T P SUNDARALINGAM Vs. STATE OF MADRAS

JUDGEMENT

(1.) THE Constitutional validity of the Rice Milling Industry (Regulation) Act 1958 is questioned in the batch of appeals by different appellants against orders of Single judges quashing grant by Government of permits in four of them to establish new rice mills, and dismissal of a petition to quash a similar grant. some of the appellants are existing rice mill owners in certain rural areas who opposed the grant of further permits, mainly o the ground of prevailing milling capacity, and inadequacy of paddy in the locality, for further permits. In one or two cases their contention was that in making the grants, Government had been influenced irrelevant considerations like the grantee having already incurred heavy expenditure in construction, and in the process of establishment of machinery. In one case, yet another ground was that Government was in error in equating 'locality' for the purpose of Section 5 (4) to either a three mile radius, or a panchayat area. These grounds were upheld. In a few cases, Government having earlier refused permits on the ground of inadequacy of paddy in the locality, subsequently on being moved therefore, granted them notwithstanding that there had been since no change in the availability of paddy. The grants have been quashed on ground of arbitrariness. In order to consider in the proper perspective the merits of all these matters, the true scope and effect of the Act and the Rules framed thereunder, particularly of section 5, should be examined.

(2.) THE Act was passed to regulate the Rice Milling Industry in the interests of the general public, and came into operation from April 22, 1959. There is a statutory declaration that it was expedient in the public interest that the Union should take under its control the rice milling industry. The regulation is by prohibition of establishment of a new rice mill and carrying on rice milling operation without relative licence, or permit. Permit for establishment of a rice mill is by application, and is granted if the Government is of opinion that it is necessary to do so for ensuing adequate supply of rice. Grant of such a permit being made subject to the provisions of sub-section (4) of Section 5, Government, before granting it is required to cause a full and complete investigation to be made in the prescribed manner, in respect of the application, and is enjoined to have due regard to-a. the number of rice mills operating in the locality; b. the availability of paddy in the locality; c. the availability of power and water supply for the rice mill in respect of which a permit is applied for; d. whether the rice mill in respect of which a permit is applied for will be of the huller type, sheller type or combined sheller-huller type; e. whether the functioning of he rice mill in respect of which a permit is applied for would cause substantial unemployment in the locality; f. such other particulars as may be prescribed. In exercise of the power to prescribe the procedure in making investigation, and of the enabling rule-making power under Section 22, the Rice Milling Industry (Regulation and Licensing) Rules 1959 have been made. Rule 3 (1) requires an application for permit to be in Form I. It shows the particulars to be filled in, including the approximate milling capacity per diem of 8 hours, the place of location sought. A new sub-rule (I-A) introduced in 1960 says that an application should be made for a new rice mill before taking steps for its establishment, like acquisition of land, commencement if construction, and placing order for whole or any part of the plant and machinery required for the rice mill. Sub-rule (2)explains that the investigation under Section 5 (4) should be made with a view to ascertaining whether the grant of the permit is necessary for ensuring adequate supply of rice, and requires that such investigation should also relate to ascertainment of information regarding-a. the effect that the operation of the new or the defunct rice mill may have on the local economy; b. the pattern of trade and commerce in rice in the locality; c. the reasons for the stoppage of operation in the case of a defunct rice mill; d. the necessity or otherwise for an addition to the productive capacity of the existing rice mills in the locality; e. whether hand-pounding industry in the locality is already well organised, and whether the establishment of a new rice mill is likely to affect adversely that industry. If in the light of such investigation and after having due regard to the matters mentioned in Section 5 (4), and the said rule, Government is satisfied that it is necessary to grant the permit for ensuring adequate supply of rice, it will make it. A separate licence is however, required to be taken for carrying on rice mill operation under Section 8 (2 ). In passing, we may notice that a person aggrieved by the decision of the Officer under Section 6 is given a right of appeal authority nominated for the purpose, violation of the restrictive provisions of the Act. The state Government, under delegation from the Central Government, enforces the provisions of the Act and the rules made thereunder. Certain amendments were made in 1968 to Sections 5 and 6, as well as certain other sections, which, for the purpose of these appeals, do not appear to be material.

