Holding

Clauses 9 and 10 of the Control Order are valid regulatory provisions and do not conflict with the policy under the Foreign Trade Act; the High Court’s finding of repugnancy is set aside.

Summary

The State of West Bengal issued the West Bengal Rice and Paddy Control Order, 1997 under the Essential Commodities Act, 1955, containing clauses 9 and 10 that regulated storage, transport and export of rice and paddy. A writ petition challenged these clauses as being inconsistent with the export‑import policy framed under Section 5 of the Foreign Trade Development and Regulation Act, 1992. The Calcutta High Court held the clauses repugnant to the central policy. On appeal, the Supreme Court examined whether the clauses were merely regulatory and within the State's delegated powers, and whether they conflicted with the central export policy. The Court held that the clauses are regulatory, pertain only to certain aspects of export activity, and are harmonised with the policy under Section 5 of the Foreign Trade Act; moreover Section 6 of the Essential Commodities Act gives such orders effect notwithstanding any inconsistency with other statutes. Consequently, the High Court’s decision was set aside and the appeal was allowed.

Issues considered

Whether clauses 9 and 10 of the West Bengal Rice and Paddy Control Order, 1997 are repugnant to the export‑import policy under Section 5 of the Foreign Trade Development and Regulation Act, 1992.
Whether the State, exercising power under Section 3 of the Essential Commodities Act, 1955, can impose such regulatory restrictions without violating the central trade policy.

Legislation cited

Essential Commodities Act, 1955s. 3, s. 5, s. 6
Foreign Trade (Development and Regulation) Act, 1992s. 5, s. 6

Subjects

Essential Commodities ActForeign Trade ActRegulatory powerExport controlState vs CentreRice exportSection 5Section 6Permit requirement

Judgment

THE STATE OF WEST BENGAL AND ORS. A
-.A
v.
MIS VEEJAY INTERNATIONAL (INDIA) AND ORS.

FEBRUARY 20, 2007

[DR. ARIJIT PASAYAT AND S.H. KAPADIA, JJ.] B

West Bengal Rice and Paddy Control Order, 1997-Clauses 9 & 10-
Regulations regarding stora[jf! of rice and paddy for export and export there
of-Clauses held to be contrary to Foreign Trade Development and Regulation
Act by High Court-On appeal, held: Clauses relate to only certain restrictions C
on some parts of export activities-They are regulatory in nature without
affecting the policy flowing from the Trade Act-Foreign Trade Development
and Regulation Act, 1992-Section 5-Essential Commodities Act, 1995-
Section 3.

State Government, by a Notification issued West Bengal Rice and Paddy
D
Control Order, 1997 (Control Order) in exercise of Power available under
Essential Commodities Act, 1955. Clauses 9 and IO thereof were challenged
in Writ Petition. High Court held that the clauses were contrary to the policy
declared under the Foreign Trade Development and Regulation Act, 1992
(Foreign Trade Act). Hence the present appeal. E
Allowing the appeal, the Court

HELD: I. Section 5 of the Foreign Trade Act authorizes the Central
Government to formulate and announce, by notification in the Official Gazette,
the export and import policy as also to amend the same in like manner. If the F
clauses 9 and IO of the Control Order and Section 5 of the policy of the
Foreign Trade Act are harmonized, that rules out any conflict. [Para Pl
[I012-G]

2. The Control Order was passed in exercise of power available under
Essential Commodities Act, 1955 "Export" under the Foreign Trades Act G
involves several activities. It includes transport, international contract between
parties, interstate movement and delivery to the buyer outside the country.
The impugned clauses of the Control Order relate to certain restrictions on
some parts of the activities. By no stretch of imagination they can be
considered to be opposed to the policy of export. The clauses are regulatory
1007 H
1008 SUPREME COURT REPORTS [2007) 2 S.C.R.

