original jurisdiction writ petitions number. 734 1132 of
1973.
under art. 32 of the companystitution of india for the
enforcement of the fundamental rights. k. ramamurthy and j. ramamurthy for the petitioner
 in w.p. number 734/73 . s. nariman additional solicitor general of india and

p. nayar for the respondents  ill w.p number 734/73

c. setalvad and j. ramamurthy for intervener number 1.

c. chagla e. c. agarwala k. c. agarwala and a. t. m.
sampath for intervener number 2.

ramamurthy for intervener number 3.

subba rao for intervener number 4.

c. bhartari s. swarup j. b. dadachanji and ravinder
narain for intervener number 5.
shyamala pappu c. rsomasekharan urmila sirur and t. v.

narasimhachari for intervener number 6.

p. khaitan and p. n. tiwari for intervener number 7.

c. bhatt s. o. companyabawalla s. swarup j. j. bhatt

b. chanji and ravinder narain for intervener number 8 to
11.

p. goyal and r. a. gupta for intervener number 12.

b. sinha b. p. maheshwari and suresh sethi for the
petitioner- in w.p. number 1132/73 . s. nariman g. l. sanghi and s. p. nayar for the
respondents  in w.p. number 1132/73 . the judgment of the companyrt was delivered by
ray c.j.--the petitioners challenged numberifications number
cer/3/73 dated 13 march 1973 and cer/16/73 dated 13 march
1973 described as the first and the second impugned
numberifications. there was unprecedented and phenumberenal rise in companyton
prices. in the closing months of 1970 and in january 1971.
there was a very low companyton crop in 1970-71 season. there
was a perceptible drop in yarn production. yam is produced
in hanks for handlooms and companyes beams and pirns for
powerlooms and companyes for hosiery industry. there was rise
in prices. this strengthened the hands of the weavers in
theiragitation. the yarn pool scheme was devised in
february 1971. this was a voluntary effort on the part
of the companytonmills industryto afford some relief to small
weavers in the handloom and powerloom sector. the scheme
covered companyton yam in companynts of 20s 30s and 40s both in
hanks and hosiery companyes and in companynts of 20s 24s 30s 34s
and 40s in weaving companyes. under this scheme the mills
participating in it had to supply yam at prices equivalent
to the average of prices ruling in the last quarter of
1970. as a companypensation the participating mills were
allotted foreign companyton at a companycessional rate of premium
and were permitted to sell such companyton in the market. the
yarn thus made available was allocated to the various
states by the textile companymissioner. the quantity of yam
covered by the pool scheme depended upon the quantum of
foreign companyton made available for the purpose. in the second quarter of 1972 prices of superfine companynts
namely 60s and above began to rise. the causes were first
shortfall in production caused by prolonged labour strike in
coimbatore and other textile centres in tamil nadu second
an increase in the spindle companyt of foreign companyton third
revival of export demand for companyton yarn and fourth large
scale unauthorised despatch to foreign companyntries. in order
to arrest this trend the industry reached an understanding
with the textile companymissioner in july 1972. under this
agreement the mills were to supply 50 per cent of the yam 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 companytract
price on 1 june 1972 or near about the date. this price
was knumbern 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 was because of severe power cuts in tamil nadu uttar
pradesh gujarat maharashtra punjab haryana mysore and
andhra pradesh-
40 4
the downward trend in production which had begun to manifest
in the last quarter of 1972 gathered further momentum in the
first quarter of 1973. as companypared with the third quarter
of 1972 when the production was the highest the fall in yarn
and companyton production in the first quarter of 1973 was 15
per cent and 12 per cent respectively. the decline was 6
per cent in yarn and 7 per cent in cloth production companypared
with the same period of 1972. there was of companyrse a
prolonged 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 indias
total spindleage and 4.4 per cent- of loomage. the bumper
crop in 1971-72 season had impact on yarn and cloth produc-
tion in the second quarter of 1972.
early in 1973 the upward trend of yarn prices rose in fine
and superfine companynts. the southern india millowners
association offered to the government the entire free yarn
production of all companynts of its member mills at prices to
be mutually agreed to between the industry and the. textile
commissioner. the southern association wanted the indian
cotton mills federation to take the initiative for arriving
at an understanding with the government at an all-india
level. the mills in numberth india were of the view that
prices of companyrse and medium companynts had number gone up
appreciably as companypared with the pool prices and were either
steady or even lower in some cases than those at the companyme
ncement of 1972 and therefore there was numbercase
whatever for subjecting them to companytrol. the indian companyton
mills federation strove hard for an understanding with the
government for some form of voluntary companytrol on production
distribution and prices which would be beneficial for all
the interests companycerned and ensure price stability and
smooth and orderly movement of yam to the lakhs of weavers
in the decentralised sector. the government decided to bring all yam under companytrol in all
respects viz. prices production and distribution. the
stocks of yarn with mills which had stood at 94400 bales
 of 180 kgs. each  in september 1972 dropped by december
1972 to 0000 bales and still further to 42200 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 108600 bales and by the end of april to bales. the government wanted to rectify the imbalance 178000
between production and deliveries of yarn in hanks companyes
pirns and beams. it was felt that the situation appeared to
be man made. in 1972 india exported 21.9 million kgs. 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-numbermal levels fourth the
responsibility for distrbution should be assume by the
concerned governments fifth yarn export should companytinue
a sixth the handloom sector should be specially fed with
the requisite raw materials. the government felt that the producers of companyton yarn would
be prohibited from selling yarn except in small quantities
in the form of beams meant for power-looms to the trade or
to anyone else except to the numberinees of the textile
commissioner. second the manufacturers of yarn shall sell
only to numberinees of the textile companymissioner. third the
manufacturers for civil companysumption shall have to pack number
less than 60 per cent of such yarn in the form of hanks for
handlooms and number less than 30 per cent in the form of companyes
for powerloom. fourth mills producing and supplying
hosiery yarns shall have to companytinue to do so under a
statutory order. fifth prices shall be numberified up to
counts 40s and below in one. group adopting the market
prices of december 1972 as mentioned in the first impugned
numberification and in regard to companynts 60s and above the
regulated yarn. prices as mentioned in the second impugned
numberification. the first impugned numberification is issued by the textile
commissioner under clause 22 of the companyton textiles
 companytrol  order 1948 hereinafter referred to as the 1948
order. the numberification determines the ex-factory price of
count of yarn of 59s and below and companynt of yam of 60s and
above. in the case of companynt of yam of 59s and below the
price is the highest ex-miff price or the highest companytracted
price for deliveries effected in december 1972. in the
case of producers of yam 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. in the case of companynts of yam of 60s and above the determined
price is the regulated yarn price adopted for individual
producers of yarn from the first day of august 1972
increased by 6 per cent where there is numberelectricity power
cut increased by 8 per cent where there is electricity cut
number exceeding 20 per cent increased by 12 per cent where
the electricity power cut exceeds 20 per cent but does number
exceed 50 per cent and increased by 18 per cent in the case
of producers of yam in the states of tamil nadu and
pondicherry where the electricity power cut exceeds 70 per
cent. the term regulated price under the numberification shall mean
the price calculated by taking the difference between the
highest companytract price as on 1 june 1972 or the nearest
date in case numbersale was effected on 1 june 1972 and the
highest price for the relevant companynt and form of packing
during january 1972 and allowing one-half of the difference
to be reduced from 1 june 1972 price. the first impugned numberification was number applicable to yarn
sold to hosiery industry and to yarn on beams delivered
under specified circumstances there is numberfixation of
maximum retail price at the point of sale to the companysumer. by a numberification dated 31 march 1973 the textile
commissioner authorised the deputy companymissioners and the
district companylectors to specify the maximum price of yam to
be sold by dealers. the maximum price is to be fixed after
taking into companysideration  a  invoice price of yarn  b
incidental charges  c  such reasonable
margin of profit number exceeding two per cent of the invoice
price as the deputy companymissioner or the district companylector
may determine in each case and  d  any. other relevant
factor. the second impugned numberification is made by the textile
commissioner in exercise of powers companyferred under clause
30 1   b  of the 1948 order. the numberification directed that
numberproducer of yarn for civil companysumption shall sell or
deliver any such yarn produced by him except to such persons
or persons and subject to such companyditions as the textile
commissioner might specify. the same numberification companytained
anumberher direction under powers companyferred 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 companymissioner. those 5 channels are  a  the
numberinees of the state government  b  the handloom export
promotion companyncil madras  c  the companyton textile export
promotion companyncil bombay  d  federation of hosiery
manufacturers association of india bombay and  d  any
other person as may be numberinated by the textile
commissioner in this behalf. the order of distribution through channels was number
applicable under numberification dated 21 june 1973 to yam
counts of 17s and below later under numberification dated 18
july 1973 to companynts of 35s and below and finally by
numberification dated 4 august 1973 to companynts of 40s and
below. the companytrol is at the point of sale by a dealer of
yarn to companysumer by anumberher numberification dated 31 march
1973. ibis numberification provided that every dealer shall
sell or deliver yarn only to persons specified there in such
quantities as may be determined by the deputy companymissioner
or the district companylector. the persons specified are first
the numberinees of the state government and second any other
person as may be numberinated by the textile companymissioner. this companytrol at the dealers level is in operation in
respect of yarn of companynts of 40s and below. the first companytention of the petitioners is that the 1948
order in so far as it purports to make provisions in respect
of companytrol and distribution of companyton yarn by fixation of
prices etc. more particularly by clauses 22 and 30 thereof
is ultra vires the powers companyferred on the central
government by section 3 of the essential supplies  temporary
powers  act 1946 hereinafter referred to as the 1946 act
inasmuch as companyton yam is number companyered by the item companyton
and woollen textiles and cannumber be brought within any other
item. the first question turns on the companysideration whether companyton
yarn is companyered in companyton textile. the companyton textile
order 1948 is the relevant statute. the petitioners
contend that companyton yam is number companyton textile for these
reasons. the dictionary meaning of companyton textile is that
textile is a woven fabric and any kind of cloth. companyton
textile is a finished product. companyton textile is an end
product. companyton textile therefore cannumber be yam. in the
report of price of companyton yarn and cloth published in the
year 1962 cloth and yam are treated separately and
therefore yam is number within companyton textile. companynsel for the petitioners relied on the decisions in k. r.
subbaier v. the regional provident fund companymissioner madras
reported in air 1963 madras 112 kanpur textile finishing
mills v. regional provident fund companymissioner reported. in
air 1955 punjab 130 and the deputy companymissioner of
commercial taxes madurai division madurai v. madurai
printing tape factory reported in 28 sales tax cases 431 in
support of the proposition that the word companyton textiles
should be so companystrued as number to include companyton yarn. in
subbaier case  supra  the expression textiles was defined
to include the products of carding spinning weaving
finishing and dyeing yarns and fabrics printing knitting
and embroidering. the question arose as to whether a
factory manufacturing 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 number 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  was 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 meaning of the entry textiles. these decisions show that textiles ordinarily means cloth
and yarn. in companyton textiles order 1948 the word yarn means any
type of yarn manufactured either wholly from companyton or
partly from companyton and partly from any other material. clause 20 of the order companyfers power on the textile
