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1978 (2) TMI 214

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..... Kackar, Sol. Genl. (WP Nos. 812 838), R. P. Bhatt (WP 861), E. C. Agarwala and Girish Chandra for the respondent. 770, L. N. Sinha U. P. Singh for R/State of Bihar in W. P. No. 765781-784/77 A. P. Chatterjee, Mukti Maitre G. S. Chatterjee for R/State of West Bengal The following Judgments were delivered BEG, C.J.- The ninety-one writ petitions before us for delivery of our reasons in support of our order dated 23 November, 1977 dismissing them, raised a common question of the validity of an order (hereinafter referred to as 'the Control Order), passed on 30th September, 1977, by the Ministry of Civil Supplies and Cooperation of the Government of India, which runs as follows ORDER New Delhi, the 30th September 1977 S. O. WHEREAS the Central Government is of opinion that it is necessary and expedient so to do for securing equitable distribution and availability at fair prices, of mustard oil; NOW, THEREFORE, in exercise of the powers conferred by section 3 of the Essential Commodities Act, 1955 (10 of 1955), the Central Government hereby makes the following orders namely : 1. Short title, extent and commencement. (1)This Order may be called the Mustar .....

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..... controlled by such Government or to such other person or class of persons and in such circumstances as may be specified in the order. Explanation I.-An order made under this clause in relation to foodgrains, edible oilseeds or edible oils, may, having regard to the estimated production, in the concerned area, of such foodgrains, edible oilseeds and edible oils, fix the quantity to be sold by the producers in such area and may also fix, or provide for the fixation of, such quantity on a graded basis, having regard to the aggregate of the area held by, or under the cultivation of, the producers. Explanation 2.-For the purpose of this clause, production with its grammatical variations and cognate expressions includes manufacture of edible oils and sugar; We are not concerned here with other provisions of section 3 (2). Section 3(3), which will be relevant for the purposes of interpretation, runs as follows : 3 (3) Where any person sells any essential commodity in compliance with an order made with reference to clause (f) of sub-section (2), there shall be paid to him the price therefore as hereinafter provided (a) where the price can, consistently with the controlle .....

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..... e correct meaning of section 3(2). They read as follows (3B) Where any person is required, by an order made with reference to clause (f) of sub-section (2), to sell to the Central Government or a State Government or to an officer or agent of such Government or to a Corporation owned or controlled by such Government, any grade or variety of foodgrains, edible oilseeds or edible oils in relation to which no notification has been issued under sub-section (3A), or such notification having been issued has ceased to be in force, there shall be paid to the person concerned notwithstanding anything to the contrary contained in sub-section (3), an amount equal to the procurement price of such foodgrains, edible oilseeds or edible oils, as the case may be specified by the State Government, with the previous approval of the Central Government having regard to- (a) the controlled price, if any, fixed under this section or by or under any other law for the time being in force for such grade or variety of foodgrains, edible oilseeds or edible oils; (b) the general crop prospects; (d) the recommendations, if any, of the Agricultural grains, edible oilseeds or edible oils available at re .....

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..... spect to the whole or any art of any such undertaking engaged in the production and supply of the commodity as may be specified in the order such functions of control as may be provided therein. and so long as such order is in force with respect to any undertaking or part thereof, (a) the authorized controller shall exercise his functions in accordance with any instructions given to him by the Central Government, so, however, that he shall not have any power to give any direction inconsistent with the provisions of any enactment or any instrument determining the functions of the persons in charge of the management of the undertaking, except in so far as may be specifically provided by the order; and (b) the undertaking or part shall be carried on in accordance with any directions given by the authorized controller under the provisions of the order, and any person having any functions of management in relation to the undertaking or part shall comply with any such directions. 3(5) An order made under this section shall,- (a) in the case of an order of a general nature or affecting a class of persons, be notified in the Official Gazette; and (b) in the case of an order .....

