9911796707
TMI Blog1962 (4) TMI 92X X X X Extracts X X X X X X X X Extracts X X X X ..... ertain types of forward contracts in cotton including that known as "hedge contracts" was "detrimental to the interest of the trade and the public interest and to the larger interests of the economy of India" and directed these contracts to be closed out, to be settled at prices fixed in the notification. It is necessary to set out briefly certain facts in order to appreciate the points raised by the appeal. The fast India Cotton Association is an "association" which has been recognised by the Central Government under a. 6 of the Act. The three appellants are members of the Association carrying on business in partnership. The appellants had, prior to December 1955, entered into "hedges contracts" in respect with other members of the Association for settlements in February and May 1956. There was no dispute that these contracts were in accordance with the bye-laws of the Association as they stood at the date when the contracts were entered into. The terms and conditions of forward contracts in cotton including "hedge contracts", and the manner of their implementation, were governed by the provisions contained in certain bye-laws of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t also were anxiously considering the steps to the taken to solve or avert the crisis. The action which the government took in this matter is reflected in a notification issued by them on December 23, 1955, by which in exercise of the powers conferred in them by s. 14 of the Act they directed the Association to suspend its business in Indian cotton edge contracts for delivery in February 1956 and May 1956 for a period of 7 days with effect from the date of the notification. The situation did not apparently improve as a result of this temporary suspension so that before the expiry of the work fortnight, action under the same provision was gain taken under a notification dated December 10, 1955, by which the period of 7 days was extended by a further period of 7 days i. e. till 6, 1. 56A meeting of the Board of Association was held on January-6, 1956, i. e., the day on which the suspension of forward business expired when the following-, resolution was unanimously passed: - "'In view of the suspension of forward trading by government the Board hereby resolves under bye-law 52 that an emergency has arisen or exists and prohibits until further notice, subject to the concurrence o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... January 23, 1956. We might here state that the validity of this new bye-law has been impugned on various grounds and the alleged invalidity of this We-law serves as the main foundation for challenging the validity of the notification of the Forward Markets Commission issued under the powers conferred by it. On January 24, 1956, the appeal from the order refusing the interim injunction in Suit No. 2 of 1956 was settled between the parties on , theme terms : "(1) The impugned resolution dated January 6, 1956, declared to be valid, (2)The Board of Directors to meet on January 25, 1958, and consider under bye-laws 52 (2) whether the rate of ₹ 700 fixed under the said resolution should continue or whether it should be waived. 'In considering the same the Board will apply its own mind and exercise its own judgment". On the same day, i.e. January 24, 1956, the Forward Markets Commission took action under-the powers vested in them under the new bye-law 52 AA which had been made by government three days earlier. By a communication addressed to the Chairman of the Association, the Commission stated : "'In pursuance of cl. (1) of the bye-law 52AA of the Bye-laws of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... all, be validly applied only to Forward hedge contracts entered into thereafter. (3) The notification by the Forward Markets Commission was improper and malafide and was therefore invalid. It would be convenient to deal with these points in that order : (1) The first of the points raised raises the question of the validity of bye-law 52 AA as amended by the Central Government on January 21, 1956. Learned Counsel divided his submission on this matter into two sub-heads- (a) that the Forward Markets Commission could not, on a proper construction of the Act, be validly vested with the power with which it was clothed by the amended byelaw, and (b) that it was beyond the power of the Association to have conferred the power which it purported to do under the amended bye-law 52AA. Put in other words, the objections were that the Forward Markets Commission could not, having regard to the terms of the statute under which it was created, be a proper recipient of the power 'with which it was vested by the bye-law and secondly that the Association was in law incapable of conferring that power on the Forward Markets Commission or on any other body. We shall first take up for consideration the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rd markets ; (e) to undertake the inspection of the accounts and other documents of any recognished association whenever it considers it necessary ; and (f) to perform such other duties and exercise such other powers as may be assigned to the Commission by or under this Act, or as may be prescribed". Pausing here it is necessary to add that