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G.T.N Textiles Ltd. And Another v. Assistant Directors, R.O.T Commissioner And Others
Factual and Procedural Background
The appellants—spinning and weaving mills operating in Andhra Pradesh—challenged the constitutional validity of Clause 16 of the Textile (Control) Order, 1986 and a series of notifications dated 29 March 1990, 11 May 1990 and 17 May 1990 issued by the Textile Commissioner. These instruments required every yarn producer to pack at least 50 % of the yarn meant for civil consumption in hank form. The mills claimed they produced yarn only in cone form and lacked reeling machinery necessary for hank packing.
Writ petitions filed under Article 226 of the Constitution were dismissed by the Andhra Pradesh High Court on 29 October 1991. The present appeals arise from that judgment; special leave to appeal was granted by the Supreme Court.
Legal Issues Presented
- Whether Clause 16 of the Textile (Control) Order, 1986 and the impugned notifications violate Articles 14 and 19(1)(g) of the Constitution by imposing arbitrary or unreasonable restrictions on the appellants’ business.
- Whether the Textile Commissioner possessed valid statutory authority, in view of earlier litigation striking down a similar provision in the 1948 Order, to mandate that mills pack a specified proportion of yarn in hank form.
Arguments of the Parties
Appellants' Arguments
- The impugned notification is indistinguishable from the one struck down in Sri Rani Lakshmi G. S. & W. Mills (P) Ltd. v. Textile Commissioner; therefore it must also fail.
- Requiring mills that do not possess reeling equipment to pack hank yarn compels them to manufacture a product they are not equipped to produce, infringing Article 19(1)(g).
- The notification treats unequals as equals because mills differ widely in machinery and capacity, offending Article 14.
Respondents' Arguments
- The 1986 Order, unlike the 1948 Order, contains an explicit proviso guiding the Textile Commissioner’s discretion, curing the arbitrariness found in the Madras decision.
- The process of spinning is common up to the ring-frame stage; only the final packing differs, so the mills are not being asked to undertake a wholly new manufacture.
- Handloom weavers depend exclusively on hank yarn, and a substantial deficit exists between required and available quantities, threatening employment and cloth production goals. The notification serves the public interest and the broader textile industry.
- The appellants accepted a licence condition obliging them to follow Textile Commissioner directions on hank packing and are estopped from challenging the obligation.
- A press note dated 11 May 1990 provides mechanisms—such as transfer of surplus hank yarn or outsourcing reeling—to mitigate operational difficulties, addressing equality concerns.
Table of Precedents Cited
| Precedent | Rule or Principle Cited For | Application by the Court |
|---|---|---|
| Sri Rani Lakshmi G. S. & W. Mills (P) Ltd. v. Textile Commissioner, AIR 1986 Mad 66; ILR (1986) 1 Mad 285 | Struck down Clause 21(5) of the 1948 Cotton Textile (Control) Order for conferring unguided discretion on the Textile Commissioner. | The Court distinguished the present case, holding that Clause 16(1) of the 1986 Order contains detailed guidelines absent in the 1948 Order; therefore, the prior reasoning does not invalidate the current provision or notification. |
Court's Reasoning and Analysis
1. Distinction from Previous Madras High Court Ruling: The Supreme Court observed that Clause 16 of the 1986 Order is materially different from Clause 21(5) of the 1948 Order because the 1986 clause’s proviso enumerates factors—such as demand, public need, and manufacturing capacity—that cabin the Commissioner’s discretion. Hence, the arbitrariness found in the earlier case is absent.
2. Article 19(1)(g) Challenge: The Court held that the mills are not being compelled to initiate an entirely new manufacturing process; only the packing stage differs. The requirement is a reasonable restriction justified by the vital socioeconomic objective of supporting the handloom sector, which employs millions and supplies a significant share of national cloth production.
3. Article 14 Challenge: Applying the notification uniformly to all yarn producers is not discriminatory. Each mill’s obligation is proportionate to its own total yarn packed. Further, a press note allows fulfilment of the obligation through transfer or outsourced reeling, softening the impact on mills with limited reeling capacity.
4. Licence Estoppel: The industrial licences issued to the appellants expressly required compliance with Textile Commissioner directions regarding hank packing. Having accepted this condition, the appellants cannot repudiate it now.
