons for-introducing thi;: provision justify its enaetmcnts, if the objects of the
. Act are to be achi_ev:J. , -Oath: ~sp!c:t of casting unreasonable burd.:n on the
dealer refiner, tirStly, the burde~ orl the dealer or refiner i:s the same as that which
haS been Casi on a non-de:il:r (iridividual or family) whenever the l.ttter come:;.'
to own, posses5, h;)ld or have under hi1 cOntrol articles or oriiamenti of sold
in .excess of the exempted limit ; seco~dly visits of guests and relationS (including ·
, ma~ried daught:rs and si~ters) on festive o.:casiofi5 aod requests·proct.·eding frOn1
• them r·o lh~ hou~e-k.e.:p:r to keep their orilam!nts in safe" custody during their
stays \\-i!h him, which are ordinary inciden'ts iri li_fe, arc common to licensed
dealers Or refiners· aiid nCln'-dealers and thi::refi.Jr.! the requirement of rriaking a
declaration uild.:r section _16(7) does not cao;t any additional burden on him;
and. thirdly under section 16(i) it is provided that 'the licensed d:aler or refiner
shall inake a -dec-laratioa- "'in iccordanc: with the provisions of this section"
\vhich means he his to '&J so wi"1hin · 30 days of his acquiring the O\\-n.erShlp,
('9ssession, custody or conlrol of such gold. \Vith such, time limi-t being Provided the burden casttcannot be, said to be unreasonable.~ especialiy Y.ben the
provision is found to be nCcessary to carry out the objectives of the Act,
.
. [470E-H, 471A·B]
..
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tl.C. PAUL v, UN:O~
463
2:t". Section 52 of the GOid (Coptrol) Act, 1968 -as am.end~d does ·not suffCr
from the vice of excessiVi! delegation of the power and therefore the· said provi·
sion iS constitutional. [472G-HJ
2:2. it is true that section 52 ~o~s not contairi any guide-line~ or p~inciples
which would regul~te the exercise of the ppwer of the Administrator in the
matter of gi-ant or refusal ·or approval to change in lhe Partnership of a firm
but in the exercise of the powers conf~rred by s.114 read·with s.27(6) of the Act
the Central Government has framed the 'Gold Control (Licensing of Dealers)
Rules 1969'_ and Rule 2 enlists· matters ·to Which regard. is tq be had before·
issuing a licence and Rule 3 indicates the conditions on the fulfilinent of which
_a Hcence could bC ref!ewed. It 'is true that the5c RuJes. w.hich deal wi1h Jicens ..
ing of d:!alers and renewal of their licences, in tenns do not cover a case of a
change in the partnership of a firm and the.approval to t-e accorded thereto by
the Adminbtrator but in a sense a case of a change occurrin'g in thC -partnership
of· the _ fifin and the occasion to app_ly for grant. of approval thi:reto by the
Administ'rator would be a ca1J~ of 5eekin& renewal of the licence by the firm in
which a change has occurred eith'r by death· or re tiremefit of a partner or aS a
result of reconstitution of th~ firm and therefore to such a: case .th-!se licensi~g
Rules, particularly Rule 3, must and will apply and these rules; in so far as they.
are appli.:able to the situation, afford. the n,ecessary guidi.lincs on the basis of
which approval to the change could be given or
r~fused .. Obviously, if the
charige in ~he .firm involves fntroduction of a· new panner into the firm these
guide-lines under Rules, 2 and 3 will play an important part ia the matter of
ac.:ording or refusing to accord ihe approval but if the change nearly involves.
alteration in lhe share..capit<il or Profit ~harirlg basfa an1~ngst the se!f-same
partners who coatin1,1e the .firm the .ipproval Would be a nlatter of forma!i{y, ·
In view of the Licensing Rule1J, 1969 which must apply, it cannot be said that
·any unfeuered or unregulated discretion· has beeO conferred upon the Adminis·
trator in th~ matter of grant of refusal of appro(al to a change in the partaCr.
