Dr. Indramani Pyarelal Gupta Vs. W. R. Nathu & Ors [1962] INSC 136 (11 April 1962)
1962 Latest Caselaw 136 SC

Dr. Indramani Pyarelal Gupta Vs. W. R. Nathu & Ors [1962] INSC 136 (11 April 1962)

11/04/1962 AYYANGAR, N. RAJAGOPALA AYYANGAR, N. RAJAGOPALA AIYYAR, T.L. VENKATARAMA SINHA, BHUVNESHWAR P.(CJ) SUBBARAO, K.

MUDHOLKAR, J.R.

CITATION: 1963 AIR 274 1963 SCR (1) 721

CITATOR INFO:

R 1970 SC 385 (5) RF 1970 SC1597 (20) RF 1971 SC1828 (12) R 1975 SC1218 (10) C 1984 SC 87 (21) R 1987 SC2239 (8) D 1988 SC1263 (13)

ACT:

Forward Contracts-Regulation of-Bye-laws empowering closing out of hedge contracts--Validity of-If can operate retrospectively-East India Cotton Association Bye-laws cl. 52A-Forward Contracts (Regulation) Act, 1952 (LXXIV of 1952), ss. 4, 11 and 12.

HEADNOTE:

The appellants were members of the East India Cotton Association which was an association recognised by the Central Government under the Forward Markets Regulation Act, 1952. Prioi to December 1955, they had entered into "hedge contracts" in respect of cotton for settlements in February and May 1956 in accordance with the bye-laws of the Association. Towards the end of 1955 it was apprehended that the forward market in cotton was heading for a crisis and the Central Government issued notifications directing the Association to suspend business in hedge contracts for February and May 1955 deliveries for short periods this did not improve the situation. On January 21, 1956, the Central Government, acting under s. 12 of the Act, made a new byelaw in substitution of bye-law 52AA of the Association which empowered the Forward Markets Commission, constituted under, the Act, to issue a notification closing out all hedge contracts at rates fixed by the Commission. On January 24, 1956, the Commission issued a notification closing out all hedge contracts including those subsisting on that date, and fixed the rates for the settlement of such contracts. The appellants contended that the amended bye. law 52AA was invalid as the power to close out hedge contracts could not be conferred upon the Commission and as the Association was in law incapable of conferring such a power on the Commission or on any other body and that in any cases the bye-law could not operate retrospectively so as to affect existing contracts.

Held, (per Sinha, C. J., Ayyangar, Mudholkar and Aiyar, JJ.

Subba Rao, J. contra), that the amended bye-law 52AA was not ultra vires the Central Government and validly empowered the Commission to close all hedge contracts in cotton including existing contracts. Clause (f) of s. 4 of the Act provided that one of the functions of the Commission 722 shall be to perform such other duties and exercise such other powers as may be assigned to the Commission "by or under the Act, as may be prescribed". There was no limitation upon the nature of the power that may be conferred under cl. (f) except that it must be in relation to the regulation of forward trading in goods. It was not possible to place any limitation on this power by invoking the rule of ejusdem genesis as there was no common positive thread running through cls. (a) to (e) of s. 4. To judge whether legally a power could be rested in a statutory body the proper rule of interpretation was that unless the nature of the power was such as to be inconsistent with the purpose for which the body was created or unless the particular power was contra-indicated by any specific provisions of the Act, any power which furthered the provisions of the Act could be legally conferred. judge by this test the power conferred by the bye-law could be validly vested in the Commission. The power was one conferred "under the Act".

The words "under the Act" signified a power conferred by laws made by a subordinate law-making authority which was empowered to do so by the Act. The impugned bye-law was clearly well within the bye-law making power under ss. II and 12. The bye-law did not contravene articles 64 of the Articles of Association of the Association as articles 64 applied only to the Board and placed no restrictions on the power of the Association, Western India Theaters Ltd. v. Municipal Corporation of Poona, [1959] Supp. 2 S.C.R. 71, Hubli Electricity Co. Ltd.

v. Province of Bombay, 76 I.A. 57 and Narayanaswamy Naidu v. Krishnamurthi, I.L.R. 1958 Mad. 513, referred to, Further, upon a proper construction of the amended bye-law it applied not only to contracts to be entered into in future but also to subsisting contracts. A statute which could validly enact a law with retrospective effect could in express terms validly confer upon a rule making authority a power to make a rule or frame a bye-law having retrospective operation. In the present case the power to make bye-laws so as to operate on subsisting contracts followed as a necessary implication from the terms of s. 11. There was no contra indication in the other provisions of the Act.

Per Subba Rao, J.-Under s. 12 (1) of the Act the Central Government had no power to make a bye-law with retrospective effect. The provision conferring rule making power must be strictly construed and unless it expressly conferred a power to make a bye-law with retrospective effect, it must be held that it was not conferred any such power. Evey if it was permissible to inter such a power by necessary 723 implication, it could not be inferred in the present case.

