TMI Blog1962 (4) TMI 92X X X X Extracts X X X X X X X X Extracts X X X X ..... ward 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 the Association and of these that relevant to the consideration of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he 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 of the Forward Markets Commission as from Saturday, the 7th January, 1956, tradi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 the E.I.C.A. Ltd., Bombay I hereby notify to you that the For. ward Markets Commissi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 argument that the Forward Markets Commission was in law incapable of being the r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed 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 recognised association and every member thereof shall maintain such books of account and other documents as the Commissio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r 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, there is no limitation upon the nature of the power that might be conferred except, of course, that which might f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssion 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 itself but is conferred or imposed by virtue of powers enabling this to be done; in other words, by laws made by a subordinate law-making authority which is empowered to do so by the parent Act. This distinction is thus between what is d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 recognised association or of any of its members and submit its report thereon to the Central Government under s. 8 (2)(c) and suggested that this would be a case of a power or duty which would be covered by the words under the Act . We find ourselves wholly unable co accept this. If without the reference to the phrase as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 byelaw 52AA which the impugned bye-law amended, under which power was vested in the Textile Commissioner with the concurrence of the Forward Markets Commission, (though after consultation with the Chairman of the Board) to direct the enclosure of hedge contracts and fix the rates at which such contracts might be closed out a provision whose validity was not impugned in the present proceedings. Mr. Pathak no doubt submitted that he was not preclude ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing 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 contained, (b) fix settlement process for forward contracts, (c) fix a special Settlement Day. (2)............... Every hedge contract entered into between a member and a member or between a member and a non-member outstanding on the date fixed under clause (1)(a) hereof shall be demand closed out at the rate appropriate to such contracts fixed under clause (1)(b) hereof. 3 -6 - - - - - - - an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rticles 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 their powers, authorities and duties to committees consisting of such members or member, of their body or consisting of such other members or members Associate Members, Special Associate Members or Temporary Special Associate Members of the Association not being Directors, or partly of Directors and partly of such other members and/or Associate Members, Special Associate Members or Temporary Special Ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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, alteration of or addition to a bye law or bye-laws . If therefore a bye-law could be made, by the Association it is manifest that there is no limitation upon its powers such as is to be found in Article 64 which applies only to the Board. The validity of the bye-law therefore cannot be challenge by reference merely to the powers of the Board, because what is contemplated by s. I I is the power of the recognised Associati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 differences arising out of every such contract between members shall be paid through the Clearing House on the Settlement Day fixed under clause (1) (c) her Clause (4) 52A (4) All differences arising out of every such contract between a member and a nonmember shall become immediately due and payable. and Clause (6) 52A (6 In hedge and on call contracts entered into between a member and a non. member and in contracts to which clause (5) applies, any margin received shall be adjusted and the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tra 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 retrospective effect so as to Affect PendinG transactions, is conferred not by express words but where the necessary intendment of I the Act confers such A power. If in the present case the power to make a byelaw so as to operate on contracts subsisting on the day the same was framed, would follow as; a necessary implication from the term of S. 1 1, it would not be necessary to discuss the larger question as to whether and the circumstances - in which Subordinate legislation with retrospective effect could be valid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt 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 terms of bye-law 52A which shows that when an emergency of the type referred to a. It (2) (a) arises it is not practicable to rescue a forward market from a crisis without (1) putting an end to forward trading, and (2) closing out subsisting contracts so as to start with a clean slate for the future. When therefore under s. 11 (2) power is conferred to frame a bye-law to provide for: (O) the emergencies in trade which may rise and the exercise of power in such emergencies including the power to fix maximum and minimum ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 was amended and that immediately the amended bye-law came into force the Commission took action and issued: the notification now manugned. He also pointed out that the liberty given to the Association to consider the matter under the terms of the Compromise Memo was a factor which had also boon taken into account before the notification had been issued. The learned Judges of the High Court accepted this explanation of the circumstances in which the notification came to be issued and considered that on the allegation in the pet ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hese 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. After the affixation of the said notice onthe Notice Board, trading in hedge and on call contracts shall be prohibited until the Textile Commissioner with the concurrence of the Forward Markets Commission and after consultation with the Chairman, permits resumption . On January 21, 1956, the Central Government, in exercise of power conferred upon it by sub-s. (1) of s. 12 of the Act, notified a new bye-law 52-AA to be substituted in place of the earlier bye-law 52-AA. The new bye-law reads as follows : (1) Whether or not pri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct. 