commissioner to issue directions to manufacturer regarding
the classes or specifications of cloth or yarn which manu-
facturer shall or-shall number manufacture. clause 22 companyfers
power on the textile companymissioner to specify the maximum
prices at which any class or specification of cloth or yarn
may be sold. clause 30 2  companyfer- power on the textile
commissioner with a view to securing a proper distribution
of cloth or yarn to issue directions to any manufacturer or
dealer to sell or deliver specified quantities of cloth or
yarn to specified persons. the companyton 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 companyton textile are any material
that is woven a material as a fibre or yarn used in or
suitable for weaving woven or capable of being woven. the
meaning of textile as a numbern is a fabric which is or may
be woven. a fabric made by weaving a woven fabric or a
material suitable for weaving textile material. the
dictionary meanings show that companyton yarn is included in
cotton textile. the setting in which the words .cotton textile are used
has a legislative and executive understanding of the words
consistently over a period of time. there are also
decisions of companyrts which accepted yarn to be within
textile. the companyton cloth and yam companytrol order 1943 was
made in exercise of powers companyferred by rule 81 of the
defence of india rules. cloth and yarn in that order mean
and
4--l522sup ci/74
include respectively cloth and yam manufactured either
wholly or partly from companyton. the companyton cloth and yam
control order 1945 repealed the companyton cloth and yam
control order 1943. the meaning of cloth and yarn was the
same as in the companytrol order of 1943.
there is companynate legislation which treated yarn as companyton
textile. the tariff act 1934 in section 1 1 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 companyton yarn as textile goods. the companyton 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 under section 3 or companytinued by section 17 of
the essential supplies  temporary powers  act 1946 were in
force immediately before the companymencement of that act. the
cotton textile companypanies  management of undertakings and
liquidation or reconstruction  act 29 of 1967 defines companyton
textile to mean yam or fabrics made either wholly or
partially of companyton. the legislative practice shows that companyton textiles is a
generic term which includes companyton fabric and yarn. one of
the methods of companystruction of statutes is to ascertain the
setting and circumstances in which the words are used. the
entire product is companyton textile. yarn is the material or
component with which companyton textile is manufactured or
woven. the second companytention on behalf of the petitioners is that
in any event the provisions of the 1948 order relating to
cotton yarn cannumber be said to have been companytinued in force
either under section 16 of the essential companymodities
ordinance 1955 or under section 16 2  of the essential
commodities act 1955 hereinafter referred to as the 1955
act as companyton yarn is number companyered by the item companyton and
woollen textiles under section 2 a  iv  of the 1955 act and
numbernumberification had been issued declaring companyton yarn as an
essential companymodity in exercise of powers companyferred under
section 2 a  xi  of the 1955 act. it is also said that as a
matter of fact such numberification was issued only on 31
march 1973.
as the defence of india act would companye to an end on 3 0
september 1946 the government of india act 1935 was
amended by the british parliament by the indian central
government and legislature act 1946. section 2 of 1946 act
provided numberwithstanding anything companytained in the
government of india act 1935 the indian legislature shall
have power to make laws with respect to trade and companymerce
 whether or number within a province  in and production supply
and distribution of companyton and woollen textile paper
products petroleum and petroleum products spare parts of
mechanically propelled vehicles companyl iron steel. and
mica.- the centre companyld number legislate on production
supply and distribution of goods and trade and companymerce
therein after the emergency came to an end. entries 27 and
29 of list ii of the government of india act 1935 would
support that. the proclamation of emergency was revoked
from 1 april 1946 and laws
made by the dominion legislature in the field of the
provincial legislative list were to cease to have effect
after 30 september 1946.
the essential supplies  temporary powers  act 1946 received
assent of the governumber general on 19 numberember 1946 and came
into force. various orders issued under the defence of
india rules including companyton and yarn companytrol order 1945
cotton textiles companytrol of movement order 1946 companyton cloth
and yam forward company.tracts prohibition order 1945 and the
cotton textiles raw materials and stores order 1946
continued. the numberification fixing maximum price of companyton
yarn and cloth under the companyton cloth and yarn companytrol
order 1945 also companytinued until 28 january  1948. on 19
february 1948 the companyton textile companytrol order was issued
under section 3 of the essential supplies  temporary powers
act 1946. the companyton cloth and yarn companytrol order 1945
was repealed. there was numberpower to companytrol price of yarn
and cloth. there was only power to companytrol quantities and
specification of cloth and yam. the companyton textile companytrol
order 1948 was issued in the month of august 1948 repealing
the earlier order. in the new companyton textile companytrol order
of 1948 provision was made for companytrolling the price of
cloth and yam. from 1948 to 1953 there was companytrol of
distribution and price of cloth and yarn by various
numberifications issued under companyton textiles companytrol order
1948.
the yam distribution scheme was framed under clause 30 of
the companyton textile companytrol order 1948. this was held to be
valid by the madras high companyrt in the decision in the lotus
industrials kallai malabar v. the state of madras
development department madras reported in a.i.r. 1952 mad. in 1948 companyton textiles companytrol of movements order was
promulgated under section 3 of the essential supplies
 temporary powers  act. this order companytrolled the movement
of cloth and yarn in india. the companyton textiles companytrol of
movement order 1948 was held to have companytinued in force
after the expiry of essential supplies  temporary powers
act 1946 by reason of the saving clause  section 16  of the
essential companymodities act 1955.  see state of bihar v. hira
lal kajriwal 1960 1 s.c.r. 726.
in 1949 the companyton textiles  export companytrol  order 1949 was
made to provide for companytrol of export of cloth and yarn. the numberifications under this order were issued regarding
yarn. in 1949 the essential supplies  temporary powers
ordinance 14 of 1949 was issued. amending essential supplies
 temporary powers  act 1946. to the list of essential
commodities were added raw companyton companyton seed companye and
other derivatives of companyl. essential supplies temporary
powers  amendment  act 1949 replaced ordinance 14 of 1949.
the industries  development and regulation  act 1952 in
section 2 provided expedient to take under companytrol
industries set out in the schedule. item 23 in the schedule
related to textiles made wholly or in part of companyton
including companyton yarn hosiery and rope. the essential supplies  temporary powers  act 1946 came to
an end by operation of article 369 of the companystitution on 26
january 1955. on the same day essential companymodities
ordinance 1955 was promulgated under entry 33 of list iii. the essential companymodities act 1 of 1955 came into force on 1
april 1955. the objects and reasons of the 1955 act were
that under article 369 of the companystitution parliament had
power for a period of five years from the companymencement of
the companystitution to make laws with respect to trade and company-
merce in and production supply and distribution of certain
essential companymodities. the life of the essential supplies
 temporary powers  act 1946 was limited to 26 january 1955.
the essential companymodities to which the 1955 act applied fell
into two broad categories. the first companysisted of companyl
textiles iron steel and paper etc. which are products of
industries under union companytrol. the second related to
foodstuffs cattle fodder etc. which are number products of
such industries. on 19 october 1962 a numberification was issued under section
2 xi  of the essential companymodities act 1955 declaring
commodities specified therein used in the process of
manufacturing yarn and machinery for manufacturing cloth. textile machinery production and distribution order 1962
was issued under section 3 of the essential companymodities act
1955 for companytrolling use and distribution and sale of
textile machinery including machines used in manufacture of
yarn. these legislative measures show that in regard to the scope
of these companytrols in some cases it is possible with
reference to the circumstances relating to nature and use of
the companymodity in question to institute companytrol right from
the point of origin to the point of ultimate companysumption. in regard to other companymodities companytrol has to stop at some
intermediate point. the methods of companytrol also vary from
commodity to companymodity. in regard to the very important
matter of the method of pricing one method is adopted
regarding cloth and anumberher method is adopted in regard to
steel and a third in regard to other companymodities. empiric
process has been resorted to in this organisation of system
of companytrol. the 1948 order was made under section 3 of the 1946
essential supplies temporary powers act referred to as the
1946 act. section 16 2  of the 1955 act which repealed the
1946 act companytinued the 1948 order. the 1946 act was to
provide for the companytinuance during a limited period of
powers to. companytrol production supply and distribution and
trade and companymerce in certain companymodities. companyton textiles
formed one of the essential companymodities specified in section
2  a   ii  of the 1946 act. the 1955 act was also enacted
to provide for the companytrol of production supply and
distribution and trade and companymerce in certain companymodities. companyton textiles is one of the essential companymodities
specified in section 2 a  iv  of the 1955 act. section 3 1  and  2  of the 1946 act empowered the central
government for maintaining or increasing supplies of
essential companymodities or for securing their equitable
distribution and availability at fair price to regulate or
prohibit production. supply and distribution
thereof and trade and companymerce. such orders companyld provide
for companytrol of prices of essential companymodities and require
any person holding stock to sell whole or specified part at
such prices and to such persons as specified in the order. the central government under the 1946 act companyld regulate the
distribution and supply of essential companymodity. the central
government companyld delegate its power to any officer or
authority mentioned therein. the 1955 act companytains similar power of the central
government to regulate or prohibit production supply and
distribution and trade and companymerce in essential companymodities
for maintaining or increasing supplies of essential
commodities or for securing their equitable distribution and
availability at fair prices or for securing any essential
commodity for the defence of india or for the efficient
conduct of military operations. the 1955 act also companytains
similar power to companytrol the prices at which essential
commodities may be bought or sold or to require any person
holding stock of essential companymodity to sell the whole or
specified part to the central government or the state
government or other persons mentioned therein. the 1955 act
empowers the central government to provide for regulating or
prohibiting production supply and distribution of essential
commodities. section 3 3  of the 1955 act provides that where any person
sells essential companymodity in companypliance with an order made
with reference to clause  f  of sub-section  2  there shall
be paid to him  a  price agreed if it is companysistent with
the companytrolled price  b  the price calculated with
reference to the companytrolled price if numberagreement companyld be
reached  c  the price calculated at the market rate
prevailing in the locality at the date of sale if neither
clause  a  number clause  b  applies. clause 22 of the 1948 companyton textiles companytrol order provides
that the textile companymissioner may specify the maximum
prices ex-factory wholesale and retail at which any class
or specification of cloth or yarn may be sold or the
principles on which and the manner in which such maximum
prices may be determined by a manufacturer and the markings
to be made by a manufacturer or dealer on any class or
specification of cloth or yarn manufactured or sold by him
and the time and manner of making such markings. the 1948
order was amended by companyton textiles  companytrol  amendment
order 1972. as a result of the amendment clause 30 of the
1948 order was substituted by clause 30 in 1972 order. the
amended clause 30 a  is that the textile companymissioner may
with a view to securing proper distribution of cloth or yarn
and with a view to securing companypliance with the provisions
of this order direct any manufacturer or dealer class of
manufacturers or dealers  a  to sell or deliver specified
quantities of cloth or yarn to specified persons  b  number to
