# VISHNU DAYAL MAHENDRA PAL AND OTHERS v. STATE OF UTTAR PRADESH AND ANOTHER

- **Citation:** [1975] 1 S.C.R. 376
- **Court:** Supreme Court of India
- **Decided:** 1975
- **Case number:** Writ Petitions Nos. 1524, 1537-1580 of 1973
- **Bench:** A. N. Ray, K. K. Mathew, A. ALAGffiISWAMY, P. K. Goswami, R. S. Sarkaria
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/vishnu-dayal-mahendra-pal-and-others-v-state-of-uttar-pradesh-and-another-6338
- **Pages:** 10

## Headnote

Uttar Pradesh Krishi Utpadhan Mandi Adhiniya1n, 1964 and Rules made
thereunder-If violative of Arts. 14 and 19(1){g) of the Constitution.
The Uttar Pradesh Krishi Utpadhan Mandi Adhiniyam, 1964 as amended
by U.P. Acts 25 of 1964 and 10 of 1970. was enacted
to provide for the
regulation of the sale and purchase of agricultural produce, to protect
the
producers from exploitation and for the establishment, superintendence and
control of markets in U.P. Under s. 5, the State Government is empowered
to declare a particular area as market area and under s. 7 the principal market
yard and sub-market yards are declared.
Section
7(2)
provides
that
no
person shall, in a principal market yard or sub-market yard carry on business
as a trader, broker, commission agent etc., in respect of specified agricultural
produce except in accordance with the conditions or a licence obtained from
the concerned market committee. Sec. 13 provides for the constitution of the
market committee and for representation on the committee from different
SQ.urces.
Under s. 17. the committee has power to issue, renew, suspend .
or ·cancel licences. Section 25 provides for appeals against orders of the
committee to the Director of Agriculture and s. 32 for revision by the State
Government. Under s. 16(2) (vii), the !:.ommittee has to provide accommci·
dation for storage. Sec. 40 enables the State Government to make rules.
Rule 70(4)(i)provides that the Committee may issue a licence to an applicant
if it is satisfied (a) that the applicant is solvent and (b) that the applicant
is a desirable person. Rule
76( 1)
provides
that
every
consignment
of
specified agricultural produce brought for sale into the principal or sub-market
yard shall be sold by open auction.
The petitioners who were traders or commission agents, dealing fn agricul ·
tural produce, challenged the validity of the Act, and the rules made thereunder on the ground of violation Of Arts. 14 and 19(l)(g).
A
B
c
D
E
They contended that : ( 1) that constitution of the con1mittee is prejudi·
cial to their interests since. it will have a perpetual majority of producers, (2)
the entrustment of Jicensing to such a committee is an unreasonable restriction
on their right to trade, (3) there is no guidance in the matter of grant of
licences, the criteria mentioned in r. 70(4) being vague, (4) the requirement to
F
provide storage space for Jhe producers by the petitioners is an unreasonable
restriction, and (5) r. 76(1) is u/U-a vires s. 40 and also places an unreasonable restriction on the petitioners.
Dismissing the petitions~
,
HELD :-(1) Under s. 13 the Committee is to consist of 23 members and
,,
out of them only 10 are ffom the producers. Therefore the submission is
factually inaccurate as there is no question of a perpetual majority of proG
~
dacers. [381G·HJ
(2) There are no unreasonable features in the scheme of representation
~
in the committee. Under s. 13, 8 producers are elected who may represent
the 8 categories of agricultural produce mentioned in the schedule and two
producers are nominated frofu tlie schedule castes by the Government, be·
cause, they may not . get due representatk!n in the electi'!n .. The perf~rpiance
of the duty of licensing by such a committee cannot ~reJudicc the petitioners.
ll
In fact, none of the petitioners has been refused a licence. 'Th<?ugh ?-sually
some governmental authority is charged with the duty of granting licences
under various Acts, that does not prove that L~e duty_ c:J.nn_ot be prope;ly and
impartially exercised by a Committee representing various interests which are
•
A
B
c
VISHNU DAYAL v. u. P. STATE (Goswami, J.)
