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State Of Rajasthan v. Nath Mal And Mitha Mal
Factual and Procedural Background
The respondents, Nath Mal and Mitha Mal, are grain merchants licensed to deal in food-grains at Raniwara in the Jodhpur Division of Rajasthan. On 7 October 1950, the Deputy Commissioner, Civil Supplies, acting through the Sub-Divisional Officer, “froze” their considerable stocks of bajra. At that time the market price was about Rs. 18 per maund. The State Government requisitioned these stocks at the Government procurement price of Rs. 9 per maund and later sold them at Rs. 13-5-4 per maund. Claiming to have purchased the grain at Rs. 17–18 per maund, the respondents filed a writ petition on 23 January 1951 before the Rajasthan High Court under Article 226 of the Constitution, challenging the constitutional validity of Clause 25 of the Rajasthan Foodgrains Control Order, 1949.
The High Court held Clause 25 unconstitutional, awarded compensation at Rs. 17 per maund, and granted a certificate to appeal. The State of Rajasthan appealed to the Supreme Court under Articles 132(1) and 133(1)(c) of the Constitution. The present judgment, delivered on 12 March 1954 by Ghulam Hasan J. for a Constitution Bench, decides that appeal.
Legal Issues Presented
- Whether the first portion of Clause 25 of the Rajasthan Foodgrains Control Order, 1949—empowering authorities to “freeze” stocks of food-grains—violates fundamental rights guaranteed by Article 19(1)(g)/(f) of the Constitution.
- Whether the latter portion of Clause 25—authorising requisition or disposal of such frozen stocks “at the rate fixed for purposes of Government procurement”—is void for contravening Articles 19(1)(g)/(f) and 31(2) of the Constitution.
Arguments of the Parties
The opinion does not contain a detailed account of the parties' legal arguments.
Table of Precedents Cited
No precedents were cited in the provided opinion.
Court's Reasoning and Analysis
First Portion (Freezing Power)
The Court read Clause 25 in conjunction with Section 3 of the Essential Supplies (Temporary Powers) Act, 1946. Section 3 authorises regulation of essential commodities to secure equitable distribution and fair prices. Bajra is an essential commodity. Freezing stocks, though not expressly conditioned by stated criteria, is reasonably related to these statutory objectives. Therefore, the Court rejected the High Court’s view and held that this part of the clause does not impose an unreasonable restriction on the right to carry on trade or business under Article 19(1)(g).
Second Portion (Requisition at Procurement Price)
The clause allows authorities to requisition frozen stocks “at the rate fixed for purposes of Government procurement” while permitting subsequent disposal at any price. Unlike Clauses 23 and 24 of the same Order—which tie compulsory sales to “ceiling prices” fixed under Clause 23—Clause 25 sets no comparable limitation on the Government’s acquisition price. This confers an unrestrained power to take property at an arbitrarily low price, potentially far below the prevailing market and ceiling prices, as demonstrated by the present case (Rs. 9 vs. Rs. 18 per maund). Such an arrangement:
- Places an unreasonable restriction on the respondents’ ability to conduct business, violating Article 19(1)(g).
- Fails to either “fix the amount of compensation” or “specify the principles” for determining it, thereby offending Article 31(2) because compensation is left entirely to executive discretion.
Consequently, the last portion of Clause 25 is void.
Holding and Implications
Holding: APPEAL DISMISSED. The Supreme Court upholds the High Court’s decision insofar as it declared the last portion of Clause 25 unconstitutional, while it overturns the High Court’s finding regarding the freezing power, declaring that portion valid.
Implications: The State of Rajasthan cannot requisition food-grain stocks at procurement prices without statutory provisions that fix or rationally determine compensation. While the power to “freeze” stocks survives, any acquisition must comply with the constitutional requirements of reasonable restriction and just compensation. The decision directly affects parties governed by the Rajasthan Foodgrains Control Order, 1949, but sets no broader precedent beyond reinforcing constitutional limits on executive requisitioning powers.
http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 1 of 4
PETITIONER:
THE STATE OF RAJASTHAN
Vs.
RESPONDENT:
NATH MAL AND MITHA MAL.
DATE OF JUDGMENT:
12/03/1954
BENCH:
HASAN, GHULAM
BENCH:
HASAN, GHULAM
MAHAJAN, MEHAR CHAND (CJ)
MUKHERJEA, B.K.
DAS, SUDHI RANJAN
BOSE, VIVIAN
CITATION:
1954 AIR 307 1954 SCR 982
CITATOR INFO :
E&D 1960 SC 475 (9,12)
R 1967 SC 829 (6)
R 1974 SC 366 (58)
RF 1981 SC 873 (18,27)
R 1987 SC1802 (9)
ACT:
Constitution of India, arts. 19(1)(f) and 31(2) -Rajasthan Foodgrains Control Order, 1949, cl. 25-Whether ultra vires the constitution.