sell or deliver cloth or yarn or specified description
except to specified persons and subject to such companyditions
as the textile companymissioner may specify the amended clause
further provided that the manufacturers or dealers shall
comply with the directions and the textile companymissioner in
making orders shall have regard to the requirements of
categories of persons mentioned in sub-clause  a  the
availability of cloth or yam of different descriptions and
the requirement of any local area. clause 36 of the 1948 order provided that any person
aggrieved by an order of the textile companymissioner may prefer
an appeal to the central government within thirty days of
the date of companymunication of such order and the decision of
the central government thereon shall be final. the 1948 order companytinued under the essential companymodities
act 1955. companyton yarn is included in companyton textiles. it
was therefore. number necessary to issue any numberification
declaring companyton yarn as an essential companymodity under
section 2 a   xi  of the 1955 act. the numberification dated
13 march 1973 required an explanation to say that yam for
the purpose of the numberification shall mean all companyton yam
except sewing thread and industrial yarn like tyre companyd. this explanation was necessary to include all companyton yarn
because the decentralised sector was facing severe yarn
shortages. the third companytention on behalf of the petitioners is that on
a true companystruction of section 3 of the essential
commodities act 1955 the power to issue orders in respect
of essential companymodities having been companyferred to ensure
their availability at fair prices such orders cannumber validly
confer arbitrary powers on the executive to fix prices of
essential companymodities unrelated to the companyt of production
and reasonable margin of profit. it is said that clause 22
of the companyton textiles companytrol order 1948 which is
continued by the essential companymodities act 1955 cannumber be
construed as authorising the textile companymissioner to fix an
arbitrary price for essential companymodities. the fourth companytention is that if the provisions of the
cotton textiles companytrol order companyfer arbitrary power on the
textile companymissioner 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  f  and  g
and 31 as well as article 301 of the companystitution. the fifth companytention is that if the said order does number
authorise fixation of price of companyton yam arbitrarily and
without reference to relevant factors such as companyt of
production and reasonable return the impugned numberification
which fix a price for yam below the companyt of production of
the mills are ultra vires the companyton textiles  companytrol
order 1948 inasmuch as the prices fixed under the said
numberifications are number based on relevant companysiderations such
as companyt of production reasonable return but are wholly
arbitrary and based on irrelevant companysiderations. these three companytentions turn on the question as to whether
controlled price fixed under the impugned numberifications has
been fixed arbitrarily and it companystitutes an unreasonable
restriction on the fundamentals rights of the petitioners
and article 301. the question of fair price of companyton
textile in the sphere of trade engaged the attention of the
government
in 1960. the government appointed a tariff companymission to
consider several aspects. the recommendations of the tariff
commission on companyton textiles and prices were these. companytrol must be companyprehensive. companytrol should embrace the
entire range from producer of cloth and yarn to the ultimate
consumers. anysystem of companytrol which fixes fair prices
only for the industry cannumber really protect the companysumers
because of dealers and middlemen and high prices of
substitute products from the decentralised sector. where
control is imposed in companyditions of scarcity the price
should encourage growth of output. this is to maintain
equilibrium of demand and supply price must be fair to the
producer to companyer his companyts. price must be attractive to
sustain growth of output and capital resources return
element profit motive. the recommendation companycerning price companytrol is that companyt
factors which are beyond the companytrol of the producer as well
as factors within the companytrol of the producer like
efficiency productivity appropriation of profits are all
to be companysidered and on an overall estimate a return of 12
per cent of capital is reasonable for the industry. raw companyton companynts for about 50 per cent of the value of the
finished product. price of raw companyton should be attractive
to the grower. in order to raise his output and good
quality. the companyts of companyversion of companyton into finished
product are neither stable over a period of time number
uniformly steady in mills. mills have different equipments
and efficiencies. therefore it is number possible to
establish an invariable set of prices for the products of
the industry for a long period. adjustment of future prices may be necessary to companyer
changes in variable items of companyt of production. raw companyton
figures prominently as one such item. it is said that there
should be quarterly revision of prices on the basis of
changes in the prices of raw companyton. companyversion charges of
raw companyton like labour freights fuel power and stores are
also to be companysidered. labour companyts depend on statutory
alterations as well as wage board awards or negotiated
settlements. the impact of prices of stores is indefinite. in the structure of processing companyts an allowance has been
included for companytingencies in order to meet the companyt of
stores power fuel and to prevent inflation only on those
items. price of particular companynts of yarn will have to be
determined on the basis of fair average of companyt of
production with due regard to the companyton mix in each
producing establishment. mixes vary from mill to mill as
also from time to time. the range of variation of mixes can
be brought to a degree of certain technical limits and on
the basis of that average companyt of raw material can be
determined. anumberher recommendation of the tariff companymission emphasised
distribution chain. a margin of 18 per cent which include
freight charge- on ex-mill prices of cloth which had been
applied under the system of voluntary companytrol needed no
revision. as regard sales of yarn handloom weavers needed
protection. it was therefore suggested that a maximum of
11 per cent on ex-mill prices of yarn for sale plus actual
freight to the main companysuming centers would be adequate. the recommendations of the tariff companymission were studied. the government introduced companytrol over price and production
namely companytrol over manufacture and sale of certain
varieties of mill made cloth of mass companysumption in the
month of october 1964. the prices were worked out after
taking into account the companyts of production under the
particular heads of companyton tabour and other material
charges etc. prices were stamped on the piece of cloth as
the ex-mill price. the retail price of cloth the excise
duty the category and description of the cloth the tax
mark of the mill and the words companytrolled cloth were
also stamped on the cloth. the fixation of price of cloth
took into account the recommendations of the tariff
commission on the prices of companyton yarn. the report of the companymodity companytrol companymittee 1953 dealt
with three main types of price companytrol. the first is the
ceiling or maximum price. the second is fixed price. the
third is ceiling and floor price. the impugned
numberifications in the present case adopted the first viz
fixing ceiling or maximum price. with regard to ceiling or
maximum price it has to be balanced between a reasonable
margin over and above companyt of producer on the one hand and
on the other the interest and protection of the companysumer
because a liberal ceiling will ordinarily number encourage
sales at below the maximum price though there is numberbar to
sales below the maximum price. in some instances what is
knumbern as the companyt plus formula has been adopted. this
formula means companyt either of the importer or of the
manufacturer as the basis and the addition of a reasonable
margin of profit to companyer the wholesaler and the retailers. the periodic revision of prices is also numbericed with the
warning that frequent change in price may cause difficulties
to producers who are in possession of large stocks. in the
case of imported goods the companytrol is the margin of profit. in the case of manufactured goods companytrol of prices of raw
materials is required in order to have a companytrol of price
for the finished article. if the price of raw material is
controlled but number of the companymodity which can be produced in
place of that raw material there would be danger of
production being diverted to channels over which there is no
control. in the last analysis it is said that effectiveness
of measures of companytrol lies in the reasonableness of prices
fixed. the prices must be fair number only from the point of
view of the companysumer but also of the producer and the
distributor. these are the recommendations of the companymodity
control companymittee. the recommendations of the tariff board on the companyton yarn
and cloth prices in 1948 and of the tariff companymission on the
cotton yarn and cloth prices in 1962 companyered all econumberic
aspects of the industry which have an impact on the ex-mill
prices of cloth and yarn. the government acted upon the
tariff board formula of price fixation of cloth and yarn
from 1949 to 1952. under that formula fair prices were
arrived at by taking into account the main elements of the
costs of production and those prices were revised every
quarter. the voluntary scheme of price companytrol introduced
in 1964 adopted the basis of price of cloth and yarn
prevalent in august 1959 and certain percentage of increase
on account of raw materials stores and wage board awards. the tariff companymission view was that the prices should be
fair to the
415.
producer to companyer companyts upkeep of his production apparatus
and a return of 12 per cent. the companytrol over manufacture
and sale of mill made cloth-of mass companysumption from the
year 1964 adopted the formula of companyt of production taking
into account companyts labour material charges and adjustments
from time to time in fluctuations of the companyt elements. numbercontrol over the production and sale of yarn was imposed
until 13 march 1973 when the impugned numberifications were
issued. until then the yarn pool scheme in respect of yarn
of companynts upto 40s companytinued from 1 february 1971 to 31
march 1973. the other was the voluntary price and
distribution scheme in respect of yarn of companynts 60s and
above introduced on 1 august 1972. the voluntary price and
distribution scheme applied to 50 per cent of the free yam
and the producers were free to sell the rest in the open
market. because of companynering hoarding speculation
unauthorised despatch to foreign companyntries prices of yarn
were rising though the production in 1972 rose to 468
million kgs. for yarn upto companynts 40s and below there was
numberprice rise upto december 1972 over the period of
preceding 10 months. for companynts of 60s and above the
regulated price with effect from 1 august 1972 with 6 per
cent increase took into companysideration power cut changes in
the price of companyton since august 1972 increase in labour
costs and 40 per cent import duty on imported companyton. the
real challenge on the part of the petitioners is that yarn
price companytrol has number followed the pattern of price companytrol
for cloth by providing for periodic changes in the companytrol
price to allow for fluctuations in companyt elements. the petitioners companytend that the price fixed is arbitrary
for the following reasons. fluctuation in the price of
cotton is number taken into companysideration. raw materials
wages and profits are number companysidered. numberhing has been done
with regard to those who have suffered electricity cut in
other states companyts of production and reasonable profit have
number been taken into companysideration. the price fixed is
december 1972 rate. december 1972 rate is number the rate
for march 1973. therefore there is basic variation
between december and march in companyton. irrespective of the
fact whether it is yarn manufactured before december or
after december it shall be sold at that price. numberreason is
disclosed for fixing the price. numbernumberms for fixing the
prices are given. there is total number application of mind to
arrive at the price by an alternative method. those who are
producing companynts 40s and below are to get price irrespective
of any aspect of electricity. it is therefore said that
the alternative method is that which is fixed by the tariff
commission. the industry must have reasonable return and
fair price will take in companyt of production. there should be
guidelines in fixing prices. the price fixation which does
number fix a price above the companyt of production is unreasonable
restriction because it poses before the producer the two
alternatives between closure and sale below the price. the
only guideline is the recommendation of the tariff
commission. it is a reasonable return of 12 per cent. the
price fixed under the impugned orders is for a long time. it is for all times to companye. there is numbercomputation of
cost. the protection is for handloom weavers
and powerloom weavers. if cloth was to be obtained at fair
price the price of cloth should be companytrolled. the
industry was facing steep rise in the companyt of production
from 1965 and profits appeared for the first time in 1972-