It could not be said that unless retrospective operation was given to the provisions of s. 12, the object of the legislature would be defeated or the purposes for which the power was conferred could not be fulfilled.

Further, the powers conferred on the Commission under the impugned bye-law could not be performed by the Commission under c1. (f) of s. 4. Clauses (a) to (e) of s. 4 showed that the functions of the Commission were wholly supervisory and advisory in nature; the functions described in cl. (f) were analogous to these and could only be supervisory or advisory. The Commission had no administrative functions or powers of management or powers of interference in the internal management of registered association which were vested in the Association. The power conferred upon the Commission was not conferred "under the Act". The words did not include a rule or a bye-law, and applied only to an assignment made in the exercise of an express power conferred under the Act. The Central Government had no power tinder s. 12 to make a bye,law assigning any function to the Commission.

Union of India v. Madan Gopal Kabra (1954) S.C.R. 541, Modi Food Products Ltd. v. Commissioner of Sale's Tax, U.P., A.I.R. 1956 All. 35, Strawboard Manufacturing Co. Ltd. v. Gupta Hill Workers' Union, (1953) S.C.R. 439, India Sugar & Belineries Ltd. v. State of Mysore, A.I.R. 1960 Mys. 326, C.W. Motor Service (P) Ltd. v. State of Kerala, A.I.R. 1959 Kerala 347, Howell v. Falmouth Boat Construction Co. Ltd.

(1951) A. C. 837; The Western India Theatres Ltd. v. Municipal Crporation of the City of Poona, (1959) Supp. 2 S.C.R. 71 and Hubli Electricity Co. Ltd. v. Province of Bombay ( 1948) 76 I.A. 57, referred to.

CIVIL APPELLATE JURISDICTION: Civil Appeal No. 109 of 1957.

Appeal by special leave from the judgment and order dated March 1, 1956, of the Bombay High Court in Appeal No. 20 of 1956.

G. S. Pathak, K. H. Bhabha, H. M. Vakeel and I. N. Shroff, for the appellants.

C. K. Daphtary, Solicitor General of India, B. K. Khanna and P. D. Menon, for the respondents.

724 C. K. Daphtary Solicitor General of India S. N. Andley, Rameshwar Nath and P. L. Vohra, for the Interveners.

1962. April 11. The Judgment of Sinha C. J., Ayyangar, Madholkar and Aiyar, JJ., was delivered by Ayyangar, J., Subha Rao, J. delivered a separate judgment.

AYYANGAR, J.-This is an appeal by special leave from the judgment of a Division Bench of the Bombay High Court affirming the judgment of a learned Single Judge whereby a petition filed under Article 226 of the constitution by the appellants was dismissed. By their petition, the appellants challenged the validity of a notification issued by Forward Markets Commission a statutory body created by the Forward Markets Regulation Act 1952 (LXXIV of 1952) (hereinafter referred to as the Act) to the authorities of the East India Cotton Association, Bombay (which will be referred to as the Association) intimating to them that the continuation of trading in certain types of forward contracts in cotton including that known as "hedge contracts" was "detrimental to the interest of the trade and the public interest and to the larger interests of the economy of India" and directed these contracts to be closed out, to be settled at prices fixed in the notification.

It is necessary to set out briefly certain facts in order to appreciate the points raised by the appeal. The fast India Cotton Association is an "association" which has been recognised by the Central Government under a. 6 of the Act.

The three appellants are members of the Association carrying on business in partnership. The appellants had, prior to December 1955, entered into "hedges contracts" in respect with other members of the Association for settlements in February and May 1956. There was no dispute that these 725 contracts were in accordance with the bye-laws of the Association as they stood at the date when the contracts were entered into. The terms and conditions of forward contracts in cotton including "hedge contracts", and the manner of their implementation, were governed by the provisions contained in certain bye-laws of the Association and of these that relevant to the consideration of the matters in this appeal was bye-law 52AA which on the date when the appellants entered into their contracts ran as follows:"52-A.A. (1) whether or not the prices at which the cotton may be bought or sold are at any time controlled under the provisions of the Essential Commodities Act, 1055, if the Textile Commissioner with the concurrence of the Forward Markets Commission and after consultation with the Chairman (of the Board), be of opinion that the continuation of hedge trading is likely to result in a situation detrimental to the larger interests of the economy of India and so informs the Board, the Board shall forthwith cause a notice to be posted on the Notice Board to that effect and on the posting of such notice and notwithstanding anything to be contrary contained in these bye-laws or in any hedge or on call contract made subject to these Byelaws, the following provisions shall take effect.

