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B. Viswanathiah and Company and Ors. Versus State of Karnataka and Ors.

1991 (2) TMI 415 - SUPREME COURT OF INDIA

C.A. 2959 of 1980 - Dated:- 11-2-1991 - S. Ranganathan, Kuldip Singh and N.M. Kasliwal, JJ. For the Appellant : Soli J. Sorabjee, Rajinder Sachhar, H. Raghavendra Rao and Vineet Kumar, Advs For the Respondents: M. Veerappa, K.H. Nobin Singh and P.R. Ramasesh, Advs. JUDGMENT S. Ranganathan, J. 1. The two appeals and the three writ petitions challenge the validity of the provisions of the Mysore Silkworm Seed and Cocoon (Regulation of Production, Supply and Distributions) Act, 1959 (Act No. 5 of 1 .....

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ain notifications issued thereunder were challenged in Civil Appeal Nos. 450 and 451 of 1966 and 542 of 1964. These Civil appeals were disposed of by a judgment of this Court dated 6.1.1967 in State of Mysore and Ors. v. Hanumiah. By the said judgment this Court repelled the contentions then put forward. The validity of certain provisions of the impugned Act had then been challenged on the footing that the said provisions as well as the rules made and the notifications issued thereunder imposed .....

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ndia. The contentions were repelled with the result that the statutory regulations providing for protection to readers by the establishment of regulated cocoon markets and forbidding the sale or purchase of silk worm cocoons except in such markets were held to be valid. The present challenge, however, is on different grounds. The contention now is that certain amendments effected to the impugned Act by Karnataka Act No. 33 of 1979 have to be struck down as the State Legislature was not competent .....

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1948), (hereinafter referred to as 'the Central Act') which contains a declaration contemplated under Entry 52 of List I in the Seventh Schedule to the Constitution of India. We shall be addressing ourselves only to this argument. 3. Mysore Act 5 of i960 was passed since it was considered expedient to consolidate the laws providing for the regulation of the production, supply and distribution of silk worm seed and cocoon in the State of Mysore. This Act contained several restrictions in .....

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ed the Government to specify the manner of marketing the above goods, the places at which cocoon markets, cocoon market yards and cocoon stores could be located, specify the sericulture areas to be served by each cocoon market, assign zones and markets in which any licensed buyer could carry on his business. It also provided that all transactions involving the sale or purchase of cocoons in a cocoon market shall be by weight, in open auction and in cash. The above Act, (and in particular the pro .....

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39; and 'cocoon', reference was added to 'silk yarn'. Definitions of 'silk yarn' and various categories thereof were inserted. Section 5A was introduced under which no person could be in possession of silk yarn in excess of a prescribed quantity unless he is a reelers, a licensed trader, a twister, a weaver or a person authorised in writing by the prescribed officer. Section 10A provided for the establishment of silk exchanges at specified places. It enabled the Governmen .....

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t of a silk exchange. It prohibits a reelers or twister from selling or agreeing to sell silk yarn reeled or twisted by him. It permitted only licensed traders to purchase or agree to purchase silk yarn from a reelers or a twister and that too only in a silk exchange and in accordance with such conditions and in such manner as may be prescribed. Sub-section (2) of Section 8A provided that no person shall, except in such silk exchange, use, or permit the use or assist in the use of any building, .....

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islation in respect of 'silk industry' can be enacted only by Parliament and the State Legislature is incompetent to legislate on this matter. This is because Section 2 of the Central Silk Board Act, which reads as follows: It is hereby declared that it is expedient in the public interest that the Union should take under its control the silk industry. enacts a declaration in terms of Entry 52. This removes the 'silk industry' from the purview of the State's legislative powers .....

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and for that purpose to establish a Central Silk Board". Under Section 4, the Central Government is empowered to constitute a Board to be called the Central Silk Board with a Constitution as set out in Sub-section (3). The functions of the Board are set out in section B, which may be set out: (1) It shall be the duty of the Board to promote the development of the silk industry by such measures as it thinks fit. (2) Without prejudice to the generality of the foregoing provision, the measures .....