'ship of a firm. [47JH, 472A-E]
·
,,
2:~. On the aspect of absence -of a prov1s1on from· appe!ll, a remedy by
· wa:Y of an appeal to correct any erroneous order that may· be· pasSed undel'. section 52 ·has beeil provided for by Notificafion dated 26August, .. 1983 issued ·.
by tht: Ad1ninistrator under seC. 4 (4) of thC Act whereunder the exercise of the
poWer under sec. 5-2 has been delegated to the Deputy Collector of the Centre
Excist: with the result that.aq ippeal; against his order und.er s.52 will lie to the
. Collector of. Centre Excise under s.80 of t?c ACt. -[472E~G]
•
3. The power to grant extension under section 79 of the Gold (Control)
Act as amended is not arbitrary and does not suffer fronl.Jack of guidelines. Of·
course two in built .;afeguards will have to be and must b-= read into the Provision. Since every extensio_n ·involves civil Consequence in that the owner's or
the ~r::cerned person's right to have the seize_d g0Jd returned to him is adversely
affected by being- postponed. before granting any extensio_n he must be given a
notice and an opportunity to make representatiou aga'in~t the Proposed exten·
Sloe. 474H,,47SA-lJJ
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S~PREME COURT REPORTS
(19811] 3 s.c.R.
It is true that s.79 docs not expressly mention the iuidelinc5 on 'the ba,sis of
·which the power to grant ext;psion of die initial period of six Il!Ontbs is to be
exercised buL if regard is had ·to the provh.ions ._dealing with· &:izure (s.66),
Confiscation (s.71), .Adjudication (s.78). and Giving of ('pportunity (s.79) the
Policy of the Legislature becomes ·qi.lite clear that -·- herl!:<1'3 tlo' .. l---Ower to seize'.
can be_ exercised by any Gold Control Officer if ht: Las"'reason to lxlieve" that
in re~pect ot ~any -gold _any provision of the A.ct has been or is beini or is
_ attempted t? 'be contravened the confi~cation._of gold can takC_ pla.cC only if'
: actual contravention bas taken place Or is apprehended or is attempted and such
co;,fisCatiori can b~ adjudged or o?defed withOut limit tiy a Gold cOntiol Officer
not below the rank of a Coll~ctoi Or· Central Excise or of Customs and subject
_-to such.limits- as may __ be specified in that behalf by'such other Gold COntrol
0f!1ccr not beTOw the rank of a Superintendent of Central Excise as the Centrai
GovemmentS·ma~ autliorise in that behalf; but the power _to 8raot extension of
- -- the initial period of six moflths has been conferred under the second proviSo to
's.~9 only upon a superi~r officer, namely tl1;e COlfector of· Ceiitral Excise or of
customs, Further under the second proviso to s.79 tbe owner oi the person con·
'Cemed has been iliven the right to have· the seized gold returned to him where Ilo ·
... ~o-tice _p.roposing Cofi~scation is_ served uPon him within' a period of six months
from"the d'ate ·of th~ seizure of _the gold which shows that the Legisla:ure
clearly intended that ordinarily the investig<ition in corinection with the seized
gold is Cxpected to be· over within six months ; but ·only in caseS where such
investigation may not be complet'ed owing to some gen.uine or bonafide diffi·
culties the Legislature gave undi:r the proviso power to the Co11ector tO'"e'l!"tend
that time. Iii other word3 Collector is ·expected to pass extension order~ neither
mech.anicaUy nor as a ~atter Of routine but only on being satisfied that fact! or
circumstances Cxist which ind.icate that the investigation could not be completed
for bona fide reasons withln the initial period of six moI}ths. Such guidelines
- would be imP1icit if the extra-ordinary powe; to effect seizure and adjudge confis.
cation conferred by the Act is considered in jllstaposition with· the rig.ht confer· ,
·ted upon the owner or the person cOncerned to have the seized gold.returned to
·him "norniauY at the eX.piry of the initial Period of six months. Presumably, the
ramifications of any gold· smllgg\ing 3.ctivity which are usually' extensive and.
cclmplicated must haVe Jed the. LegisJature ··not to 'impose a Jimit or ceiling on_
the power to· gtant. extension but ,jf the above gllidelines are to gov_ern ·every-·
extension that may be granted then mere absence of a limit or ceiling will not
be or any consequence. [473H, 474A-G]
.
