RAMANLAL PURSHOTTAMDAS CHOKSHI Vs. UNION OF INDIA

JUDGEMENT

(1.) The first petition is filed by some of the licenced dealers to challenge the provisions of the Gold (Control) Act 1968 hereinafter referred to as the Act along with the rules enacted thereunder; while the second petition is by the money lenders who have challenged the provisions in sec. 16(1) read with sec. 16(5) of the Act. In the first petition a circular had been issued by the authorities on July 12 1968 informing the President of the Chokshi Mahajan Association that after the Gold (Control) Ordinance 1968 which came into effect from June 29 1968 all licensed dealers and refiners were required to declare all articles ornaments owned by them or their families or in their possession custody or control i.e. capacity other than that of a dealer or refiner. The result of that would be that licensed dealers and refiners who had already filed declarations of their personal holdings of articles-ornaments would not have to file fresh declaration in respect thereof but those who had not filed such declarations for reasons of their personal holding being within the exempted limit would now have to make a declaration irrespective of the quantity of their holdings. They would have 30 days time from the date of the promulgation of the Ordinance for making the declaration and the declaration of their personal holdings and ornaments should be made before July 29 1968 The licensed dealers were also required according to sec. 31 to stamp the purity of gold on the ornaments or articles manufactured by them after the ordinance and the association was therefore asked to give top priority to this matter and inform all the licensed dealers and refiners accordingly. That is why in the first petition the petitioners have Challenged the various provisions as under:-

(2.) In Harakchand v. Union of India A. I. R. 1970 S. C. 1453 their Lordships had except for sec. 5(2)(b) 27 (27(6) 32 46 88 and 100 which were held to be constitutionally invalid upheld the vires or the other provisions of that Act. The Parliament was held to be validly exercising its legislative power in respect of matters covered by Entry 5g of List 1 and Entry 33 of List III. In the Industries (Development and Act (1951) the expression semi-manufactures or manufactures of item (1)(B) (2) of the first schedule was construed in the context to cover the subject of manufacture of gold ornaments and Parliament was. held to be competent to legislate in regard to the subject-matter of the Gold Control Act because manufacture of gold ornaments by the goldsmiths in India was a process of systematic production for trade or manufacture and so it fell within the connotation of the word industry in the appropriate legislative entries. It followed therefore that in enacting the Gold (Control) Order 1968 Parliament was validly exercising its legislative power in respect of matters covered by Entry 52 of List I and Entry 33 of List III. Their Lordships referred to the preamble that the Act was to provide in the economic and financial interests of the community for the control of the production-manufacture supply distribution use and possession of and business in gold ornaments and articles of gold and for matters connected therewith or incidental thereto. At page 1463 their Lordships considered the circumstances and the social back-. ground in which this Gold Control Act was enacted. Their Lordships considered the fact that the Act was passed to bring about reduction in the quantity of smuggled gold by rendering smuggling more dangerous and the disposal of smuggled gold in the domestic market more difficult. Even though import of gold had been banned considerable quantities of contrabanned gold found their way into this country through illegal channels. The Customs Department was in itself not in a position to effectively combat smuggling over the long borders and the coast lines and therefore the anti-smuggling measures had to be supplemented by a detailed system of control over internal transaction so as to make the circulation of smuggled gold more difficult if not impossible. The loss of foreign exchange caused by smuggling of gold was estimated at nearly Rs. 100 crores per year in the post-devaluation period and Government felt that it was very necessary to reduce the internal demand for gold and erect barriers to the circulation of the smuggled gold within the country. In the Taxation Enquiry Commission report the factual position as to the existence of widespread smuggling was mentioned as under: It is now clear that smuggling constitutes not only a loophole for escaping duties but also a threat to the effective fulfilment of the objectives of foreign trade control. The existence of foreign pockets in the country accentuates the danger. The extent of the leakage of revenue that takes place through this process cannot be estimated even roughly but it is not unlikely that it is substantial. Apart from its deleterious effect on legitimate trade it also entails the outlay of an appreciable amount of public funds on patrol vessels along