371
vitally interested in the trade of agricultural produce. If in a partiCular case.
the action of the Committee is rvala fide or otherwise objectionable such n
grievance can be properly dealt with. [381H-382E]
(3) It is not correct to say that there is no guidance in the Act in the
matter of grant of license and that the two criteria provided by

## Text

376
VISHNU DAYAL MAHENDRA PAL AND OTHERS
v.
STATE OF UTTAR PRADESH AND ANOTHER
May, 1, 1974
[A. N. RAY, C.J., K. K. MATHEW, A. ALAGffiISWAMY, P. K. GOSWAMI
AND R. S. SARKARIA, JJ.]
Uttar Pradesh Krishi Utpadhan Mandi Adhiniya1n, 1964 and Rules made
thereunder-If violative of Arts. 14 and 19(1){g) of the Constitution.
The Uttar Pradesh Krishi Utpadhan Mandi Adhiniyam, 1964 as amended
by U.P. Acts 25 of 1964 and 10 of 1970. was enacted
to provide for the
regulation of the sale and purchase of agricultural produce, to protect
the
producers from exploitation and for the establishment, superintendence and
control of markets in U.P. Under s. 5, the State Government is empowered
to declare a particular area as market area and under s. 7 the principal market
yard and sub-market yards are declared.
Section
7(2)
provides
that
no
person shall, in a principal market yard or sub-market yard carry on business
as a trader, broker, commission agent etc., in respect of specified agricultural
produce except in accordance with the conditions or a licence obtained from
the concerned market committee. Sec. 13 provides for the constitution of the
market committee and for representation on the committee from different
SQ.urces.
Under s. 17. the committee has power to issue, renew, suspend .
or ·cancel licences. Section 25 provides for appeals against orders of the
committee to the Director of Agriculture and s. 32 for revision by the State
Government. Under s. 16(2) (vii), the !:.ommittee has to provide accommci·
dation for storage. Sec. 40 enables the State Government to make rules.
Rule 70(4)(i)provides that the Committee may issue a licence to an applicant
if it is satisfied (a) that the applicant is solvent and (b) that the applicant
is a desirable person. Rule
76( 1)
provides
that
every
consignment
of
specified agricultural produce brought for sale into the principal or sub-market
yard shall be sold by open auction.
The petitioners who were traders or commission agents, dealing fn agricul ·
tural produce, challenged the validity of the Act, and the rules made thereunder on the ground of violation Of Arts. 14 and 19(l)(g).
A
B
c
D
E
They contended that : ( 1) that constitution of the con1mittee is prejudi·
cial to their interests since. it will have a perpetual majority of producers, (2)
the entrustment of Jicensing to such a committee is an unreasonable restriction
on their right to trade, (3) there is no guidance in the matter of grant of
licences, the criteria mentioned in r. 70(4) being vague, (4) the requirement to
F
provide storage space for Jhe producers by the petitioners is an unreasonable
restriction, and (5) r. 76(1) is u/U-a vires s. 40 and also places an unreasonable restriction on the petitioners.
Dismissing the petitions~
,
HELD :-(1) Under s. 13 the Committee is to consist of 23 members and
,,
out of them only 10 are ffom the producers. Therefore the submission is
factually inaccurate as there is no question of a perpetual majority of proG
~
dacers. [381G·HJ
(2) There are no unreasonable features in the scheme of representation
~
in the committee. Under s. 13, 8 producers are elected who may represent
the 8 categories of agricultural produce mentioned in the schedule and two
producers are nominated frofu tlie schedule castes by the Government, be·
cause, they may not . get due representatk!n in the electi'!n .. The perf~rpiance
of the duty of licensing by such a committee cannot ~reJudicc the petitioners.
ll
In fact, none of the petitioners has been refused a licence. 'Th<?ugh ?-sually
some governmental authority is charged with the duty of granting licences
under various Acts, that does not prove that L~e duty_ c:J.nn_ot be prope;ly and
impartially exercised by a Committee representing various interests which are
•
A
B
c
VISHNU DAYAL v. u. P. STATE (Goswami, J.)
371
vitally interested in the trade of agricultural produce. If in a partiCular case.
the action of the Committee is rvala fide or otherwise objectionable such n
grievance can be properly dealt with. [381H-382E]
(3) It is not correct to say that there is no guidance in the Act in the
matter of grant of license and that the two criteria provided by rule 70(4)(i)
are vague. [382E-F]
(a) The Committee which is entrusted with the duty of granting licences
consists of people from different sources vitally interested in the marketing of
agricultural produce, as well as Government officials.