-
AsSistant Collector of Customs v. Charan Das Malhot'ra, [1971] 3 S.C~R. -802;
aPPtied~
'
4:1 Section JOO of ihe Gold Control Act read with Rule 3(1) of the Gold
Controi (ldentificaliOn of Customers) Rules~ 1968 is constitutiona1Jy v:ilid and'
does not restrict. ihe licensed dealers to ~arry on their business iricludins their
. inter-state trade-, (478FeG]
4':2. Section 100 of thC Act as it originally stood prior to its amendment in
·t969 imposed a statutory obligation Upon a dealer to-take all reasonable steps
to 'sati:c;fy himself about the identity .of the person fro~ :n.hom gold wa! boug.h;t
liut h did not specify the n~tuII cf steps which a dealer ~as supposed to t-ak.o
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M.C. PAUL v. UNION
4~5
-for such -satisfaction and therefor~ this Court· i~ .1/arakchtind: Ratanchand
...Banthia's case· took the view that the obliiatioa, cast thereunder' was uncertain ·
-2nd incapable of proper_ co:npliance and therefore the section was uncqnstitu~
tional on the ground that it imposed an imposSible and unreasonable burden. In
·the light of this decision, ~.100 was appfopriately ameilded and the •Gold Control
·{ld<.!ntification of Customers) Rules, 1969 were. frarried and p.irticularly Rule 3(1)
n::>w prescribed the Several steps one. or more of which have to be iakCn by the
'11censed dealer to satisfy himself as to the identitY of the Customer from whom
·be proposes to accept, buy or otherw_ise receive any go?d, 477E-G]
4:3. From the. mere fact that most of the custon1ers who come from villages
.:as also from outside their own State. prefer to recive payments in.cash_in Jieu of
·~old sold and are- not prepared to receive- payments by crossed cheque!. for the
£Cason that they do not ha Ve a.ny·_ bank account or their apprChen .. ion that the
---said cheques may-_ not be enca-stied, it cannot be said complianCe is either incap·
. able or hnpOssiable even frcm-·a practical or commercial point of view. More· :
-Over. thi provisions contained in sub-rule_ (2)(a) of Rule 3 i!I apPlicable in all
-cases. v.:hcre gold is accepted bought or otherwi:so received by th: dealer irrespec· -
tive -Qf whether the. customer is personi;Jlly _known to the dealer or not known tc>
:him; The Purpose served b:Y s_ub-rul.! (2)(a) of Rule 3 is entirely diffl;!rept from .
the purpose served by one or more _of the step:s that are 1equired to be taken by
"a dealer under sub-rule (I) of Rule 3· and therefore, it canD.ot be said that be ..
---Cause of the provisions contained in sub-rule 2(a) ihe stePs contemplated under
sub.-rulc (If are unreasonable •. [ 47SA-B, E;Fl
BihCir State Bullion Merchafits,·Assn. &: Others v. Union of India ·an_d Otheu,
A. \.R. 1971 Pat. 240; approved.
S. The amende~ prescribed form3 Nos. G.S.11 and GS. 12 required to be
maintained ur..der section 5.$ · of the Gold Control Act read with Rule J l of the
-Oold Gontrol (Forms Fees, and Miscellaneous Matters)Rules, 1968 brought into-.
force v.:lth effect frOm 31st Octob~r. 1975 do not.-provide, as conceded by the
Government, for all tb~ituations under which gold would be received by him in
·his possession or custody and keeping the account of their gOid in . aCcordance
- with ·the said For.ms· Would -give rise to anomalies and the dealer \VOuld not
be' able_ to discharge his st1tutory duty ·of disclosing a true and complete
.=:cunt of the gold in his possession or custody. [478H, 479G-1!]