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..... int of view also, it is enough if we consider whether the Control Order falls within section 3 of the Act. It was evidently for this reason that, beyond mentioning Article 301, counsel for the petitioners did not, quite rightly, advance much argument to show how Article 301 is involved here. We will, therefore, not consider it any more here. It was, however, vehemently urged on behalf of the petitioners that the Control Order is assailable for violating Article 14 and 19(1) (f) and (g) despite the fact that the Act itself was placed in 1976 in the 9th Schedule of the Constitution. The result of placing it there by a constitutional amendment is that section 3 of the Act became free from any limitations based on the provisions of Part III of the Constitution. Article 31B, providing for a removal of the protection to fundamental rights given by Part III of our Constitution, lays down : 31B. Validation ofcertain Acts and Regulations.- Without prejudice to the generality. of the provisions contained in article 31A, none of the Acts and Regulations specified in the Ninth Schedule nor any of the provisions thereof shall be deemed to be void, or ever to have become void, on the g .....

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..... of the orders passed under it. But, if it has no such effect upon section 3 of the Act itself, orders passed under it would continue to be subject to provisions of section 3 of the Act as controlled by Articles 14 and 19 of our Constitution so that they will have to satisfy what may be described as a dual test : firstly that of provisions of section 3 of the Act itself; and, secondly, that of provisions of Chapter III of the Constitution containing fundamental rights. Learned Counsel for the petitioners suggested that the placing of the Act in the Ninth Schedule protected only the grant of powers under section 3 of the Act but not their exercise. Article 31B, no doubt, speaks of specified Acts and Regulations. But it makes no distinction whatsoever between any grants of powers and their exercise. Powers are granted or conferred so as to be exercised and not to be kept in cold storage for purposes of some- kind of display only as though they were exhibits in a show case not meant for actual use. The whole object of a protection conferred upon powers meant for actual use is to protect their use against attacks upon their validity based upon provisions of Part 111. If ',hi .....

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..... e the effect of the inclusion of the Act in the Ninth Schedule. The Solicitor-General contended that section 3 of the Act constituted what he described as skeleton legislation, over which the exercised of powers given by section 3 built, so to say, a body of flesh and blood . The term skeleton legislation is used sometimes for denoting the broad outlines of a particular scheme found in an Act of which details are to be filled in later by administrative orders of experts. It is doubtful whether the Essential Commodities Act, 1955, could be spoken of as a piece of skeleton legislation. Section 3, sub-s.(1) of the Act provides for delegation of powers to the Central Government in order that it may carry out certain purposes by framing appropriate schemes and evolving policies which may meet the purposes of the Act. These schemes and policies to serve the stated purposes may differ as. regards the nature of means adopted and even in the particular objectives sought at particular times to accord with changing circumstances. Orders passed under section 3 of the Act, in pursuance of such schemes or policies, do not become parts of the Act for the purposes of the Ninth Schedul .....

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..... any rate, s. 6(xvii) and rule 4(4) are part of a scheme of land reform in U.P. and would be protected from attack under Art. 31B of the Constitution . In that case, the rule made under the provisions of the Imposition of Ceiling on Land Holdings Act 1960 of U.P. was under attack. The section under which the rule was made enjoyed the protection of both Articles 3 1 A and 3 1B of the Constitution. Hence, it was held that the rule was not to be questioned if it fell within the empowering (1) [1975] 3 S.C.R. 885. (2) [1971] Suppl.S.CR.719at720. provision of the Act. The position before us is very similar. The Control order passed under section 3 of the provisions of the Act before us, included in the Ninth Schedule, is assailed on the ground that, although section 3 of the Act may be protected by the 9th Schedule of the Act, yet, an order passed under this provision is not so protect- ed. Although, we agree that the impugned order is not protected for this reason, yet, if the section under which it was passed is protected from any attack based on the provisions of Part III of the Constitution, the only question which survives is whether the control order is covered by the prot .....

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..... ing capacity was increased by pumping money into his pocket artificially. This would necessarily imply a general rise in wages of the working classes and salaries of middle classes which do not share the profits of an inflationary economy. In other words, a fixation of price above ₹ 10/- per kg. of mustard oil could have, contributed to push the country down the slippery slope of inflation towards economic crisis and disaster. Price control and planning may have been forced upon all nations of the world due to the needs and exigencies of modern total warfare. But, as has been observed, the problems of the aftermath or of the peace and reconstruction, which follow (according to some they break out ) are no less demanding. In addition, it is common knowledge that the population explosion, unemployment, and rising prices in our country, due to the inflationary spiral pose problems with no less grave implications for the whole country than a war. It would be no exaggeration to say that the fate of every government depends ultimately upon a satisfactory solution of these problems, and, particularly, on its capacity to check rise in prices of essential commodities. We have .....