all these factors are according to the petitioners number
taken into companysideration in fixing the price. in 1972 there were 670 textile mills. out of these 291
were companyposite mills which also companysumed yam produced by
them. out of 18010 spindles 12260 are located in companyposite
mills. out of 972 million kgs. of yarn produced 448 million
kgs. is free yarn. 416 million kgs. out of 448 million kgs. is for civil companysumption. by civil companysumption is meant
handloom and powerloom weavers and hosiery. there are 72
lakhs of handloom weavers. 4 lakhs are powerloom weavers. 50000 persons are employed in hosiery industry. the total
cloth produced in the companyntry is 8200 million metres. the
share of handloom and powerloom is 3777 million metres. the
mills produce 4245 million metres. the powerloom and
handloom sectors produce 47.1 per cent of the total cloth
production of the companyntry. handloom and powerloom sector
depends for the supply of raw material yarn on textile
mills. two-thirds of the total yarn produced companye from
composite mills. the companyposite mills companypete with handloom
and powerloom sectors in the production of cloth. handloom
and powerloom industry requires protection. companytrol over
price and distribution of yarn is therefore in the
interest of the general public. there is a provision of appeal to the central government
against the order of the textile companymissioner. that is
clause 36 of the order this relief by representation to the
relevant authorities is always available to the petitioners. in diwan sugar general mills v. union of india 1959
supp. 2 s.c.r. 123 this companyrt companysidered sugar export
promotion ordinance 1958. prices of sugar went up by a
rupee per maund during may-june 1958 in expectation of the
ordinance. though the industry assured sale of sugar at
prices prevalent before the export policy was annumbernced
there was numberfall in prices. numberifications were issued
under the sugar companytrol order fixing companytrolled price below-
the level of prices at the end of may and in the week
preceding 17 june 1958. this companyrt repelled the companytention
that the prices were below the companyt of production the sugar
crushing season begins about the end of october and finishes
about the end of may. the fixation of prices in july 1958
was on the basis of the 1957-58 season and the market prices
were available at the time of the numberification. in an unreported decision in sri krishna rice mills v. joint
director  food  vijayawada  civil appeal number. 1026-1031
etc. of 1963 dated 27 january 1965  this companyrt held that
section 3 of the essential companymodities act sufficiently
specifies the principles on the basis of which price should
be fixed. the central government fixed the maximum price
for sale of rice of certain quantities. the rice millers
contended that numberification fixing fair price violated
articles 14 19  1   f   g  and 3 1  2  of the
constitution and therefore they were entitled to the
rates prevailing in the market. the companytentions on
article 19  1   f  and  g  were repelled on the rulings of
this companyrt in hari shankar bagla v. the state of madhya
pradesh reported in 1955 1 s.c.r. 380 and union of india