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 and after consultation with the Chairman, under the new bye-law the said power of forming an opinion is conferred solely on the For-ward Markets Commission where as under the old, bye-law the opinion and was in regard to the question whether hedge trading was likely to result in a situation detrimental to the larger interests of the economy of; India under the new bye-law the opinion is in respect of the question whether the continuation of trading in hedge contracts will be detrimental to the interests of trading or the public interest or the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 by recognizing a power only to make bye-laws prospective in operation, that is, bye-laws that would not affect any vested rights. In the circumstances, can it be held that the Central Government to which the power to make bye-laws is delegated by the Legislature without expressly conferring on it a power to give them retrospective operation can exercise a power thereunder to make such bye-laws. Learned counsel for the respondents contends that, as the Legislature can make a law with retrospective operation, so too a delegated authority can make a bye-law ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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, 15-10-1957 and 13-2-1958 purporting to act under s. 14 (1) of the Madras Sugar Factories Control Act, 1949, whereby cess was imposed on sugarcane brought and crushed in Petitioner s factory for the crushing season 1955. 56, 1956-57 and 1957-58 respectively. One of the question raised was whether under the said section the Government had power to issue the notifications imposing a cess on sugarcane brought and crushed in petitioner s factory for a period prior to the date of the said notifications. Das Gupta, C. J., delivering the judgment of the division Bench, held that it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 authority in exercise of a power conferred under a statute. Our Constitution promises to usher in a welfare State. It involves conferment of powers of subordinate legislation on government and governmental agencies affecting every aspect of human activity. The regulatory process is fast becoming an ubiquitouselement in our life. In a welfare State, perhaps,it is inevitable, for the simple reason that Parliament or Legislature cannot be expected to provide for all possible contingencies. But there is no effective machinery to control the rule-making powers, or to prevent its diversion throu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ake 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 indication that a bye-law contemplated by that sub-clause must necessarily provide for its retrospective operation. It reads: the emergencies in trade which may arise and the exercise of powers in such emergencies including the power to fix maximum and minimum prices; The learned Solicitor General contends that an occasion may arise when by a determined action of a bear or a bull the rates may about up beyond a reasonable level or fall down steeply below a particular point creating an emergency in the market and in that emergency it would be necessary for the authorities concer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 and its rule in the scheme of control provided by the Act. Under a. 2(b), ,Commission means the Forward Markets Commission established under s. 3. Section 3 empowers the Central Government to establish a Commission to be called the Forward Markets Commission for the purpose of exercising such functions and discharging such duties as may be assigned to the Commission by or under this Act . Clauses (a) to (e) of s. 4 show that the function of the Commission are wholly supervisory and advisory in nature. It keeps the forward markets under observation, collects and publishes information, undertakes the in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 differently, all the clauses deal with functions of the Commission. That apart, a power and a duty are, the two facts of the same concept. Clauses (a) to (e) also, though ex facto they read as if they impose only duties, on a closer scrutiny indicate that the duties cannot be exercised without the corresponding powers for the discharge of those duties. I would, therefore, hold that the duties and powers that may be assigned to the Commission under cl. (f) can be only supervisory or advisory functions other than those mentioned in cls.(a) to (e). The power conferred on the Commission under the bye-law made by the Government to close out contracts and thus terminate the c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wo 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-laws on the one hand, and s. 28, whereunder the Central Government is empowered to make rules on the other, indicate that the former are intended for conducting the business of the association and the letter for the purpose of carrying into effect the objects of the Act. In considering the question raised in this case in this distinction will have to be borne in mind. It would be unreasonable to assume that a private association, though registered under the Act, could confer powers on a statutory authority ,under the Act. That is why under s. 4(f), the Legislature did not think fit to provide for the assignment of a function to the commission in exercise of a power under a bye-law. The nonmention of byelaw in cl. (f) is not because of any accidental omission ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f 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 words to be construed there were different and in a sense wider than the words to be construed in the present case, the principle accepted in the decision is only of a general application and does not help to construe the specific words of cl. (f) of s. 4 ; their meaning can be gathered only by interpreting the said words, having regard to the setting and the context in which they are used. For the foregoing reasons, I would hold that the Government had no power under s. 12 of the Act to make a bye-law assigning any function to the Commission. It follows that notification dated January 24, 1956, by the Forward Markets Commission was illegal and the appellants would be entitled to the issue of a writ of mandamus in the terms prayed for. In the result, the appeal is allowed with costs. ORDER In view of the Jud ..... X X X X Extracts X X X X X X X X Extracts X X X X
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