Th~~ef~re. the Court directed .·the- Adrllillistrator .to look into theSe
\1lriev1nces and remedy the same by taking appropriate action and hope that
in the meanwhile no action penal or otherwise would be taken against Iicens·
-cd dealers for f;J.ilure io maintain aecounts in the amended Forms G,S. 11
.and G.S. 12. [480C-D]
6. Secti0n 27(7J(b) of the Gold Control Act. y,rhich confines· a licensed dealer
to carry on business as such dea!er to the premises specified in his licence. being
regulatorY in Charact!r does not violate any ot his rights under the constitution.
The L~tter of Instructions or the trade Notices does not prive~t or stop inter
. State trade but were issued with a view to prevent the several malpractice:s that
were indulged iii while availing of the facility or hawking: ornam"ents throuch
t[ave~ling :salesmen. [431C·Fl
1
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·466
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SUPREME COURT REPORTS
.(1984] 3 S.C.R~
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·ORIGINAL Jur'1SDICTION: Writ'Petitio~s Nos. 918-953,. 1159-
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1186 of 1977, 88 of)973, ,107, 664 & 575 So 618 ~f 1973 •
. (Under Article 32 of the Constitution of India)
·Wmr
,.
·Special Leave Petition (Ciyil No. 538 of 1973
(From the Judgment and Order dated ·24th July. 1972 of the
Punjab ancj Haiyana High Conrt'in C.W. No. 1221 of 1972)
•
A.K. Sen and G.S. Chatterjee for the ~Petitioners in WP. 918_
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and 95~/77 .
. Gobindas, G.S.
Chatterjee
and D.P. Mukherjee for the
Petitioners iri W.Ps. Nos. 1159-86 of 1977.
.
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Dr. Y.S. Chitale; Mrs. A.K. Verma, R.N. Banerjee and D.'N •.
Jfishra' for the Petitioners in WP. No. 88 of 1973 ·& WP, No.
107 /73.
.
•. D.N. Mishra for the Petitio~~rs in WPs. 564, 575-618/73 and:
(Civil) No. 538/73. ·
.. Ms. A. Subhashini for th(Respondents in WPs. 918-953/77.
SLP 1159-86 of 1977 ..
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;
88/73
Abdul Khadder, D. Goburdhan 1 for the Respon.d~nts in WP..
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D. Goburdhan .for the Respondents. ·
The Judgment of the CoJlrt was delivered by
TuLZAPURKAR:· J. 'By these. writ petiticns, the petitioners whoa re licensed dealers, are chailenging the constitutional validity of tliec
Gold (Control)·Act, 1968 and in particular the provfaions. contained
in ss. 2(p), 16, 27 (as amended), 44, 48, 52,. 79 and 100 (as amended)
l
...
M.C. PAUL v. UNION (Tulzapurkar, J.)
467
and the Gold Control (Forms, Fees and Miscellaneous Matters)
Rules, 1968 (as amended in 1975/1976) and the Gold Control
. (Identification of Customers) Rules, 1969 as being violative of /
th,. fundamental rights under Arts. 14 and 19(l)(g) and are
seeking suitable directions restraining the respondents from giving:
effect to any of those provisions, Some of the petitioners (including the petitioner in S.L.P. (Civil) No. 538of1973) are challening
the Government of India's Letter of Instructions and the Trade
Notices withdrawing the facility of permitting licensed dealers to
,end ornaments for sale through their travelling salesmen as being
'
violative of the constitutional guarantee under Art. 301 as also their
fundamental rights under Arts. 14 and 19(1)(g) of the Constitution.
•
At the outset we would like to observe that the several grou\lds
of challenge will have to be considered in the background of two
things: (a) the object with which the Act was ~nacted and (b) this
Court's decision and the observations made by it in Harakchand
Ratanchand Banthia'sl'l case where the Gold (Control) Act and some
of its provisions prior to its amendment by Act 26 of 1969 were
challenged. The Long Title to the Act shows that it was put on
the Statute Book with a view ("to provide, in the economic and
'financial interests of the community, for the control of production
.
.
