M/S. KURALI KHANDSARI UDYOGversusEXCISE COMMISSIONER AND CONTROLLER OF MOLASSES, U.P. AND ORS.

                  MIS. KURALI KHANDSARI UDYOG                                   A
                         v.
EXCISE COMMISSIONER AND CONTROLLER OF MOLASSES, U.P.
                     AND ORS.

                             APRIL 20, 2004
                                                                                B
                 [S.N. VARIA VA AND H.K. SEMA, JJ.]


      U.P. Sheera Niyantran Niyamawa/i, 1974:

      Rule 24 -Restriction on transport of "any molasses" without permission- C
Challenged by manufacturers of khandsari molasses-Held, the term "any
molasses" means any molasses and not just molasses manufactured by process
of vacuum panning-Such regulatory measure, neither without jurisdiction
nor in excess ofrule making power-Such a restriction could always be imposed
by virtue of Article 162 of the Constitution-It does not impose unreasonable D
restriction and cannot be said to be violative of Article 19(/)(g) of the
Constitution-UP. Sheera Niyantran Adhiniyam, 1964-ss. 2(d) and 22-
Constitution of India-Articles 19(/)(g) and 162.

     In pursuance of Rule 24 of the U.P. Sheera Niyantran Niyamawali,
1974 (the Rules), framed by State Government in exercise of power under         E
s.22 of the U.P. Sheera Niyantran Adhiniyam, 1964 (the Act), the
Controller of Molasses issued orders restricting transport of "any
molasses" without permission. The appellant-manufacturer of Khandsari
molasses challenged the said orders by filing a writ petition which was
dismissed by the High Court. Aggrieved, the manufacturer filed the              F
present appeal.

      It was contended for the appellant that the Act, in view of definition
of molasses as contained in s.2(d) thereof, applied to vacuum pan molasses;
and Rule 24 so far as it sought to place restrictions on possession, purchase
or transport of molasses could only apply to molasses prepared by process       G
of vacuum panning and not to khandsari molasses as Rule 24 could not
exceed the provisions of the Act. It was further contended that the orders
issued by the Controller of Molasses were restrictive of the right of
freedom of trade as guaranteed under Article 19(l)(g) of the Constitution;
and the proper course was to keep a close check in the sugar mills premises
                                    413                                         H
    414                     SUPREME COURT REPORTS [2004) SUPP. 1 S.C.R.
                                                                                    I

A itself and by verifying at the premises receiving such molasses.                  c
          Dismissing the appeal, the Court

          HELD: 1. Keeping a watch on the premises may be one method of
    control. However, requiring transporters to take permission is also a
B   method of control. Such regulatory measure do not impose unreasonable .
    restriction and cannot be challenged on the ground that they affect the
    right to carry on trade ·as guaranteed under Article l 9(l)(g) of the
    Constitution of India. (417-A-B)

          2. It cannot be said that the orders passed by the Controller of
C   Molasses are without jurisdiction and in excess of the rule making power.
    The purpose of the Act is to control vacuum panned molasses. In order
    to achieve this object it would be necessary to regulate movement of any
    molasses. Thus the term "any molasses" in Rule 24 inust necessarily mean
    any molasses and not just molasses manufactured by the process of
D   vacuum panning. Even presuming that the rule making power did not
                                                            a
    enable the Government to make such a rule, such restriction could
    always be imposed by virtue of Article 162 of the Constitution of India.
                                                                    [417-D-EJ

          Bishambhar Dayal Chandra Mohan v. State of UP., (1982] I SCC 39,
E   relied on.

          CtVIL APPELLATE JURISDICTION : Civil Appeal No. 4796 of 1998.

         From the Judgment and Order dated 18.2.98 of the Allahabad High
    Court in C.M.W.P. No. 43744 of 1997.

F         Ms. Sandhya Goswami for the Appellant.

         Dinesh Dwivedi, Ms. Niranjana Singh, Rajnish Prasad, K.C. Dua, Ashok
    K. Srivastava and P.K. Chakravarty for the Respondents.

          The Judgment of the Court was delivered by
G          S.N. VARIA VA, J. This Appeal is against the ·Judgment of the
    Allahabad High Court dated 18th February, 1998; The Appellants' Writ
    Petition challenging Orders dated 10th December, 1997, l lth December,
    1997 and 19th December, 1997 has been dismissed.

          These Orders have been issued tinder the Uttar Pradesh Sheera Niyantran
H
   KURALI KHANDSARI UDYOG '" EXCISE COMMR. AND CONT. OF MOLASSES [VARIAVA, J.) 415

Adhiniyam, 1964 (hereinafter referred to as the Act) and the rules framed            A
thereunder. Section 2(a) of the Act defines "Controller" as the Controller of
Molasses. Section 2(d) defines "Molasses" as the heavy, dark coloured viscous
liquid produced in the final stage of manufacture of sugar by vacuum pan,
from sugarcane or gur, when the liquid as such or in any form or admixture
contains sugar. Section 2(h) defines "Sugar Factory" or "Factory" as any             B
premises wherein twenty or more workers are working and in which a
manufacturing process connected with production of sugar by means of
vacuum pan is being carried on or is ordinarily carried on with the aid of
power. Section 22 of the Act gives to the State Government power to make
rules. The State Government has framed the U.P. Sheera Niyantran Niyamavali,
1974 (hereinafter referred to as the Rules). Rule 22 provides that molasses          C
produced in sugar factory shall be sold or supplied only to distilleries or
other persons bonafidely requiring it for purposes of industrial development.
Rule 24 reads as follows:

        "24. Restriction on transportation of molasses.- No person shall,
        transport or cause to be transported outside Uttar Pradesh any molasses      D
        unless permission in writing obtained from the Controller."