the expression prescribed" found at the end of cl. (f) has been defined by s. 2(h) of the Act to mean "Prescribed by rules made under the Act". Before considering the points urged as regards the construction of this section taken in conduction with the terms of s.3(1) we shall refer to a few other provisions which are of some relevance in the present context. Section 3(2) which confers power on the Central Government to call for periodical returns from Recognised Associations and to direct such enquiries as they consider necessary to be made, empowers the government to direct the Commission to inspect the accounts and other documents of any recognised Association or of any of its members and submit its report thereon to the Central Government [vide s. 3(2) (c)]. Subs. (4) of this section enacts : "8(4). Every recogn ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... their essence either recommendatory or advisory. In the context therefore #,,the other" duties or '-,other" powers which may be assigned to the Commission under cl. (f) must be either ejuesdem generis with advisory or recommendatory powers or of a nature similar to those enumerated in the previous subclauses. In support of these submissions learned Counsel invited our attention to several decisions in which ancillary powers which might be implied from the grant of certain express powers were referred to. In particular it was submitted that the Court would not imply a power which it was not absolutely necessary to effectuate on express grant or was need to prevent the nullification of an express power that was granted. In our opinion, these decisions afford no assistance for resolving the controversy before us. There is no question here of deducing an implied power from the grant of an express one. What we are concerned with is the scope of an express power or rather whether the grant of the power conferred upon the Commission by the bye. law could be held to be a power which could be assigned to the Commission under cl. (f). So far as the terms of el, (f) are concerned, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t one that was conferred ""by or under the Act or as may be prescribed". Learned Counsel is undoubtedly right in his submission that a power conferred by a bye-law is not one conferred "by the Act", for in the context the expression "conferrod by the Act" would mean "conferred expressly or by necessary implication by the Act itself". It is also common ground that a bye-law framed under s. II or 12 would not fall within the phraseology "as may be prescribed", for the "expression" 'Prescribed' has been defined to mean "'by rules under the Act", those framed under s. 28 and a bye-law is certainly not within that description. The question therefore is whether a power conferred by a bye- law could be held to be a power ",conferred under the Act". The meaning of the word ",under the Act" is well-known. "By" an Act would mean by a provision directly enacted in the statute in question and which is gatherable from its express language or by necessary implication therefrom. The words under the Act " would, in that context, signify what is not directly to be found in the statute itsel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... its bye-laws under s. 18, they are not in either case Subordinate legislation under s. 11 or 12 as the case may be, of the Act and they would therefore squarely fall within the words ,-under the Act" in s- 4(f). Indeed, we did not understand Mr. Pathak to dispute this proposition. His contention however was that when cl. (f) specifically made provision for powers conferred by "rules" by the employment of the pbrase "or as may be prescribed" and, so to speak, took the "rules" out of the reach of the words "'under the Act" it must necessarily follow that every power confered by Subordinate law making body must be deemed to have been excepted from the content of that expression and that consequently in the Content the word ,,'by the Act" should be held to mean ,,directly by the Act" i.e., by virtue of positive enactment, of the words "under the Act" should be held to be a reference to powers gatherable by necessary implication from the provisions of the Act. As an instance learned Counsel referred us to the power of the Central Government to direct the Commission to inspect the accounts and other documents of any recogni ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot competent for the Association to have framed this bye-law and that the powers of the Central Government under s. 12 and of the Association under s. 11 in regard to the framing of bye-law being co-extensive, the bye-law framed was not competent to confer any power on the commission. This contention was urged with reference to two considerations: (a) that a bye-law of the type now in controversy was not within s. II of the Act, and (b) that having regard to the provision contained in the Articles of Association of the Association the bye-law was beyond the powers of the Association to frame. These we should deal in that order. The first objection naturally turns upon whether the bye-law is one which could be comprehended with s. 11 of the Act. Its first sub-section enacts; " 11 (1) any recognised association may, subject to the previous approval of the Central Government, make bye-laws for the regulation and control of forward contract." That the impugned bye-law is one for the regulation and control of forward contracts cannot be disputed, and the terms being very general would include a bye-law of the type now impugned. In this connection reference may be made to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uot;52.