,
A
B
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manufacture, Supply distribution, use and possession bf, and business in, gold ornaments and articles of gold and for matters connected
therewith or incidental thereto.") In Harakchand Banthi~'s case
E
this Court bas further pointed out that even though import. of Gold
into India had beed banned, considerab1e quantities of contraband
gold were finding their way into the country through illegal channels, affecting the national economy and hampering the country's
economic stability and progress. tbftt the Customs Department was
not in a position to effectively combat the smuggling over the Jong
' borders and coast lines, that, therefore, anti-smuggling measures
[had to be supplemented by a detailed system of control over interF
: nal transactions and that the Gold (Contfol) Act, 1968 was passed ' G
for this purpose. In other words, the several restriciions that have
been put on the activities of the traders doing business in gold, gold
ornaments and articles of gold, will have to be viewed from the
aforesaid perspective. We might also mention that in Harakchand
.' Banthia's case the enactment (prior to its amendment in 1969) had
(I) [1970] I SCR. 479
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been challenged riot merely on the ground of legislative incompe-
. tence on the part of the Parliament but several of its provisions
,were also challenged on the ground that the same were in violation
of the petitioners fundamental rights under Arts. 14 and
19(1.~") &
(g). This Court held the enactment to be within the legislative ~mIL . petence of Parliament and out of the several provisions that were
. challenged only ss. 5(2)(b), 27(2) (d) 27(6), 32, 46, 88 and 100 were
held to be invalid.
As a result of the aforesaid decisionand the
observations made by this Court thercrin the Act of 1968 was suit·
c
ably amend.ed by Go!<,! Control (Amendment) Act (26) of 1969). It
j
. is the provisions of the Act,. as amended in 1965 t.hat are being
thal!engcd by the petitioners before us and we. may state th~t
•
though a large number of provisions have been made the subject of
. challenge in the writ petitions, at the hearing only some provisions
~
were selected against which the ch.allcnge was pressed before us an'd
• we propose to deal with only those provisions.
The first provision that has been
Act which provides :
challenged is
e
s. 16(7) of the
"Every licensed dealer ot refiner shall make a declaration in accordance with the provisions of this section in
relation to any gold owned, possessed, held or controlled by
E
him, in any capacity other than the capacity of a licensed
dealer or refiner and the provisions of sub-s.(5) shall not
apply to such gold".
'
The requirement of making a declaration under this prov1S1on
. is in respect of any gold owned, possessed, held or conttolled by a
licensed dealer or refiner otherwise than
in his capacity as a
·~
I licensed dealer or refiner and the examption ·granted to' a nondealer in respect of articles and ornaments of gold, total weight
whereof does not exceed 2,000 gms. in the case of au: individual ancl
4,000 gms. in case of a family in the matter of making a declaration
under sub"sec. (5) is. not applicable.
Counsel for the petitioners
challenged this. provision on two ground : (a) it is discriminatory
under Art. 14 and (b) it imposcs'.unreasonable restriction on licensed
f dealers and is violative of Art. 19(1 )(g). It was pointed out that
•very licensed dealer is reqμired to furnish, under s. 56, returns in
1 'escribed form as to the quantity, description and other prescribed
'pa.~iculars of gold owned, possessed, held or .controlled by him as
such dealer ~nd the aforesaid requirement of making a declaration
in respect of any other gold owned, possessed. helcl or controlled
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M.C. PAUL v. UNION (Tu/zapurkar, J.)
46?
'by him as non-dealer is an additional requirement and while prescribing such additional tequirement the exemption under s. 16(5)
which is available to non-dealers (individuals and families) has been
.denied to him and according to counsel the classification made is
not based on any intelligible differentia having any nexus to the
. -0bject sought to be achieved by
th~ Act ; in other words, every
licensed dealer·in his capacity as a non-dealer is subjected to dis-
·Criminatory treatment.
Secondly, counsel urged that imposing
£uch a requirement on a licensed dealer to make declarations on
B
,. evety occasion in respect of any quantity of gold coming in his
possession or custody as an individual or a member of a family
.amounts to putting an unnecessary and unreasonable burden on him
and the .requirement may at times become impossible to comply
with ; counsel elaborated his submission by giving an example
that if guests or relations, particularly married daughters and
sisters visit the residence of a gold dealer for a short stay on festive
.occasions and request him, as it frequently happens in normal
. .course of events, to keep their ornaments in safe custody during
their stay he has to oblige them, but in terms of the requirement of
s. 16(7) the dealer has to make a declaration in respect of such gold·. ·
which has come in his custody or possession and to require him to dp
so on every occasion is to cast unreasonable burden on him amoun- ·
ting to unreasonable restriction especially as. non-compliance there
·entails penal consequences and therefore the provision must . be
regarded as unreasonable and arbitrary.
ln our view neither of the contentions has any force.