It is a \Vell-reprcsented
Committee which is expected to know the object and purpose of the Act of
which it is a creature. There· is sufficient guidance from the preamble and
other provisions of the Act with which the members of the Committee would
be familiar and _conversant, for example, s. 16 of the Act and the particulars
in Forms XI and XIII, for the application of a licence and 1conditions of a
licence.
With the help of Government officials in the comn1ittee there is no
reason to think that the Committee will not function smoothly or to apprehend
that licence would be refused arbitrarily. There is also a 1i1nitarion on the
power of the Committee in that the Act insists that the
Committee
should
record its reasons while refusing a licence. Further, there is provision of
appeal against the decision of the Committee and a further revision to the
State Government. [382F-38JD]
(b) One of the two criteria mentioned in r. 70( 4) (i). is solvency and
the ·criterion on the scor·e of' bankruptcy is well-known and cannot be said
D
to be vague or indefinite.
As regards the second criterion, namely, that the
applicant should be a desirable person the Act itself provides sufficient guid~
ance to the Committee in the matter of deciding whether a particular applicant
is or is not a proper person to hold the licence. [383F-H]
F
G
H
( 4) The requirement to provide a _storage space is only an interim measure
pending arrangements by the Committee for .proper storage as required by
s. 16. Under r. 52(4) storing of the specified agricultural produce ~hall be
subject to the payment of such storage fee and other conditions as may be
specified in the bye-laws. Since the storage by the traders in the market yards:
will always be paid for under the rule there is no substance in the contention
that the requirement is unreasonable.
[384A-B]
(5)(aj Rule 76(1) is not ultra vires s. 40
Section 9(2) restricts the right to carry on trade except under and in
accordance with the
licenc~ and s. 17 provides for issuing or renewal of
licences subject to the restrictions under the rules, and these sections are not
challenged. Section 40 empowers the State Government to make rules for
carrying out the purposes of the' Act, and under s. 40(2) (xxvii), r. 76(1}
only prescribes open auction as the mode of sale. [384B-D]
(b) The rule does not violate the fundamental right of the petitioners
under Art. 19( I) (g), [384G]
The definitions of sale and purchase in the Act do not run counter to
the provisions relating to auCiioh sale under the rule. and, it could not be
held to be an unreasonable mode considered in the entire scheme of the Act.
Jn order that the producers may obtain the best price for their commodity,
sale by open auction is prescribed under the rule to fulfil one of the important purposes of the Act. The legislature is intervening to see that the producers get the maximum pecuniary return pOssible in the transaction and as
a necessary concomitant eliminated the mode of private sale by individual
negotiation resultfng in mat-practices. Besides, by the proviso to the rule
the restriction is not allo\ved to operate in the case of retail saJes.
[384D-GJ
Lala Hari Chand Sarda v. Mizo District CouncU and a11r. [1967] 1 S.C.R.
479 and Harakchand Ratancha11d Bauthia aud ors. 4?fC.
v.
Union of lndill
and ors. [1970] I S.C.R. 479, distinguished.
378
SUPREME. COURT REPQRT·S
[1975) 1 S.C.R>
ORIGINAL JURISDICTION:
Writ Petitions Nos. 1524, 1537-1580
of 1973 and 74, 75, 254, 510-512 of 1970, 21 of 1971 and 1525 &
1581-1606 of 1973.
Petitions under Art. 32 of the Constitution of India.
A. K. Sen, Y ogeshwar. Prasad, S. K. Bagga and S. Bagga, for the
A
petitioners (in W.Ps. Nos. 1524 and 1537-1580/73).
·
B
A. K. Sen', (in W.P. No. 74/70), Hardyal Hardy (in W.P. No.
75/70). Yogeshwar Prasad, S. K. Bagga and S. Bagga, for the petitioners in (W.P. Nos 74, 75, 254 and 510-512/70, 21/71 and 1525,
1581-1606/1973).
L. N. Sinha, Solicitor General and 0. P. Rana, for respondents (in
W.Ps. Nos. 1524, 1537-1580[73).