5. Public Interest Justification: Data placed on record showed a significant shortfall in hank yarn supply, leading to price escalation and unemployment in the handloom sector. The notification, therefore, advances public interest and the larger objectives of the textile policy.
Holding and Implications
Appeals Dismissed. The Supreme Court upheld the validity of Clause 16 of the 1986 Order and the impugned notifications, affirming the Andhra Pradesh High Court’s judgment. Each appellant was ordered to pay costs of Rs 5,000.
Implications: The decision confirms the statutory authority of the Textile Commissioner under the 1986 Order to regulate the form in which yarn is packed and underscores the Court’s willingness to uphold economic regulations aimed at protecting large employment-generating sectors such as handlooms. No new constitutional doctrine was articulated, but the judgment clarifies that detailed statutory guidelines can salvage a delegation of power previously deemed arbitrary.
Kuldip Singh, J.— Special leave granted in all the petitions.
2. The appellants-petitioners challenged the constitutional validity of Clause 16 of the Textile (Control) Order, 1986 (the 1986 Order) and the notification, issued thereunder, dated March 29, 1990 as amended on May 11, 1990 and May 17, 1990 (the notification) by the Textile Commissioner, before the Andhra Pradesh High Court by way of writ petitions under Article 226 of the Constitution of India. The High Court by its judgment dated October 29, 1991 dismissed the writ petitions. These appeals by way of special leave are against the judgment of the High Court.
3. The appellants are the Spinning and Weaving Mills in the State of Andhra Pradesh. The cotton yarn manufactured by the mills is of different varieties. It is classified on the basis of counts. Yarn with 1 to 40 counts is coarse, 40 to 60 medium, between 60 and 100 fine and anything above 100 counts is described as very fine. There are two methods of packing the yarn. One is the cone form packing which is used in power-loom and hosiery industry. The other is hank form packing which is exclusively consumed by the handloom industry. Spinning and packing are the two stages of manufacturing yarn. Raw cotton has to pass through the process of blow-room, carding, drawing, simplex and finally the ring frame to complete the process of spinning. The process of packing starts thereafter. For the cone form packing the ring frame cops are fed to the winding machines and for the hank form packing the cops are fed to the reeling machines. According to the appellants they are packing the yarn in cone form. They have not installed the reeling machines and as such it is not possible for them to pack the yarn in hank form.
4. The 1986 Order was issued by the Government of India in exercise of its powers under Section 3 of the Essential Commodities Act, 1955. Clause 16 of the 1986 Order is as under:
“16. (1) The Textile Commissioner, may from time to time, issue directions in writing to any manufacturer or class of manufacturers or manufacturers generally, regarding,—
(a) the classes or specifications of cloth or yarn which each manufacturer or class of manufacturers or manufacturers generally shall or shall not manufacture;
(b) the maximum or minimum quantities of cloth or yarn which such manufacture or class of manufacturers or manufacturers generally shall manufacture during such period as may be specified in the order;
(c) the maximum price ex-factory, wholesale or retail at which any class or specification of cloth or yarn may be sold; or
(d) the principles on which and the manner in which such maximum prices may be determined by a manufacturer; and
(e) the manner of packing of yarn in hanks, cones or in any other form and in such proportion as he may consider necessary or expedient:
Provided that in issuing any direction under this clause, the Textile Commissioner shall have regard to—
(i) the demand for cloth or yarn;
(ii) the needs of the general public;
(iii) the special requirements of the industry for such cloth or yarn;
(iv) the capacity of the manufacturer or class of manufacturers or manufacturers generally, to manufacturer or pack different descriptions or specifications of cloth or yarn; and
(v) the necessity to make available to the general public cloth of mass consumption.
(2) While issuing any direction under sub-clause (1), the Textile Commissioner may also provide that such direction shall be with reference to the quantity of cloth or yarn packed by the manufacturer or class of manufacturers or manufacturers generally during the period specified in the direction.
(3) Every manufacturer, or class of manufacturers or manufacturers generally, to whom a direction has been issued shall comply with it.
(4) Where, on an application made by any manufacturer or class or manufacturers or otherwise the Textile Commissioner is satisfied that any direction issued by him under this clause causes undue hardship or difficulty to any such manufacturer or class of manufacturers, he may, by order and for reasons, to be recorded in writing, direct that the direction shall not apply, or shall apply subject to such modification as may be specified in the order to such manufacturer or class of manufacturers.”