(1) If in the opinion of the Board an emergency has arised or exists, the Board may, by a resolution, (i) passed by a majority of not less than --and (ii) confirmed prohibit, as from the date of such confirmation or from such later date as maybe fixed by the Board in the resolution referred to in sub-clause (1), (a)trading in the Hedge Contract for any delivery or deliveries -- ------or (b) all trading in such contracts as are referred to in clause (a) for a specified period------------------------ "52A.-If the Board, at a meeting specially convened in this behalf, resolve that a state of emergency exists or is likely to occur such as shall in the opinion of the Board make free trading in forward contracts extremely difficult, the Board shall so inform the Forward Markets Commission and upon the Forward Markets Commission intimating to the Board its agreement with such resolution, then notwithstanding anything to the contrary contained in these bye-laws or in any forward contract made subject to these Byelaws, the following provisions shall take effect- (1)The Board shall at a meeting specially convened in this behalf, (a ) fix a date for the purpose hereinafter ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aw 52AA is well within the bye-law making power under s. 11 of the Act and therefore within 12. It was then said that the amended bye-law 52AA wag invalid as in violation of the Articles of Association of the Association being an impermissible delegation of the powers vested in the board of the Association by its Memorandum of Articles. In this context Mr. Pathak placed reliance on cl. 64 of the Articles as laying down the limits within which the Board might delegate their powers. He contended that the conferment of the power to take action on the Forward Markets Commission was thus contrary to and inconsistent with the powers of the Association under this Article. It would be seen that if learned Counsel is right, this would render invalid not merely bye-law 52AA as now amended but even the bye-law as it originally stood, but as already stated learned Counsel urged that he was not precluded from raising this contention. This point was not raised in the Court below but having beard arguments on it we shall pronounce upon it. We consider that there is no substance in this objection. Article 64 on which reliance was placed runs in these terms: "The Board may delegate any of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a (7) repeats inter alia the contents of Paragraph III (e) of the Memorandum of Association which we have extracted, The entire argument of Mr. Pathak on Article 64 was based on the footing that the power to make a bye-law was vested solely in the Board, because it is only the powers of the Board that are subject to the limitation imposed by Article 64. If however the power to make a byelaw was not confined to the Board but bye-laws might be framed by the Association itself, the argument based on Article 64 would be seen to have no validity. That the later is the true position is clear from Article 73 which reads: "The Board's powers as aforesaid in relation to bye-laws shall not derogate from the powers hereby conferred upon the Association who may also in the same way and for the same purpose from time to time pass and bring into effect new bye-laws and rescind or alter or add to any existing bye-law by resolution passed by a majority of two-thirds at the least of the Members present and voting at the General Meeting previous to which at least fourteen day's notice has been given that a Member intends at such meeting to propose the making of such bye-law or the decision, al ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e contract" and "every on call contract" "in so far as cotton is uncalled thereunder or in so far as the pride has not been fixed thereunder". This therefore places it beyond doubt that executory contracts which were subsisting on the date of the notification were within its scope and were intended to be affected by it. And this, if anything more needed, is made more certain by the I reference in parts (2) to the provisions of old. (3), (4) and (6) of bye-law 52A. Bye-law 62A deals with cases where the Board of the Association resolves repeat its terms "that a state of emergency exists or is likely to occur which makes free trading in forward con. tracts difficult and on obtaining the concurrence of the Forward Markets Commission, then notwithstanding anything to the contrary contained in these Bye-laws subject to these Bye-laws. The following provision %hall have effect "(1) The Board shall at a meeting specially convened in this behalf, (a) fixa date for the purposes herein. after contained, (b) fix settlement prices for forward contracts, (c) fix a special Settlement Day." Clause (3) of bye-law 52A runs :- "52A (3) All differenc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... acts requiring such contracts to be closed out on a (lay not originally: - contracted for and at a price fixed by law is in the above sense undoubtedly retrospective. The submission of learned 'Counsel was that though a legislature which bad plenary power in this regard could enact a, havind a retrospective operation, Subordinate legislation, be it a rule, a bye-law or a notification, could not be made so as to have retrospective operation and that to that extent the rule, bye-law or notification would be ultra vires and would have to be struck down, relying for this position on -the decision of the Mysore High Court reported in AIR 1960 Mys, 326. 