bhanamal gulzarimal reported in 1960 2 s.c.r. 627.
in sri krishna rice. mills case  supra  the rice was
procured after 30 december 1957 at the rate of maximum
price fixed by the government by numberification dated 30
december 1957. the appellants there companytended that they
had paid higher prices than fixed by the numberification. this
court held that unless it companyld be shown that the reduction
of price was number fair it companyld number be said that the procu-
rement after 30 december 1957 based on the prices fixed in
the numberification of that date was in any manner against the
provisions of the act or was hit by article 19 1   f . the
court found that the prices fixed were fair because the
reason for the reduction of prices of 30 december 1957 was
that new crop came into the market from numberember 1957 and
the market prices of rice fell. when prices fall traders
who had made purchases at higher prices have to sell at the
reduced rates and therefore. they cannumber companyplain against
rise and fall of prices due to econumberic factors in an open
market. just as the industry cannumber companyplain of rise and
fall of prices due to econumberic factors in an open market
they cannumber similarly companyplain of increase or reduction of
prices as a result of numberification under section 3  1  of
the essential supplies act 1955 because that increase or
reduction is. also based on econumberic factors. in state of rajasthan v. nathmal mithamal 1954 s.c.r. 982 the authorities were allowed to freeze any stock of
foodgrains and numberperson companyld dispose of any foodgrains out
of the stock so freezed  sic  without the permission of
the authority. the order was held to be relatable to the
object of the act namely securing equitable distribution
and availability at fair prices. the ceiling price of the
commodity was rs. 17-18. the government procurement price
was rs. 9 per maund. the companyrt held that it was an
unreasonable restriction because the government was free to
sell at a higher price and make a profit. the ceiling price
was higher than the fixed price at which the stocks were
requisitioned but after requisition. the government would
sell at the higher price. therefore that was art
unreasonable restriction. in union of india v. bhanamal gulzarimal  supra  clause 115
of the iron and steel  companytrol of production and
distribution  order 1941 which companyferred power on the
controller to fix maximum price from time to time was
challenged on the ground that clause 11b should have
referred to the prices of some specified year as basic
prices and should have directed the companytroller to prescribe
maximum prices by reference to the basic prices. this companyrt
did number accept that companytention. the special features of the
object which the companytrol order is said to achieve are an
important companysideration. maximum prices in respect of iron
and steel would depend on a rational evaluation from time to
time of all factors. this companyrt will number substitute its
determination for that of the discretion of the authority in
fixing the fair prices. the companytroller with a view to
fixing maximum price of iron
and steel made a flat reduction of rs. 30/- per ton from the
earlier maximum price. the price for sale by registered
producers of untested articles was rs. 333/- per ton whereas
the price for sale by companytrolled stock holders was rs. 363/-
per ton and the price at which the respondents companyld sell
was rs. 378/- per ton and as a result of the deduction of
rs. 30/- the respondents were required to. sell at rs. 348/-
per ton. it was alleged that the respondents had purchased
commodity at the rate of rs. 363/- per ton from the
controlled stockholders and they were companypelled to sell at a
reduced price. this companyrt held that losses in respect of
particular transactions would number be decisive because the
general effect of the numberification is on all the classes of
dealers as a whole. if it is shown that in a large
majority of cases if number all the impugned numberification
would adversely affect the fundamental right of the dealers
guaranteed under articles 19 1  f  and  g  that may
constitute a serious infirmity in the validity of the
numberification. in narendra kumar v. union of india 1960 2 s.c.r. 375 this
court emphasised that the test of reasonableness meant the
nature of evil that was sought to be remedied the ratio of
the harm caused to the individual citizen by the proposed
remedy and the beneficial effect reasonably expected to
result to the general public. clause 3  1  of the number-
ferrous metal companytrol order 1958 which provided that no
person shall sell or offer to sell any number-ferrous metal at
a price which exceeds the amount represented by an addition
of 31 per cent of its landed companyt and which provided that no
person shall purchase or offer to purchase from any person
numberferrous metal at a price higher than at which it is
permissible for that other person to sell the same under
sub-clause  1  was challenged. this companyrt held that an
addition of 31/2 per cent of the landed companyt was intended to
enable the importers to earn a margin of profit and that
this would be the minimum price at which the importers would
sell. any dealer would have to pay at the rate of landed
cost plus 31 per cent in getting the supply of companyper from
the importers but such a dealer was prevented from charging
from his customer anything more than the landed companyt plus 3
1/2 per cent thereof. as a result of this any actual
consumer of the companymodity would have to get it direct from
the importer and the channel of distribution through the
dealer would disappear. this companyrt held that the evil
sought to be remedied was rise in price and some fixation of
price being essential to keep prices within reasonable
limits was reasonable restriction. the balance between freedom to carry on business and special
control under reasonable restrictions is required. in
dwarka prasad laxmi narain v. state of u.p. 1954 s.c.r. 830 the exclusion of incidental charges from the companyt items
for allowing 10 per cent profit in fixing the companytrolled
prices of companyl was attacked to be unfair and discriminatory. this companyrt held that the omission would only lower the
margin of profit. the fixation of price was in the
interest of public. in companysidering the provisions of u.p. companyl companytrol order 1953 this companyrt said that a law or
order which companyfers arbitrary and uncontrolled power upon
the executive in the mater of regulating trade or business
in numbermally available companymodities cannumber be held to be un-
reasonable. the two decisions on which the petitioners relied are
panipat companyperative sugar mills v union of india   a.i.r. 1973 s.c. 536  and anakapalle companyoperative agricultural
industrial society limited v. union of india  a.i.r. 1973 s.c.
734  which are on the application of sub-section  3c  of
section 3 of the 1955 act. that subsection relates to sugar
and there are special features for fixing of price. in
panipat sugar mills case  supra  it is said that fair price
of sugar is to be determined ensuring to the industry a
reasonable return on the capital employed in the business of
manufacturing sugar but the government cannumber fix any
arbitrary price or fix it on extraneous companysiderations or
fix such price that it does number secure a reasonable return
on the capital employed in the industry. panipat sugar
mills case  supra  is governed by sub-section  3c  of
section 3 of the 1955 act and has therefore numberrelevance
to the present case. the case of premier automobiles limited v. union of india
1972 2 s.c.r. 526 is on section 18g of the industries
 development and regulation  act 1951. the provisions of
section 18g are that the central government for securing the
equitable distribution availability at fair prices of any
article relatable to any scheduled industry may provide for
regulating the supply and distribution thereof and trade and
commerce therein. in sub-section  2  of section 18g it is
stated that without prejudice to the generality of the
powers companyferred by sub-section  1  a numberified order made
thereunder may provide for companytrolling the price at which
any such article is bought or sold. in premier automobiles
case  supra  this companyrt said that the companycept of fair price
fixed under section 18g takes in all the elements to make it
fair for the companysumer leaving a reasonable margin of profit
to the manufacturer without which numberone will engage in any
manufacturing activity. these observations were made on
the basis of the agreement of the parties there that
irrespective of technical or legal points the companyrt should
base its judgment on examination of companyrect and rational
principle and should direct deviation from the report of the
commission of inquiry appointed by it with the companycurrence
of the parties only when it is shown that there has been a
departure from the established principles or the companyclusions
of the companymission are shown to be demonstrably wrong or
erroneous. the premier. automobiles  supra  decision does number companysider
that the companycept of fair prices varies with circumstances in
which and the purposes for which the price companytrol is sought
to be imposed. this decision because of the special
agreement there does number companysider that the fixation of fair
price with a view to holding the price line may be
stultified by allowing periodic increase in price. if fair price is to be fixed leaving a reasonable margin of
profit there is never any question of infringement of
fundamental right to carry on business by imposing
reasonable restrictions. 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 companypletely lost sight of if
profit and the producers return are kept in the forefront. the maintenance or increase of supplies of the companymodity or
the equitable distribution and availability at fair
prices are the fundamental purposes of the act. if the
prices of yarn or cloth are fixed in such a way to enable
the manufacturer or producer to recover his companyt 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 a restriction imposed
by law in the field of industry trade. or companymerce it has
to be remembered that the mere fact that some of those who
are engaged in these are alleging loss after the imposition
of law will number render the law unreasonable. by its very
nature industry or trade or companymence goes through periods
of prosperity and adversity on account of econumberic and
sometimes social and political factors. in a largely free. econumbery when companytrols have to be introduced to ensure
availability of companysumer goods like foodstuff cloth and the
like at a fair price it is an impracticable proposition to
require the government to go through the exercise like that
of a companymission to fix the prices. the tariff board and the
tariff companymission did number deal with the question of fixing
prices with a view only to holding price line and in the
circumstances that justify giving preeminent preference to
the interest of the companysumer or general public over that of
the producers of the companymodity and the dealers. even these
commissions cannumber always make a companyrect estimate of a price
which is fair to all because there are intricacies of the
trade of all profit making enterprises which a companymission
may number be able to probe. as an illustration the tariff
commission report points out that many textile mills use
cotton mixes with a view to reducing companyt and the result of
such mixes is difficult to discern. when available stocks go underground and the government has
to step in to companytrol distribution and availability in
public interest fixing of price can therefore be only
empirical. market prices at a time when the goods did number
go underground and were freely available the general rise
in prices the capacity of the companysumer specially in case of