(3.) THE Madras Rice Mills Licensing Order 1955 which has superseded the earlier order of 1954, was made in exercise of the powers conferred by Section 3 of the madras Essential Articles control and Requisitioning (Temporary Powers) Act 1949. The scope of the order was more limited than the now current Rice Milling Industry (Regulation) Act 1958, Milling or hulling of paddy or subjecting rice or paddy to any processing by power-driven machinery should not be carried on except under and in accordance with the terms and conditions of a licence issued. In granting or refusing licence, the licensing authority was to be guided by such general orders as the State Government might from time to time, issue to him in that behalf. The present Act goes further, and provides for licences for establishment of rice mills as well as for operating them, and lays down guidelines both as to the necessity for grant of licences, and as to considerations to which due regard must be had, in granting or refusing licences for establishment of rice mills. Contravention of any of the provisions of the 1955 order or of the conditions of the licence issued thereunder, entailed cancellation of the licence in addition to any other penalty. The order also contained provisions requiring licensees to maintain accounts and making returns of stocks, receipts, production, deliveries and balance of paddy and rice for each month. The Commissioner of Civil supplies, or the District Collector was authorised to enter and to inspect any premises in which they have reason to believe that milling, or other processing of rice was taking place and the licensees were obliged to comply with the directions given adjustments to the machinery, or in regard to the milling, re-milling or other processing of rice or in regard to the working hours of the rice mill. In respect of these matters, more stringent provisions with additional powers are found in the present Act. While the Act is clearly regulatory, inasmuch as it controls establishment and running of rice mills as an industry, the regulation takes the shape of prevention of new rice mills except to the extent warranted by necessity to ensure adequate supply of rice, and even this exception is made subject to the other considerations specified, not all of which directly relate to such necessity. The necessity notwithstanding, which is not confined to any area or locality, actual grant of permit is further conditioned by the facts brought out by investigation in the prescribed manner on an application for permit, and the circumstances to which due regard must be had. The investigation to be made will have a two-fold purpose: 1. to ascertain particulars which show that grant of permit is necessary to ensure adequate supply of rice: and 2. to gather facts relating to the consideration to which regard must be had under Section 3 (4) and Rule 3 (2 ). Rice supply may be adequate in a locality which may be hand-pound entirely. No permit for a new rice mill can in that case normally be granted. Even so, if necessity to ensure adequate supply of rice elsewhere is found, and there is enough paddy available in the locality to go round for a new or an additional rice mill there, a permit therefore may well be justified. If, on the other hand although, such n necessity exists there is no paddy available in 'x' locality for which a permit is applied for, but available from a neighbouring locality 'y' from which it could conveniently for purposes of milling, be transported to 'x' locality which has power for running a rice mill unlike at 'y', there is nothing in Section 5 or the Rules which forbids grant of permit for establishment of a rice mill at 'x', The number of rice mills operating in the locality, and the availability of paddy in such locality, should of course, receive due consideration. But we do not think that this simply means that if the paddy available in the locality is just sufficient or insufficient, to keep going the existing rice mills in the locality, that by itself must be decisive against grant of further permits. Availability is not the same as adequacy or surplus. The mention in Section 5 (4) in juxtaposition of the number of rice mills and the availability of paddy in a locality, does not necessarily, in our opinion, contemplate sufficiency of paddy for existing rice mills and a new one for which permit is sought. The contingency that a new rice mill may bring down the income of the existing rice mills in a locality, or render them unremunerative, as a ground in itself justifying refusal of a permit does not appear to us to be in the contemplation of Section 5. The purpose of the Act, or Section 5 is not, as we are inclined to think, to protect monopolies in rice milling industry in any locality by preventing competition and rendering them remunerative. Even Rule 3 (2) (a)speaks of the effect that the operation of a new or a defunct rice mill may have on the local economy, not the economy of a particular existing rice mill but economy in general in the locality having regard to the pattern of trade and commerce in rice in such locality. The number of rice mills and the availability of paddy in a locality have a bearing on productive capacity in the context of necessity for ensuring adequate supply of rice, not necessarily in such locality. If, therefore, after giving due regard to the fact that paddy available in a locality is just sufficient to go round the existing mills, a permit is granted on the view that it is necessary to do so in order to secure adequate supply of rice, we do not think that such a grant is liable to be quashed. The grant of permit in that case, is not necessarily inconsistent with the requirement, having due regard to the number of rice mills operated in the locality, and the availability of paddy in the locality. Just as availability, as we said, is not the same as sufficiency of paddy, availability is not necessarily related to paddy produced in the locality. All that is meant by the expression 'due regard' in Section 5 (4) is that the licensing authority must pay proper attention to the several circumstances mentioned by the sub-section in balancing the considerations for grant, or refusal of a permit, that is to say, in balancing the considerations for grant, or refusal of a permit, that is to say, in balancing the facts and circumstances to form an opinion that I order to ensure adequate supply of rice, it is necessary to grant the permit. Whether there has been such a balancing by the licensing authority is subject to an appeal by the aggrieved person. It will include, as held by Lakshminarayanan v. Maruthappa nainar. (FB) an existing rice mill operator in a locality. But it is not open to review by this Court under Article 226 of the Constitution as such in an appeal. Weighing the circumstances in an appellate function, and what the Court under Article 226 is concerned with, is not to approach the matter as an appellate court but to scrutinise to see whether relevant circumstances have been ignored, or irrelevant matters have influenced the grant, or refusal of the licence, and whether the power has been exercised in a given case arbitrarily, or mala fide.