# SHREE MEENAKSHI MILLS LTD v. UNION OF INDIA

- **Citation:** [1974] 2 S.C.R. 398
- **Court:** Supreme Court of India
- **Decided:** 1973-11-26
- **Case number:** Writ Petitions Nos. 734 & 1132 of 1973
- **Bench:** A. N. Ray, D. G. Palekar, Y. V. Chandrachud, P. N. Bhagwati, V. R. Krishna Iyer
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/shree-meenakshi-mills-ltd-v-union-of-india-6143
- **Pages:** 31

## Headnote

Cotton Textiles (Control) Order,
1948-Clauses
22,
30-NotlficationFixation of fair price of Cotton yarn-Validity-Clauses 22. 30 If ultra vlrts the
powers conferred
1by. s., 3 of the Essential Supp!les (Temporary Powers)
Act,
1946-Cotton yarn if 'Colton and Woollen tex11les''-Order, If co11linued under
Essential Cofn111odilies Act, 1955-Fixarion of Fair price if arbitrary and unreasonable-Co11stitutio11 of /11dia, ' J 950-Artfrles 19(1) (/) and (g) and 301.
A
B
EJ·sential Con11nodiries Act, 1955-Section 3 sub-secs. (3) 3(A)
3(~) and
C
3(C)-Scope-Price fixation-Principles regarding.
'
·
·'
Constitution of /11dia, 1950-Articles 32, 358-lf executive
action
taken
du ... fllf? nnergency has 110 aurhorily as a valid law its consthutionality can be
challenged.
Words and Phrases-Cotton yarn, if ''Cotton and Woollen textiles".
Owing to the very low cotton crop there was unprecedented and phenorileD.al
rise in cotton prices and there was a perceptible drop in yarn production. r:arty
D
in 1973 the yarn prices showed an upward trend in the fine and super fine
counts. The power-loom and band-loom sectors which produced 47.1 pen.:ent
of the total cloth production in the country, depended for the supply oi raw·
material yarn on textile mills.
Two thirds of the total yarn produced came
from c-omposite mills.
The composite mills competed
with
handloon1
and
power-loom sectors in the production of cloth. Even thou~h the question of
control and fixation of fair price of cotton textiles had received the attention ot
the Government in the past pursuant to the recommendations of the TaritI Com·
E
mission and the Tariff Board, no control over the production and sale Of yarn
was imposed until March, 1973 when the Government decided to bring yarn
under control in all respects, viz.1 prices, production and distribution and-issued
the two impugned notifications.
The first notification was issued by the Textile
Commissioner under clause 22 of the Cotton Textile (Control)
OnJer,
1948.
The notification determined the ex-factory price of count of yarn of 59s and
below and count of yarn 60s and above. In the case of count of yarn of 59<;
and below the price was to be the highest ex-mill price or the highest contracted
price for delivery effected in :December, 1972. In the case of producers of
F
yam situated in States of Tamil Nadu and Pondicherry where the electricity
cut exceeded 70% the relevant price as applicable was to be increased by 6 per
cent. Jn the case of counts of yarn 60s and above the determined price was the
regulated yarn price adopted for individual producers of yarn from the 1st day
of August 1972~ increased by 6 per cent where there was no electricity power
cut, and further increased according to the percentage of electricity cut.
The
term 'regulated price' under the notification meant the price calculated by taking the difference between the highest contract price as on June 1, 1972 or the
G
nearest date in case no sale was effected on June 1, 1972 and the highest price
for the relevant count and form of packing during January, 1972 and allowing
one half of the difference to be reduced from June 1, 1972 price.
By a notification dated March 31, 1973, the Textile Commissioner authorised the Deputy
Commissioners and the District Collectors to specify the maximum price
of
yarn to be sold by dealers. The m1Ximum price was to be fixed after taking
into consideration (a) invoice pri,.,.~ of yarn (b) incidental charges
(c)
such
reasonable marginal profit not exceeding 2 per cent of the invoice price as the
Deputy Commissioner or the District Collector may determine in each case, and
H
(d) any other relevant factor.
The notification was not applicable to yarn sold
to hosierv industry and to yarn on beams delivered under specified circumstances. The second impugned notification was made by the Textile Commissioner 1n exercise of powers conferred under cl. 30(1)(b) of the 1948
order.
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MEENAKSHI MILLS v. UNION (Ray, C./.)
399
The notification d

## Text

_Characters 0–39,683 of 106,533. This is a partial read: ask again with offset=39683 for what follows._

•
398
SHREE MEENAKSHI MILLS LTD.
v.
UNION OF INDIA
November 26, 1973
[A. N. RAY, C.J., D. G. PALEKAR, Y. V. CHANDRACHUD,
P. N. BHAGWATI AND V. R. KRISHNA IYER, JJ.]
Cotton Textiles (Control) Order,
1948-Clauses
22,
30-NotlficationFixation of fair price of Cotton yarn-Validity-Clauses 22. 30 If ultra vlrts the
powers conferred
1by. s., 3 of the Essential Supp!les (Temporary Powers)
Act,
1946-Cotton yarn if 'Colton and Woollen tex11les''-Order, If co11linued under
Essential Cofn111odilies Act, 1955-Fixarion of Fair price if arbitrary and unreasonable-Co11stitutio11 of /11dia, ' J 950-Artfrles 19(1) (/) and (g) and 301.