As regards the attack under Art. 14, sufficient material has been placed
before us in the counter affidavit of Shri K.S. Venkataramani,
Deputy Secretary, Ministry of Finance (filed in W.P. Nos. 918-953
·ef 1977) showing how the classification made between the two cate-
:gories in the context of making a declaration under s. 16 in relation
to gold owned, possessed, held or controlled by them is based on
intelligible differentia having a nexus to the object of the Act. In
para 5 of the counter affidavit it has been pointed out that ·while
·ordinary citizens (non-dealers ·and non refiners). are not premitted
·by law to have ony primary gold in their possession, a dealer or a
refiner is permitted under the law to have unlimited quantity of
primary gold in his posse1sion and therefore, it is easy for a dealer
or a tenner to acquire 11muggled gold and with a view to preventin&
.ctetectioa of such gold, to convert the same into ornaments and t.
.claim Hl'l1l ornaments as bis i>crsonal property. It is further poia·
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BUP}lEME COURT REPORTS
(1984] 3 S.C.R.
ted out that it had been ·repeatedly observed that licensed dealers.
A in gold, when found in.possession of stocks of ornaments in excesi.
. of those entered in the prescribed accounts. often took the plea that
these represented their personal property and it was further noti~ed
that they kept the ornaments manufactured by· them clandestinely
at their residences and at other places and when such stocks were
t
•
detected the~e were cla.imed as tfleir personal property ; it therefore
became necessary to provide for a declaration of all ornaments ' ancll
...
articles owned, possessed, held or controlled by them so that they
. could not claim any clandestinely manufactured ornaments, when
•
detected, to ·be their personal property and that is why it has been
' provided in s. 16(7) that every licensed dealer or 1efiner shoold
C, dedare all gold articles and ornaments which belong to him or
which are in his custody, possession or conttol, and that is why it
has been further provided that the exemption limits permissible for
general public in relation t_o the requirement of declaration of arti-
.J
cles and .ornaments should. not be available to the dealers and
D refiners. The aforesaid materials in the counter.-affidavit not merely
furnishes the intelligible differentia for the classification mad_e lint
also shows thaHhe classification.has a reasonable nexus with the
object of the Act and the reasons for denying the exemption limits.
to_ licensed dealers or r;finers are also valid and referable to the
object of the Act.
As regards the second ground of challenge it is difficult t<>
ap_preciate how the provision could be regarded as unnecessary or
one which casts an unreasonable burden on the licensed dealer or
refiner.
In fact the reasons for introducing the provision as indicated
F above justify its enactment if the objects of the Act are to be achieved. On the aspect of castiug unreasonable burden on the dealer
or refiner it must in the first place be observed that the burden oi:i
the dealer or refiner is the same as that which bas been cast on a
non-dealer Qlidividual or family) whenever the latter comes to own,·
·possess, hold or have under his control articles or ornaments of gold
G
in excess of the exempted limit. Visits of guests and relations
(in~luding 'married daughters and sisters on festive occasions and
requests proceeding from them to the house-keeper to keep their
ornaments in safe custody during their stays with him.
which are
ordinary incidents in life, are common to licensed dealers or refiners
H
and ilon-dealers and there is no reason to suppose that the requirement of making a declaration under s. 16(7) casts any additional
burden on him than on a non-dealer when be has in his possession
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M.C. PA.UL v. UNION (Tulzapurkar, J.)
471
-Or 'custody articles and ornaments in excess of the exemption limit.
&
Moreover, unders.16(7) it is provided that the licensed dealer or
refiner shall make ·a declaration "in accordance with the provisions
-of this section'' which means he has to do so·within 30 days pf his
acquiring the ownership, possession, custody or control of such gold.