(2)Every hedge contract and every on call contract in so far as the cotton is uncalled there under or "in so far as the price has not been fixed there under entered into between a member and a member or between a member and a non-member then outstanding shall be deemed closed out at such rate, appropriate to such contract as shall be fixed by the Textile Commissioner and the provisions 726 of Clauses (3), (4) and (6) of Bye-laws 52A in so far as they apply to hedge and on call contracts, shall apply as if they formed part of this Bye-law. After the affixation of the said Notice on the Notice Board trading in hedge and on call contracts shall be prohibited until the Textile Commissioner with the concurrence of the Forward Markets Commission and after consultation with the Chairman, permits resumption".

Towards the end of 1955 the Chairman of the Association appears to have apprehended that the forward Market in cotton was heading for a crisis which was in part due to the transacting of unbridled option business, which though prohibited by the Act and also by the bye-laws of the Association was ever the less indulged in on a large scale.

The hair man brought this situation to the notice of the members of the Board of the Association at a meeting held on December 16, 1955, and suggested that they should give serious thought to this vital problem. It may be mentioned that the government also were anxiously considering the steps to the taken to solve or avert the crisis. The action which the government took in this matter is reflected in a notification issued by them on December 23, 1955, by which in exercise of the powers conferred in them by s. 14 of the Act they directed the Association to suspend its business in Indian cotton edge contracts for delivery in February 1956 and May 1956 for a period of 7 days with effect from the date of the notification. The situation did not apparently improve as a result of this temporary suspension so that before the expiry of the work fortnight, action under the same provision was gain taken under a notification dated December 10, 1955, by which the period of 7 days was extended by a further period of 7 days i. e. till 6, 1. 56A meeting of the Board of Association was held on 727 January-6, 1956, i. e., the day on which the suspension of forward business expired when the following-, resolution was unanimously passed: "'In view of the suspension of forward trading by government the Board hereby resolves under bye-law 52 that an emergency has arisen or exists and prohibits until further notice, subject to the concurrence of the Forward Markets Commission as from Saturday, the 7th January, 1956, trading in hedge contracts for February and May 1956, deliveries above a maximum rate of Rs. 700/per candy Thereupon a suit (numbered as suit 2/1956) was filed by a member of the Association as representing himself and all other members, on the original side of the High Court, Bombay against the Association and its Board, challenging the validity of the notification of Government suspending forward trading, as also of the resolution of the 'Board, just now extracted. An application for the grant of interim stay was made for restraining the Board from giving effect to its resolution but this was refused by the learned trial Judge and an appeal was filed against the refusal.

While things were in this state the Central Government, in exercise of the powers conferred on them by s. 12 of the Act, made anew bye-law which was published in a Gazette of India Extra. ordinary dated January 21, 1956, in substitution of bye law 52 AA set out earlier. The new byelaw ran.

"152 AA (1) Whether or not prices at which cotton may be bought or sold are at any time controlled under the provisions of the Essential Commodities Act, 1955, if the Forward Markets Commission is of the opinion 728 that continuation of trading in hedge contracts for any delivery or deliveries is detrimental to the. interest of the trading or the public interest or to the larger interests of the economy of India and so notifies the Chairman, then notwithstanding anything to the contrary contained in these bye-laws or in any hedge or on call contract made subject to these bylaws the following provisions shall take effect.

(2)Every hedge contract and every on call contract in so far as the cotton is uncalled there under or in so far as the price has not been fixed there under and relating to the delivery or deliveries notified under clause (1) entered into between a member and a member or between a member and a non-member then outstanding shall be deemed closed out at such rate appropriate to such contract and with effect from such date as shall be fixed by the Forward Markets Commission and the provisions of clauses (3), (4) and (0) of Byelaws 52-A in so far as they apply to hedge and on call contracts shall apply as if they formed part of this Bye-law".

This bye law was communicated to the Board of the Association on January 23, 1956.

We might here state that the validity of this new bye-law has been impugned on various grounds and the alleged invalidity of this We-law serves as the main foundation for challenging the validity of the notification of the Forward Markets Commission issued under the powers conferred by it.

On January 24, 1956, the appeal from the order refusing the interim injunction in Suit No. 2 of 1956 was settled between the parties on , theme terms :

"(1) The impugned resolution dated January 6, 1956, declared to be valid, 729 (2)The Board of Directors to meet on January 25, 1958, and consider under bye-laws 52 (2) whether the rate of Rs. 700 fixed under the said resolution should continue or whether it should be waived. 'In considering the same the Board will apply its own mind and exercise its own judgment".