      In pursuance of this Rule, the Controller issued Orders dated 10th
December, 1997, 11th December, 1997 and 19th December, 1997, which
prohibited transport of "any molasses" without permission. The Appellants
who are manufacturer of Khandsari molasses felt aggrieved by these Order             E
and challenged the same on the ground that such a restriction imposes an
unreasonable restriction on their right to carry on business as guaranteed
under Article 19(l)(g) of the Constitution of India and on the ground that
Rule 24 cannot go beyond the Act and cannot apply to molasses which is not
produced by vacuum panning.                                                          F
       It is submitted that the Act only applies to vacuum pan molasses. It is
submitted that this is clear from the definition of the term "Molasses" in
Section 2(d). It is submitted that even the definition of the term "Sugar
Factory" or "Factory" makes it clear that the Act only applies to those sugar
factories or factories which manufacture sugar by the process of vacuum              G
panning. It is submitted that the rules which can be framed under Section 22
cannot exceed the provisions of the Act. It is submitted that Rule 24 in so far
as it seeks to place restrictions on purchase, transport or possession of molasses
can only apply to molasses prepared by the process of vacuum panning and
not Khandsari molasses. It is submitted that the term "any molasses" in Rule
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    416                     SUPREME COURT REPORTS (2004) SUPP. I S.C.R.

A   24 must necessarily mean any molasses prepared by the process of vacuum
    panning. It is submitted that therefore the three Orders which prevent transport
    of molasses without permission can apply only to molasses prepared by
    vacuum panning. It is submitted that if the Orders seek to restrict transport
    of any molasses then they are restrictive of the right of freedom of trade as
B   guaranteed under Article 19(l)(g) of the Constitution oflndia and beyond the
    scope of the rule making power under Section 22.

           On the other hand Mr. Dwivedi points out that ir. U,P. 90% of the
    molasses is produced by vacuum pan process. He submitted that the purpose
    of the Act was to control supply and sale of vacuum pan molasses so that it
C   is available for industries in the State. He submitted that Sections 7 and 8
    permits regulation· of removal, sale and supply of molasses. He submitted
    that in the guise of exporting Khandsari molasses, vacuum pan molasses was
    being smuggled out of the State. He pointed out that it is impossible to
    differentiate vacuum panned molasses from khandsari molasses by merely
    looking at it. He pointed out that the difference could 01:1ly be made out by
D   sending the molasses for testing.in a laboratory. He submitted that in order
    to control the smuggling of vacuum panned molasses as khandsari molasses
    it was necessary to con!J"ol transport of molasses. He submitted that Section
    22 of the Act gave power to the State Government to makes rules for carrying
    out the purpose of the Act. He admitted that the purpose of the Act was to
E   control sale and supply of vacuum pan molasses. He submitted that this
    included controlling the illegal or unlawful removal thereof. He submitted
    that one of the method of control was to prevent removal of any type of
    molasses without permission,· He submitted that permission was required to
    be taken so that Government could check that only Khandsari molasses was
    being exported. He stated that if khandsari molasses was to be exported then
F   permission would be given. He subinitted that at present the trucks had to be
    held up for a number of days till the molasses carried by them w~ got tested
    to ensure that vacuum panned molasses was not being exported. He submitted
    that the aim in enacting Rule 24 was to ensure that the power of search and
    seizure, given under Section 14 of the Act, need hot be used, as once
G   permission is granted it would be known what is being transported is Khandsari
    molasses.

          In reply to this Ms. Goswami submitted that the Allahabad High Court
    had already noted that the transporters of khandsari molasses were being
    harassed by having their trucks detained and had directed that proper course
H   was to keep a close check in the sugar mills premises itself and by verifying
  KURALI KHANDSARI UDYOG "· EXCISE COMMR. AND CONT. OF MOLASSES [VARJA VA, J.) 41 7


at the premises receiving such molasses. She showed to Court the Judgment             A
dated I Ith December I 998 in Writ Petition No. 39733 of I 998. However this
Judgment does not deal with or consider Rule 24 or the impugned Orders.
This Judgment also recognizes the need for control. Keeping a watch on the
premises may be one method of control. However requiring transporters to
take permission is also a method of control. Such regulatory measures do not
impose unreasonable restriction and cannot be challenged on the ground that           B
they affect the right to carry on trade as guaranteed under Article I 9(1 )(g) of
the Constitution of India. This Court in the case of Bishambhar Dayal Chandra
Mohan v. State of U.P., reported in [1982] I SCC 39 has held in respect of
a regulatory measure which required an endorsement of the Deputy Marketing
Officer or a Senior Marketing Officer not to be a restriction on freedom of           C
trade, commerce and intercourse within the country. It was held that even if
these were considered as restrictions the limitation so imposed cannot be
considered to be arbitrary or of an excessive nature. It was held that such
restrictions satisfy the test of reasonableness.

       We are also unable to accept the submission that these Orders are              D
without jurisdiction and in excess of the rule making power. The purpose of
the Act is to control vacuum panned molasses. In order to achieve this object
it would be necessary to regulate movement of any molasses. Thus the term
"any molasses" in Rule 24 must necessarily mean any molasses and not just
molasses manufactured by the process of vacuum panning. Even presuming                E
that the rule making power did not enable the Government to make such a
rule, such a restriction could always be imposed by virtue of Article 162 of
the Constitution of India.

     We therefore see no infirmity in the Judgment of the High Court. The
Appeal stands dismissed. There will be no order as to costs.                          F
R.P.                                                          Appeal dismissed.