INDRAMANI PYERELAL GUPTA Vs. W R NATU

JUDGEMENT

(1.) BY the petition which was dismissed by Coyajee, J. the appellants challenged an amendment effected by the Central Government in by-law 52aa of the By-laws of the East India Cotton Association Ltd. on 21-1-1956 and a notification issued by the Forward Markets Commission on 24-1-1956. By this notification hedge contracts for February delivery were closed at Rs. 700/-and for May delivery at Rs. 686/8/- with effect from 25-1-1953. The petitioners have entered into hedge contracts for both these deliveries and by the petition they souhgt an order upon the respondents who are members of the Forward Markets Commission to cancel the said notification and not to fake any steps in enforcement of the said notification.

(2.) A little background to the points which arise for decision in the petition is perhaps necessary and therefore a few facts may be stated. On 22-12-1955 Government issued a directive to the East India Cotton Association to prevent the price of cotton rising beyond Rs. 700/- per candy. At first the Association, as appears from the minutes of the board of directors, was not in favour of agreeing with the view taken by Government. The result was that Government suspended trading in hedge contracts from 23-12-1955 till 6-1-1956, and on 6-1-1956 the board of directors of the East India Cotton Association in substance gave effect to the views of the Government and fixed the ceiling for trading in hedge contract at Rs. 700/ -. On that one Bhalchand Shah filed a suit challenging the decision of the board of directors, viz. , Suit No. 2 of 1956. A motion was taken out in that suit and that motion was dismissed by Coyajee J. on 18-1-1956. There was an appeal against the decision of Coyajee J. and the appeal was heard on 23rd and 24th January 1956 and on 24-1-1956 certain consent terms were arrived at in that appeal and the con sent terms were that the plaintiff accepted the "validity of the resolution passed by the board of directors on 6-1-1956 and it was agreed that the board of directors were to meet on 25-1-1953 and under by-law 52 (2) consider whether the rate of Rs. 700/- fixed under the said resolution should continue or whether it should be varied and in considering that, the board would apply its own mind and exercise its own judgment. Before the consent terms were arrived at Government amended by-law 52aa on 21-1-1956 and as already pointed out the notification was issued by the Forward Markets Commission on 24-1-1956.

(3.) THE by-law is challenged on two substantial grounds. One is that it is retrospective in its application and therefore it is bad, and the second ground is that it purports to confer upon the Forward Markets Commission power which could not be conferred upon that Commission looking to the provisions of the Forward Contracts (Regulation) Act, Act 74 of 1952. Before we look at the relevant by-law and the amendment effected by the Central Government, it would be better perhaps briefly to consider the scheme of the Forward Contracts (Regulation) Act, 1953, That Act was passed for regulation of certain matters relating to forward contracts, the prohibition of options in goods and for matters connected therewith. By Section 3 the Forward Markets Commission was set up and that Commission was to consist of not less than two but not exceeding three members appointed by the Central Government and one of them was to be a person having knowledge of forward markets in India, Section 4 deals with the functions of the Commission which are advisory and supervisory in character. The Commission has to advise the Central Government in respect of the recognition of, or the withdrawal of recognition from, any association, to keep forward markets under observation and to draw the attention of the Central Government to any development taking place in, or in relation to, such markets, to collect information regarding trading conditions, to make recommendations with a view to improving the organisation and working of forward markets, to undertake the inspection of the accounts and other documents of the recognized association whenever it considered necessary and finally to perform such ether duties and exercise such other powers as may be assigned to the Commission by or under this Act, or as may be prescribed. Then Chapter III of the Act deals with recognised associations and Section 6 provides for the granting of recognition to an association, and it is rather pertinent to note that it is only if the Central Government is satisfied that it will be in the interest of the trade and also in the public interest to grant recognition to an association which has made the necessary application that recognition is to be granted. Section 7 confers power upon the Government to withdraw recognition which has already been granted. Section 11 deals with the power of recognized associations to make by-laws, and Sub-section (1) provides that any recognized association may, subject to the previous approval of the Central Government, make by-laws for the regulation and control of forward contracts, and Sub-section (2) deals with certain topics with regard to which these by-laws may be made, but these topics are without prejudice to the generality of the power conferred upon the association under Sub-section (1), and under Clause (f) by-laws may be made with regard to the terms and conditions and incidents of contracts, under Clause (g) by-laws may be made regulating the entering in to, making, performance, rescission and termination of contracts, under Clause (m) by-laws may be made with regard to the making, comparing, settling and closing of bargains, and under Clause (o) by-laws may be made with regard to the emergencies in trade which may arise and the exercise of powers in such emergencies including the power to fix maximum and minimum prices. Section 12 confers power upon the Government to make or amend by-laws of recognised associations, and when this Dower is exercised by the Central Government the by-laws so made or amended shall have the effect as if they had been made or amended by the recognised association. Section 13 confers power on the Central Government to supersede governing body of recognised associations. Section 14 confers upon the Central Govt. power to suspend business of recognised associations. Section 15 provides for the circumstances in which forward contracts in goods which are notified are illegal or void, and it may be pointed out that cotton is one of the goods which has been notified under the Act. Section 28 confers upon the Central Government the power to make rules for the purpose of carrying into effect the objects of the Act.