0. P. Rm!a, for respondents (in W.Ps. Nos. 74, 254[70, 21[71,
1525, 1581-1606/73 and respondents nos. 1 & 3 in W.P. 75 and
510-512/70).
V. M. Tarkunde and E. C. Agarwa/a, for respondent No. 2 (in
c
W.P. No. 75/70 and applicant/intervener in W.P. No. 75/70.
D
The Judgment of the Conrt was delivered byGoswAMI, J.-By the above writ applications under Article 32 of
the Constitution the validity of the Uttar Pradesh Krishi Utpadhan
Mandi Adhiniyam, 1964 (U.P. Act No. XXV of 1964 as amended
by U.P. Act No. 10 of 1970) (briefly called the Act) and the rules
made thereunder are challenged on the ground of violation of Article
14 and Article 19 ( 1 )(g) of the Constitution.
The petitioners in all the above cases arc traders or commission
agents dealing in agricultural produce.
The following submissions are made on behalf of the petitioners :-
(I ) The constitution of the Market Comtnittee under section
1 3 of the Act is highly prejudicial to their interests and of
the traders in general since it will have a perpetual majority of producers.
E
F
(2) To cntrustment of licensing to such a Market Committee
instead of to any impartial authority is unfair and an unG
reasonable restriction on the right to trade.
( 3) The Act in the matter of grant of licences gives no guidance at all and even under rule 70 ( 4) two vague criteria
have been laid down in the matter of issue of licences under
the_Act
( 4) The petitioners are re<quired to provide a storage space to
H
the producers for their agric,1ltural produce goin;~ to the
market and this ohliga!ion is also an unreasonable restriction on the fundamental right of the petitioners.
•
•
'
B
c
l)
E
F
•
G
•
H
VISHNU DAYAL v. u. P. STATE (Goswami, J.)
379
(5) Rule 76(1) is invalid and ultra vires section 40 of the Act
and has also placed unreasonable restrictions on the right
to carry on trade or business.
Before we deal with these submissions, we may turn out attention to the ~ct. As the preamble shows the Act has to provide for
the regulation of sale and purchase of agdcultural produce and for
tho establishment,
superintendence, and control of markets therefor
in Uttar Pradesh. The statement of object and reasons gives a clear
·picture of the evils sought to be remedied by this legislation and a
portion therefrom may be extracted below :- ,
"The present chaotic state of affairs as
obtaining
in
agricultural produce markets is an acknowledged fact. There
are , innumerable charge,s, levies. and exactions which the
agricultural producer is required to pay without having any
say in the proper utilisation of the amount so paid by him.
In matters of dispute between the seller and the buyer, the
former is generally put at a disadvantage by being given arbitrary awards.
The producer is also denied a large part of
his produce by manipulation and defective use of weights and
scales in the market.
The GDvernment d India and the
various committees and commissions appointed to study the
condition of agdcultural markets in the country have also
been inviting the attention of the State Government from time
to time towards improving the conditions of these markets ....
The Planning Commission stressed long ago that legislation
in respect of regulation of markets should be enacted and
enforced by 1955-56".
56".
It is also mentioned that legislation in the State was first proposed in
1938 bnt lapsed. It also appears that most of the other states have
already passed legislation in this respect. It is, therefore, clear that
the principal object of this Act is to come in aid of the producers who
are generally ill-organised and are by far and large the exploited party
in the bargain between nnequals.
I
Sectio~ 2 contains the definitions. Bv section :l(a) '''agricultural
proonce' means snch items of proouce of agdcultnre, horticiJlt\Jre, viticulture, apiculture, sericu!ture, pisciculture, animal husbandry or forest
as are specified in the schedule, and includes admixture of 2 or more of
such items, and also includes any such item in processed form, and further includes gur, rab, shakkar, khandsari and jaggery". By section 2
{f) " 'Committee' means a Committee constituted under this Act". By
section 2 (k) " 'Market Area' means an area notified as such under section 6 or as modified under section 8". By section 2(p) " 'producer'
means a person who, whether by himself or through hired labour, produces, rears or catches, any agricultural produce, not being a producer
who also works as a trader, broker or Dalal, commission agent or
Arhatiya or who is otherwise ordinarily engaged in the business of
storage of agdcultural produce". We are not concerned with the proviso 1ttached thereto. By section 2(y) "'trader' means a person who in
the ordinary course of business is engaged in buying or selling agdculr
iural produce as a principal or as a duly authorised agent of one or more
380
SUPREME COURT REPORTS
(1975] l S.C.R.