the sea-coasts and permanent works along the land border and watch and ward staff on a genenous scale. It was therefore necessary in the Commissions view that stringent measures both legal and administrative should be adopted with a view to minimising the scope of that evil. In the light of this social background their Lordships considered the reasonableness of the restrictions imposed by the impugned Act in the light of the magnitude of the evil which was sought to be eliminated. Their Lordships therefore justly balanced the individual liberty as against the requirements of social control in order that it may subserve public interest while striking down the aforesaid provisions which did not fulfil the test of reasonableness. The provisions in sec. 5(2)(b) was held to be legislative in character because it gave power to the administrator which was a parallel power of subordinate legislation which was conferred on the Central Government under sec. 114(2) and (2) of the Act by enacting rules which were at least to be laid down before each House of Parliament. Therefore this regulative power conferred under sec. (5)(2)(b) was held to suffer from the vice of excessive delegation. The licensing scheme under sec. 27(2)(d) and 27 (6) was struck down on the ground that sec. (27)(6)(a) required the Administrator in the matter of issuing or renewal of licence to have regard to the number of dealers existing in the applicant intended to carry on business as a dealer. Similarly sec. 27(6)(b) required the Administrator to have regard to the anticipated demand as anticipated by him for ornaments in that region. The expression anticipated demand was a vague expression which was not capable of objective assessment and was bound to lead to a great deal of uncertainty. Similarly the expression of the applicant in sec. 27(6)(e) and public interest in sec. 27(6)(g) did not provide any objective standard or norm or guidance. Therefore clauses (a) (b) and (e) of sec. 27(6) were held to impose unreasonable restrictions on the fundamental right of the petitioner to carry on business and were constitutionally invalid especially as the same requirement or strict condition was kept even for renewal of the licence. These clauses being not severable and the entire sec. 27(6) was struck down especially as sec. 27(2)(d) enabled the Administrator to issue a licence containing such conditions limitations and restrictions as he would think fit to impose and on the face of it conferred such wide and vague power upon the Administrator that it was difficult to limit its scope. Their Lordships however pointed out at page 1466 that as the licensing scheme was invalid sec. 27 could not be worked in practice and therefore it was necessary for the Parliament to enact fresh legislation imposing appropriate conditions and restrictions for the grant or renewal of licence to the dealer. In the alternative the Central Government might make appropriate rules for the same purpose in exercise of its rule making power under sec. 114 of the Act. Thereafter it was pointed out by their Lordships that so far as sec. 100 was concerned it imposed statutory obligation upon the dealer to take all reasonable steps to satisfy himself as to the identity of persons from whom any gold was bought. The section did not specify the nature of steps which a dealer should take for satisfying himself as to the identity of the person from whom any gold was bought. The statutory obligation imposed by the section was uncertain and incapable of proper compliance and was therefore held to impose an impossible burden upon the dealers and constituted an unreasonable restriction. Their Lordships however observed at the end that the provisions which were held to be constitutionally invalid were severable and the Act still remained the Act as it was passed that is an Act to provide for the control production manufacture supply distribution use and possession of gold and gold ornaments and articles of gold and therefore only the aforesaid provisions were struck down. In Badri Prasad v. Collector Central Excise A.I.R. 1971 S.C. 1170 a person carrying on money lending business against the pledge of gold ornaments challenged the vires of this Act read with the rules particularly secs. 6 8 and 16(1)c After referring to the earlier decision their Lordships observed at take 1774 that the impugned Act was as shown by its preamble to provides for the economic and financial interestes of the community for the control of the production manufacture supply distribution use and possession of and business in gold ornaments and articles of gold and for matters connected therewith or incidental thereto. As was well-known the object of the Act was to make it difficult if not impossible for sold which was smuggled into the country from being circulated evidently with the object of checking smuggling of gold or rendering the same unprofitable and so avoiding a loss of foreign exchange to the country. Although there was no definition of pawn broker in sec. 2 their Lordships at page 1175 pointed out that there could be no doubt