On the same day, i.e. January 24, 1956, the Forward Markets Commission took action under-the powers vested in them under the new bye-law 52 AA which had been made by government three days earlier. By a communication addressed to the Chairman of the Association, the Commission stated :

"'In pursuance of cl. (1) of the bye-law 52AA of the Bye-laws of the E.I.C.A. Ltd., Bombay I hereby notify to you that the For. ward Markets Commission is of the opinion that continuation of trading in the hedge contracts for February and May 1956 delivery is detrimental to the interests of the trade and the public interest and the larger interest of the economy of India and fixed under cl. (2) of the said bye-law; that the rates prevailing at the time at which the trading in the said contracts closed On January 24, 1956, viz., Rs. 700/for February and Rs. 686/8/for May delivery as the rates at which and January 25, 1956 as the date with effect from which the hedge contracts and on call contracts in so far as the cotton is uncalled there under or in so far as the price has not been fixed there under relating to the said delivery shal l be deemed to be closed out".

Thereupon the three appellants who are partners carrying on business in cotton under the name and style of Indramani Pyarelal Co. moved the High Court of Bombay by a petition under Art. 226 of the Constitution on January 27, 1956, for a writ of mandamus or a direction in the nature of 730 mandamus against the members of the Forward Markets Commission who were individually impleaded as respondents to the petition, ordering them to cancel or withdraw the notification dated January 24, 1956, whose validity was impugned on various grounds. The petition was heard by a learned single Judge who dismissed it by his order dated February 23, 1956. An appeal was filed therefrom to a, Bench of the High Court and when this was also dismissed the petitioners moved for a certificate of fitness to appeal to this Court but the same having been rejected, they applied for. and obtained special leave from this Court, and that is bow the matter is now before us.

The submissions of Mr. Pathak learned Counsel for the appellant in support of the appeal may be classified under three main heads : (1) The notification dated 24th January, 1956, served on the Board of the Association by the Forward Markets Commission was ultra vires for the reason that byelaw 52AA, as amended by the Central Government on January 21, 1956, was invalid. (2) Assuming the byelaw to be valid it could not operate retrospectively or be availed of retrospectively so as to affect rights under existing contracts subsisting on the day the amended bye-law was notified in the Gazette but that it could if at all, be validly applied only to Forward hedge contracts entered into thereafter. (3) The notification by the Forward Markets Commission was improper and malafide and was therefore invalid.

It would be convenient to deal with these points in that order : (1) The first of the points raised raises the question of the validity of bye-law 52 AA as amended by the Central Government on January 21, 1956. Learned Counsel divided his submission on this matter into two sub-heads(a) that the Forward Markets Commission could not, on a proper construction of the Act, be validly vested 731 with the power with which it was clothed by the amended byelaw, and (b) that it was beyond the power of the Association to have conferred the power which it purported to do under the amended bye-law 52AA. Put in other words, the objections were that the Forward Markets Commission could not, having regard to the terms of the statute under which it was created, be a proper recipient of the power 'with which it was vested by the bye-law and secondly that the Association was in law incapable of conferring that power on the Forward Markets Commission or on any other body.

We shall first take up for consideration the argument that the Forward Markets Commission was in law incapable of being the recipient of the power conferred by the bye-law under which it was empowered to issue the impugned notification.

For this purpose it is necessary to examine in detail the relevant provisions of the Act. Section 2 (b) defines 'Commission' as meaning "The Forward Markets Commission" established under s. 3. Section 3 (1) enacts :

"3. The Central Government may, by notification in the Official Gazette establish a Commission to be called the Forward Markets Commission for the purpose of exercising such functions and discharging such duties as may be assigned to the Commission by or under this Act." The point urged by learned Counsel was that the function or the duty cast upon it by the amended bye-law 52 AA was not such as could be assigned to the Commission "by or under this Act." The meaning of the words by or under' and the extent and nature of the duties assigned to the Commission by the Act will therefore require careful examination.

Section 4 relates to the functions of the Commission and it is the proper construction of this 732 section that has loomed large in the arguments on this point. It is, therefore, necessary to set this out in full :

"4. The functions of the Commission shall be(a)to advise the Central Government in respect of the recognition of, or the withdrawal of recognition from any association or in respect of any other matter arising out of the administration of this Act ;

(b)to keep forward markets under observation and to draw the attention of the Central Government or of any other prescribed authority to any development taking place, in or in relation to, such markets which, in the opinion of the commission is of sufficient importance to deserve the attention of the Central Government and to make recommendations thereon ;

(e)to collect and whenever the Commission thinks it necessary publish information regarding the trading conditions in respect of goods to which any of the provisions of this Act is made applicable, including information regarding supply, demand and prices, and to submit to the Central Government periodical reports on the operation of this Act and on the working of forward markets relating to such goods ;

(d)to make recommendations generally with a view to improving the Organisation and working of forward markets ;

(e)to undertake the inspection of the accounts and other documents of any recognished association whenever it considers it necessary ; and 733 (f)to perform such other duties and exercise such other powers as may be assigned to the Commission by or under this Act, or as may be prescribed".