A
B
EJ·sential Con11nodiries Act, 1955-Section 3 sub-secs. (3) 3(A)
3(~) and
C
3(C)-Scope-Price fixation-Principles regarding.
'
·
·'
Constitution of /11dia, 1950-Articles 32, 358-lf executive
action
taken
du ... fllf? nnergency has 110 aurhorily as a valid law its consthutionality can be
challenged.
Words and Phrases-Cotton yarn, if ''Cotton and Woollen textiles".
Owing to the very low cotton crop there was unprecedented and phenorileD.al
rise in cotton prices and there was a perceptible drop in yarn production. r:arty
D
in 1973 the yarn prices showed an upward trend in the fine and super fine
counts. The power-loom and band-loom sectors which produced 47.1 pen.:ent
of the total cloth production in the country, depended for the supply oi raw·
material yarn on textile mills.
Two thirds of the total yarn produced came
from c-omposite mills.
The composite mills competed
with
handloon1
and
power-loom sectors in the production of cloth. Even thou~h the question of
control and fixation of fair price of cotton textiles had received the attention ot
the Government in the past pursuant to the recommendations of the TaritI Com·
E
mission and the Tariff Board, no control over the production and sale Of yarn
was imposed until March, 1973 when the Government decided to bring yarn
under control in all respects, viz.1 prices, production and distribution and-issued
the two impugned notifications.
The first notification was issued by the Textile
Commissioner under clause 22 of the Cotton Textile (Control)
OnJer,
1948.
The notification determined the ex-factory price of count of yarn of 59s and
below and count of yarn 60s and above. In the case of count of yarn of 59<;
and below the price was to be the highest ex-mill price or the highest contracted
price for delivery effected in :December, 1972. In the case of producers of
F
yam situated in States of Tamil Nadu and Pondicherry where the electricity
cut exceeded 70% the relevant price as applicable was to be increased by 6 per
cent. Jn the case of counts of yarn 60s and above the determined price was the
regulated yarn price adopted for individual producers of yarn from the 1st day
of August 1972~ increased by 6 per cent where there was no electricity power
cut, and further increased according to the percentage of electricity cut.
The
term 'regulated price' under the notification meant the price calculated by taking the difference between the highest contract price as on June 1, 1972 or the
G
nearest date in case no sale was effected on June 1, 1972 and the highest price
for the relevant count and form of packing during January, 1972 and allowing
one half of the difference to be reduced from June 1, 1972 price.
By a notification dated March 31, 1973, the Textile Commissioner authorised the Deputy
Commissioners and the District Collectors to specify the maximum price
of
yarn to be sold by dealers. The m1Ximum price was to be fixed after taking
into consideration (a) invoice pri,.,.~ of yarn (b) incidental charges
(c)
such
reasonable marginal profit not exceeding 2 per cent of the invoice price as the
Deputy Commissioner or the District Collector may determine in each case, and
H
(d) any other relevant factor.
The notification was not applicable to yarn sold
to hosierv industry and to yarn on beams delivered under specified circumstances. The second impugned notification was made by the Textile Commissioner 1n exercise of powers conferred under cl. 30(1)(b) of the 1948
order.
.A
c
£
H
MEENAKSHI MILLS v. UNION (Ray, C./.)
399
The notification directed that no producer of yarn for civil consumption shall
sell or deliver any such yarn produced by him except to such ~rson or persons
and subject to such conditions as the Textile Commissioner tn1ght specify. The
same noutication contained another direction under powers conferred
by
cl.
30( 1) (a) of the 1948 order that Cvtry producer of yarn for civil consumption
shall sell or deliver such yarn only to five channels of distribution mentioned
therein on the basis of the directions that might be issued from time to time by
the Textile Commissioner. Thate five channels were (a) 1he nominees of the
State Government; (b) the Handloom Export Promotion Council Madras; (c)
the Cotton Textile Export Promotion Council, Bombay; (d) the Federation of
Hoslery Manufacturers Association of lndia1 Bombay; andt (e) any other person
as may be nominated by the Textile Comm111ioner In this behalf. The order of
distribution tbroua:h channels was made inapplicable by successive notifications
to yarn counts of 40s and below. However control was imposed In 1uch cases
by another notiHcation at the }'9int of sale by a dealer of yarn to consumer by
providing that eve'ry dealer shall sell or deliver yarn only to persons therein in
such quantities as inay be determined by the Deputy Con1missioner or_ the Dis·
trict Collector.