consumer goods like foodstuff cloth etc. the amount of loss
which the industry is able to absorb after having made huge
profits in prosperous years all these enter into the
calculation of a fair price in an emergency created by
artificial shortages. in this companytext the observations of
this companyrt in chintaman rao v. state of madhya pradesh
 1950 s.c.r. 759 are that the phrase reasonable
restriction companynumberes that the limitation imposed on a
person in enjoyment of the right should number be arbitrary or
of an excessive. nature beyond what is required in the
interest of the public. in secretary of agriculture v. central reig refining companypany
 94 law ed. 381-335 u.s. 664-620  the sugar act of 1948
which allotted to specified domestic sugar-producing areas
some within and some without the companytinental united states
an annual quota of sugar specifying the maximum number of
tons which might be marketed on the mainland from each of
those areas was challenged. the challenge was based on the
due process clause of the fifth amendment because of alleged
discriminatory character and the oppressive effects of the
refined sugar quota established by the act. the act
established limits on the tonnage of refined sugar which
might be marketed annually on
the mainland from the offshore areas as part of their total
sugar quotas. the act did number subject mainland refiners to
quota limitations upon the marketing of refined sugar. the
secretary was authorised to allot the refined sugar quota of
a particular area among those marketing the sugar on the
mainland from an offshore area to provide a fair distribu-
tion of the quota by companysidering three factors namely
first processing of sugar to which proportionate shares
determined pursuant to the provisions of the act pertained
second past marketing and third ability to market the
amount allotted. it was held there that the companygress instructed the secretary
to make allotments in such manner and in such amounts as to
provide a fair efficient and equitable distribution. the
secretary was given discretion companymensurate with the
legislative goal. allocation of quotas to individual
marketers was deemed an essential part of the regulatory
scheme. the companyplexity of problem affecting raw and refined
sugar in widely separated and econumberically disparate areas
accentuated by the instability of the differentiating
factors must have persuaded companygress of the need for
continuous detailed administrative supervision. the companyrt
therefore held that the secretarys judgment would number be
replaced to that of the companyrt by holding on the record that
the secretary acted arbitrarily in reaching the companyviction
that the years 1935-41 furnished a fairer measure of past
marketings than the war years. it was also said suffice it
to say that since companygress fixed the quotas on a historical
basis it is number for this companyrt to reweigh the relevant fac-
tors and perchance substitute its numberion of expediency and
fairness for that of companygress. this is so even though the
quota thus fixed may demonstrably be disadvantageous to
certain areas or persons. this companyrt is number a tribunal for
relief from the crudities and inequities of companyplicated
experimental econumberic legislation. in the present case the
legislative measures have left the question of resolving the
econumberic problems of increasing supplies equitable
distribution and availability of essential companymodities at
fair prices to the judgment of the statutory authorities. the main plank of the petitioners companytention that a fair
price means a determination with regard to the companyt of raw
material manufacturing companyt and a reasonable return on the
capital employed in the business was founded on the
construction that sub-sections  3   3a   3b  and  3c  of
section 3 of essential companymodities act 1955 companystitute a
single scheme and what is implicit in sub-section  3  is
made explicit in sub-section  3c . the power to fix companytrolled price is in section 3  2   c
read with section 3  1  and number in section 3  3  of the
1955 act. in sub-section  2   c  of section 3 it is stated
that the order may provide for companytrolling the price at
which any essential companymodity may be bought or sold. the
dominant words in section 3  1  are that if the government
is of opinion that it is necessary or expedient to provide
for maintaining or increasing supplies of any essential
commodity or for securing their equitable distribution and
availability at fair prices the government may by order
provide as mentioned therein. sub-section  3  provides that where an order under section
3  2   f  of the act is made requiring any person holding
any stock to sell to the government or to any officer or to
any class of person the price under sub-section  3  can be
fixed  a  by an agreement companysistent with companytrolled price
or  b  if there is numberagreement with reference to companytrolled
price or  c  the market price where neither of the two
courses is possible. sub-sections  3a   3b  and  3c  deal with specific cases of
foodstuff foodgrains edible oilseeds edible oil and
sugar respectively. sub-section  3a  of section 3 is an
exception to sub-section  3 . subsection  3a  applies when
there is a numberification in the official gazette that
numberwithstanding anything companytained in sub-section  3  the
price shall be regulated in the case of foodstuff in
accordance with the provisions of sub-section  3a . in sub-
section  3b  it is stated that where either there is no
numberification under sub-section  3a  or any such numberification
has ceased to remain in force by efflux of time the
contingencies mentioned therein will happen. again in sub-
section  3c  the matters companytemplated are similar to sub-
section  3b . the differences between sub-sections  3  and  3a  on the one
hand and sub-sections  3b  and  3c  on the other are these. subsections  3  and  3a  speak of fixing price by agreement
consistent with or with reference to companytrolled price or
failing both market rate prevailing in the locality during
three months preceding the date of the numberification. sub-
section  3b  speaks either of companytrolled price or where no
such price is fixed the price prevailing or likely to
prevail during the post harvest period in the area to which
the order applies. in sub-section 3c  which relates to
sugar price is to be calculated with reference to minimum
price of sugarcane manufacturing companyt of sugar duty or
tax and a reasonable return and different prices may be
provided for different areas or factories or different
kinds of sugar. therefore companytrolled price fixed under section 3 1  read
with section 3  2   c  is different from price under sub-
sections  3a   3b  and  3c . the companytrol of prices may have effect either on maintaining
or in creasing supply of companymodity or securing equitable
distribution and availability at fair prices. the
controlled price has to retain this equilibrium in the
supply and demand of the companymodity. the companyt of production
a reasonable return to the producer of the companymodity are to
be taken into account. the producer must have an incentive
to produce. the fair price must be fair number only from the
point of view of the companysumer but also from the point of
view of the producer. in fixing the prices a price line
lids to be held in order to give preference or predominant
consideration to the interest of the companysumer or the general
public over that of the producers in respect of essential
commodities. the aspect of ensuring availability of the
essential companymodities to the companysumer equitably and at fair
price is the most important companysideration. the producer should number be driven out of his producing
business. he may have to bear in the same way he does when
he suffers losses on account of econumberic forces operating in
the business. if an
essential companymodity is in short supply or there is hoarding
cornering or there is unsual demand there is abnumbermal
increase in price. it price increases it becomes injurious
to the companysumer. there is numberjustification that the
producer should be given the benefit of price increase
attributable to hoarding or companynering or artificial short
supply. in such a case if an escalation in price is
contemplated at intervals the object of companytrolled price
may be stultified. the companytrolled price will enable both
the companysumer and the producer to tide over difficulties. therefore 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 companysidered so that the
producer does number perish and the companysumer is number crippled. the petitioners companytended that the companytrol over prices of
yarn in relation to ex-mill prices would number serve the
purpose of companytrol because there is numbercontrol over retail
prices. the numberification. dated 31st march 1973 companyfers
power on the deputy companymissioner and the district companylector
to specify maximum prices at which yarn may be sold by the
dealer in their respective jurisdiction. in specifying the
maximum price the factors to be taken into companysideration
are  a  invoiced price of yarn  b  incidental charges
including transport and local taxes  c  such reasonable
margin of profit number exceeding two per cent of the invoiced
price as may be determined in each case and  d  any other
relevant factor. in the case of companynts of 59s and below the companytrolled price
fixed is the highest ex-mill price or the highest companytract
price as the case may be for deliveries effected in
december 1972 with 6 per cent increase in the case of yarn
producers situated in the states of tamil nadu and
pondicherry. in companynts of yarns of 40s and below there was
numberincrease of price for 10 months ending december 1972.
it means free market price. it reflects companyts of production
and-reasonable return. he numbermal companyditions of supply and
demand are indicated. the prices fixed for companynts of 59s and below include
appreciation in prices in 1970-71 when companyton crop was low
and the price in 1971-72 which in spite of bumper crop and
fall in price of companyton did number decrease but were higher
than the pool prices of the distribution scheme. companyton
prices represent 70 per cent of the companyt of production of
the yarn. in december 1972 the price of companyton fell by 24
points from 209 to 185 whereas the prices of yarn
appreciated by 29 points from 174 to 203. thus the
controlled price fixed for yarn is much more than fair price
to the companyton yarn producer. in december 1972 prices of
yarn were favourable to the yarn producer. this is
established in writ petition of bihar companyton mills. it is
stated there that in 1972 favourable market companyditions
enabled the companyton mills to improve its profit and wipe out
2/3rd of the accumulated losses amounting approximately rs. 930000/-. in the case of companynts of 60s and above the regulated yarn
prices adopted for individual producers of yarn are the
difference between the highest companytract price for the
relevant companynt on 1 june 1972 or the nearest  late in case
numbersale was effected on 1 june 1972 and the highest
contract price for the relevant companynt during january 1972
and
15--l522supci/74
allowing one-half of the difference to be reduced from
june 1972 price. on this price a 6 per cent increase has
been allowed in addition where there is numberelectricity power
cut. the 6 per cent increase appears to be for allowing
changes in the prices of companyton since august 1972 increase
in labour companyts and the impact of 40 per cent import duty on
imported companyton. january 1972 is selected as base because
it was since january 1972 that the prices of yarn of
superfine companynts of 60s and above went up. price went up at
that time on account of strike in companymbatore mills during
february-march 1972 unauthorised despatch to foreign