HEADNOTE:
Held, that the first portion of cl. 25 of the Rajasthan Foodgrains Control Order, 1949, relating to the freezing of stocks of foodgrains is not void under art. 19(1)(f) of the Constitution because such freezing of stocks of foodgrains is reasonably related
983
to the object which the Act was intended to achieve, namely to secure the equitable distribution and availability at fair prices and to regulate transport, distribution, disposal and acquisition of an essential commodity such as foodgrains.
Hold, that the last portion of cl. 25 to the effect that "
such stocks shall also be liable to be requisitioned or disposed of under orders of the said authority at the rate fixed for purposes of Government procurement ", is void both under art. 19(1)(f) and art. 31(2) of the Constitution:-
(i)because the clause places an unreasonable restriction upon the carrying on of trade or business and is thus an infringement of the respondents' right under art. 19(1)(f) of the Constitution;
(ii)because the clause by vesting the power in the authority to acquire the stocks at any price fails to fix the amount of compensation or specify the principles on which it is to be determined and leaves it entirely to the discretion of the executive authority to fix any compensation it likes and is thus hit by art. 31(2) of the Constitution.
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JUDGMENT:
CIVIL APPELLATE JURISDICTION: Civil Appeal No. 136 of 1952. Appeal under articles 132(1) and 133(1)(c) of the Constitution of India from the Judgment and Order dated the 19th October, 1951, of the High Court of Judicature for Rajasthan at Jodhpur in D. B. Miscellaneous Writ Petition No. 3/1951.
K. S. Hajela, Advocate-General of Rajasthan, for the appellant.
K. N. Aggarwal and P. C. Agarwal for the respondents. M. C. Setalvad, Attorney-General for India (Porus A. Mehta, with him) for the intervener (the Union of India). 1954. March 12. The Judgment of the Court was delivered by GHULAM HASAN J.-The question involved in this appeal relates to the constitutional validity of clause 25 of the Rajasthan Foodgrains Control Order, 1949, hereinafter called the Control Order, and arises in the following circumstances :-
The respondents, who are grain merchants at Raniwara in Jodhpur Division, Rajasthan State, held
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licences for dealing in foodgrains. They held considerable stocks of bajra in the ordinary course of business but on October 7, 1950, their stocks were frozen by the Deputy Commissioner, Civil Supplies, Jodhpur, through the Sub- Divisional Officer. It is not disputed that the market price then prevailing was about Rs. 18 per maund. The State, however, requisitioned the stocks at the rate. of Rs. 9 per maund and sold them at Rs. 13-5-4 per maund. The respondents claimed that they had purchased the bajra at the prevailing market rate of Rs. 17 to Rs. 18 per maund. They filed a petition on January 23, 1951, for the issue of a writ under article 226 of the Constitution before the High Court of Rajasthan, contending that clause 25 of the Control Order was void under articles 14, 19 (1) (g) and 31 (2) of the Constitution. The High Court held that clause 25 was void inasmuch as it is a restriction upon the fundamental right of the respondents to carry on business under article 19 (1)(g) of the Constitution, that the restriction is not reasonable and is not saved by clause (6) of article 19. The High Court further held that clause 25 was also hit by article 31 (2) as fair compensation had not been fixed by the law for the acquisition of the foodgrains. As the grains had already been disposed of by the Government, the High Court holding that Rs. 17 a maund was fair compensation directed that the State of Rajasthan shall pay compensation at that rate. The State has preferred.the present appeal on a certificate granted by the High Court.