1n a petitlon under article 32 of the Constitution of lndia the petitioners
questioned the validity of the two notifications on the following grounds : (I)
the 1948 Order in so far as it purported to mak-e provisions ip respect of con·
crol and distribution of cotton yarn by fixation of prices, more particularly by
clauses 22 and 30 thereof, was ultra vires the powers conferred on the Central
Government by s. 3 of the Essential Supplies (Temporary _Powers) Act. 1946.
inasmuch as cotton yarn wao; not covered by the item ""Cotton and Woollen
textiles" and could not be brought within any other item; (ii) in any event the
provisions of the 1948 Order relating to cotton yarn could net be said to have
been continued· in force either under s. 16 .of the Essential Commodities Ordiimflce, 19SS1 or under s. 16(2) of the Essential Commodities Act,
19SS, ns
cotton yarn is not covered by the item "cotton and woollen textiles" under
s. 2(a) (iv) of the 1955 Act and no notification bad been issued declaring cotton
yarn .as- an essential commodity in exercise of the powers conferred under
s. 2(a)(xi) of the 19SS Act; (iii) on a true construction of s. 3 of the Essen·
tial Supplies (Temporary Powers) Act, 1946 the power to issue orders in~re•·
pect of essential commodities bavtng been conferred to ensure their availability
at fair price such orders cannot validly confer arbitrary powers on the. -executive
to fix prices of essential commodities unrelated to. the cost of production and
reasonable margin of profit; in particular, yarn price control bad not followed
the pattern of price control for cloth by Providing for periodic changes in the
control price to allow for fluctuations in cost elements; sub sections (3). 3(A),
(3B), and (3C) of .section 3 of Essential Commodities Act, 1955 constituted a
sin~le scheme and that what is implicit in sub section (3) is made explicit in
sub section (3C); (iv)' if provisions of the Cotton Textlles Control Order conferred arbitrary power on the Textile Commissioner to fix prices for yarn unrelated to the cost of production and reasonable profits to the producer then the
provisions become void by reason of infringement
of fundamental
rights
guaranteed by Articles 19(1)(!) and (g) and 31 as well as Article 301 of .the
Constitution; (v). if the 1948 Order did not authorise fixation of price of cotton
yarn arbitrarily and without reference to relevant factors such as cost of production and reasonable return, the impug"ned notifications which fixed a price
for yarn below the cost of production of the mills are ultra vires the Cotton
Textiles Control Order 1948, inasmuch as the prices fixed-. under the notifications
were not based on relevant considerations such as cost of production, reasona·
ble return, but were wholly arbitrary and based on irrelevant considerations; and
(vi) the provisions of the second itnpugned notification regarding; channelisa·
tion of vam distribution was arbitrarv and also created monooolv in favour·
of soecified persons violating articles 19(1)(1)
and
(g)
and· 301
of the
Constitution.
A preliminary objection· was raised oh behalf of the State that the petitions
were not competent because of the Proclamation of Emergency. Disn1is'ii'lg
the petition'-._
460
SUPREME COURT REPORTS
[ 1974] 2 S.C.R.
HELD : The petitions are competent.
If it can be shown that the executive
A
action taken during the emergency has no authority M a valid law its constitutionality can be challenged. The Cotton Textiles (Control) Order 1948 was
continued by Essential Commodities Act, 1955. The
impugned
orders
are
made under pre-emergency Cotton Textile Control Order. The validity of the
impugned orders is challenged under articles 19(1) (f) and (g) of the Constitution on the ground_that it is a pre-emergency executive order which could have
been challenged under Article 19(1)(f) and (g) before the proclamation of
emergency. From the point of view the petitions are competent though the
8
challenge is insupportable. [428E-Fl
Bennett Coleman & Co. case f 19721 2 S.C.R. 788, referred to.
(l) Cotton yarn is included in cotton textiles.
Yarn is
the
material or
component with which cotton textile is manufactured or woven.
The setting
in which the words 'Cotton textile' are used has a legislative and executive
understru1ding of the words consistently over a period of time.
The legislative
practice shows that cotton textile is a generic term which includes cotton fabric
and yarn. One of the methods of construction of statutes is to ascertain the
set.tinu. and circull).stance1; in which the words are used.
[407Hi 4080]
K. R. Subbaier v. The Regional Provident Fund Commissioner Madras, AIR
1963 Madras 112, Kanpur Textiles Finishing Mills v. Regional Provident Fund
Commi,uiouer, AIR 1955 Punjab 130 ·and The Deputy Commissioner of Comnzercial Taxes, Madurai Division, Madurai v. Madurai Prl,nting Tape Factory,
28 Sale:s Tax Cases 431. referred to.
(ii) The 1948 Order continued under the Essential Commodities Act, 1955.
Since cotton yarn is included in cotton textiles it was not necessary to issue any
notificaticln declaring cotton yarn as an essential commodity under s. 2(a) (xi)
of the 1955 Act. The notification dated March 13, 1973, required an explanation to say that yarn for the purpose.~of notification shall mean all cotton yarn
except sewing_ thread and industrial yarn like tyre cord. This explanation was
necessmy to include all cotton yarn because the decentralised sector was facing
·severe y<irn shortage.
[412C]
T!tc Lotus Industrials, Kallai, Malabar v. The State of Madras Development
Deparnnenr, Madras, A.LR. 1952 Mad. 71S and State of Bihar v. Hira Lal
K•i,iwal, (1960] 1 S.C.R. 726, referred to.
c
D
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(iii) (iv) (v). Control over price and distribution of yarn is in the interest
of the general public.
Handloom and powerloom industries require protection
and, therefore, control over the price and distribution of yarn is in the interest
f
of the general P.Ublic.
f416Dl
Just as the industry cannot complain of rise and fall of prices due to economic factors. in an open market, they cannot similarly complain of increase or
reduction of prices as a result of notification under s. 3 ( 1) of the Essential
Supplies Act, 1955, because, that increase or reduction is also based on economic
factors.
If fair price is to be fixed leaving a reasonable margin of profit there
is never any questioin of infringement of fundamental right to carry on business.