countries power cut in maharashtra and tamil nadu. therefore january 1972 was the time when numbermal market
forces were in operation. the benefit of one-half of the
price increases which took place between january-june 1972
on account of factors which do number enter into determining
the companyt of production have also been taken into
consideration. the mere suggestion that numberprovision is made for adjustment
on account of changes in the companyt of production does number
amount to infringement of fundamental right to carry on
business and to hold and dispose of property. there is no
material to show that increase in yarn prices was on account
of companyt of production. the fixing of companytrolled price is
much more than a fair price to the producer on the date it
is fixed. the prices of new companyton crop i.e. for
september 1973 to august 1974 are number knumbern at the time of
the fixation of the price. even when they are knumbern the
petitioners will have to show with reference to the
different types of mixes used in producing yarn the impact
of companyton prices on the companyt of production of that category
of yarn. further even if there is increase in the companyton
prices the petitioners can absorb it because the companytrolled
price fixed is more fair to the producer. if he sustains
alleged losses or some time it will be a reasonable
restriction because the object of the price companytrol is to
hold the price line or revert the prices to numbermal levels
and make available companyton yarn to the handloom and powerloom
weavers at a fair price which will enable them to withstand
competition from mill-made cloth. it is number shown here that
the companytrolled price is so grossly inadequate that it number
only results in huge losses but also is a threat to the
supply position of yarn. the companytrolled price is in the
interest of the companyntry as a whole for just distribution of
basic necessities. the companytrolled price is neither
arbitrary number an unreasonable restriction. the sixth companytention turned on what is described as
channelisation of yarn distribution. the impugned orders
are made in exercise of powers companyferred by clause 30 1   a
of the companyton textiles order 1948. the producers of yarn
are prohibited from selling or delivering yarn to any
person other than the five channels mentioned in the order. the five channels are  a  the numberinees of the state
governments  b  the handloom export promotion companyncil
madras  c  the companyton textiles export promotion companyncil
bombay  d  federation of hosiery manufacturers association
and  e  any other person as may be numberinated by the textile
commissioner. by an order dated 21 june 1973 companynts 17s and below were
excepted from the operation of the order. by anumberher order
dated 4 august
1973 companynts 40s and below were excepted from the order. the
position of yarn supply is under companystant review of the
government. the press statement of 21 june 1973 shows that
the companytrol over distribution of yarn upto companynts 17s is
relaxed because the quantities are adequate to meet the
demand. similarly by subsequent numberification companytrol over
distribution of yarn upto companynts 40s has been relaxed. the impugned orders as they stand require the producers to
sell to these five channels on the basis of directions
issued by the textile companymissioner. the dealers are
required to sell or deliver yarn to  a  numberinees of the
state government and  b  any other person as may be
numberinated by the textile companymissioner in such quantities as
may be determined by the deputy companymissioner or district
collector. the prices for such sale are on companysideration of  a
invoiced price of yarn  b  incidental charges including
transport and local taxes  c  such reasonable margin of
profit number exceeding two per cent of the invoiced prices as
the deputy companymissioner or the district companylector may
determine in each case and any other relevant factor. there
is thus price companytrol as well as distribution companytrol to
meet the problems of availability of goods at reasonable
prices. the seventh companytention of the petitioners as well as the-
interveners was that the impugned orders requiring the
producer to deliver yarn only to the five channels of
distribution mentioned therein created monumberoly in favour of
specified persons and therefore there was violation of
articles 19 1  f  and  g  and 301 of the companystitution. it
was also said that there was numberobligation on the
distribution channels to buy from the mills. companynsel on behalf of the traders who intervened submitted
that there was numberjustification for canalisation of the
goods because it was number in public interest and it was a
total ban on traders. it was also said that there would be
neither equitable distribution number availability of goods
because the order did number provide that it would reach the
weavers and the order also did number provide that the agencies
were to sell at specified rates. the fifth channel of
distribution viz any other person as may be numberinated by
the textile companymissioner was attacked on the ground that
there was numberclassification and it companyferred arbitrary power
of choice. the companyton textiles companytrol order 1948 companyfers power by
clause 30 to impose companytrol over distribution of yarn. the
order states that such power is required to be exercised
with a view to securing proper distribution of cloth or
yarn. the textile companymissioner with a view to securing
compliance with the directions issued by him shall have re-
gard to  a  requirements of various categories of persons
specified in clause 30  b  availability of cloth or yarn of
different descriptions and  c  requirements of any local
area. handloom weavers are the bulk companysumers of yarn of companynts of
40s and below. there is numbercontrol over distribution of
this yarn. therefore it is said that traders in this
class of yarn are free to charge any price whereas companytrol
is imposed on the producers. the government excepted companynts
40s and below from the operation of the order when
availability was ensured. further traders in this category
of companynts 40s and below cannumber sell at any price they like
because the maximum retail price has to be prescribed by the
deputy companymissioners or the district companylectors and no
trader can sell at a price higher than that price. the
price specified by the deputy companymissioners or the district
collectors takes into companysideration the reasonable margin of
profit number exceeding 2 per cent of the invoiced price. maximum retail price is specified for all companynts. therefore profiteering in the sale of yarn of all companynts is
eliminated. the distribution channels are companytended to be monumberolies in
favour of specified persons. the traders say that they are
substituted by the distribution channels as middleman. the
numberinees of the state government under the distribution
channel companyld be any dealer chosen and favoured by the
deputy companymissioner or the district companylector. it is said
that freedom of trade is violated. these companytentions are
unsound for these reasons. the channels of distribution are
agencies of the state for distribution purposes. further
the handloom export promotion companyncil madras the companyton
textiles export promotion companyncil bombay and the federation
of hosiery manufacturers association are associations of
users of companyton yarn. they can demand service charges. if
middlemen be totally excluded the companytrol scheme does number
become unreasonable just because a part of the ban in regard
to companynts of 40s and below is relaxed. 87 per cent of the
total yarn marketed is in companynts 40s and below. traders are
permitted to carry on trade in them though prices are
specified for such companynts. the balance 13 per cent of yarn
is in companynts of 40s and above. the requirement number to sell
yam at a price above the maximum price operates on all
distributing channels. even if an ordinary dealer is chosen
by the government within the fifth category of distribution
channel viz. any other person as may be numberinated by the
textile companymissioner such person companyld also be actual
consumer of yarn. the numberification number cer/20/73 dated 31
march 1973 states that the numberinees can be any dealer
carrying on business of selling yarn. the distribution
control is intended to ensure availability of yam at
reasonable or fair price. profiteering hoarding companynering
are the evils to be eliminated. it is number that all dealers
in yarn have been denied the right to carry on trade. it is
only those whose carrying on trade in yarn would number in the
opinion of the textile companymissioner ensure availability of
yarn to actual companysumers at the fair price. black marketing
as the expression goes is to be weeded out in this manner. the selection of traders is made on the basis of ensuring
availability of yarn at a fair price. elimination of
persons who have hoarded or companynered or are unscrupulous in
distribution is intended in public interest. this is a
reasonable restriction in the interest of the general public
and is companytemplated in article 19 6  of the companystitution. in rashbihari pande v. state of orissa 1969 3 s.c.r. 374
the government invited offers for advance purchases of kendu
leaves but restricted the invitation to those individuals
who had carried out companytracts in the previous year without
default and to the satisfaction of the government. the
scheme was held by this companyrt to be discriminatory and
unreasonable restriction upon the rights of persons other
than the
existing companytractors and the scheme of selected purchasers
was number protected by article 19  6   ii . in the present
case the traders cannumber make any profit they like because
of specified prices. in bhatnagars company v. union of india 1957 s.c.r. 701 the
importers resorted to malpractices leading to speculation
and fluctuation in prices. the government therefore
canalised distribution of the goods by inviting tenders for
the grant of import licences. this companyrt held that it was
open to the government in national interest to intervene and
regulate the distribution in a suitable manner. the power to regulate sale through licensed vendors to whom
quotas are allotted and who are permitted to sell yarn at
fixed prices has been upheld in m s dwarka prasad laxmi
narain case  supra . but a numbere of possible mischief was
indicated in instances where numberrule or principle to guide
them was stated or where numbercheck or companytrol by higher
authority was intended. the textile companymissioner in the
present case is guided by the provisions of clause 30 of the
order as well as by section 3 of the essential companymodities
act. the rules or principles for guidance are first
equitable distribution and second availability at fair
price. prices are fixed with limited profit to traders. further an aggrieved person can appeal to the central
government. in mannalal jain v. state of assam 1962 3 s.c.r. 936 the
assam foodgrains  licensing and companytrol  order 1961
conferred power on the authority to have regard to company
operative societies in the grant of licences. this companyrt
held that such preference did number create a monumberoly. the
co-operative societies in villages were held to be in a
better position for maintaining or increasing supplies and
for securing equitable distribution and availability at fair
prices in accordance with village econumbery. the question is
whether prohibition of others doing the business is
reasonable under article 19 6 . canalisation orders have been upheld by this companyrt as
reasonable within article 19 6  of the companystitution. the
recent unreported decision in m s daruka company v. union of
india writ petition number 94 of 1972 dated 31 august 1973
referred to the earlier decisions in glass chaton case
1962 1 s.c.r. 862 devasan of bhimji gobil case 1963 2

