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1972 DIGILAW 309 (KER)

KALLAR CARDAMOM AUCTION COMPANY v. CARDAMOM BOARD

1972-12-11

T.C.RAGHAVAN, V.KHALID

body1972
Judgment :- 1. These Original Petitions raise a common question of law. They have corns up before us on a reference by a learned single judge of this Court as the petitions relate to an important question of law regarding the limit and ambit of the powers of the Cardamom Board constituted under the Cardamom Act, 1965, hereinafter referred to as the Act. 2. The petitioners are auctioneers conducting auction of cardamom produce entrusted to them by the growers of cardamom. They are in effect middlemen between the cardamom growers and the Cardamom Board. The Cardamom Board imposed some conditions for the issuance of licences to the auctioneers. One of the conditions so imposed is that the auctioneers should produce a bank guarantee of Rs. 50,000/-to the Board. In both the petitions, this condition is attacked as being beyond the jurisdiction of the Board. In O. P. No. 5428 of 1970, in addition to the attack made above, the condition to provide a godown also has been subjected to attack. The contention of the petitioners is that the imposition of conditions is not provided for either under the Act or under the rules framed thereunder and hence is beyond the jurisdiction of the Board. 3. Before considering the contentions of the petitioners it would be useful to refer the relevant provisions of the Act. The Act has been passed to provide for the development of cardamom industry under the control of the Union Government. The main purpose of the Act is to help the cardamom growers and to secure them the price of their produce. Cardamom being one of the foreign exchange earners, the Act seeks to confer benefits to the growers to encourage maximum cardamom production. The constitution of the Board is proceeded for in S.4 of the Act. S.9(1) of the Act provides that "it shall be the duty of the Board to promote by such measures as it thinks fit, the development under the control of the Central Government of the cardamom industry". S.9(2) illustrates the measures referred to in sub-s.(1) S.9(2) (g) and (1) reads as follows: "(2) without prejudice to the generality of the provisions of sub-s.(1). the measures referred to therein may provide for. S.9(2) illustrates the measures referred to in sub-s.(1) S.9(2) (g) and (1) reads as follows: "(2) without prejudice to the generality of the provisions of sub-s.(1). the measures referred to therein may provide for. (g) registering and licencing of brokers (including auctioneers) of cardamom and persons engages in the business of cardamom; (1) Such other matters as may be prescribed." S.9(3), which has loomed large in these petitions, reads thus: "The Board shall perform its functions under this section in accordance with and subject to such rules may be made by the Central Government". S.11 provides for registration of owners of cardamom estates. S.20 vests in the Central Government the power to control price and distribution of cardamom S.33 authorises the Central Government to make rules to carry out the purposes of the Act. S.33(2) illustrates the matters on which rules can be framed. S.33(2) (u) reads thus: "(2) Without prejudice to the generality of the foregoing power, such rules may provide for all or any of the following matters, namely:- (u) the form of and the manner of making application for licences issued by the Board, the fees payable for such application and the procedure to be followed in granting and conditions governing such licences' The Central Government in exercise of powers conferred by S.33 of the Act firmed rules on 27-12-1968 and on 30-7-1969. The rules are called Cardamom (Licensing and Registration) Rules, 1968. 4. the exhibits referred to in this judgment will be with reference to the exhibits produced in O.P.No 5223 of 1970. Ext. P2 contains the conditions for issuing licences by the Board. The Bank Guarantee Form is contained in Ext. P4(a). 5. The main argument is built on the wording of S.9(3) of the Act which has been extracted above. It lays down that the Board shall perform its functions in accordance with and subject to such rules as may be made by the Central Government. The emphasis is given to the expressions :in accordance with" and "subject to such rules as maybe made". The argument is that the Board has to be subservient to the rules made. Indirect is contented that the Board has no jurisdiction to unilaterally impose any conditions in matters not covered by the rules. This contention, according to us, cannot be accepted. The argument is that the Board has to be subservient to the rules made. Indirect is contented that the Board has no jurisdiction to unilaterally impose any conditions in matters not covered by the rules. This contention, according to us, cannot be accepted. If this contention is to be accepted, the Board reduces itself to a mere clerical office of accepting applications for licences on the payment of necessary licence fees. 6. We are fortified in this conclusion by the composition of the Board as provided for under S.4(3) of the Act. The Board has a Chairman appointed by the Central Government. The Director of Cardamom Development, three members of Parliament three members representing the Central Ministries of Commerce, Agriculture and Finance and Members not exceeding fifteen to represent cardamom growing States, the cardamom growing interests, the cardamom trade interests, the interests of labour and consumers and such other persons who in the opinion of the Central Government ought to be represented on the Board are the members of the Board. The composition of the Board as contemplated in S.4(3) of the Act leaves no room to doubt that the Act intended to confer necessary powers on the Board to promote the interests of cardamom industry. It cannot be said that in matters not governed by the rules framed under the Act the Board has no power to act. It follows therefore that the Board has powers to impose necessary conditions to safeguard the interests of the produced the cardamom industry before issuing licence. 7. In support of the contention that the Board cannot act in the absence of the rules framed under the Act, two decisions reported in Bhaskaran Reddiar v. Alleppey Municipality (1955 KLT 912) and The Ranni Pazhavangadi Panchayat v. Narayanan Nair (1957 KLT 704) were brought to our notice. In both these cases, the question that came up for consideration was the power of a local authority to levy entertainment tax. It was laid down in those cases that unless the mandatory provisions of the sections contrained in the Local Authorities Entertainments Tax Act are fulfilled the Local Authority cannot levy entertainment tax. The ratio in these tow cases is that the making of bye-laws is a prerequisite for the levy of entertainment tax. The cases in hand differ from the two cases before us. The ratio in these tow cases is that the making of bye-laws is a prerequisite for the levy of entertainment tax. The cases in hand differ from the two cases before us. There, the Act concerned clearly provided that framing of the bye-laws was a condition precedent before a levy could be made and in the absence of such a bye-law the levy is not proper. The Act in question does not contain any such provision. 