'We do not however consider it necessary to canvass the correctness of this decision or the broad propositions laid down in it. It is clear law that a Statute which could validly enact a law with retrospective effect could in express terms validly confer upon a rule-making, authority a power to make a rule or frame a: bye-law having retrospective operation and we would add that we did not understand Mr. Pathak to dispute this position. If this were so the same result, would follow where the power to enact a rule or,a byelaw with "ret ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... affect rights under subsisting contracts and that in cases where there was no such specific provision it was not intended that a bye-law or a notification could have that effect. We see no force in this argument. The fact that the Act itself makes provision for subsisting contracts being affected, would in our opinion far from supporting the appellants indicate that in the context of a crisis in forward trading the closing out of contracts was a necessary method of exercising control and was the mechanism by which the enactment contemplated that normalcy could be restored and healthy trading resumed. If therefore we eliminate the provisions in as. 16, 17 and 19 as not containing any indication that a power to frame a bye-law with retrospective effect was withheld from the Association, the question whether such bye-law-making power was conferred has to be gathered from the terms of s. II itself. Thus considered we are clearly of the opinion that a power to frame a bye-law for emergencies such as those for which a bye-law like 52 AA is intended includes a power to frame one so as to affect subsisting contracts for resolving crisis in Forward Markets. We have already referred to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... What remains to consider is the challenge to the notification based on the ground that it was vitiated by having been issued malafide. The ground of malafides alleged was that the impugned notification was issued in order to prevent the Board of Directors of the Association. from applying their minds and exercising their judgment which they were directed to do by the terms of the Consent Memo filed on which the appeal from the judgment in C.S. 2 of 1956 was disposed of on January 24, 195 . To the allegation made in this form in the petition the first respondent, the, Chairman: of the Forward Markets Commission, filed an affidavit in the course of which he pointed out that the continuance of trading in futures was in the circumstances then prevailing in the market detrimental to the interests of the trade and that a conclusion on this matter had,been reached by the Commission even before by-law 52 AA was amended, that the question of closing out existing contracts was engaging the attention of even the Board of the Association from as early as the beginning -of January 1956 and it was for the purpose of enabling the Commission to take action to set right matters that bye-law 52AA ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r the provisions of the Essential Commodities Act, 1955, if the Textile Commissioner with the concurrence of the Forward Markets Commission and after consultation with the Chairman, be of opinion that the continuation of hedge trading is likely to result in a situation detrimental to the larger interests of the economy of India and so informs the Board, the Board shall forthwith cause a notice to be posted on the Notice Board to that effect and on the posting of such notice and notwithstanding anything to the contrary contained in these Bye-laws or in any hedge or on call contract made subject to these Bye-law, the following provision shall take effect. (2)Every hedge contract and every on call contract in so far as the cotton is uncalled thereunder, or in so far as the price has not been fixed thereunder, entered into between a member and a member or between a member and a non-member then outstanding shall be deemed closed out at such rate, appropriate to such contract, as shall be fixed by the Textile Commissioner and the provisions of clauses (3), (4) and (6) of Bye-law 52-A, in so far as they apply to hedge and on call contracts shallapply as if the formed part of this Bye-law. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eal. I purpose, as I have already indicated, to consider the following two questions, as in the view I will be taking on those questions, the appeal will have to be allowed, and no other question, therefore, will arise for consideration. The said questions are : (1) Whether under s. 12 (i) of the Act the Central Government. has power to make a bye-law with retropective effect; and (21 whether under s. 4 (f) of the Act, the Forward Markets Commission can exercise a, power assigned to it under a bye-law made by the Government under s. 12 of the Act. Before considering the scope of the power of the Central Government under s. 12 (1) of the Act, it is necessary to consider whether the new byelaw notified on January 21, 1956, has retrospective There are material differences between the old bye-law 52-AA and the new one substituted in its place Under the now bye-law the important provision is that all hedge Contracts outstainding at the time it came into force shall be deemed to be closed out at such rates as shall be fixed by the Textile Commissioner. Whereas under the old by law the, Textile Commissioner had to form his opinion with the concurrence of the Forward Markets Commission an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e, clear that the said bye-law, in so far as it purports to effect the mode of performance of the preexisting contracts, is certainly retrospective in operation. I am assuming for the purpose of the present question that the bye- law cannot be construed in such a way as to confine its operation only to contracts that are entered into after it came into force. If so, the question arises whether the Central Government had power to make a bye law under s. 12 (1) of the Act with retrospective effect-Section 12 (1) of the Act reads "The Central Government may, either on a request in writing received by it in this behalf from the governing body of a recognized association, or if in its opinion it is expedient so to do, make bye-laws for all or any of the matters specified in section II or amend any bye laws made by such association under that section.' Section 11 enumerates the matters in respect of which the recognized associations can make bye. laws for the regulation and control of forward contracts. Neither s. 12 nor a. 11 expressly states that a bye-law with retrospective operation can be made under either of those two sections. Full effect can be given to both the sections b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . General Clauses Act, 1904, in support of the contention that the power of amendment and modification conferred on the State Government under that section might be so exercised as to have retrospective operation. In rejecting that contention, Das, J., as he then was, observed : "It is true that the order of April 26, 1950, does not ex facie purport to modify the order of February 18, 1950, but, in view of the absence of any distinct provision in section 21 that the power of amendment and modification conferred on the State Government may be so exercised as to have retrospective operation the order of April 26, 1950, viewed merely as an order of amendment or modification cannot, by virtue of section 21, have that effect." This decision is, therefore, an authority for the position that unless a statute confers on the Government an express power to make an order with retrospective effect, it cannot exercise such a power. The Mysore High Court in a considered judgment in India Sugar & Refineries Ltd. v. State of Mysore (A. 1. R. 1960 Mys. 3) dealt with the question that now arises for consideration. There, the Government issued there notifications dated 9-4-1956, 15-10-195 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e rule is well-settled that even in a case where the executive Government acts as a delegate of a legislative authority, it has no plenary power to provide for retrospective operation unless and until that power is expressly conferred by the parent enactment." The House of Lords in Howell v. Folmouth Boat Construction Co. Ltd. ((1951) A. C. 837) expressed the same opinion and also pointed cut the danger of conceding such a power to a delegated authority. There, a licence was issued to operate retrospectively and to cover works already done under the oral sanction of the authority. Their Lordships observed: "It would be a dangerous power to place in the hands of Ministers; and their subordinate officials to allow them, when. ever they had power to license, to grant the licence ex post facto; and a statutory power to license should not be construed as a power to authorise or ratify what has been done unless the special terms of the statutory provisions clearly warrant the construction." It is true that this is a case of a licence issued by an authority in exercise of a statutory power conferred on it, but the same principle must apply to a byelaw made by an authorit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssible to so imply under s. 12 of the Act ? The phrase "necessary implication", as applied in the law of statutory construction means an implication that is absolutely necessary and unavoidable; that is to say, a court must come to the conclusion that unless such an implication is made, the provisions of the section could not be given full effect on the wording as expressed therein. Under s. 12 of the Act, the Central Government may either on a request in writing received by it from the governing body of a recognized association, or if in its opinion it is expedient so to do, make byelaws for all or any of the matters specified in s. 11 or amend any bye-law made by such association under that section. Now s. 11 says that any recognized association may, subject to the previous approval of the Central Government, make bye-laws for the