A in nature and character without in any manner affecting the policy flowing
from Section S of the Foreign Trade Act. It is not that any unbridled and/or ,.\ -
arbitrary power was given to the authorities as held by the High Court. In
fact, the pa.rameters of exercise of power are inbuilt in Clause 10. Reasons
were required to be recorded. This was to be done objectively and not
subjectively as appears to have been concluded by the High Court. Looked at
B from any angle, the High Court's judgment is indefensible. (Para 14)
[1013-B-DI

K. Ramanathan v. State of Tamil Nadu and Anr., [1985) 2 SCC 116,
referred to.

C CIVIL APPELLATE JURISDICTION: Civil Appeal No. 5048 of2000.

From Judgment and final Order dated 28.4.1999 of the High Court of
Calcutta at Calcutta in M.A.T. No. 2689/1998.

Altaf Ahmad, Neelam Sharma and Tara Chandra Sharma for the
D Appellants.
Sarla Chandra for the Respondents.

The Judgment of the Court was delivered by

E DR. ARIJIT PASAYAT, J. I. Challenge in this appeal is to the judgment
rendered by a Division Bench of the Calcutta High Court holding that clauses
9 and 10 of the Notification No.4784-F.S./FS/Sectt/Food/148-1/97, dated
19.12.1997 issued in exercise of the powers conferred by Section 3 of the
Essential Commodities Act, 1955 (in short the 'Act') read with Government
of India, Ministry of Agriculture and Irrigation (Department of Food) Order
F No. G.S.R. 800 dated 8th June, 1978 was contrary to the policy declared under
the Foreign Trade Development and Regulation Act, 1992 (in short 'Foreign
Trade Act'). Accordingly, it was held as follows:

"In view of our findings aforementioned it must be held that the order
does not conform to the policy laid down by the Central Government
G in exercise of its power conferred upon it under Section 5 of the 1992
Act inasmuch as in terms thereof, the Central Government could not
even itself interfere with the proclaimed policy relating to import and
export adopted by it in terms of Section 5 of the 1992 Act."

2. By the abovesaid notification order in question was made which was
H called West Bengal Rice and Paddy Control Order, 1997 (for short 'the Control
TilESTATEOFWESTBENGAL v. VEEJA YINTERNA TIONAL(INDIA)[PASA YAT,J.] j 009

Order'). A
3. Background facts in a nutshell are as follows:

4. The notification in question was issued purportedly with a view to
regulate the price and availability of rice in the State of West Bengal. The
State Government in exercise of delegated power given under the Act, by the B
notification No.G.S.R. 800 dated 8th June, 1978 promulgated West Bengal Rice
and Paddy (Restriction on Movement) Order, 1981 (in short 'Movement Order').

5. Clause 5 of the said order authorizes Officers to enter into any
premises and make search and seizure of essential commodities or vehicle etc.
Vires of the said orders were considered by a Division Bench of Calcutta High C
Court.

6. Thereafter, the Control Order was issued. Clauses 9 and I0 of the said
Control Order are relevant for the purpose of the present dispute. They read
as follows:-
D
"9. Regulation of storage of rice and paddy for export

(1) No person shall store or attempt to store or transport any quantity
ofrice or paddy procured for export without a valid permit in Form
'D' granted by the Director or by the Controller, if so authorized
by the Government. E
(2) In the case of transshipment of stocks from one vehicle to another
in exigencies, by an exporter without a valid permit such
transshipment shall be made only with the prior permission of the
nearest Controller, stating in total the reason for such
transshipment. F
10. Regulation of export of rice produced in West Bengal -
No person shall export or attempt to export any rice or paddy
produced or grown in West Bengal without a written authority
granted by the Government in this behalf, and if the Government
or such authorized officer is satisfied that such export of rice will G
not adversely affect the price and availability of rice in the local
market, the Government or such authorized officer may grant
authority for export of specified quantity and variety of rice as
may be determined by the Government or such authorized officer."
H
JOJO SUPREME COURT REPORTS [2007] 2 S.C.R.