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..... the cost price to the ducers, is it not necessary to take such a measure in order to break the vicious inflationary spiral and bring down prices ? The last question could only be answered by waiting and watching the ultimate effects of a particular price, fixation on prices of mustard seed and cost of production of mustard oil ultimately. If the object of price fixation suggested by this question is very 'necessary to take into account, from the point of view of availability of mustard oil at fair prices to consumers, as we think it is, the actual cost of production to the purchasers could certainly not be the sole or the decisive factor. It could only be one out of a Dumber of relevant facts and circumstances. The net result of the mass of statistics placed before us on behalf of the petitioners is that the price fixed should have been about ₹ 3/-per kg. more, that is to say, about ₹ 13/- per kg. Even if we accept this to be correct estimate for normal times, when fair and reasonable profits to the producers could be an important consideration, we think that a price fixed at ₹ 10/- per kg., as a part of an attempt to break the vicious inflationary circle, is .....

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..... #8377; 7/- per kg. Apparently, this is enough to cover reasonable profits of producers as well as middlemen. We are informed that the impugned Control Order has itself been withdrawn by the Central Government. We can take judicial notice of those facts which illustrate the extreme inadvisability of any interference by any court with measures of economic control and planning directed at maximising general welfare. It is not the function of the Courts to obstruct or defeat such beneficial measures devised by the Govt. of the day. Courts cannot pass judgments on the wisdom of such actions, unless actions taken are so completely unreasonable that no law can be cited to sanction them. If the impugned order of 30th September, 1977, falls within this provision, as we think it does, no question of violating a fundamental right could arise. If an impugned order were to fall outside section 3 of the Act, no question of applying any test of reasonableness contemplated by Article 19(6) need arise because it would then be a purely illegal I restriction upon the right conferred by Article 19(1) (g) which would fall for lack of authority of any law to support it. We have also heard consider .....

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..... r purpose, covered by Section 3(1) of the Act at a particular time, in a particular state of affairs. It was submitted that, after the purpose is achieved, the order could be and will be withdrawn by the Govt. of India. As already 'stated above, that order has been withdrawn because the purpose has been achieved. Even if that purpose had not been achieved, the order could be withdrawn if it became evident to the Government that such control would not achieve the desired object. It is extremely hazardous for Courts to enter the sphere of experimentation in matters of economic policy which must be, left to the Government of the day. It will be seen from the provisions of Section 3 (3) of the Act that price fixation on certain given principles is enjoined only when there is an order under Section 2 (f) of the Act compelling the sale of a whole stock or a specified part of it to the Central or a State Government or to authorities or persons as directed by them. Again, Section 3 (a) (iii) provides a machinery for price fixation in special cases. Similar is the position with orders under sections 3B and 3C. The whole machinery of control of supplies with a view to their equitable .....

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..... shed princi- ples or the conclusions of the commission are shown to be demonstrably wrong or erroneous.'.' In other words, the judgment was not to provide a precedent for anything similar to be done by Courts in other cases. In Saraswati Industrial Syndicate Ltd. etc. v. Union of India(1) the cases mentioned above were discussed by this Court in the context of Suger Control Order, 1966, where clause (7) laid down certain matters to be considered in determining fair price. It was held there Price fixation is more in the nature of a legislative measure even though it may be based upon objective criteria found in a report or other material. It could not, therefore, give rise to a complaint that a rule of natural justice has, not been followed in fixing the price. Nevertheless, the criterion adopted must be reasonable. The guiding factors laid down in clause (7) of the Sugar Control Order, 1966, were held to afford only indicate to help the Government in fixing prices on the lines indicated in the Control Order. We think that unless, by the terms of a particular statute, or order, price fixation is made a quasi-judicial function for specified purposes or cases, it is re .....