With such time limit being provided the burdeu cast tannot be said
·to be unreasonable, especially when the provision is found to be
B
necessary to carry out the objectives of the Act.
Having regard to
~he above discussio:1, the challenge to the constitutionality of s.16(7)
must foil.
The next provision challenged is sec. 52 of the Act which
·provides for licence· issued to a firm becoming invalid if there is any
•£hange in the partnership of the firm. fhat section runs thus:-
"52. Where any firm has been licensed under this Act
to carry on business as a dealer or refiner, such licence shall,
notwiths•anding anything contained in this Act, become
invalid on and from the date on which there is a change in
the partnership of such firm, unless such change in the partnership has been approved by the Administrator".
Counsel for the petitioners contended that change in partnership
~ a normal and usual thing that occurs when business is carried on
ty a firm and such change may arise on account of death or retirement of a partner or reconstitution of ,the firm but the above
provision imposes an nnrcasonable restriction in so far as it provides
'that the licence of a firm shall become invalid on and from the date
-0n which there is a change in the partnership of such firm unless the
,
-<:bange has been approved by the Administrator. According to
.counsel the restriction imposed is excessive and what is more no
;guide-lines or principles arc !"id down on the basis of which approval
to a change may or may not be given by the Administrator; besides
·there is no appeal or other corrective machinery provided against
.an!adverse order oftthc Administrator refusing at)proval. Counsel
·therefore, urged that this provision clearly suffers from the vice of
.excessive delegation of legislative power and is liable to be declared
.unconstitutional.
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It is true that sec. 52 does not contain any guide-lines er
J>rinciples which would regulate the exercise of the power of the
~ .
Administrator in the matter of grant or refusal of approval to a
<£h ange in the partnership of a Ii.rm but in the exercise of the powers
472
SUPREME COURT REPORTS
[1984] 3 S.C.R.
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conferred by sec.114 read with sec. 27 (6) of the Act the CentraF
Government has framed the 'Gold Control (Licensing of. Dealers)
Rules 1969' and Rule 2 enlists matters to which regard is to be had
before issuing a licence and Rule 3 indicates the conditions on the·
fulfilment ofwhfch a licence could be renewed. It is true that these
B
Rules, which deal with licensing of dealers and renewal of their
licences, in terms do not cover a case of a change in the partnership·
of a firm and the approval to be accorded thereto by the Administrator but in a sense a case of a change occurring in the partnershil"
of the firm and the occasion to apply for the grant of approval thereto by the Administrator would be a case of seeking renewal of the
Cl
licence by the firm in which a change has occurred either by death
or retirement of a partner or as a result of reconstitution of the firm,
and therefore to such a case these Licensing Rulos, particularly Rule
3, must and will apply and these Rules, in so far as they are appli-
. .:able to the situation, afford the necessary guide-lines on the basis.
of which approval to the change could be given or refused. Obviously,
8 · if the change in the firm involves introduction of a new partner into
the firm these guide-lines under Rules 2 and 3 will play an important
part in the matter of according or refusing to accord the approval
but if the change nearly involves alteration in the share· capital or
profit sharing basis amongst the self-same partners who continue the
E
firm the approval would be a matter of formality. Inview of tlw
Licensing Rules, 1969 which must apply it is difficult to accept the·
contention 'that any unfetterred or unregl,llatcd discretion has been
.£onferred upon the Administrator in the matter of grant or refusat
<Jf approval ·to a change in the partnership of a firm.
On the aspect
of there being no appeal or other corrective machinery provided·
•
against an adverse order of refusing approvat"that may be passed
11nder this ~ection it may be stated that Counsel for the respondents.
produced before us copy of a (Notification dated 26th Augus~. 1683 '
issued by the Administrator under sec.4(4) of the Act whereunder
the exercise of the power under sec .52 has been, delegated to the
G • Deputy Collector of Ceqtral Excise with the result that an appeal'
against his order under sec.52 w!ll lie to the Collector of Central
Excise under sec.SO of the Act.
In other words, a remedy by way
ef an appeal to correct any erroneous order that may be passed under
11ec.52 has been provided for.