that some of the provisions of the Act were designed to restrict the use of gold by way of pledge or hypothecation for securring loan. Their Lordships referred to sec. 6(1) which empowered the Administrator to require any person who lent money on pledge hypothecation etc. or any article or ornament to furnish a return giving full particulars of the things given by way of security and the persons who gave the security. Sub-sec. (2) authorised the examination of accounts of person lending money on the security of gold articles or ornaments and provided that any gold which was not declared in the accounts or found to be in excess of the quantity shown in the accounts and which was not otherwise accounted for to the satisfaction of the examining officer was to be deemed to be in possession of such person in contravention of the provisions of the Act. Chapter III of the Act was referred to which contained sections s to 11 dealing with restrictions relating to the manufacture acquisition possession sale transfer or delivery of gold. Sec. 10 provided that no shall obtain from any other person any loan or advance on the pledge mortgage or charge of (a) any primary gold or (b) or ornament which was required to be included in a declaration such article or ornament had been so included. After referring to the entire scheme their Lordships held at page 1178 that no exception could be taken to these provisions on the ground that they were unreasonable restrictions on the part of the pawn broker to hold acquire or dispose of property or carrying on his business of money lending within the meaning of Articles 19(1)(f) and (g) of the Constitution not saved by sub-clauses (5) and (6) thereof. If smuggling of gold into the country was to be checked by the prevention of the conversion of smuggled gold into gold articles ar ornaments there was no unreasonableness in the State calling upon all pawn brokers and the persons who took pledges or hypothecation of ornaments to furnish declarations so that the Administrator and the Gold Control Officer might keep an eye on the activities of such persons and if necessary at any point of time ask for a return in terms of sec. 6 ant satisfy himself about the legality of their acts by inspecting their accounts. It would not be difficult for anybody carrying on or wanting to carry on business lawfully to insist on the pawnor producing the copy of the declaration in his possession given to him after authentication by the Gold Control Officer in terms of sec. 16(8) in order to satisfy himself that there was no contravention of the Act. Sec. 16 was all embracing and made it obligatory on every person unless he was exempted under sub-sec. (5) hereof to make a declaration of all the gold articles and ornaments in his possession custody or control. In order that there might not be any uncertainty in the matter of making declarations in certain cases the Legislature had indicated the persons on whom the burden lay. The of making a declaration as often as a pawn broker acquired ownership possession custody or control of gold under sub-sec. (4) was to the read with sub-sec. (10) and it was enough for a pawn broker to Approach the Gold Control Officer with the full and detailed statements of his holding at the end of every month. As such it could not be said that there was any unreasonable restriction on his holding property or pursuing his business in terms of Article 19(1)(f) or (g) of the Constitution. Further proceeding at page 1179 their Lordships referred to the conditions in form GS III under Rule 4 where estimated weight and value of gold contained and purity had to be mentioned. It was contended that where the ornament was made up not only of gold but of other metals and stones precious or otherwise it would be impossible either to givetrue estimate of the weight and value of the gold contained or the purity of the gold. Their Lordships observed that there might be some difficulty in some cases but it must be realised that a pawn broker who was asked to advance money on the security of such an article would make a fairly accurate estimate of the weight and value of the gold therein so as to be to judge for himself the security of that article. He was not called upon to give the exact purity of the gold content in the article. He could only give an estimate of its purity. Therefore the supposed difficulty in the matter of compliance with sec. 16 of the Act as regards acquisition or transfer of gold as and when made really did not exist. Further proceeding at page 1181 their Lordships pointed out that sec. 16 was not excluded in the case of money lenders or pawn brokers. Any person who came under the purview of sec. 16(1) has to make a declaration unless there was any provision to the contrary in that Chapter. The only provision to the contrary was contained in sub-sec. (S) which permitted of exemptions in respect of persons holding gold articles or ornaments upto a specified limit. The provision in sec. 6(1) empowering the Administrator to call upon any pawn broker to furnish a return did not do away with his obligation