The question of fair price to the consumer with reference to the dominant object
and purpose of the legislation claiming equitable distribution and
availability
at fair price is completely lost sight of if profit and the producer's return are
kept in the forefront.
The maintenance or increase of supplies of the commodity or the equitable distribution and availability at fair prices are the fundan1co·
tal purposes of th~ Act. If the prices of yarn or cloth are fixed in such a way
as to enable th~ manufacltirer or producer to recover his cost of production and
secure a reasonable margin of profit, no aspect of infringement of fundamental
right can be said to arise.
In determining the reasonableness of restrictions
imposed by law in the field of industry, trade or commerce, the mere fact that
some of those who are engaged in these are alleging loss after the impcsitioo of
the Jaw will not render the law unreasonable.
By its very nature, industry or
trade or commerce goes th.rough periods of prosperity and adversitv on account
of economic and, sometimes, social and political factors. [419H; 420A-CJ
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F
G.
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MEBNAKSHI MILLS v. UNION (Ray, C./,)
401
When controls have to be introduced to ensure
&vailabilit~ of coiiaumer
goods at a fair price. it is an impracticable propositi~n. to require the .aovern··
ment to ao throuab the exercise like that of a. comml8S1on tp fix ~e ~rices; A
com1nlssion cannot always make a correct estimate Of a price 'Yh1ch 1s fair. to
aU, because. there are intricacies in the trade of all profit making enterprises
which a commission may not be able to probe. [420C]
When available stocks ,ao underaround and the Government has .to step in
to control distribution and availab~ity i;t public interest, fix.in~ «?f ~nee. can be
only empirical. "Reasonable restriction' connotes that the lumtatlon llllpo~ed
on o. person in enjoyment of the right should not be arbitrary or of an excessive
nature beyond what is required in the interest of the public. In the present case
the leaislative measures have left the question of resolvina the economic prob·
lems cf increasing supplies, equitable distribution and availability of
csse.n.tial
cornmoditic5' at fair prices to the judament · of
the
statutory
authorities.
[420E·FI
The power to fix controlled price is in Section 3(2)(c) read withs. 3(1) and
not in s. 3(3) of the 1955 Act. The controlled price fixed under s. 3(1) read
\vith s. 3(2)(c) is different from price under sub-section (lA), (lB) and (lC).
.
[42l·Gt
The control of prices may have effect either on ·maintaining or' increasing
supply of commodity or sec.uring equitable distribution and availability at fair
prices.
Th:: controlled price has to retain this equilibrium in the supply and
demand of the commodity. The cost of production and a reasonable return to
the producer of the commodity arc to be taken into account. The producer
must have an incentive to produce. The fair price must be fair not only from
the point of . view of the consumer but also from the point of view of the pro·
ducer.
In fixing the prices, a price line has to be held in order to give prefe·
rence or predominant consideration to the interest of the consumer or the general public over that of the producer in respect of essential commo.dities. The
.aspect of ensuring availability of the essential commodities to the consumer
equitably and at fair price is the most important consideraHon. The prooui:'! ..
should not be driven out of bis producing' business. He may have to. bear loss
in the same way as he does when he suffers losses on account of economic
forces operating on the business. There is no justification that the producer
should be given the benefit of pri'ce increase attributable to hoarding or corner·
ing or artificial short supply. In such a case, if an ''escalation" in price is
contemtilated at intervals, the object of controlled price may be stultified.
Any
restriction in excess of what would be necessary in the interest of general public
or to remedy the evil has to be very carefully considered that the producer does
nor perish and the consumer is not crippled. [422F·H; ·123A·B]
Jn the present CJlSe the controlled price fixed reflects costs of production and·1
reasonable return. The inere suggestion that no provision is made for adjust.
ment on account of changes in the cost of production does not amount to infrin·
gement of fundamental right to carry on business and to .hold and dispose of
property. There is no material to show that increase in yam prices
was
on
account of cost of production. The fixing of controlled price is much
more
than a fair price to the producer on the date it is fixed. The prices of n!w
cotton crop, that is for September, 1973 to August. 1974 are not known at the
time of the fixation of price. Even when they are known the petitioners will
have to show with reference to the different types of mixes used in producinp
yarn,, the impact of cotton prices on the cost of production of that categorv of
yarn. Further, even if there is increase in the cotton prices, the· petitioners· can
abso~b it because the controllecj price fixed is more fair to the producer. If he·
sustains alleged losses fpr some time, it will be a reasonaDle restriction because·
the obiect of the price control is to bold the price line or revert the 'prk:cs to.
normal levels and make availabte· cotton yarn to the handloom and powerloo1n
w~avers at a fair price which will enable them to withstand competition from
mill made cloth. It is not shown that the controlled price is so grossly inadequa.!~ that it not only results in huge losses but also in a threat to the supplv
pes1t1on of .Yarn .. ~e ~ontrolled price is ~~ the interest of th' countrv . as Q
whole f<?r JUSt d~stnbutton of basic necessities.
Th~ controllerl price i>. then~··
fore, neither arbitrary p.or an unreasonable restriction, [424C·F]
402
SUPREME COURT REPORTS
( 1974 j 2 S.C.R.