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..... urposes of the Act. We do not think that we need deal with American cases in price 'fixation such as Leo Nebbia v. People of the State of New York(1), where the guarantee of due process against capricious action was involved. in this country, such guarantees in regard to rights of property or to carry on industry or trade or business could only arise by reason of Articles 14 and 19 of the Constitution which it, excluded here because of the protection conferred upon section 3 of the Act by the 9th Schedule of the Constitution. I may, however, mention that in Permian Basin Area Rate cases(2), where the majority of learned judges of the U.S. Supreme Court laid down, inter alia, with regard to price fixation by a body of experts of Federal Power Commission required to proceed quasi-judicially, that in order to over turn the Commission's judgment the petitioners must undertake the heavy burden of making a convincing showing that it is invalid, because it is unjust and unreasonable in its consequences . That was a case in which a Commission was charged with a duty to fix rates in accordance (1) 291 U.S. (78 Law. En.) 502. (2) 20 L. Ed. 2d. p. 312. with certain principle .....

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..... assed in 1976, the Essential Commodities Act was placed in the 'Ninth Schedule to the Constitution as item 125. One of the main con- tentions of the Union Government in answer to the petitioners' challenge to the constitutionality of the Price Control Order is that since the Act, by reason of its being placed in the Ninth Schedule, is immune from attack on the ground that its provisions violate the fundamental rights guaranteed by Part III of the Constitution, the Price Control Order which is but a creature of the Act must enjoy the same immunity. This contention has found favour with the learned Chief Justice, Shri M. H. Beg but, with respect, we are unable to share his view. Article 3 1 A of the Constitution saves laws which provide for matters mentioned in clauses (a) to (e) thereof from a challenge under articles 14, 19 or 31 notwithstanding anything contained in article 13 of the Constitution. Article 31A which was introduced by the Constitution (First Amendment) Act, 1951, validates certain Acts and Regulations providing that without prejudice to the generality of the provisions contained in Article 31A, none of the Acts and Regulations specified in the Ninth Schedul .....

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..... edule. The Mustard Oil (Price Control) Order, 1977, was passed under section 3 of the Essential Commodities Act, 1955, which by the relevant part of its sub-section (1) empowers the Central Government to provide by an order for regulating or prohibiting the production, supply and distribution of an essential commodity or trade and commerce therein, if it is of the opinion that it is necessary or expedient so to do for maintaining or increasing supplies of any essential commodity or for securing its-equitable distribution and availability at a fair price. Since the Act of 1955 has been placed in the Ninth Schedule, none of its provisions, including of course section 3(1), is open to attack on the ground that it ever was or is inconsistent with or takes away or abridges any of the rights conferred by any provision of Part III of the Constitution. But that is the farthest that the immunity offered by article 31B can go. In other words, speaking of a provision directly in point, s. 3(1) of the Act of 1955 is not open to challenge on the ground, to take a relevant instance, that it violates the guarantee contained in article 19 (1) (f) or 19 (1) (g) of the Constitution. But there is .....

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..... g) of the Constitution. The learned Solicitor General relies, justifiably, on two decisions of this Court in Vasantlal Maganbhai Sanjanwala v. The State of Bom- 32 2 bay and Others(1) and Latafat Ali Khan and Ors. v. The State of U.P.(2), in support of his argument that the Price Control Order must receive the protection of the Ninth Schedule to the same extent as the Essential Commodities Act under which that order was issued and which has been placed in the Ninth Schedule. In Vasantlal Maganbhai(1), the vires of section 6(2) of the Bombay. Tenancy and Agricultural Lands Act, 1948, was challenged on the ground that it suffered from the vice of excessive delegation. In exercise of the power con feared by section 6(2), the State Government had issued a Notification fixing the maximum rent payable by tenants of lands situated in the areas specified in the schedule appended to the Notification. The validity of that Notification was challenged on the ground. that it offended against Article 31 of the Constitution. The first contention was rejected by the majority which held that section 6(2) did not suffer from excessive delegation. 'On the second question it was held by the Cou .....

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..... Kamble and Ors.(1), appears to us to be in point and it supports the petitioners' contention that the benefit of article 31B of the Constitution cannot be extended to an order or notification issued under an Act which is placed in the Ninth Schedule. The Bombay High Court while affording protection of article 31B to the Maharashtra Agricultural Lands (Ceilings on Holdings) Act, 1961, which was included in the Ninth Schedule, also granted the benefit of that protection to the later Amending Acts of 1968, 1969 and 1970 on the ground that they were only ancillary or incidental to section 58 of the Principal Act. That view was rejected by this Court on the ground that if the protection afforded under article 31 B is. extended to amendments made to an Act or Regulation subsequent to its inclusion in the Ninth Schedule, the result would be that even those provisions would enjoy the protection which were never scrutinised and could not, in the very nature of things, have been scrutinised by the prescribed majority vested with the power of amending the, Constitution. That, according to the Court, would be tantamount to giving a power to the State Legislature to amend the Constitution .....