principals and includes a person, engaged in processing of agricultural
A
produce". After notification by the State Government of its intention to
declare a particular area as a Market Area under section 5 and after
invitinl( objections and consideration of the same, the State Government under section 6 declares the whole or any specified portion of the
area mentioned in the notification to be the Market Area in respect of
such agricultural produce as may be specified. Similarly under section 7,
the Principal Market Yard and Sub-Market Yards are declared.
SecB
tion 9(2) which is material for our purpose, may be quoted:-
"No person shall, in a Principal
Market Yard or any
Sub-Market Yard, carry on business or
work as a trader,
broker, cqmmission agent, warehouseman, weighman, pnlledar or in such other capacity as may be prescribed in respect
of any specified agricultural produce except under and in
accordance with the conditions of a licence obtained therefor
from the Committee concerned".
The petitioners make a great grievance of this licensing provision
by the Market Committee called the Mandi Samiti of the Market Area.
Section 13 provides for co1,1Stitution of the Market Committee and
provides for representation from different sources as detailed in (i) to
(xi) therennder. The learned connsel draws our attention to clauses
(vii) and (vii-a) of section 13(1) whereby ten representatives of the
producers are included in the Committee. It is pointed out by the
learned Solicitor General and not contradicted by Mr. Sen that the
Committee under section 13 consists of 23 members out of whii:h tcu
are from the producers. Section 16 provides for functions and duties
of the Committee and, inter alia, under section 2 (i) thereof "a Com1mttee shall ensure fair dealings_ between the producers and persons
engaged in the sale or purchase of specified agricultural produce."
Under section 17, "A Committee shall, for the purposes of this Act,
have the powers to-
( il issue or renew licences under this Act on such terms
and conditions and subject to such restrictions as may
be prescribed, or, after recording reasons therefor,
refuse to issue or renew any such licence;
(ii) suspend or cancel licences issued or renewed nnder
this Act".
*
*
•
*
Section 25 provides for appeals against the orders of the Committee
c
D
E
F
to the Director of Agriculture who is to decide the same in accordance
G
with the ru1~s.
U11der section 32, the State
Government also has
...
powers of revision and may call for the records of the proceedings of
~
the Committee and pass orders modifying, annulling or reversing the
same.
Section 40 enables the State Government to make rules for
carrying out the purposes of this Act.
•
The rules, inter alia, provide for matters relating to the functions,
powers and duties of the Committee, licensing fee, or market fee which
H
may be levied and renlised by the Committee and their mode of recovery and the terms and conditions for assessment and renewal of
licences under this Act f section 40 (2)]. There is a schedule to the Act
A
B
"
c
D
E
F
G
•
H
VISHNU DAYAL v. u. P. STATE (Goswami, J.)
381
which contains the description of the agricultural produce under eight
different heads.
Chapter VII of the rules deals with transaction of
business in Market Yards and the opening rule 70 provides for licensing by the Market Committees. By sub-rule(3) "any person desiring to
hold licence under sub-rule (1) shall make, in Form No. XI or Form
No. XII, as the case may be, a written application for a licence to the
Market Committee and shall pay the licence fees prescribed under
rule 67".
Rule 70(4)(i) may now be quoted:
"On receipt of such application together with the amount
of fee prescribed under rule 67, the Market Committee may
issue him the licence applied for, if-
(a) it is satisfied that the applicant is solvent;
(b) it is satisfied that the applicant is a desirable person to
whom a licence may be granted;
provided that the provisions of sub-clause (a) shall not
apply to weighmen, measurers, palledars, truck plyers and
Thela plyers".
This rule will have to be read with section 17 quoted above.
By
rule 73, the order of refusal, cancellation or suspension of a licence
by the Committee shall be communicated to the person concerned in
the specified manner indicated therein. Rule 76(1) which is impugned
may be quoted :
"Every consignment of specified agricultural produce
brought for sale into the Principal Market Yard or any subMarket Yard shall be sold by open auction :
Provided that nothing in this sub-rule shall apply to a
retail sale as may be specified in the bye-laws of the Committee".