c.r. 73 and upheld the distributing channels of imports
and exports of different companymodities and goods. the petitioners companytend that though the order obliges
producers of yarn to sell to persons named there is no
obligation on those persons to buy and therefore it is an
unreasonable restriction. the petitioners supported this
contention by instances where those persons or bodies failed
to lift the stock of yarn. it is said that producers
therefore suffered losses. there were cases where the
allottees did number lift the goods when the voluntary scheme
was in operation. the allotment order on record shows that
the allotment of yarn is made subject to the companyditions that
the allotted yarn would be lifted within 15 days of receipt
of intimation from the mill after making necessary payments. if any portion of the yarn is number paid for and lifted within
the stipulated time the state government may intimate the
same to the companyton companyporation of india and the
millsconcerned. the companyton companyporation will effect
payment and take charge of the yarn. the textile
commissioner on receipt of such intimation will issue the
reallotment orders and in respect of such reallotted yarn
the allottee state government will make necessary payments
to the companyton companyporation of india. the companyditions of
allotment ensure lifting of yarn by the numberinees of the
state government within a reasonable time. in the past at
the initial stages of the voluntary companytrol scheme the state
government numberinees were number adequately financially equipped
and that is why there were cases of number-lifting of yarn. it
cannumber happen number. the distribution companytrol scheme does number
impose an unreasonable restriction on the producers right
to carry on his business. it was said on behalf of the state that the petitions were
number maintainable because of the proclamation of emergency. during the proclamation of emergency article 358 does riot
apply to executive action taken during the emergency if the
same is a companytinuance of a prior executive action or an
emanation of the previous law which is otherwise violative
of article 19 or is otherwise unconstitutional. the
petitioners challenged the action or previous law to be
violative of fundamental rights. this companyrt in bennett
coleman company case 1972 2 s.c.r. 788 said during the
proclamation of emergency article 19 is suspended. but it
would number authorise the taking of detrimental executive
action during the emergency affecting the fundamental rights
in article 19 without any legislative authority or in
purported exercise of power companyferred by any pre-emergency
law which was invalid when enacted. therefore if it can
be shown that the executive action taken during the
emergency has numberauthority as a valid law its
constitutionality can be challenged. the companyton textiles
order 1948 was companytinued by essential companymodities act 1955.
the impugned orders are made under pre-emergency companyton
textiles companytrol order. the validity of the impugned orders
is challenged under article 19 1   f  and  g  of the
constitution on the ground that it is a pre-emergency
executive order which companyld have been challenged under
article 19 1   f  and  g  before the proclamation of
emergency.