The impugned clause 25 is as follows:-
" 25. Notwithstanding anything contained in this Order, the Commissioner, the Director, the Deputy Commissioner, the Nazim, the Assistant Commissioner, the Sub-Divisional Officer, the Senior Officer of a jurisdictional Thikana, the enforcement officer 'or such other officer as may be authorized by the Commissioner in this behalf, may freeze any stocks of foodgrains held by any person, whether in his own behalf or not, and such person shall not dispose of any foodgrains out of the stock so freezed except with the permission of the said authority. Such stocks shall
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also be liable to be requisitioned or disposed of under orders of the said authority at the rate fixed for purposes of Government procurement. "
It is not disputed that bajra is an essential commodity
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within the meaning of the Essential Supplies Act (No. XXIV of 1946). The question that arises for consideration is how far and in what respects clause 25 can be said to be void as violating Part III of the Constitution. The clause authorises the Commissioner and various other authorities mentioned therein and such other officers as may be authorised by the Commissioner to freeze any stock of foodgrains held by a person. It is true that the authority of the Commissioner to delegate his powers to any other officer at his discretion is expressed in somewhat wide terms but we need not decide that per se would be sufficient to invalidate the clause. Admittedly that :power has not been exercised in the. present case. Nor do we think that the power to freeze the stocks of foodgrains is arbitrary or based on no reasonable basis. It is not disputed that the clause does not state in express terms the circumstances in or the grounds on which the stocks may be freezed but it should be read along with section 3 of the Essential Supplies Act which lays down the policy for controlling the production,, supply and distribution of essential commodities. Section 3 in so far as it is material says:-
" The Central Government, so far as it appears to it to be necessary or expedient for maintaining or increasing supplies of any essential commodity, or for securing their equitable distribution and availability at fair prices, may by order provide for regulating or prohibiting the production, supply and distribution
thereof
Sub-section (2) lays down:-
" Without prejudice to the generality of the powers conferred by sub-section (1) an order made thereunder may provide...................
(a).......................
(b).......................
(c).......................
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(d) for regulating by licences, permits or otherwise the storage, transport, distribution, disposal, acquisition, use or consumption of any essential commodity;
(e) for prohibiting the withholding from sale of any essential commodity ordinarily kept for sale; We are clear, therefore, that the freezing of stocks of foodgrains is reasonably related to the object which the Act was intended to achieve, namely, to secure the equitable distribution and availability at fair prices and to regulate transport, distribution, disposal and acquisition of an essential commodity such as foodgrains. We do not agree with the High Court that the first portion of clause 25 is void under article 19 (1) (g).
The last portion of clause 25 to the effect that such stocks shall also be liable to be requisitioned or disposed of under orders of the said authority at the rate fixed for purposes of Government procurement ", however stands on a different footing. The clause, as it is worded, leaves it entirely to the Government to requisition the stocks at any rate fixed by it and to dispose of such stocks at any rate in its discretion. This obviously vests an unrestrained authority to requisition the stocks of foodgrains at an arbitrary price. In contrast with this provision we may refer to clauses 23 and 24 of the Control Order. They are as
follows:-
" 23. The Commissioner or the Director, and the Deputy Commissioner or the Senior Officer of a jurisdictional Thikana with the approval of the Director, may fix the
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ceiling prices at which foodgrains in any area to which this order applies shall be sold, and may from time to time vary such prices."
"24. The Commissioner, the Director, the Deputy Commissioner, the Nazim, the Assistant Commissioner, the Sub-Divisional Officer, or the Senior Officer of the jurisdictional Thikana as the case may be, may direct any person or persons in possession, whether on his own behalf or not of any foodgrains to sell such foodgrains or part thereof to any person or persons at any
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specified place and at such price as may be fixed under clause 23."
It appears from these clauses that while the authorities may fix the ceiling price at which foodgrains should be sold in the market by the dealers and may direct any person in possession of foodgrains to sell them to any other person at the price fixed under clause 23, there is no such limitation upon the power of the Government to acquire the stocks. In other words, it will be open to the Government to requisi- tion the stocks at a price lower than the ceiling price thus causing loss to the persons whose stocks are freezed while at the same time the Government is free to sell the same stocks at a higher price and make a profit. It is obvious that the dealer whose stocks are thus freezed will stand to lose considerably and will be unable to carry on his trade or business at the prevailing market price. No dealer will be prepared to buy foodgrains at the market price when he knows that he is exposed to the risk of his stocks being freezed any moment and the same being requisitioned at the procurement rate. The present is a typical case which illustrates how the business of a grain dealer can be paralyzed, for it is admitted that while the Government procurement rate was Rs. 9 a maund, the market rate was Rs. 17 or Rs. 18 per maund, with the result that the stock holder suffered nearly cent. per cent. lose, while the Government made a profit of Rs. 4-5-4 per maund on the stock requisitioned. We hold, therefore, that the last portion of clause 25 places an unreasonable restriction upon the carrying on of trade or business and is thus an infringement of the respondent's right under article 19(1)(g) of the Constitution and is, therefore, to that extent void. The same result follows if the impugned clause is examined in the light of article 31(2). The clause by vesting the power in the authority to acquire the stocks at any price fails to fix the amount of the compensation or ,specify the principles on which the compensation is to be determined. The clause leaves it entirely to the discretion of the executive authority to fix any compensation it likes. The High Court
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rightly held that the clause offended against article 31(2). For the foregoing reasons we hold that the last portion of clause 25 is void and dismiss the appeal with costs. Appeal dismissed.
Agent for the appellant and for the intervener: R. H. Dhebar.
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