regulation and control of forward contracts; under sub a. (2) thereof, the association is authorized to make laws providing for any of the matters mentioned therein. A glance at those matters shows that all the bye-laws providing for those matters could be framed without giving s. 12 any retrospective effect. It is said that s. II (o) gives an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oods to which any of the provisions of this Act is made applicable, including information regarding supply, demand and prices, and to submit to the Central Government periodical reports on the operation of this Act and on the working of forward markets relating to such goods; (d) to make recommendation generally with a view to improving the Organisation and working of forward markets; (e) to undertake the inspection of the accounts and other documents of any recognized association or registered association or any member of such association when. ever it considers it necessary; and (f) to perform such other duties and exercise such other powers as may be assigned to the Commission by or under this Act, or as may be prescribed." Two questions arise under this section, namely, (i) whether the duties imposed and the powers conferred on the Commission under cl. (f) of s. 4 shall be read ejusdem generis with those imposed or conferred under cls. (a) to (e), and (ii) whether the powers assigned to the Commission by or under a bye-law can be performed by the Commission under cl. (f). To appreciate the first question it would be necessary to know the constitution of the Commission ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on the principle of ejusdem generis cannot be invoked in this case, for items (i) to (x) do not, strictly speaking, belong to the same genus, but they do indicate, to our mind the kind and nature of tax which the municipalties are authorized to impose." So, in the present case, it way be said that cls. (a) to (f) may not belong to the same class, but they indicate that the functions described in the said clauses, being supervisory and advisory in character, are so analogous to each other that they take colour from each other and therefore the general words following must be restricted to a sense analogous to the said functions. It is said that cl.(f) provides for duties and powers, whereas cls. (a) to (e) only deal with functions and, therefore, cl. (f) must be deemed to provide for altogether a different subject-matter. I cannot agree with this contention, for the heading of s.4 is "Function of the Commission", and the action opens out with the words "The functions of the Commission shall be" and the functions are mentioned in cls.(&) to (f). It is, therefore, manifest that the duties and powers mentioned in cl.(f) are also functions. To put it differentl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... w in legislative practice, while it treated a bye-law as a provision of Act: that cannot be. The other reason that may be suggested is that the word "Prescribed" was used in superabundant caution or by mistake. If superabundant caution was required to mention separately the rules, greater caution would have been necessary to provide separately for a bye-law. A court ordinarily shall attempt to give meaning to every word used by the Legislature, unless it is impossible to do so. Here there is not only no such impossibility, but there is also a good reason for the Legislature in excluding the bye-laws from the operation of cl.(f) of s. 4 of the Act. Subordinate or delegated legislation takes different forms. Subordinate legislation is divided into two main classes, namely, (i) statutory rules, and (ii) bye-laws or regulations made, (a) by authorities concerned with local government, and (b) by persons, societies, or corporations. The Act itself recognizes this distinction and provides both for making of the rules as well as bye-laws. A comparative study of ss. 11 and 12 whereunder power is conferred on the Central Government and the recognized associations to make bye-law ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the conditions laid down in Schedule VI, which were deemed to be incorporated in the licence by virtue of s. 3(2), and therefore he did not do the thing required of him within the meaning of s. 4 of that Act. The Privy Council held that the performance by the licensee of the conditions of the Schedule to the Act was clearly required to be made under the Act. This decision does not help us very much in the present case, as the question of bye-law did not arise therein'. Nor the decision of the Madras High Court in Narayanaswamy v. Krishnamurthi ( I.L.R. 1958 Mad 513.) is of any assistance. There the question was whether the regulations framed by the Life Insurance Corporation by virtue of the powers vested in it by Act 31 of 1956 prohibiting the employees from standing for election fell within the meaning of the words ,under any law" in Art. 191 (1) (e) of the Constitution. The High Court held that the regulations were law made under the Act of Parliament. The conclusion was based on the principle that the rule made in pursuance of the delegated power has the same validity and has the same characteristic as a law made directly by the Parliament. Apart from the fact that the wor ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