Pausing here it is necessary to add that the expression prescribed" found at the end of cl. (f) has been defined by s. 2(h) of the Act to mean "Prescribed by rules made under the Act".

Before considering the points urged as regards the construction of this section taken in conduction with the terms of s.3(1) we shall refer to a few other provisions which are of some relevance in the present context. Section 3(2) which confers power on the Central Government to call for periodical returns from Recognised Associations and to direct such enquiries as they consider necessary to be made, empowers the government to direct the Commission to inspect the accounts and other documents of any recognised Association or of any of its members and submit its report thereon to the Central Government [vide s. 3(2) (c)]. Subs. (4) of this section enacts :

"8(4). Every recognised association and every member thereof shall maintain such books of account and other documents as the Commission may specify and the books of account and other documents so specified shall be preserved for such period not exceeding three years as the Commission may specify and shall be subject to inspection at all reasonable times by the Commission".

Section 28 reads :

"28. (1) The Central Government may, by Notification in the Official Gazette, make rules for the purpose of carrying into effect the objects of this Act.

734 (2) In particular, and without prejudice to the generality of the foregoing power, such rules may provide for(a) the terms and conditions of service of members of the Commission;

(b) the manner in which applications for recognition may be made under section 5 and the levy of fees in respect thereof ;

(c) the manner in which any inquiry for the purpose of recognising any association may be made and the form in which recognition shall be granted ;

(d) the particulars to be contained in the annual reports of recognised associations ;

(e) the manner in which the bye-laws to be made, amended or revised under this Act shall, before being so made, amended or revised be published for criticism ;

(f) the constitution of the advisory commit.

tees established under section 26, the terms of office of and the manner of filling vacancies among members of the committee ; the interval within which meetings of the advisory committee may be held and the procedure to be followed at such meetings ; and the matters which may be referred by the Central Government to the advisory committee for advice ;

(g) any other matter which is to be or may be prescribed." The argument on this part of the case was briefly this : The Forward Markets Commission is a statutory body specially created for the purposes of the Act. The powers which mat be conferred upon the Commission and the duties which it may be called on to discharge are therefore subject to the provisions of the Act. No more power can be conferred upon this body than what the Act allows 735 and the power under the amended bye-law 52AA is not one which is contemplated by the Act as conferable on it.

Section 4 defines the functions of the Commission under five general heads (a) to (e) with a residuary clause contained in cl. (f). The powers or duties dealt with in cls. (a) to (e) are in their essence either recommendatory or advisory.

In the context therefore #,,the other" duties or '-,other" powers which may be assigned to the Commission under cl. (f) must be either ejuesdem generis with advisory or recommendatory powers or of a nature similar to those enumerated in the previous sub clauses.

In support of these submissions learned Counsel invited our attention to several decisions in which ancillary powers which might be implied from the grant of certain express powers were referred to. In particular it was submitted that the Court would not imply a power which it was not absolutely necessary to effectuate on express grant or was need to prevent the nullification of an express power that was granted. In our opinion, these decisions afford no assistance for resolving the controversy before us. There is no question here of deducing an implied power from the grant of an express one. What we are concerned with is the scope of an express power or rather whether the grant of the power conferred upon the Commission by the bye. law could be held to be a power which could be assigned to the Commission under cl. (f). So far as the terms of el, (f) are concerned, there is no limitation upon the nature of the power that might be conferred except, of course, that which might flow from its having to be one in relation to the regulation of forward-trading in goods which the Act is designed to effectuate. Any limitation therefore would have to be deduced from outside cl.(f) of s. 4. Taking each of the clauses (a) to (e), it is not possible to put them positively under one genus in order 736 that there might be scope for the application of the ejusdem generis rule of construction. Negatively, no doubt it might be said that none of these five clauses confer an executive power such as has been vested in them by the amended bye-law 52AA but this cannot be the foundation for attracting the rule of construction on which learned Counsel relies. On the other hand, if there is no common positive thread running through cls.(a) to (e) such as would bring them under one genus and negatively they do not expressly include any administrative or executive functions, that itself might be a reason why the expression "other" occurring in cl. (f) should receive the construction that it is intended to comprehend such a function. Learned Counsel further suggested that even if the rule of ejusdem generis did not apply, the allied rule referred to at page 76 of the report of Western India Theatres Ltd. v. Municipal Corporation of Poona, that the matters expressly referred to might afford some indication of the kind and nature of the power, might be invoked, but we consider that, in the context, there is no scope for the application of this variant either. What we are here concerned with is whether it is legally competent to vest a particular power in a statutory body, and in regard to this the proper rule of interpretation would be that unless the nature of the power is such as to be incompatible with the purpose for which the body is created, or unless the particular power is contra-indicated by any specific provision of the enactment bringing the body into existence, any power which would further the provisions of the Act could be legally conferred on it. Judged by this test it would be obvious that the power conferred by the bye-law is one which could be validly vested in the Commission.