Diwan Sugar .l Gential Mills v. C,!nion of India [1959] Supp. 2 S.C.R. 123,
A
.Sri, Kriih1Ja Rice Mills v. Joint Director (Food).t Vijayawada (Civil Appeal
Nos. 1026·1031 etc. of 1963 dated 27 January, 1Y65,) Hari Shankar Bag/a v.
The State of Madhya Pradesh £1955] I S.C.R. 380, Union of India v. Bhanamal
Gulz.arimal [1960] 2 S.C.R~ 6_'1.7, State of Rajasthan v. Nathmal·&.
Mitliamiil
(1954] S.C.R. 982. Dwarka Prasad Laxmi Narain v. State of U.P. [1954] S.C.R.
830, qinraman Rao v. State of Madhya Pradesh [1950] S.C.R. 759 and Secretary of Agriculture v. Central Reig Refining Company (94 Law Ed. 381-338
U.S. 604-620). referred to.
B
Panipat Co-operative Sugar Mills v. Union of India (A.I.R. 1973 S.C. 536)
and Ankaoalfe Co~opuatlve ARricultural & Industrial Society Ltd. v. Unk>n of
India (AJ.R. 1973 S.C. 734), held inapplicable.
Premier Automobiles Ltd.
v.
Union ,o, India,
[19721
2 S.C.R.
526,
·distinguished.
(vi) By the channelisation of yarn distribution what is sought to be achieveJ
is price control as well as distribution control to meet the problems of avail-.
ability of goods at reasonable prices. The contention that the distribution
channels are monopolies in favour of specified persons is unsound. The channels
of distribution are·agencies of the State and associations of users of cotton yarn.
The requirement not to sen yam at a price above the maximum price operates
on all distributing channels. The distribution control is intended to ensure availability of yarn at reasonable or fair price. It is not that all dealers in yarn have
been tlenied. the right to carry on trade. It is denied only to those whose carrying on trade in yarn would not, in the opinion of the Textile Cemmissioner, ensure availability of yarn to ·actual consumers at the fair price. Elimination of
persons who b.ave boarded or cornered' or are unscrupulous in distribution is httcnded in public' interest. This is a reasonable restriction in the interest of general public and is contemplated in Article 19(6) of the Constitution. [426C-0]
/lashblhari Panda v. State of Orissa. [19691 3 S.C.R. 374. Bliatnagars & Ce,
v.
Union nf Indla, [19571 S.C.R. 701.
Manna/a/ Jain
v.
Slate of Assa111,
[1962) 3 S.C.R. 936. Mis Daruko & Co. v. Union of India, W.P. No. 94 of 1972
.and Gla.fs Cl1alon case, f19621 1 S.C.R. 862, referred to.
ORIGINAL JURISDICTION: Writ Petitions Nos. 734 & 1132 of 1973.
Under Art. 32 of the Constitution of India for the enforcement of
the fundamentol rights.
• M. K. Rama11;urthy and J. Ramamurthy, for the petitioner, (in W.P.
c
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No. 734/73).
F
F. S. Narima11, Additionai Solicitor General of India and S. P. Nayar,
for the respondents (in W.P. No. 734/73).
M. C. Seta/vad and J. Ramamurthy, for intervener No. 1.
M. C. Cha1;/u, E.· C. A11arwa/a, K. C. Agarwa/a and A. T. M.
SampaJh, for intervener No. 2.
G
J. Ramamurthy, for intervener No. 3.
A. Subba Rao, for intervener No. 4.
P. C. Bhartari, S. Swarup, J. B. Dadachanji and Ravinder Narain,
ior intervener No. 5.
Shyamala Pappu, C. R. Somasekharan, Urmila Sir.ur and T. V. S.
Nara.<imhachari, for intervener No. 6.
0. P. Khairan and P. N. Tiwari, for intervener No. 7.
H
MEENAKSH! MILLS v, UNION (Ray, CJ.)
403
A
J. C. Bhatt, S. 0. Colabawalla, S. Swarup, J. J. Bhatt, I. B. D._
chanj; and Ravinder Narain, for intervener No.· 8 to 11.
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J. P. Goyal and R. A. Gupta, for intervener No. 12.
A. B. Sinha, B. P. Maheshwari and Suresh Sethi, for the petitioner
(in W.P. No. 1132/73).
F. S. Nariman, G. L. Sanghi and S. P. Nayar, for the respon·
dents, (in W.~. No. 1132/73).
The Judgment of the Court was delivered by
RAY, CJ.-The petitioners challenged Notifications No. CER/3/73·
dated 13 March, 1973 and CER/16/73 dated 13 March, 1973 described as the first and the second impugned notifications.
There was unprecedented and phenomenal rise in cotton prices
in the closing months of 1970 and in January, 1971. There was a
very low cotton crop in 1970-71 season .. There was a perceptible drop·
in yarn production.
Yarn is produced in hanks for handloom8 and
cones, beams and pirns for powerlooms and cones for hosiery industry.
There was rise in prices. This strengthened the hands of the weavers
in their agitation. The Yarn Pool Scheme was devised in February,.
1971.
This was a voluntary effort on the part of the cotton m'll
industry to afford some relief to small weavers in the handloom and
powerloom sector. The scheme covered cotton yarn in counts of 20s,
30s and 40s both in hanks and hosiery cones and in counts of 20s, 24s,
30s, 34s and 40s in weaving cones. Under this scheme the mills participating in it had to supply yarn at.prices equivalent to the average of
prices ruling_ in the last quarter of 1970. :As a compensation, the participating mills were allotted foreign cotton at a concessional rate of
premium and were ~itted to sell such Cotton in the market.