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properly equipped raw silk conditioning houses: (c) x x x x x (d) improving the marketing of raw silk; (e) the collection of statistics from such persons as may be prescribed; (f) carrying out any other duties which may be vested in the Board under rules made under this Act. The Board has also a duty to advise the Central Government on all matters relating to the development of the raw silk industry and to prepare and furnish such reports relating to the industry as the Central Government may c .....

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framed but these mostly relate to the functioning of the Board the only two topics on which such rules could be framed which may be relevant purposes are those contained in Clause (xviii), (xix) and (xx) which read as follows: (xviii) the collection of any information or statistics in respect of raw silk or any product of silk; (xix) the manner in which raw silk shall be graded and marketed; (xx) any other matter which is to be or may be prescribed. 6. In the context of these provisions the shor .....

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ament has declared that it is expedient in the Public interest that the Union should take under its control the silk industry. Again, by Section 2 of the Industries (Development and Regulation) Act, 1951 Parliament has declared that it is expedient in the public interest that the Union should take under its control the industries specified in the first Schedule to the Act. Item 23(4) of the first Schedule thereunder specifies "textile (including those dyed, printed or otherwise processed) m .....

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Corporation Ltd. v. State of Uttar Pradesh and Ors. [1980]1SCR769 that merely because an industry is controlled industry as declared by Parliament under Entry 52 in List I, the State is not deprived of its legitimate power to legislate within its own sphere in respect of such industry. Referring to the scope of Entry 52 of List I, in the context of legislation dealing with regulation of supply and purchase of sugar cane required for use in sugar factories. Supreme Court in Tika Ramji's [1956 .....

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re the industry was a controlled industry when it would fall within Entry 52 of List 1 and the products of the industry would also be comprised in Entry 27 of List 2 except where they were the products of the controlled industries when they would fall within Entry 33 of List 3. It is clear from the above observations that it is not all aspects of the industry (that) fall within the scope of Entry 52 of List 1. It is only one aspect of the industry, that is, the process of manufacture or producti .....

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nd effect of Entry 52 of List 1 in relation to Entries 24 and 27 of List II and Entry 33 of List III. The effect of these decisions is that though expressions in legislative entries refer to broad topics and fields of legislation and require a liberal construction, and though the particular expression 'industries' in Entry 52 of List I in its wide sense may comprise many aspects, however, having regard to the scope of other entries in the other lists, the ambit of Entry 52 of List I shou .....

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nted out that when Entry 52 talks of control of industry it does not mean all aspects of the industry in question. An industry comprises of 3 important aspects: (i) raw materials (ii) the process of manufacture or production; and (iii) the distribution of the products of the industry. Legislation in regard to raw materials would be permissible under Entry 27 of List 2, notwithstanding a declaration of the industry under Entry 52 to be one within the purview of parliamentary legislation. The proc .....

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f the industry would be permissible by both the Central and the State Legislatures by virtue of Entry 33 of List 3. This in short is the decision of the High Court based, as already pointed out on a series of decisions of this Court. Observations by this Court to a like effect in Calcutta Gas Co. (P) Ltd. v. State (1961)IILLJ431SC may also be seen. We entirely agree with this view. 8. On behalf of the appellants/petitioners, Shri Soli Sorabji contended that the validity of the enactment has now .....

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n, that the State legislation in this case is also incompetent or we should refer this matter also to a larger Bench. 9. We are of the opinion that it is unnecessary, for the purposes of the present case, to consider the contentions raised in the I.T.C. case (supra). That was a case in which the State enactment was held to be competent by the High Court on the narrow ground that the central legislation covered only Virginia tobacco and did not deal with the industry in so far as it related to ot .....

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he matter is on a totally different footing. It is true that the Central Silk Board Act purports to control the raw silk industry in the territory of India. But, as pointed out by the High Court in the light of the earlier decisions of this Court therein referred to the control of the industry vested in Parliament was only restricted to the aspect of production and manufacture of silk yarn or silk. It did not obviously take in the earlier stages of the industry, namely, the supply of raw materia .....

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did not challenge the provisions of the 1959 Act, when it was originally enacted, on the ground that is now being put forward. The present legislation, as a result of the amendments, controls the supply and distribution of the goods produced by the industry. As rightly pointed out by the High Court this is the third aspect of the industry which falls outside the purview of the control postulated under Entry 52. In other words, though the production and manufacture of raw silk cannot be legislate .....

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