A 7. Respondent filed a writ petition before the Calcutta High Court
questioning the legality of the aforesaid clauses primarily on the ground that ~-
they were repugnant and inconsistent with the policy declared by the Foreign
Trade Act. The State took the stand that the clauses in question are regulatory
in nature and do not suffer from any infirmity.

B 8. The High Court accepted the challenge and, inter alia, concluded as
follows:

"Clause 9(1) of the Control Order deals with restriction on transport
whereas; clause 4.21 of the export and import policy framed by the
Central Government under Section 5 of the 1992 Act clearly states that
c items allowed for export shall not be withheld/delayed for any reason
by any agency of the Central or State Government. Both the provisions,.
thus, are in direct conflict with each other. Clause 9.2, provides for a
prior permission of the nearest controller when transshipment takes
place from one vehicle to another. If clause 9. I is bad, clause 9.2
D cannot survive independently.

Clause I0 of the Control order is in mandatory form. It totally
prohibits export or import. It confers absolute unguided, unbridled
and uncontrolled power upon the authorities named therein to consider
as to whether a permit for export should be granted or not. By reason
E of an order made under the delegated notifications no authority of the
State Government can authorize to issue permit for export. Such a
contingency is contemplated only in terms of paragraph 5 of the 1992
Order. Once in terms of EXIM policy non Basmati rice is considered
to. be free for export which decision must have been taken into
consideration by the Central Government upon taking into
F consideration all aspects of the matter viz. availability thereof in the
country, the quantum of production and the requirement within the
courts, the State Government in exercise of its delegated power cannot
be held to have any say in the matter. If the State Government has
any difficulty in relation thereto, it may bring the same to the notice
G of the Central Government so that at the time of registration of such
contract entered into by and between the exporter and the foreign
country, the same may borne in mind by the appropriate authority so
as to restrict number of registrations of contract by and between the
exporters from India and the Foreign Countries."

H 9. As noted above, an escape route was suggested as would be seen
~
THESTATEOFWESTBENGAL r. VEEJA YINTERNATIONAL(INDIA)[PASA YAT,J] 1011

_,._ from the quoted portion of the High Court's order. A
I0. In support of the appeal, learned counsel for the appellants submitted
that the High Court completely lost sight of the fact that the two clauses were
regulatory in nature. There was no complete ban on export or import and, it
cannot be said that there was any absolute, unguided, unbridled and
uncontrolled power upon the authorities to decide whether the permit for B
export shall be granted or not. The purpose was to ensure that the export
does not affect the price in the local market and the availability of stock. As
a matter of fact, there was no conflict as was held by the High Court.
+-
11. In K. Ramanathan v. State a/Tamil Nadu and Anr. [1985] 2 SCC 116
it was held as follows: c
"The appellants impugned clause 3(1-A) of the 1982 Order on the
grounds that it was ultra vires the State Government being in excess
of the delegated powers. It was urged (i) that the delegation of a
specific power under Section 3(2Xd) of the Essential Commodities Act
D
by the Central Government notification dated June 9, 1979 issued
under Section 5 of the Act to regulate the storage, transport,
distribution, disposal, etc. of an essential commodity, in relation to
foodstuffs, does not carry with it the general power of the Central
Government under sub-section (I) of Section 3 to regulate or prohibit
the production, supply and distribution thereof and trade and commerce E
therein, and (ii) that the word 'regulating' in clause (d) of Section 3(2)
of the Act does not take in 'prohibiting' and as such there cannot be
a total prohibition on transport, movement or otherwise carrying of
paddy out of the areas in question under clause (d) but only regulation
of such activities in the course of trade and commerce by grant of
licences or permits."
F

12. Decision in Harishankar Bag/a and Anr. v. The State of Madhya
Pradesh AIR (1954) SC 465 throws considerable light on the controversy. Para
7 of the judgment read as follows:-

"7. The first question canvassed by Mr. Umrigar was that the G
• provisions of Section 3 of the Control Order infringed the rights of a
~
citizen guaranteed in sub-clauses (f) and (g) of Article 19(1) of the
Constitution. These sub-clauses recognize the right of a citizen to
dispose of property and to carry on trade or business. The requirement

- of a permit to transport by rail cotton textiles to a certain extent H
+·
1012 SUPREME COURT REPORTS [2007] 2 S.C.R.