The
yarn thus made available was allocated to the various States by the
Textile Commissioner. The quantity of yarn covered by the Pool
Scheme depended upon the quantum of foreign cotton made available
for the purpose.
In the second quarter of 1972 prices of superfine counts, namely,
60s and above began to rise.
The causes were first; shartfall in production caused by prolonged labour strike in Coimbatore and other textile
centres in Tamil Nadu; second, an increase in the spindle cost of
foreign cotton; third revival of export demand for cotton yarn, and,
f()Urth, large scale unauthorised despatch to foreign countries.
In
order to arrest this trend, the industry reached an understanding with
the Textile Commissioner in July, 1972. Under this agreement the
mills were to supply SO per cent of the yarn of 60s and above meant
for sale in the market at agreed prices. The agreed prices were the
average of the highest contract price in January, 1972 and the highest
contract price on 1 June, 1972 or near about the date.
This price was
known as the '!regulated price". The 'arrangement came into force
from 1 August, 1972.
This scheme suffered a setback in the last quarter of 1972. This·
waa because of severe {>OWet cuts in. Tamil Nadu,
Uttar Pradesh,
Gujara~, Maharashtra, Punjab, Haryana, Mysore and Andhra Pradesh ..
• 404
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SUPREME COURT REPORTS
[ 1974 J 2 s.c.R.
The dowl)ward trend in production which had begun to manifest in the
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last quarter of 1972 gathered further momentum in the first quarter of
1.973.
As co~pared with th~ third quarter of 1972 when the production was the highest the fall m yarn and cotton production in the first
quarter of 1973 was 15 per cent and 12 per cent respectively.
The
decline ~as 6 per cent i!l yarn and 7 per cent in cloth production compared with the same period of 1972.
There was of course·a prolonged
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labour strike in February, March, 1972 in Coimbatore and for a short
period elsewhere in Tamil Nadu. There was a marked fall in production in that State.
It may be stated here that Tamil Nadu has 23 per
cent of India's total spindleage and 4.4 per cent of loomage. The
~umP.er crop in 1971-72 season had impact on yarn and cloth produc·
t1on m . the second quarter of 1972.
Early in 1973 the upward trend of yarn prices rose in fine and
·superfine counts. The Southern India Millowners' Association offered
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to the Government the entire free yarn production of all counts of its
.member mills at prices to be mutually agreed to between the ind us try
and the Textile Commissioner. The Southern Association wanted the
Jndian Cotton Mills Federation to take the initiative for arriving at an
•understanding with the Government at an all-India level. The mills
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in North India were of the view that prices of coarse and medium
·Counts had not gone up appreciably as compared with the pool prices
and were either steady or even lower in some cases than those at the
commencement of 1972 and therefore there was no case whatever for
subjecting them to control.
The Indian Cotton Mills
Federation
-strove hard for an understanding with the Government for some form
·Of voluntary control on production, distribution and prices which would
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.be beneficial for all the interests concerned and ensure price stability,
·and smooth and orderly movement of yarn to the lakhs of weavers in
the decentralised sector.
The Government decided to bring all yarn under control in all res-
·pec\S, viz., prices, production and distribution.
The stocks <?f yarn
with mills which had stood at 94,400 bales (of 180 kgs. each) m September, 1972 dropped by December, 1972 to 70,000 bales and still
·further to 42,200 bales by the end of February, 1973, the lowest on
record for the last ten years.
By the end of March, 1973 they had
gone up to as much as 108,600 bales, and by the end of April to
I 7 8 000 bales. The Government wanted to rectify the imbalance
~tween .production and deliveries of yarn in hanks, cones, pirns, and
beams. It was felt that the situation appeared to be man made. In
1972 India exported 21.9 million legs. of yarn out of the total production of 975 million kgs.
The export of handloom goods needed special
attention. In this context the suggestions were, first, deliveries of yarn
in hanks, and, second, requirements of hosiery sector should be met;
third, the recent rise in price was unjustified and they should revert
to normal levels; fourth, the responsibility for distribution should be
assumed by the concerned Governments; ·fifth,_ yarn export should continue; and, sixth, the handloom sector should be specially fed with the
requisite raw mat~rials.
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MEENAKSHI MILLS V. UNION (Ray, C./,)
405
The Government felt that the producers of cotton yarn would be .
prohibited from selling yarn except in small qu~ntities m the form <if
beams meant for power-looms to the trade or to anyone else except to
the nominees of the Textile Commissioner. Second, the manufacturers
of yarn shall sell only to nominees of the Textile Commissioner. Third,
the manufacturers for civil consumption shall have to pack not less than
60 per cent of such yarn in the form of hanks for handlooms and not
tess than 30 per cent in the form of cones for powerloom. Fourth, mills
producing and 3upplying hosiery yarns shall have to continue to do so
unller a statutory order. Fifth, prices shall be notified up to counts
40s and below in. one group adopting the market prices of December,
1972 as mention~. in the first impugned notification and in regard to
counts 60s and above the regulated yam prices as mentioned in the
second impugned notification.