In this view of the matter i\is difficult.
to accept the contention that s. 52 suffers from the vice of excessive
B
.telegation of legislative power or for that reason the said "provision,
is unconstitut.ional. The challenge to that section therefore, has to1tc rejected.
•
M.C. PAUL v. UNION (Tulzapurkar, J.)
473
The next provision that has been challenged is s.79 read with
A.
the second proviso thereto.
Section 79 provides that no order. of
confiscation of any gold, in respect whereof contravention of any
provision of the Act or any rule or order made thereunder has
occurred or is apprehended or at(empt<;d, shall be made unless the
owner of such gold has been given a notice in writing informing him
of the grounds on which it is proposed to confiscate such gold and is
· B;
further given a reasonable opportunity of making a representation in
writing against the proposed confiscation and if he so desires, of
being hc?rd in the maMer; and the second proviso which is material
runs thus:
"Provided further that where'no such notice. is given
within a period of si.x months from the date of the seizure of
the gold, or such jimher period as the Collector of Central
Excise or of Customs may allow, such gold shall be returned
aft" the expiry-of that period to the person. from whose
possession it was seized.''
Counsel for the petitioners coritended that the section does.not 1
provide for any guidelines or principles regarding the conditions 'and
circumst.\l-nces governing the grant of further extention of the initial
statutory period of six months on the expiry of which, in the absence
of extention, the ow.ner or the person from whose possession the
gold has been seized is entitled to have the seized gold returned to
him; furthermore, there is no limit or ceiling over the period a for
which further extension may be granted. In contrast, counsel pointed
out that in parallel legislation like the proviso to sec. 110(2) of the
Customs Act, 1962 such limit or ceiling is laid down by providing
that the initial period of six months may, on sufficient cause being
shown, be extended by the Collector of Customs for a period not
exceeding six months; moreover the·words "on stifficient cause being
shown" that occur in the Customs Act are absent here .. Counsel,
therefore, urged that in the absence of any guidelines and in the
absence of any limit over the period of exten~ion that could be
granted, the provision (s.79. read with second proviso) will have to
be regarded as conferring an arbitrary power and is unreasonable
and hence violative of Arts. 14 and 19(\)(g) of the Constitution.
, It is true that s. 79 does not expressly mention th~ guidelines
on the basis of which the power to grant extension of the initial
period of six months is to be exercised but if regard is had .to . the'
provisions dealing with Seizure (sec. 66) Confiscation (sec. 71),
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Adjudication (sec. 78) and Giving of Opportunity (sec. 79) the
policy of the Legislature becomes quite clear that whereas the
power to seize can be exercised by any Gold Control Officer if
he has "reason to believe" that in respect of any gold any provision of the Act been or is being or is attempted to be contravened
the confiscation of gold can tike place only if actual contravention
has taken place or is apprehended or is attempted and such confis·
cation can be adjudged or,ordered without limit by a Gold Control
Officer not below the rank of a Collector of Central Excise or of
Customs and subject to such limits as may , be specified in that
· behalf by such other Gold Control Officer not below· the rank of a
Superintendent of Central Excise as the Central Government may
anthodse in that behalf ; but the power to grant extension of the
initial period of six months has beer1 conferred under the second
proviso to s. 79 only upon a superior officer, namely, the Collector
·of Central Excise or of Cust9ms.
Further under the stcond proviso
to s. 79 the owner or the person concerned has beed given the right
D · to have the seized gold returned to him where no gotice proposing
confiscation is served upon him wit[1in a period of six months from
the date of the seizure of the gold which shows that the Legislature
clearly intended that ordinarily the investigation in connection with
the seized gold is expectea to be over witliin six months ; but only
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in casts where such investigation may not be completed owing to
some genuine or bonafide difficulties the Legi,slature gave under the
proviso power to the Collector to extend that time,
In oth" words
the Collector is expecied to pass extension orders neither mechanically nor as a matter of routine but only on being satisfied that facts
or circumstances exist which indicate that, the investigation could
not be completed for buna fide reasons within the initial period of
six months.
Such guidelines would be implicit.