Some provisions of similar Acts of the State> of Madras, Bombay
and Gujarat had earlier been the targets of unsuccessful attack in this
Court and hence the constitutional challenge in the present applications
against the U.P. Act is necessarily
on
different
grounds.
[See
M. C. V. S. Arunchala Nadar etc. v. The State of Madras & Others;( I)
Mohammad Hussain Gulam Mohammad and Another v. The State of
Bombay and another;(') and Jan Mohammed Noor Mohammed Begban v. State of Gujarat and Another(')].
We may now turn to the submissions.
With regard to the first
submission, as earlier noted, the grievance is not factually accurafe.
Out of 23 members of the Committee only 10 are from the producers.
Therefore, there is no question of a perpetual majoritv of the producers in the Committee.
Besides under section 13 (1) (vii). 8 producers are elected. It may be even a legitimate expectation of the
legislature that there may be reasonable likelihood that producers of
eight categories of agricultural produce mentioned in1 th.e schedule
(I) [1959] (Suppl) (!) S.C.R. 92.
(2) [1962] (2) S.C.R. 659.
(3) [1966] (l) S.C.R. 505.
382
SUPREME COURT REPORTS
[1975] l S.C.R.
may be represented.
Under section 13(1)(vii-a), which was intro~
duced by an amendment in 1970, two producers belonging to the
scheduled castes are to be nominated by the State G<;>vernment
This
provision is made in the interest of the people belonging to the scheduled castes who may not be able .to get due representation in the
elections.
We do not find any unreasonable features in the scheme
<>f representation in the C.Ommittee under section 13.
This will be
clear even froni- section 14 whereby the first C.Ommittee appoints s1;1itable members "to represent different interests referred to m rnb->ection
(!) of section 13". The first submission of the petitioners is, therefore, of no avail.
A
II
We may now take up consideration of the second and the third
submissions which may be dealt with t<;>gether. It is submitted that
C
the licensing of the traders should not be left in the hands of the
Market C.Ommittee.
We find it difficult to appreciate how the perforrnance of this duty by the C.Ommittee will at all prejudice the traders.
To say the least it is a hypothetical objection in this case, as,
we understand, none of the petitioners have been refused a licence.
It is true that usually some governmental authority is charged with
the duty of granting of licences under various local Acts. That, howD
ever, does not prove that the duly cannot be properly and impartially
exercised by the Committee representing various interests which are
vitally inteJested in the trade of agricultural produce.
Whether in a
particular case the action of the Committee is mala-fide or otherwise
objectionable, may be a different matter and such a grievance can
be properly dealt with.
That would, however, not make the provision invalid nor can it be said to place an unreasonable restriction on
E
the right of the petitioners to trade.
It is further submitted that there is no guidance in the Act in
the matter of grant of licence and the relevant. rule 70( 4 )(i) prescribes only tw9- vague criteria in the matter. This submission fails
to take note of the fact that the C.Ommittee which is entrusted with
the duty of granting licences consists of people from different sources
F
vitally interested in the mark~ting of agricultural produce. The C.Ommittee consists also of representatives from local bodies, cooperative
marketing societies, Central Warehousing Corporation, State Warehousing C.Orporation, representatives of traders and commission agents,
Government officials of whom one shall be a representative of the
Agriculture Department and the other of Food and Supplies Department, and so forth.
It is, therefore, a fairly well-represented C.OmG .
mittee which is expected to know the object and purpose of the Act
of which it is a creature. One may legitimately expect that the members are well <)ware of the difficulties of the producers, interests of the
traders and the intricacies of the trade.
There is sufficient guidance
from the preamble and other provisions of the Act with which the
members of the C.Ommittee owe their duty to be conversant.
F'or example under section 16 the Committee is charged with the duty
II
of enforcing the provisions of the Act, the rules and the bye-laws. It
has to exercise its powers and perform its duties and discharge its
functions in accordance with the provisions of the Act and the rules.
•
•
A
]l
•C
D
vism:u DAYAL"· u. P. STATE (Goswami, J.)