The first impugned notification is issued by the Textile Commissioner under clause 2Z of the Cotton Textiles (Control) Order, 1948
hereinafter referred to as the 1948 Order. The notification determines
the ex-factory price of, count of yarn of 59s and below and count of
yarn of 60s and above. In the case of count of yarn of 59s and
below t_he price is the highest ex-mill price or the high_est contracted
price for deliveries effected in December, 1972. In the case of producers of yarn situated in the States of Tamil Nadu and Pondicherry
where the electricity cut exceeds 70 per cent the relevant price as
applicable may be increased by 6 per cent.
'
Jn the case of counts of yarn of 60s and above the determined
price is the regulated yarn price adopted for individual producers of
yarn from the tlrst day. of August, 1972, increased by 6 per cent where
there is no electricity power cut, increased by 8 per cent where there
is electricity cu~ !'ot exceeding 20 per cent, increased by 12 per cent
where the electr1c1ty power cut exceeds 20 per cent but does not exceed
.50 per cent and increased by 18 per cent in the case of producers of
yarn in the States of Tamil Nadu and Pondicherry where the electricity
power cut exceeds 70 per cent.
The term "regulated price" under the notification shall mean the
price calculated by taking the difference between the highest contract
price as on 1 June, 1972 or the nearest date in case no sale was
effected on 1 June, 1972 and the highest price for the relevant count
and form of packing during January, 1972 and allowing one-half of
the difference to be reduced from 1 June, 1972 price .
H
. The. first impugned notification was l'.ot applicable to yarn sold to
hosiery industry and to yarn on beams delivered under specified circum·
stances. There is no fixation of maximum retail .price at the point of sale
to the consumer. By a notification dated 31 March, 1973 the Textile
Commissioner authorised the Deputy Commissioners and the District
·Collectors to specify the maximum price of yarn to be sold by dealers.
The maximum price is to be fixed after taking into consideration (a)
in\>oice price of yarn,
(b) incidental charges, ( c) such reasonable
406
SUPREME COURT REPORTS
( 1974 j 2 S.C.R.
margin of profit not exceeding two per cent of the invoice price as
the Deputy Commissioner or the District Collector may determine in
each case, and (d) any other relevaqt factor.
The second impugned notification is made by the Textile Commissioner in exercise of powers conferred under clause 30(1)(b) of the
1948 Order.
The notification directed that no producer of yarn for
civil consumption shall sell or deliver any such yarn produced by him
except to such persons or persons and subject to such conditions as
the Textile Commissioner might specify.
The same. notification contained another direction under powers conferred by clause 30(1) (a)
of the 1948 Order that every producer of yarn for civil consumption
shall sell or deliver such yarn only to 5 channels of distribution mentioned therein '"on the basis of the directions that might be issued from
time to time by the Textile Commissioner.
Those 5 channels are :
(a) the nominees of the State Government; (b) the Handloom Export
Prqmotion Council, Madras; ( c) the Cotton TeX!iJe Export Promoti'?n
Council, Bombay; ( d) Federation of Hosiery Manufacttrrers' As.sociation of India, Bombay, and ( d) any other person as may be nommated
by the Textile Commissioner in this behalf.
The order of distr:Jution thfough chann$ls was not applicable under
notification dated 21 June, 1973 to yarn counts of 17s and below, _later
under notification dated 18 July, 1.973 to counts of 35s and below and
finally by notification date,! 4 August, 1973 to counts of 40s and
below.
The control is at the point of sale by .a' dealer of yarn to
consumer by another notification dated 31 ~efi, 1973. This notification provided that every dealer shall sell or.deliver yam only to persons specified there in such quantities as may be determined by the
Deputy Commissioner or the District Collector.
The persons specified
are first, the nominees of the State Government, and, second, any
other person as may be nominated by the Textile Commissioner. This
control at the dealers' level is in operation in respect of yarn of counts
of 40s and below.
·
The first contention of the petitioners is that the 1948 Order in so
far as it purports to make provisions in respect of control and distribution of cotton yam by fixation of prices etc. more particularly by clauses
22 and 30 thereof is ultra vires the powers conferred on the Central
Government by Section 3 of the Essential Supplies (Temporary Powers)
Act, 1946 hereinafter referred to as the 1946 Act, inasmuch as cotton
yam is not covered by the item "Cotton and woollen textiles" and
cannot be brought within any other item.
The first question turns on the consideration whether cotton yarn
is covered in cotton textile.
The Cotton Textile Order, 1948 is the
relevant statute. The petitioners contend that cotton yarn is not cotton
textile for these reasons. The dictionary meaning of "cotton textile"
is that textile is a woven fabric and any kind of cloth. Cotton textile
is a finished product.
Cotton textile is an end product. Cotton textile
therefore, cannot be yarn.
In the report of Price of Cotton Yarn and
Cloth published in the year 1962 cloth and yam are treated 'separately,'
arni, therefore, yam is not within cotton textile.
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MEENAKSll!°MILLS -y, UNION (Ray, C.J.)
