SHAH KAUSHIKKUMAR RATILAL A REGD FIRM Vs. UNION OF INDIA
HIGH COURT OF GUJARAT
SHAH KAUSHIKKUMAR RATILAL
UNION OF INDIA
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B.J.DIVAN, P.D.DESAI -
(1.)In all these Special Civil Applications the common questions are the challenge to the provisions of certain sections of the Forward Contracts (Regulation) Act 1952 (Act No. 74 of 1952) (herein- after referred to as the Act) and the two notifications (1) dated 24th December 1964 and (2) dated 16th March 1967 issued under the provisions of sec. 18 sub-sec. (3) of the said Act. All the petitioners except the petitioner in Special Civil Application No. 1080 of 1969 are dealers in cotton seeds. The petitioner in Special Civil Application No. 1080 of 1969 is the Association called the Palej Cottonseed Buyers and Sellers Association. The narration of facts in Special Civil Application No. 2 of 1968 will be sufficient to bring out the controversy between the petitioners in each of these Special Civil Applications and the respondents. The Forward Markets Commission is respondent No. 2 in these Special Civil Applications and the Union of India is respondent No. 1 in each of these Special Civil Applications In Special Civil Application No. 2 of 1968 the petitioner is a partnership firm dealing in cotton seeds in the area of Baroda district and this partnership firm carries on its business at Dabhoi in Baroda District. It is the contention of the petitioner that the firm buys cotton seeds from the ginners and enters into contract with buyers to supply them cotton seeds as ordered by them. It is the contention of the peti- tioner that most of the contracts made by that firm with the buyers provide for the supply of a specified quantity of cotton seeds to be delivered to the buyer at his destination. The payment of price is made when goods are delivered i. e. when railway receipts are tendered to the buyers. The partnership firm contends that the firm also enters into contracts which are locally and collequially known as Palej Rate Dabhoi Rate contracts. Under these contracts the petitioner purchases or sells a specified quantity of cotton seeds at specified rates from the seller or the buyer as the case may be through an agent who sends a purchase transaction note or sale transaction note as the case may be to both the buyer and the seller. The buyer under these contracts undertakes an obligation to pay interest on the amount of the price at the specified rate till he takes delivery. This type of contract is prevalent in several areas for a very long time and they are genuine business transactions for giving delivery of the cotton seeds of the specified quantity at the specified rates. It is the contention of the petitioner that normally it takes about one month to two months to get railway wagons for transporting the cotton seeds to the destination. After the goods are booked for transportation a period of one month to two months normally elapses before the railway delivers the goods to the buyer at the destination station. Annexure A to the petition in Special Civil Application No. 2 of 1968 is the certificate issued by the Station Master of Sadhli Western Railway showing the date of placing an indent for a wagon and the date of supply of a wagon and this certificate is dated October 26 1967 Annexure A to the petition is relied upon by the petitioner for the purpose of showing that under no circumstances is it possible to obtain a wagon within 11 days of the date of placing the indent. It is the contention of the petitioner that the contracts known as Palej RateDabhoi Rate contracts are the genuine transactions of purchase and sale with the firm intention to give and take delivery of the goods contracted to be sold and in the business sense they are ready delivery contracts but within the said expression ready delivery contracts under the provisions of the Forward Contracts (Regulation) Act 1952 these contracts are not ready delivery contracts. The petitioner contends that under the definitions of forward contract and non-transferable specific delivery contract set out in sec. 2 of the Act the contract which it enters into with the buyer and seller of cotton seeds as Palej rate-Dabhoi rate contract would be a forward contract and would also be covered by the definition of non-transferable specific delivery contract. In the exercise of the powers conferred upon it by sec. 15 of the Act the Central Government issued notifications from time to time applying the provisions of the said section to different commodities including cotton seeds. So far as cotton seeds are concerned the provisions of sec. 15 of the Act prohibiting forward contracts in cotton seeds have been applied to the entire country that is throughout India. By the impugned notification of December 24 1964 issued in exercise of the powers conferred by sub-sec. (3) of sec. 18 of the Act the Central Government declared that the provisions of secs. 5 to 14 (both inclusive) and secs. 15 and 16 of the Act shall apply to non- transferable specific