to file a declaration under sec. 16(1). There would not he any duplication or difficulty because of sec. 6 and every pawn broker would have to file his declaration under sec. 16(1) and be would be obliged to make a return only when he was called upon to do so in terms of sec. 6. Even in case of partnership business declaration may be made by any partners of the firm in terms of sec. 16(2)(f) and if a company carried on business of pawn broking any person in charge of the management of the affairs of the company could make the declaration. Their Lordships also observed at page 1182 that a money lender specially a pawn broker who entered into a number of transactions of pledge every day had to maintain his account and he had to record faithfully therein the articles he received by way of pledge including their weight and general description when he took the mein and making a declaration for the purpose of the Act could not entail any hardship on such a person. The Parliament only sought to control and regulate the production manufacture etc. it did not seek to disturb or annul the provisions of the State Acts as regard money lending as long as the Gold Control Act was not violated. Therefore their Lord-ships found no force in the contention that these money lenders or pawn brokers would be required to give multiple declarations or that pawn brokers were not covered by sec. 16. It was only sec. 71 which provided extreme penalty of confiscation of gold articles or ornaments that was held to impose unreasonable restrictions as it was liable to indiscriminate application and was struck down as being an unreasonable restraint.

(3.) It is in the light of this settled law that we have now to consider the challenge to the relevant provisions of the Act keeping in mind the aforesaid social background. We need not emphasise the importance of purposive approach in the context of such social control legislation introduced in a welfare State where the entire approach to the problem of the construction of the Act would have to be a purposive approach considering the social end which was kept in mind and the machinery which was enacted for implementing the measures to carry out that end. Once the vires of the Act is upheld on the ground that it is such a social control measure where individual interests have got to be sublimated so as to sub-serve the common good we would have to consider the challenge on the score of unreasonableness of these restrictions by weighing the same against the magnitude the evil which was sought to be remedied by the Act. Restrictions would have to be commensurate with that object. After the classic decision in A. K. Kraipak v. Union of India A.I.R. 1970 S.C. 155 as pointed out by their Lordships with the increase of the power of the administrative bodies it has become necessary to provide guidelines for the just exercise of their power. To prevent the abuse of that power and to see that it does not become a new despotism courts are gradually evolving the principles to be observed while exercising such powers. In matters like these public good is not advanced by a rigid adherence to precedents. New problems call for new solutions. That is why at page 156 their Lordships pointed out that whenever an administrative body has to exercise a power under a statute affecting civil rights of the subject the very width of the power would carry with it a duty to act judicially or in any event to act fairly or justly by adopting a judicial approach according to the norms or guidelines laid down for the exercise of that power. When just decision has to be arrived at even by administrative authority their Lordships pointed out that the principles of natural justice in so far as they would be necessary to arrive at a just decision could always be read into the statute. The principles of natural justice when so read do not supplant the law of the land but they merely supplement it. Therefore under such social control legislation when we are adopting a purposive approach the meticulous linguistic analysis of the statute has to be sub-ordinated. Even if the particular provision in express terms contained no guidelines or when a duty to hear a party affected in so many terms was not expressly laid down in the enactment such guidelines could be gathered from the whole scheme or even the preamble and such duty could be implied to act justly from the width of the power itself. In the context of the Minimum Wages Act a social welfare labour legislation in Chandra Bhavan Boarding and Lodging v. State of Mysore A.I.R. 1970 S.C. 2042 at page 2048 their Lordships in terms pointed out that it was not the law that the guidance for the exercise of a power should be gathered from one of the provisions in the Act. It could be gathered from the circumstances that led to the enactment of the law in question i.e. the mischief that was intended to be remedied the preamble to the Act or even from the scheme of the Act. Keeping in mind these settled principles we will now consider the various points which Mr. Nanavati has raised in these two petitions.