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..... ic factors governing the mustard oil trade vary from region to region as in the case of any other trade and further, the pattern of the trade may differ in different growing regions and manufacturing centres like Uttar Pradesh, Rajasthan, Bihar, West Bengal, Punjab and Orissa. But that by itself cannot justify the argument that different prices must be fixed for different regions and that failure to do so would necessarily entail discrimination. 'Dealers' in Mustard Oil, wherever they operate, can legitimately comprise a single class for the purpose of price fixation, especially as it is undisputed that the two basic constants of the trade are that the cost of mustard seed constitutes 94 per cent of the cost of the mustard oil and that about 3.12 kilograms of seed goes into the extraction of one kilogram of oil. Fixation of different price this background, frustrate the very object commodity should be made available for different regions will, in of the exercise that an essen to the consumer at a fair price. Consumer goods have a disconcerting tendency to disappear from regions where prices are lower and they notoriously migrate to areas where higher prices rule. Besides, t .....

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..... port raw material from outside, a hue and cry would have been raised that the Government of India was victimising the dealers in a particular area for the irrelevant reason that it grew the raw material in abundance. In the ultimate analysis, the mechanics of price fixation has necessarily to be left to the judgment of the executive and unless it is patent that there is hostile discrimination against a class of operators, the processual basis of price fixation has to be accepted in the generality of cases as valid. That takes us to the petitioners' contention that the Price Control Order is violative of the petitioners' right under articles 19(1) (f) and 19 (1 ) (g) of the Constitution. The case of M/s Prag Ice Oil Mills who are petitioners in Writ Petition No. 712 of 1977 is as follows : The average cost of production mustard oil, when the Price Control Order was issued, was about ₹ 1351.10p ' per quintal i.e. ₹ 13.51 per kilogram. Taking into consideration overhead costs and allowing for a reasonable margin of profit, the fair selling price of mustard oil would come to ₹ 14.01 per kilogram at the factory gate. Petitioners, being wholesalers, .....

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..... ke a small profit but, whether or not the dealers. made any profit, the validity of the Price Control Order was not liable to be challenged on the ground that the dealers would incur a loss if they were obliged to sell mustard oil at ₹ 10/- per kilogram. The question as to which was the fair price to the consumer was kept by the Government in the forefront and by that method alone could the dominant object of the Essential Commodities Act be achieve effectively. Shri Srinivasan's affidavit further states that mustard seed is grown mainly in the rabi season, i.e., from September to October and February to March and the peak marketing season is from April to June. The mustard crop is by and large grown by small farmers who have no staying ability and who, in their anxiety to dispose of their produce as quickly as possible after the harvest, sell their produce between April and June. From this it is stated to follow that the millers effect the bulk of their purchases during the first quarter of the year and therefore, the petitioners could not be heard to contend that the price of mustard seed after the coming into force of the impugned Price Control Order should be taken .....

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..... ses are made by the petitioners immediately after the harvesting season and that, considering the pattern of the trade in mustard seed it is wholly unnecessary to control the price of the seed in order effectively to control the price of mustard oil. It is significant that whereas mustard seed was sold in certain areas at prices ranging between ₹ 480/- and ₹ 530/- per quintal in September 1977, prices after the promulgation of the impugned Price Control Order had come down to a range between ₹ 365/and ₹ 390/- per quintal. This has not been denied by the petitioners but they describe the phenomenon as irrelevant for the purpose of determining the legality of the Price Control Order. Their contention, in which we find no' substance, is that the. consequence of the Price Control Order cannot be looked at for the purpose of deciding whether the price of mustard oil was fixed in accordance with legally acceptable principles. The proof of pudding, as the saying goes, is in the eating, and no court can shut its eyes to the fact that the Price Control Order produced the salutary and tangible result of bringing down the price of raw material. The basic rule of .....