delivery contracts in respect of cotton seeds linseed and castorseed. These provisions of different sections of the Act have been made applicable in the whole of India except within the limits of Greater Bombay. Thereafter by another notification dated March 16 1967 the Government exempted from the operation of sec. 15 all non-transferable specific delivery contracts entered into by ginners for the sale of cotton seed obtained by the ginners by ginning kapas in their ginning factories or by a dealer in kapas for the sale of cotton seed obtained by him by getting his kapas ginned or by cotton seed crusher or by his authorised agent for the purchase of cotton seed for crushing the cotton seed in his own mill. The petitioner in Special Civil Application No. 2 of 1968 contends that there is no recognised association or a registered association in respect of cotton seeds in Dahhoi or in any nearby place. The petitioners case is that Dabhoi is a big centre of trade in cotton seeds and most of the trade in the surrounding areas in cotton seeds is done through normal trade channels in Dabhoi. The petitioners case is that genuine specific delivery contracts are treated as forward contracts on account of the provisions of the Act. The Forward Market Commission ordered searches to be made in the petitioners offices by the police authorities and it is likely that the Commission would treat such contracts as forward contracts and even order prosecution of the petitioner for contravention of the Act. Moreover it is likely that the parties with whom the petitioner has entered into contracts would also take advantage of law by setting up the defence that the contracts are void as being in contravention of the provisions of the Act. The petitioner has therefore challenged the vires of sec. 18(3) of the Act on the ground (a) that it violates Article 19(1)(g) of the Constitution as it does not fall within the category of reasonable restrictions on trade and (b) on the ground that the impugned sec. 18(3) confers an uncontrolled and uncanalised power to apply the provisions of sec. 15 or not to apply the provisions of sec. 15 to non-transferable specific delivery contracts in a particular commodity. The petitioner also challenges the notification dated December 24 1964 and the subsequent notification dated March 16 1967 on the ground that they discriminates between the parties specified therein and the traders like the petitioner and secondly on the ground that the notifications are contrary to the provisions of sec. 18(3) of the Act.
(2.)At the hearing of these petitions the arguments on behalf of the different petitioners were advanced by Mr. C. T. Daru. Though the case of different petitioners may vary slightly by and large they are all affected by the notification dated December 24 1964 in as much as the provisions of sec. 15 of the Act have been made applicable to non-transferable specific delivery contracts in cotton seeds The Union of India and the Forward Market Commission have both filed affidavits in reply contending that the provisions of sec. 18(3) are valid and intra vires the Constitution and they have also contended that the notification dated December 24 1964 and the subsequent notification dated March 16 1967 are valid and are within the power of the Central Government being the power conferred upon it by the provisions of the Act. They also contend that there has been no such discrimination between different dealers in cotton seeds as would invite the applicability of Article 14 of the Constitution. The contention on behalf of the respondents is that there is a rational basis of classification of those who are exempted from the operation of the provisions of sec. 15 of the Act in connection with non-transferable specific delivery contracts entered into by them and the rest of the dealers and that this basis has a rational nexus with the object of the Act.
(3.)We may point out that in order to explain the circumstances under which the notification dated December 24 1964 came to be issued the Government have put on record two letters one of September 11 1964 from the Chairman of the Forward Markets Commission to the Regional Director Ministry of Commerce Government of India New Delhi and the other being a letter dated December 14 1964 also from the Chairman of the Forward Markets Commission to Shri D. N. Banerjee Joint Secretary to the Government of India Ministry of Commerce New Delhi. Both these letters have been addressed by the Chairman of the Forward Markets Commission to the respective officers in order to urge upon the Government the desirability of applying the provisions of sec. 15 of the Act to non transferable specific delivery contracts in cotton seed and other oil seeds. Copies of these two letters have been by consent of the parties taken on the record in Special Civil Application No. 2 of 1968 and it was agreed by all the parties before us that these two letters should be considered while deciding this group of matters.
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