GROVER - (1.) THESE petitions under Art. 32 of the Constitutionwere filed by Premier Automobiles Ltd., Hindustan Motors Ltd. and Standard Motor Products of India Ltd.,manufacturers of Fiat, Ambassadorand Standard motor cars respectivelyand two of the dealers of such cars.The petitioners challenged the fixationof fair price of the said three passenger cars by the Government of Indiaby the Motor Car (Distribution andSale) Control (Amendment) Order 1969promulgated linder S. 18G of theIndustries (Development and Regulation) Act 1951, hereinafter called the"Order" and the "'Act" respectively.The ex-factory prices of the three carswere fixed as follows:Hindustan Ambassador : Rs. 15,316.00Fiat 1100-D : Rs. 14,325.00Standard Herald 4 Door : Rs. 14,003.00
(2.) . These prices were inclusiveof dealer's commission but did not include the excise duties. Central Salestax and local taxes, if any, and transport charges. The manufacturers ordealers were prohibited from sellingor offering for sale or otherwise transferring or disposing of the motor carsfor a price exceeding the price givenin the order. The order was madeafter taking into consideration the recommendations of the Tariff Commission to whom the question of determination of a fair price of motor carshad been referred by the CentralGovernment under clause (d) of S. 12 ofthe Tariff Commission Act 1951. . On May 5, 1970 after hearing the petitions for some days thiscourt recommended to the Governmentto appoint a Commission for the purpose of suggesting a fair price for thethree cars by taking into considerationall relevant matters. On May 27, 1970the Government of India constituted aCommission consisting of Shri SarjooPrasad a retired Judge of the PatnaHigh Court as Chairman, Shri R. K.Khanna Chartered Accountant andBrig. V. Minhas Director of Inspection(Vehicles), Deptt. of Defence Production as Members. By a notificationdated June 5, 1970 all the provisionsof the Commission of Enquiry Act1952 were made applicable to theCommission. The Car Price EnquiryCommission, hereinafter called the'Commission' devoted a good deal oflabour and attention to the matter offixing a fair price of the three cars. Itsreport consists of two volumes. Thefirst volume contains the main reportand the second volume contains theappendices. . The Commission in its reporthas adverted to the historical background in which the car industry cameto be controlled in our country. It willbe useful to notice the salient facts.Till the year 1928 motor vehicles werepurchased directly from abroad orthrough agents and dealers in India.From 1928 till the early forties General Motors India Ltd. and Ford MotorCompany of India Ltd. used to assemble trucks and cars from componentsimported from United States in completely knocked down condition calledC. K. D. by way of abbreviation. Hindustan Motors Ltd. Calcutta and thePremier Automobiles Ltd. Bombay,two of the petitioners before us, wereestablished in 1942 and 1944 respectively with a programme for progressive manufacture of complete automobiles. These companies entered intotechnical collaboration with foreignmanufacturers as did the StandardMotor Products of India Ltd. In theIndustrial Policy Resolution of 1949of the Government of India automobiles and trucks were classed amongindustries of importance which wouldbe subject to regulation and control bythe Central Government. In 1949 theGovernment decided that the importof vehicles should be allowed only inC.K.D. condition. In March 1952 theGovernment asked the Tariff Commission to enquire into the question ofgrant of protection to the automobileindustry in India, The Tariff Commission submitted its report in 1953recommending that only those companies which had an approved manufacturing programme should be allowed to continue their operation whichrecommendation was accepted by theGovernment. In August 1955 the Government of India asked the TariffCommission to enquire into and recommend the fair ex-works and sellingprices of the automobiles. The TariffCommission submitted its report inOctober 1956. According to that reportthe margin between the current netdealer's price and ex-works cost of thecars and trucks produced by the approved manufacturers could not beregarded as excessive. It consideredthat a rigid system of price controlwas not likely to have a healthy effecton the development of the industry.The interest of the consumers could beproperly protected if investigationswere held after certain intervals inorder to see that excessive prices werenot actually charged although themanufacturers were left free to chargeprices at their discretion. The Government took a decision to enforce an"informal price control" on automobiles which was accepted by the manufacturers. The manufacturer was freeto revise the price from time to timeaccording to the variation in the costbut had to give a month's notice ofany variation to the Government sothat if the change proposed was primafacie unreasonable the Governmentcould intervene. The net dealer's pricewas not to exceed the ex-works costby more than 10%. Within a fewyears of the imposition of the informalprice control the situation in the country changed owing to the scarcity offoreign exchange. The Government hadto curtail foreign exchange allocationfor the import of automobile components with the result that only three outof the then existing six models of passenger cars were left in regular production. The Government consideredit necessary to introduce a Distribution Control Order which required thedealer to deliver vehicles in the orderof registration and without discrimination. A committee was appointed consisting of Shri L. K. Jha as Chairmanand other experts to reviewthe progress of the automobileindustry and to recommend measures in the matter of reduction of cost etc. The Jha Committeesubmitted its report in January 1960.According to the findings of that Committee there had been neglect and inefficiency in production owing to therebeing hardly any competition. TheCommittee felt that greater disciplinewas called for both so far as ancillaryand the main producers were concerned.As regards the taxation policy theCommittee felt that "lower level oftaxation per vehicle would stimulatemore demand for them".
(3.) . The Government in May1966 remitted the question of furthercontinuance of protection being accorded to the automobile industry to theTariff Commission and also directedthat Commission to enquire into thecost structure and the fair sellingprice of different types of automobiles.The Tariff Commission made comprehensive recommendations and it wason the basis of its recommendationsthat the Order was issued in September 1969 fixing the prices of the threecars. In July 1967 the Governmenthad also directed an investigationunder S. 15 of the Act into the qualityof the three cars by a Committee headed by Shri G. Pande. The Commission was to look into the complaintsrelating to deterioration in quality andother allied matters including the partplayed by the ancillary and otherindustries. The Pande Committee submitted its report in December 1967. Itrecommended inter alia that thereshould be a separate Quality Controland Inspection Department and thatcomponents carrying ISI certificationmarks should be preferred. In November 1968 the Government set up ateam of experts headed by Dr. A. N.Ghosh the then Director General ofthe Indian Standard Institution. Thisteam was required to examine the"internal expert organisation" of thethree car makers and to .make recommendations for strengthening them.The Ghosh Committee endorsed theview of the earlier Pande Committeewith regard to the establishment oftechnical audit cells. These cells wereto be established for watching the in-terest of the consumers and ensuringImprovement in quality of cars whichwere being manufactured by the threepetitioners. . The procedure followed bythe Commission may be briefly noticed.It invited by means of a detailed questionaire full information from the carmanufacturers, dealers, consumers andothers interested in the inquiry. It appointed a team of Cost Accountantsand another team of technical expertsbesides a Chartered Accountant. Theseteams studied and collected data fromeach of the three manufacturing unitsand examined their manufacturingprocesses. The cost structure and activities of some of the ancillary producers and dealers of automobiles werealso studied apart from visits to themanufacturing units. The Commission examined witnesses who wereproduced by the Union of India, theconsumers, the dealers and the manufacturers.;