A more serious argument was advanced by learned Counsel based upon the submission that a 737 power conferred by a bye-law framed under s. 11 or 12 was not one that was conferred ""by or under the Act or as may be prescribed". Learned Counsel is undoubtedly right in his submission that a power conferred by a bye-law is not one conferred "by the Act", for in the context the expression "conferrod by the Act" would mean "conferred expressly or by necessary implication by the Act itself". It is also common ground that a bye-law framed under s. II or 12 would not fall within the phraseology "as may be prescribed", for the "expression" 'Prescribed' has been defined to mean "'by rules under the Act", those framed under s. 28 and a bye-law is certainly not within that description. The question therefore is whether a power conferred by a byelaw could be held to be a power ",conferred under the Act". The meaning of the word ",under the Act" is well-known. "By" an Act would mean by a provision directly enacted in the statute in question and which is gatherable from its express language or by necessary implication there from. The words under the Act " would, in that context, signify what is not directly to be found in the statute itself but is conferred or imposed by virtue of powers enabling this to be done; in other words, by laws made by a subordinate law-making authority which is empowered to do so by the parent Act.

This distinction is thus between what is directly done by the enactment and what is done indirectly by rule-making authorities which are vested with powers in that behalf by the Act. (vide Hubli Electricity Company Ltd. vs. Province of Bombay, and Narayanaswami Naidu vs. Krishna-Murthi. That in such a sense bye-laws would be subordinate-legislation "'under the Act" is clear from terms of ss. 11 and 12 themselves. Section 11 (1) enacts:

"11. (1) Any recognised association may, subject to the previous approval of the Central (1) 76 I.A. 57, 66.

(2) I.L.R. 1958 Mad 513, 547.

738 Government. make bye-laws for the regulation and control of forward contracts", and sub-s. (2) enumerates the matters in respect of which bye-laws might make provision. Sub-s. (3) refers to the bye-laws as the-se made under this section and the provisions of sub-s. (4) puts this matter beyond doubt by enacting:

"11 (4) Any bye-laws made under this section shall be subject to such conditions in regard to previous publication as may be prescribed, and when approved by the Central Government, shall be published in the Gazette of India and also in the Official Gazette of State in which the principal office of the recognised association is situate ;

Section 12 under which the impugned bye-law was made states in sub-s. (2) :

"12 (2) where, in pursuance of this section, any bye-laws have been made or amended, the bye-laws so made or amended shall be published in the Gazette of India and also in the Official Gazette of the State in which the principal office of the recognized association is situate, and on the publication thereof in the Gazette of India the bye-laws so made or amended shall have effect as if they had been made or amended by the recognised associations, and in sub-s. (4):

"12. (4). The making or the amendment or revision of any bye-laws under this section shall in all cases be subject to the condition of previous publication", Having regard to these provisions it would not be 739 possible to contend that notwithstanding that the bye-laws are rules made by an Association under s. 11 or compulsorily made by the Central Government for the Association as its bye-laws under s. 18, they are not in either case Subordinate legislation under s. 11 or 12 as the case may be, of the Act and they would therefore squarely fall within the words ,-under the Act" in s4(f). Indeed, we did not understand Mr. Pathak to dispute this proposition.

His contention however was that when cl. (f) specifically made provision for powers conferred by "rules" by the employment of the pbrase "or as may be prescribed" and, so to speak, took the "rules" out of the reach of the words "'under the Act" it must necessarily follow that every power confered by Subordinate law making body must be deemed to have been excepted from the content of that expression and that consequently in the Content the word ,,'by the Act" should be held to mean ,,directly by the Act" i.e., by virtue of positive enactment, of the words "under the Act" should be held to be a reference to powers gatherable by necessary implication from the provisions of the Act. As an instance learned Counsel referred us to the power of the Central Government to direct the Commission to inspect the accounts and other documents of any recognised association or of any of its members and submit its report thereon to the Central Government under s. 8 (2)(c) and suggested that this would be a case of a power or duty which would be covered by the words "under the Act". We find ourselves wholly unable co accept this. If without the reference to the phrase "as may be prescribed" the words "'under the Act" would comprehend powers which might be conferred under "byelaws" as well as those under "rules" we are unable to appreciate the line of reasoning by which powers conferred by bye-laws have to be excluded, because of the specific reference to powers conferred by rules".

740 Undoubtedly, there is some little tautology in the use of the expression "as may be prescribed" after the comprehensive reference to the powers conferred "under the Act", but in order merely to avoid redundancy you cannot adopt a rule of construction which cuts down the amplitude of the words used except, of course to avoid the redundancy.