5. In exercise of the powers under Clause 16 of the 1986 Order the Textile Commissioner issued the notification. The operative part of the notification is reproduced hereunder:
“2. Every producer of yarn shall pack yarn for civil consumption in hank form in each half-yearly period commencing from April-September, 1990, period and in every subsequent half-yearly period in proportion of not less than fifty per cent of total yarn packed by him during each half-yearly period for civil consumption:
Provided that not less than eighty per cent of the yarn required to be packed in hank form shall be of counts 40 S and below in regard to Category 1 at Annexure I to this notification:
Provided further that the obligation to pack hank yarn pertaining to a particular half-yearly period can be fulfilled before the end of the month succeeding such period to which the obligation pertains.”
At this stage we may briefly notice the earlier litigation which ended with the judgment of the Madras High Court in Sri Rani Lakshmi G.S & W. Mills Pvt. Ltd. v. Textile Commissioner, Bombay AIR 1986 Mad 66, ILR (1986) 1 Mad 285. In Rani Lakshmi Mills case AIR 1986 Mad 66, ILR (1986) 1 Mad 285 the constitutional validity of Clause 21(5) of the Cotton Textile (Control) Order, 1948 (1948 Order) and the notification dated June 29, 1979 issued thereunder were challenged. The said notification was in similar terms as the notification before us in these appeals. Clause 21(5) of the 1948 Order was as under:
“(5) The Textile Commissioner may, by General or Special Order, direct any manufacturer or class of manufacturers to pack yarn in hanks, cones or in any other form and in such proportion as he may consider necessary or expedient: and thereupon such manufacturers or class of manufacturers shall be bound to comply with such directions.”
6. It was argued before the Madras High Court that Clause 21(5) of the 1948 Order did not provide any guidelines for the exercise of power by the Textile Commissioner and as such was arbitrary and violative of Article 14 of the Constitution of India. The High Court accepted the argument and struck down Clause 21(5) of the 1948 Order on the following reasoning:
“A bare reading of the provision of Clause 21(5) would therefore, show that the proviso under that clause gives completely uncontrolled and uncanalized power which can only be described as an arbitrary power depending upon what he considers is necessary or expedient.”
Special Leave Petition Nos. 12569-92 of 1984 against the judgment of the Madras High Court were dismissed by this Court on February 21, 1991.
7. Because of the judgment of the Madras High Court in Rani Lakshmi Mills case AIR 1986 Mad 66, ILR (1986) 1 Mad 285 the 1948 Order was repealed and the 1986 order was promulgated. Clause 16(1) of the 1986 Order gives power to the Textile Commissioner to issue directions providing the manner of packing of yarn in hanks, cones or in any other form and in such proportion as he may consider necessary or expedient. Proviso to Clause 16(1) lays down complete guidelines for the exercise of power by the Textile Commissioner.
8. Relying upon Rani Lakshmi Mills case AIR 1986 Mad 66, ILR (1986) 1 Mad 285 the learned counsel for the appellants have contended that identical notification having been struck down by the Madras High Court and the judgment upheld by this Court, the respondents are bound by the same and the Textile Commissioner had no authority to issue fresh notification in similar terms. In any case according to the learned counsel the impugned notification is liable to be struck down on the same grounds. We do not agree with the learned counsel. The notification struck down by the Madras High Court was issued under Clause 21(5) of the 1948 Order. The High Court held Clause 21(5) of the 1948 Order unconstitutional and as a consequence struck down the notification dated June 29, 1979. The present notification has been issued under Clause 16(1) of the 1986 Order. Unlike Clause 21(5) of the 1948 Order proviso to Clause 16(1) of the 1986 Order provides complete guidelines to the Textile Commissioner to issue the directions envisaged thereunder. As such the ground of attack which was available to the petitioners before the Madras High Court is not available to the appellants before us. We, therefore, reject the contention based on the judgment of the Madras High Court in Rani Lakshmi Mills case AIR 1986 Mad 66, ILR (1986) 1 Mad 285.