407
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Coun.<el for the petitionel'S relied on the decisions in K. R. Subbaier
v. The· Regional Provident Fund Commissioner, Madras reported in
AIR )963 Madras 112, Kanpur Te1Ctile Finishing Mills v. RegiOnal
Provident Fund Commissioner reported in AIR 1955. Punjab 130
and The Dcp.uty Commissioner of Commercial Taxes, Madurai Division,
Madurai v. Madurai Printing Tape Factory reported in 28 Sales Tax
Cases .431 in supp6rt of the proposition that the word· 'cotton textiles'
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should be so construi!d as not to include cotton yarn. In Subbaier
case (~upra) the eir.pression 'textiles' was defined to include th·e products
of carding, spinning, weaving, finishing and dyeing ·yarns and fabrics,
printinP,, knitting and e01broidering. The questio.n arose as to whether
a factory Ii!anufacturing tapes, wicks, braided cords and sewing thread
reels was an industry engaged in the manufacture of textiles. Tapes
and lamp wicks were held to be the products of weaving, if not
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knitting.
The word 'textile' according to the Oxford dictionary means
'of weaving'.
In Kanpur Textile Mills case
(supra) the expression
'textiles' which had the same definition as in Subbaier case (supra)
wa~ held to include anything from yarn to woven material. . In Madurai
Printing Tape. Factory case (supra) the question ·Was whether tape
was textile. It was held that the ingredient of textile is necessarily
weaving and tapes made as a result of weaving would be within the
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meaning of the entry 'textiles'.
These decisions show that textiles
ordinarily mcarrs cloth and yarn.
In Cutton Textiles Order, 1948 the word.'yarn' means any type of
yarn manufactured either wholly from cotton or partly from cotton
and partly from any other materil\l. Clause 20 of the Order confers
power on the Textile Commissioner to issue directions to manufacturer
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regarding the classes or specifications of cloth or yarn which manu-
\
facturer shall or shall not manufacture.
Clause 22 confers power on
the Tpxtile Commissioner to specify the maximum prices at which any
clas; or specification of cloth or yarn may be sold. Clause 30(2)
cdnfer; poy,·et on the Textile· Commissioner with a view to securing
a proper <listribution of cloth or yarn to issue directions to any manufacturer or dealer to sell or deliver specified quantities of cloth or yarn
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to specified persons. The Cotton Textiles Order also shows that cloth
and yarn are both embraced within the word 'textiles' in the various
clauses of the Order.
The dictionary meanings of cotton textile are any material that is
woven, a inateria1, as a fibre or yarn, used in or suitable for weaving~
woven or capable of being woven.
The
meaning of "textile"
G
as a noun is a fabric which is or may be woven. a fabric made by
weaving, a woven fabric, or a material. suitable for weaving, textile
nMterial. The dictionary meanings show that cotton yarn jg included
in cotton textile.
The setting in which the wotds "cotton textile" ar~used has a
legislative ~nd executive understanding of the words consistently over
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a oeriod of time.
There are also decisions of Courts which accepted·
yarn to be within textile. The Cotton Cloth and Yarn Control Order,
1943 was made in exercise of powers conferred bv Ruic 81 of the ·
. Defence of India Rules. Cloth and yarn 'in that Order mean and
14-LS22Sup CT/74
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408
SUPREME COURT REPORTS
[ 1974 J 2 S.C.R.
include respectively cloth and yarn manufactured either wholly or
partly from cotton. The Cotton Cloth and Yarn Control Order, 1945
repealed the Cotton Cloth and Yarn Control Order, 1943. The meaning of cloth and yarn was the same as in the Control Order of 1943.
There is cognate l•gislation which treated yarn as cotton textile.
The Tariff Act, 1934. in section 11 speaks of textile materials and
textile goods and yarn is included there. Trade Marks Act, 1940 in
section 62 read with Trade Marks Rules 96 and. 97 treats cotton yarn
as textile goods.
The Cotton Textiles Cess Act, 1948 provided for
levy of cess on cloth and or yarn. The expressions 'cloth' and 'yarn·
are defined to mean cloth and yarn of which prices. fixed by any
order made μoder section 3 or continued..by section 17 of the Essen~al
Supplies (Temporary Powers) Act, 1946 were in force immediately
before the commence!llent of that Act.
The Cotton Textile Compmie;
(Management of Undertakings and Liquidation or Reconstruction)
Act 29 of 1967 defines cotton textile to mean yarn or fabrics made
either wholly or partially of cotton.
The legislati\'e practice shows that cotton textiles is a generic term
which includes cotto~ fabric and yarn. One of the methods of construction of statutes is to ascertain the setting and circumstances in
which the words are used. The entire product is cotton textile ... Yam
is the material or component with which cotton textile is manufactured
or woven.
The second contention on behalf of the petitioners is that in any
event the provisions of the 1948 Order relating to cotton yarn cannot
be said io have been continued in force either under section 16 of
the Essential Commodities Ordinance 1955 or under section 16(2)
of the Essential Commodities Act, 1955 hereinafter referred to as the
1955 Act as cotton yarn is not covered by the item "Cotton and
woollen textiles" under section 2(a) (iv) of the 1955 Act and no
notification had been issued declaring cotton yarn as an essential
commodity in exercise of powers conferred under section 2(a)(xi) of
the 1955 Act. It is also said that as a matter of fact such notification
was issued only on 31 March, 1973.
As the Defence of India Act would come to an end on 30 September, 1946 the Government of India Act, 1935 was amended by the
British Parliament by the Indian Central Government and Legislature
Act, 1946.