Thus the utmost that could be that though normally and in their ordinary signification the words ,under the Act" would include both "rules" framed under s.28 as well as "bye-laws" under s. 11 or 12, the reference to "rules" might be eliminated as tautlogous since they have been specifically provided by the words that follow. But beyond that to claim that for the reason that it is redundant as to a part, the whole content of the words "under the Act" should be discarded, and the words "by the Act" should be read in a very restricted and, if one may add, in an unnatural sense as excluding a power confered by necessary implication, when such a power would squarely fall within the reach of these words would not, in our opinion, be any reasonable construction of the provision We need only add that the construction we have reached of s.4 (f) is re inforood by the language of s. 3 (1) which is free from the ambiguity created by the occurrence of the expression "'as may be prescribed" in the former. We have therefore no hesitation in holding that there was no incompetency in the Forward Markets Commission being the recipient of the power which was conferred upon them by bye-law 52AA as amended.

The next part of the submission in relation to this matter was that it was not competent for the Association to have framed this bye-law and that the powers of the Central Government under s. 12 and of the Association under s. 11 in regard to the framing of bye-law being co-extensive, the bye-law framed was not competent to confer any power on the commission.

741 This contention was urged with reference to two considerations:

(a) that a bye-law of the type now in controversy was not within s. II of the Act, and (b) that having regard to the provision contained in the Articles of Association of the Association the bye-law was beyond the powers of the Association to frame. These we should deal in that order.

The first objection naturally turns upon whether the bye-law is one which could be comprehended with s. 11 of the Act. Its first sub-section enacts;

" 11 (1) any recognised association may, subject to the previous approval of the Central Government, make bye-laws for the regulation and control of forward contract." That the impugned bye-law is one for the regulation and control of forward contracts cannot be disputed, and the terms being very general would include a bye-law of the type now impugned. In this connection reference may be made to byelaw 52AA which the impugned bye-law amended, under which power was vested in the Textile Commissioner with the concurrence of the Forward Markets Commission, (though after consultation with the Chairman of the Board) to direct the enclosure of hedge contracts and fix the rates at which such contracts might be closed out a provision whose validity was not impugned in the present proceedings. Mr. Pathak no doubt submitted that he was not precluded from challenging before us even the earlier bye-law for the purpose of sustaining his argument that the amended bye-law was ultra vires. Nevertheless it must be apparent that it was always assumed that bye-laws which vest in authorities external to the Association the 742 power to interfere with forward dealing was within the scope of the bye-law making powers under This general provision apart, sub-s. (2) of s. 11 enact:

"11(2). In particular, and without prejudice to the generality of the foregoing power, such bye-laws may provide for(a)...............................

(b)...............................

(c)...............................

(d)fixing, altering or postponing days for settlement;

(e)determining and declaring market rates, including opening, closing, highest and lowest rates for goods;

(f)..............................

(g)......................................

(h)........................................

(i)...........................................

(j)..........................................

(k).........................................

(1)...........................................

(m).........................................

(n) the regulation of fluctuations in rates and prices;

(o) the emergencies in trade which may arise and the exercise of powers in such eme regencies including the power to fix maximum prices;

743 As the power of the Central Government to make bye-laws under s. 12 is admittedly co-extensive with the power of the Associations to frame byelaws, it is not necessary to refer to the terms of the latter sections Before considering in detail the argument on this part of the case we consider it useful to set out a few of the byelaws of the Association whose validity has not been challenged and which would show the manner in which the Association has been functioning in emergencies such as that for which the impugned bye-law provides, Bye-law 52 which still exists:

"52.(1) If in the opinion of the Board an emergency has arised or exists, the Board may, by a resolution, (i) passed by a majority of not less than --and (ii) confirmed prohibit, as from the date of such confirmation or from such later date as maybe fixed by the Board in the resolution referred to in sub-clause (1), (a)trading in the Hedge Contract for any delivery or deliveries -------or (b) all trading in such contracts as are referred to in clause (a) for a specified period----------------------"52A.-If the Board, at a meeting specially convened in this behalf, resolve that a state of emergency exists or is likely to occur such as shall in the opinion of the Board make free trading in forward contracts extremely difficult, the Board shall so inform the Forward Markets Commission and upon the 744 Forward Markets Commission intimating to the Board its agreement with such resolution, then notwithstanding anything to the contrary contained in these bye-laws or in any forward contract made subject to these Byelaws, the following provisions shall take effect(1)The Board shall at a meeting specially convened in this behalf, (a)fix a date for the purpose hereinafter contained, (b)fix settlement process for forward contracts, (c)fix a special Settlement Day.

(2)............... Every hedge contract entered into between a member and a member or between a member and a non-member outstanding on the date fixed under clause (1)(a) hereof shall be demand closed out at the rate appropriate to such contracts fixed under clause (1)(b) hereof." 3 -6 and then follows Bye-law 52AAA.