9. Mr Venugopal and Mr Vaidyanathan learned counsel for the appellants have then contended that the appellants do not manufacture hank yarn. The contention is that the respondents cannot compel the appellants to manufacture something for which the appellants have not installed the necessary machinery and other superstructure. The notification according to the learned counsel infracts their fundamental right under Article 19(1)(g) of the Constitution of India. We see no force in the contention. The Textile Industry in this country is the second largest industry, next to agriculture, providing employment to millions of people. This industry is accounting for 20% of the total industrial output. The appellant-mills are part of the textile industry in the State of Andhra Pradesh. The respondents, in their written statement before the High Court, have elaborately explained the spinning and the packing processes undertaken by the appellant-mills. According to the respondents it is not correct that the appellants are being forced to manufacture something which they are not manufacturing already. The five stages of spinning (blow-room, carding, drawing, simplex and ring frame) are common and only thereafter the ring frame cops are either packed in hank form or in cone form. The respondents have given cogent reasons for issuing the impugned notification. We may briefly state the same.
10. The textile industry consists of three sectors namely, Mill Sector, Powerloom Sector and Handloom Sector. The primary product in the industry is yarn. It is produced only by the Mill Sector. The Powerloom and Handloom Sectors manufacture fabrics and they depend upon the Mill Sector for yarn. The yarn is packed in two forms namely, cone form and hank form. The cone form is consumed entirely by the Powerloom Sector and the hank form by the Handloom Sector. The handloom industry is the largest cottage industry in India. Nearly one third of the country's requirement of cloth is met by this Sector. As per the National Handloom Census, 1987-88 there were 3.9 million handlooms spread all over the country out of which three million were engaged in production of cotton cloth. The Handloom Sector provided direct employment to 8.4 million during 1988-89 and indirect employment to millions of people. The production target for Handloom Sector for the Seventh Plan was 4600 million mts. In order to achieve the said production target a minimum of 460 million kgs. of hank was required. The employment generated in the three sectors during the year 1988 was 84.22, 50.95 and 11.81 lakh persons in Handloom Sector, Powerloom Sector and Mill Sector respectively. The production of cloth for Handloom Sector during the Eighth Plan has been targeted at 7000 million mts. out of which cotton cloth is 5610 million mts. In order to achieve this target 561 million kgs. of hank yarn is required. Against the said requirement only 355 million kgs. of cotton yarn is being packed in hank form. According to the respondents there is a big gap between the demand and supply. This causes scarcity of yarn in the market and results in spiralling of prices. It further results in unemployment in Handloom Sector. In order to make available sufficient quality of hank yarn at reasonable prices and also for the sustenance of Handloom workers, it became necessary to reserve hank yarn for Handloom Sector by making it obligatory on the part of the manufacturers of yarn to pack a certain percentage of their production packet for civil consumption in the form of hanks.
11. We are satisfied that impugned notification has been issued in the interest of the general public and also for the larger interest of the textile industry.
12. It is not disputed that under Clause 4 of the Industrial Licence granted to the appellants one of the conditions is as under:
“[T]he packing of yarn in hank form and countwise production shall be in accordance with the policy in force and the directions issued by the Textile Commissioner in this regard from time to time.”
The appellants, having accepted the above condition while taking the licence, cannot now turn round and say that they are not bound by the same.
13. Mr Vaidhyanathan further contended that under the impugned notification unequals have been treated as equals. According to him different mills have installed different machinery and have different equipments. The contention is that the impugned notification is violative of Article 14 as it has been made uniformly applicable to mills which do not have the same capacity to produce hank yarn. We see no force in the contention. The impugned notification has been made applicable uniformly to all the producers of yarn. The appellants are required to pack yarn in hank form in the proportion as provided in the notification keeping in view the total yarn packed by the mill concerned. In any case the grievance of the appellants has been substantially mitigated by the press note dated May 11, 1990 issued by the Textile Commissioner, Bombay. The relevant part is reproduced hereunder:
“2. The Government have now reinstituted the erstwhile relaxation of getting hank yarn obligation fulfilled by transfer of surplus hank yarn packing of another producer. Secondly, the Government have also allowed a producer to get hank yarn reeled through another producer having extra reeling capacity with the permission of the Central Excise authorities and with the arrangements through the State Handloom Corporations and Apex Handloom Cooperative Organisations in the areas having concentration of handloom weavers.”
14. We, see no ground to interfere with the judgment of the High Court. We, therefore, dismiss the appeals with costs. We assess the costs as Rs 5000 to be paid by each of the appellants.
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