38 3
Under sub-section (2) of section 16, the Co111JPittee shall ensure fair
dealings between the producer;; and. the traders besides perfo/ID~g
other functions. Form No. XI m which a trader has to sub1P1t his
application for a licence also gives various particulars from which the
Committee would be able to consider his claim for a licence. It will
be seen that in this form the applicant has to undertake to abide by
the conditions of the licence and the provisions of the Act and the
rules. The condition of the licence which are noted in Form No. XIII
would also give an indication of the obligations of the licensee. All
these would be known to the Committee.
At any rate with the help ot the Government officials in the Committee there is no reason to think that the work of the Committee will
not function smoothly and that there will be any reason to apprehend
that licences would be refused arbitrarily. Even the scope for such an
apprehension is sought to be done away with by providing a provision
of appeal against the decision of the Committee and also a further
revision to the State Government. There is a further limitation on the
power of the Committee by insisting upon recording of reasons while
refusing a licence. It is, therefore, clear that a speaking order has to
bt passed when refusingi a licence and it will have to justify that the
licence is refused only on relevant considerations with regard to solvency and fitness in terms of the provisions of the Act.
It is submitted that the choice of the two criteria under rule
70( 4 )(i) is bad and there is no proper guidance in these criteria
which are not capable of objective determination. The two criteria
laid down are solvency and desirability. The applicant has to satisfy
the Committee that he is solvent as opposed to insolvent that is bankrupt. We are informed that the original Hindi version of the rule which
is translated into English gives the equivalents as follows :-
"It is satisfied that the applicant is not a bankrupt (rindiwali)".
"It is satisfied that the applicant is a proper (upoyukta)
F
person to whom a licence may be granted".
H
Mr. Sen candidly admits that the criterion on the score of "bankruptcy" is well known and cannot be said to be vague or indefinite.
He, however, submits that the second criterion is not at all precise
and definite.
. Although perhaps a more expressive guidance could have been
gi~en, we have already_ obse!ved that the Act itself provides sufficient
gmdance 1? the _Comi_n1ttee m the matter of deciding whether a particular applicant 1s or 1s not a proper person to hold a licence and we
cannot accede to the submission that the two criteria taken with the
other guidelines from the provisions of the Act and the rules offer no
proper guidance to th~ Committee in the matter of grant of licence.
The .second and the third submissions of the petitioners are, therefore
dev01d of substance.
'
With regard. to the four!~ submission, it is sufficient to point out
that under section 16(2) (vu) the Committee has to
provide, inter
384
SUPREME COURT REPORTS
( 197 5] 1 S.C.R.
a:ia, accommodation for storage and such other facilities as may ·be
prescribed. Under rule 52(4) stoting cf the specified agricultural produce shall be subject to the payment cf such storage fee and such
ether conditions as may be speci!".td in •be by-Jaws .. That being the
position,. this may be even a:i in:e1im m •asure pending arrangements
by the Committee for proper storage. Even otherwise the storage by
the traders in the Market Yards will be always paid for under rule
.52 ( 4). There is, therefore, no substance in the fourth submission of
the petitioner.
With regard to the last submission regarding invalidity of rule ,
76(1), we are not satisfied that the same is ultra vires section 40 of '
the Act. Section 40 empowers the State Government ta· make rules for
cnrrying out the purposes of the Act. Rule 76(1) is well within the
rule makingi power of the State Government under section 40(2),
clans~ (xxvii). Section 9(2) restricts the right to carry on trade except
under· and in accordance with a licence. Section 17 provides for issuing or renewal of licences subject to the restrictions under the rules
Section 9(2) and section 17 are not challenged before us. Rule 76(1)
pre•cribes the mode of sale that is to say by open auction under the
rule making power under section 40 read with clause (xxvii). The rule
is not 11/tra vires section 40 of the Act. It is said that prohibiting private sales by confining only to sale by open auction puts an unreasonable res~ction on the right to trade o_f the. pe~~oners. H section 9(2)
and section 17 are not challenged as mvalid, it lS not understood how
rnle 76(1) which is within the rule making power can be said ·to be.
umeasonable. In order that the producers obtain the best price for
their commodity, sale by OjJCII auction is prescribed under rule 76(1)
to fuifiI one of the important purposes of the Act. Sale by auction is a
well known mode of sale by which the prod~s, for whose interest
this Act has been made, can obtain the best price for their commodities.