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..... this point, the pronounced reiteration of the respondent that the, petitioners have made huge profits in past years and that their concerns are sufficiently prosperous to be able to absorb a small loss for a temporary period. But even in the absence of satisfactory proof of the extent of the profits made by the petitioners in past years, we are of the opinion that the circumstance that the petitioners may have to suffer a loss over a short period immediately following upon the promulgation of the Price Control Order will not render the Order constitutionally invalid. The interplay of economic factors and the laws of demand and supply are bound eventually to have their impact on the pattern of prices prevailing in the market. If the dealer cannot lawfully sell the finished product at more than ₹ 10/- per kilogram, the price of raw material is bound to adjust itself to the price of the product. Subsequent events unmistakably demonstrate the effect of such interplay and the favourable reaction which the Price Control Order has produced on 'the, price of mustard seed. But above all things, it is necessary to bear in mind in matters of the present nature what Krishna Iyer, J. .....

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..... se contentions were rejected by this Court on the ground that, just as the industry cannot complain of rise and fall of prices due to, economic factors in an open market, it cannot similarly complain of some increase in or reduction of prices as a result of a notification issued under section 3(1) of the Essential Commodities Act because, such increase or reduction is also based on economic factors. Dealing with the contention that a reasonable profit must be assured to the manufacturers, the Court held that ensuring a fair price to the consumer was the dominant object and purpose of the Essential Commodities Act and that object would be completely lost sight of, if the producer's profit was kept in the fore-front. Ray C.J., speaking for the Court, observed : In determining the reasonableness of a restriction imposed by law in the field of industry, trade or commerce, 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 not render the law unreasonable. By its very nature, industry or trade or commerce goes through periods of prosperity and adversity on account of economic and sometimes soci .....

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..... cases to cite the oft- quoted decision in Premier Automobiles Ltd. Anr. etc. v. Union of India(4) which concerned the fixation of price of motor cars. It is time that it was realized that the decision constitutes. no precedent in matters of price fixation and was rendered for reasons peculiar to the particular case. At page 535 of the Report Grover J., who spoke for the Court, stated at the outset of the judgment : Counsel for all the parties and the learned Attorney General are agreed that irrespective of the technical or legal points that may be involved, we should base our judgment on examination of correct and rational principles and should direct deviation from the report of the Commission which was an expert body presided over by a former judge of a High Court only when it is shown that there has been a departure from, established principles or the conclusions of the Commission are shown to be demonstrably wrong or erroneous. By an agreement of parties the (1) 94Law Ed. 381. Court was thus converted into a Tribunal for considering every minute detail relating to price fixation of motor cars. Secondly, as regards the escalation clause, the Court recorded at page 543 .....

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..... this Court in Narendra Kumar and Others v. The Union of India and Others 1 [1960] 2S.C.R.375. as 'axiomatic. As observed in, that case, since the middle mans charges often add to a considerable sum, it has been the endeavour in modern times for those responsible for social control to keep the middleman's activities to the minimum and to attempt to replace them largely by cooperative sale societies of producers and cooperative purchase societies of consumers. The elimination of the middleman is bound to cause trouble and inconvenience, but the ultimate savings in the cost of the finished product could more than balance that inconvenience. The argument of the petitioners really amounts to a rigid insistence that they are entitled to carry on their business as they please, mostly in a traditional manner, regardless of its impact on public interest. But, property rights are not absolute, and important as the right of property may be, the right of the 'public that such rights be regulated in common interest is of greater importance. These correlative rights, as observed in Lea Nebbia v. People of the State of New York(1), are always in collision : No exercise of the priv .....

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..... hem to occupy. To sum up, it seems to us impossible to accept the contention of the petitioners that the impugned Price Control Order is an act of hostile discrimination against them or that it violates their right to property or their right to do trade or business. The petitioners have taken us into the mutest details of the mechanism of their trade operations and they have attempted to demonstrate in relation thereto that a factor here or a factor there which ought to have been taken into account while fixing the price of mustard oil has been ignored. Dealing with a similar argument it was observed in Metropolis Theater Company v. City of Chicago(1) that to be able to. find fault with a law is not to demonstrate its invalidity. It may seem unjust and oppressive, yet be free from judicial interference. The problems of government are practical ones and may justify, if they do not require rough ,accommodations, illogical, it may be, and unscientific. But even such criticism should not be hastily expressed. What is best is not always discernible, the wisdom of any choice may be disputed or condemned. Mere errors of government are not subject to our judicial review. It is only its .....

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