8. The other case on which reliance was placed was the one reported in Surajmull v. L.T. Commissioner (AIR 1961 Calcutta 578) rendered by a special Bench of the Calcutta High court. It had to consider the implications of S.37(2) of the Indian Income Tax Act, 1922, which opened with the words "subject to any rules made in this behalf". Considerable argument was addressed in that case regarding the actual scope of the expression "subject to any rules made in this behalf". The Court in that case repelled the argument that the existence of rules is a condition precedent to the exercise of power of search and seizure under S.37(2) of the Indian Income Tax Act. P.B. Mukharaji, J. observes in that case thus: "The words 'subject to any rules made' are not unusual words in statutes and if the intention was to prevent exercise of the power of search and seizure before making of any rules, parliament could have used suitable words like "except and in accordance with rules" or of similar nature as used in Narendra's case". Again, in Para.67 of the judgment Sinha J. observes: "There must be some difference between these expressions. Where the expression used is "in accordance with the rules" there is no difficulty. In such a case, the rules must come first; otherwise there cannot be anything "in accordance" with it. But where the expression is :subject to rules" I do not see why the rules must necessarily come first". It was held that the wording of the section did not postulate the pre-existence of rules for bidding exercise of question. The argument advanced before us is that the distinction between the expressions "in accordance with" and "subject to any rules made", as pointed out in the judgment referred to above, is material and relevant in this case because S.9(3) contains both the expressions "in accordance with" and "subject to any rules made." 9. The argument advanced before us is that the distinction between the expressions "in accordance with" and "subject to any rules made", as pointed out in the judgment referred to above, is material and relevant in this case because S.9(3) contains both the expressions "in accordance with" and "subject to any rules made." 9. It is true that S.9 sub-s. (3) uses both the expressions "in accordance with" and "subject to any rules". Even if it is to be held that the expression "in accordance with" indicates pre-existence of rules, we do not find our way to accept the contention that the Board can exercise powers only if there are rules regulating its activities. In other words, the Board has powers to act and take such measures as in its opinion are necessary to promote the cardamom industry. And when so construed the Board has powers to impose necessary conditions before issuance of a licence. It cannot therefore be said that in the absence of any rules the Board has no power to impose conditions before licence is issued. On this aspect of the case, therefore, we hold that the Board acted well within its powers in laying down conditions for the issuance of a licence. The Board is constituted to see that the objects of the enactment are implemented and the interests of the growers, some of them small, are not in any way jeopardised. The provision by which co-operative societies and association of farmers are excluded from the conditions imposed would go to establish that the object of the enactment is to wipe out gradually middlemen between the Board and the growers so that even the commission that goes to the auctioneers is ultimately distributed among the growers, 10. However, we think the condition in Ext. P2 that the applicant for a licence should produce bank guarantee to the tune of Rs. 50,000/- to the Board and the form Ext. P4(a) laying down that the Board has the power to appropriate the amount so guaranteed in the event of non-compliance with any conditions or provisions of the licence are unreasonable. These conditions would necessitate an auctioneer either to have Rs. 50,000/- in any bank. 50,000/- to the Board and the form Ext. P4(a) laying down that the Board has the power to appropriate the amount so guaranteed in the event of non-compliance with any conditions or provisions of the licence are unreasonable. These conditions would necessitate an auctioneer either to have Rs. 50,000/- in any bank. Even if the object of the Board is to ensure payment to the producers of their price, the insistence of a bank guarantee, in our opinion, is rigorous enough to defeat the rights of the persons like the petitioners to carry on their trade as auctioneers. If the conditions imposed were to furnish sufficient security to the value of Rs. 50,000/-to the satisfaction of the Board, we would not have felt such a condition as unreasonable. We therefore quash condition No. 2 in Ext. P2 making it compulsory to furnish a bank guarantee to the value of Rs. 50,000/- and also Ext. P4(a), the consequent undertaking by the petitioners. The Board will be at liberty to impose reasonable conditions in the place of back guarantee which we have quashed in these petitions, 11. As regards the providing of warehouse, we hold that it is a necessary and welcome condition because that would ensure verification and examination by the Board and officers of the Board to compare sample with the goods sold. The condition to have a warehouse and godown for auction cannot therefore be said to be unreasonable. 12. An argument was also advanced by the petitioner's counsel that any restriction on the freedom of trade has to be struck down if such restriction imposes as unreasonable fetter on the right of citizens to carry on their trade. With this principle we have no quarrel. But the question here is whether the conditions imposed by the Board while issuing licences are so rigorous or onerous as to violate the fundamental rights guaranteed to the citizens to carry on trade. We hold, subject to the observations made above, that the conditions imposed by the Cardamom Board cannot be considered to be fetters on the right of the petitioners to carry on their trade. In the result the original petitions are allowed to the extent indicated in Para.10 above. There will be no order as to costs.