A operates as a restriction on the rights of a person who is engaged in
tht: business of purchase and sale of cotton textiles. Clause (5) of .\ -
Article 19 however permits such restrictions to be placed provided
they are in the public interest. During the period of emergency it was
necessary to impose control on the production, supply and distribution
of commodities essential to the life of the community. It was for this
B reason that the Legislature passed the Essential Supplies (Temporary
Powers) Act authorizing the Central Government to make orders from
time to time controlling the production, supply and distribution of
essential commodities.
--+
Clause 3 of the Control Order does not deprive a citizen of the
c right to dispose of or transport cotton textiles purchased by him. It
requires him to take a permit from the Textile Commissioner to enable
him to transport them. The requirement of a permit in this regard
cannot be regarded as an unreasonable restriction on the citizen's
right under sub-clauses (f) and (g) of Article 19(1 ). If transport of
D essential commodities by rail or other means of conveyance was left
uncontrolled it might well have seriously hampered the supply of
these commodities to the public. Act XXIV of 1946 was an emergency
measure and as stated in its preamble, was intended to provide for the
I
continuance during a limited period of powers to control the
production, supply and distribution of, and trade and commerce in,
E certain commodities. The number of commodities held essential are
mentioned in Section 2 of the Act, and the requirement of a permit to
transport such commodities by road or rail or other means of transport,
cannot, in any sense of the term, be said, in a temporary Act, to be
unreasonable restriction on the citizens, rights mentioned in clauses
F (f) and (g) of Article 19( 1). The High Court was therefore right in ).
negativing the contention raised regarding the invalidity of the Control
Order as abridging the rights of the citizens under Article 19 (I) of the
Constitution."

13. Section 5 of the Foreign Trade Act authorizes the Central Government
G to fonnulate and announce, by notification in the Official Gazette, the export
and import policy as also to amend the same in like manner. If the clauses 9
and 10 of the Control Order and Section 5 of the policy of the Foreign Trade
.
Act are hannonized, that rules out any conflict. As a matter of fact, Section "'
6 of the Act is also of relevance and it reads as follows:
H ...
TIIESTATEOFWESTBENGALv.VEEJAYINTERNATIONAL(INDIA)[PASAYAT,l.J JQ13

"6. Effect of orders inconsistent with other enactments - Any order A
made under section 3 shall have effect notwithstanding anything
jnconsistenf therewith contained in any enactment other than this Act
or any instrument having effect by virtue of any enactment other than
this Act."

14. The Control Order was passed in exercise of power available under B ·
the Act. "Export" under the Foreign Trades Act involves several activities.
It includes transport, international contract between parties, interstate
movement and delivery to the buyer outside the country. The impugned
clauses of the <;:ontrol Order relate to certain restrictions on some parts of the
activities. By no stretch of imagination they can be considered to be opposed C
to the policy of export. The clauses are regulatory in nature and character
without in any manner affecting the policy flowing from Section 5 of the
Foreign Trade Act. It is not that any unbridled and/or arbitrary power was
given to the authorities as held by the High Court. In fact, the parameters of
exercisable of power are inbuilt in Clause l 0. Reasons were required to be
recorded. This was to be done objectively and not subjectively as appears D
to have been concluded by the High Court. Looked at from any angle, the
High Court's judgment is indefensible and is set aside.

15. The appeal is allowed with no order as to costs.

K.K.T. Appeal allowed. E

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