The definition of sale and purchase to which our attention has been
drawn by the petitioners do not run counter to the provisions for auction-sale .under rule 76. It cannot by any stretch of imagination be held
to be an unreasonable mode in the entire scheme of the Act. The legislature is intervening to see that the producers get the maximum pecuniary return possible in their transactions · and, as a necess:iry concomitant, eliniinated the mode of private sale by individual negotiations resulting in malpractices. Besides by the proviso to rule 76(1)
this restriction is not allowed to operate in the case of retail sales.
There is, therefore, no substance in the submission thal rule 76(1)
violates the fundamental right of the petitioners under Article 19(l)(g)
of the Constitution.
.
.
Mr. Sen particularly drew our attention to two decisions of this
Court. The first is given in Lala Harl Chand Sarda v. Miza District
Council and Anr. (I) That was a case.where th~ Executive Committee
of the Mizo District Council refused to renew the temporary licence
issued to the appellant therein who was a . non-tribal trader
under section 3 of the Lushai Hills District (Trading by non-Tribals)
Regulation, 1953. This Court by majority strnck down section 3 as
(I) 1967 {I) S.C.R..1012.
c.
D
E.
F
G
H
r
•
A
B
c
D
E
F
VISHNU DAYAL v. u. P. STATE (Goswami, !.)
385
violative of Article 19(1) (g)of the Constitution. This decision is
clearly distinguishable from the present case. In that case there was
no righ! of appeal to any superior authority agains.t a refusal to grant
or renew a hccnce and the non-tribal trader had no remedy whatsoever
against such an order. This- Court also observed in that case that "a
perusal of the Regulation shows that it nowhere provides any principk
or standard on which the Executive Committee has to act in granting
or refusing to grant the licence" (emphasis added).
The second decision is in Harakchand Ratanchand Benthia and
Ors. etc. v. Union of India and Ors.(1) This was a case under the
Gold (Control) Act and Mr. Sen drew our attention to the expression
"suitability of the applicant" in section 27 (6)(c)
0[
the
Gold
(Control) Act which was held to provide no objective slandard or
norm and as such was held to be constitutionally invalid. This Court
while dealing, with the objection to section 27 of the Gold (Control)
Act which relates to licensing of dealers held as follows :-·
"Section 27 ( 6 )(a) states that in the matter of issue or
renewal ol licences the Administrator shall have regard to
the number of dealers existing in the region in which
th~
applicant intends to carry on business .as a dealer, But the
word 'region' is' now.here defined in the Act. Similarly s.
27 ( 6 )(b) requires the Administrator to have due re6Ufd to
the anticipated demand, as estimated by him for ornaments
in that region, but the expression 'anticipated demand' is
vague and incapable of objective assessment and is bound to
lead to a great deal of uncertainty. In the same way the ex·
pression 'suitability of the applicant' in s. 27(6)(e)
and
'public interest' ins. 27(6) (g) do not provide any objective
standard or norm. Further, the requirement in the section
imposing the same conditions for the renewal of the licence
as for the initial grant is unreasonable, as it renders the entire
future of the business of the dealer uncertain and subject to
the caprice and arbitrary will of the administrative authorities. Therefore, clauses (a), (b), (e)
and (")
of s.
27(6) are constitutionally invalid".
"
In the instant case we have already examined the two criteria laid
down under rule 7.0\ 4 )(i) and h~ve held that they do not place any
unreasonable restnct10n on the nght of the applicants to obtain a
licence. _By r'!le 70( 4 )(i)(b) the Committee has to be satisfied :hat
G
the applicant 1s a fit. a~1d proper person .(upoyukta) to whom a licence
may be t;ranted. This is not the same thmg as the suitability simpliciter
;vhich t~1~ C".urt had to deal with in the Gold (Control) Act case.
fhc dec!Slon 1s, therefore, clearly distinguishable.
,
H
. In the result all the applications fail and arc dismisscJ. The parties
will pay and bear their own costs.
V.P.S.
Petitions dismissed.
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(I) [1970] (1) $.C.R. 479.