Apart for the amended bye-law occurring in the group of existing bye-laws making provision for emergencies to which sub-clause (o)of s.11(2) refers, there is no dispute that there was an emergency in the forward market and that the impugned bye-law was framed to meet such a contingency. It was not contended before us that the method by which the emergency was resolved by the impugned bye-law viz., by closing out subsisting contract was not the usual method employed for the purpose. If therefore the bye-law was provision for an emergency within s.11 (2)(o) then it would seem to follow that for the resolution of that emergency, 745 every one of the matters which could be included in such bye-laws would be attracted to it, and so we find it impossible to accept Mr. Pathaks submission regarding the invalidity of the bye-Law.

An analysis of the impugned bye-law 52AA and comparison of it with that which it replaced would show that the main point of difference is that whereas formerly action to stop forward trading and for closing out contracts and to fix the rate at which contracts were to be closed out was vested in the Textile Commissioner, acting with the concurrence of the Forward Markets Commission, under the amended bye-law the power is directly vested in the Forward Markets Commission itself. The arguments addressed to us on this point are concerned not so much with the propriety as with the vires of a provisions by which the power to close out contracts by the issue of a notification is vested in the Commission.

Apart from an argument immediately to be noticed, we do not see how, if such a power could validly be conferred upon a Textile Commissioner or even exercised by the Board of the Association under a bye-law framed under s. 11, the same would be beyond the power to make bye-laws under s. 11 by the mere fact that the authority vested with the power is the Forward Markets Commission. We are clearly of the opinion that bye-law 52AA is well within the bye-law making power under s. 11 of the Act and therefore within 12.

It was then said that the amended bye-law 52AA wag invalid as in violation of the Articles of Association of the Association being an impermissible delegation of the powers vested in the board of the Association by its Memorandum of Articles. In this context Mr. Pathak placed reliance on cl.

64 of the Articles as laying down the limits within which 746 the Board might delegate their powers. He contended that the conferment of the power to take action on the Forward Markets Commission was thus contrary to and inconsistent with the powers of the Association under this Article. It would be seen that if learned Counsel is right, this would render invalid not merely bye-law 52AA as now amended but even the bye-law as it originally stood, but as already stated learned Counsel urged that he was not precluded from raising this contention. This point was not raised in the Court below but having beard arguments on it we shall pronounce upon it. We consider that there is no substance in this objection. Article 64 on which reliance was placed runs in these terms:

"The Board may delegate any of their powers, authorities and duties to committees consisting of such members or member, of their body or consisting of such other members or members Associate Members, Special Associate Members or Temporary Special Associate Members of the Association not being Directors, or partly of Directors and partly of such other members and/or Associate Members, Special Associate Members or Temporary Special Associate Members as the Directors may think fit.

Any Committee so formed shall in the exercise of the powers so delegated conform to any regulation that may from time to time be imposed on it by the Directors".

In so far as the Memorandum is concerned, its paragraph III states the objects for which the Association was established, as being, inter alia " -" (e) To make from time to time bye-laws for--opening and closing of markets in cotton and the 747 times during which they shall open or closed;

the making performance and determination the prohibition of specified classes of dealings and the time during which such prohibition shall operate; the provision of an dealing with 'Croners' or ,Bear Raids' in any and every kind of cotton and cotton transactions so as to prevent or stop or mitigate undue speculation inimical to the trade as a whole;

the course of business between Original Members inter be or between any of them on the one hand, and their constituents on the other hand, the forms of contracts between them and their rights and liabilities to each other in respect of dealings in The Articles dealing with bye-laws, the manner in which they are to be made as well as the subject to which they might relate is to be found in Articles 73 and 74. The relevant portion of Article 73 runs:

""Under and in conformity with any Statutory provisions for the time being in force, the Board may pass and bring into effect such byelaws as may be considered in the interest of or conducive to the objects of the and Article 74 runs:

"Without prejudice to the generality of the powers to make bye-laws conferred by the Memorandum of Association and by these Articles and under or in the absence or any statute or statutes in force in that behalf, it is hereby expressly declared that the said powers to make, alter, add to, or rescined Bye laws including power to do so in regard to all or any of the following matters--" Sub-para (7) repeats inter alia the contents of 748 Paragraph III (e) of the Memorandum of Association which we have extracted, The entire argument of Mr. Pathak on Article 64 was based on the footing that the power to make a bye-law was vested solely in the Board, because it is only the powers of the Board that are subject to the limitation imposed by Article 64. If however the power to make a byelaw was not confined to the Board but bye-laws might be framed by the Association itself, the argument based on Article 64 would be seen to have no validity. That the later is the true position is clear from Article 73 which reads:

"The Board's powers as aforesaid in relation to bye-laws shall not derogate from the powers hereby conferred upon the Association who may also in the same way and for the same purpose from time to time pass and bring into effect new bye-laws and rescind or alter or add to any existing bye-law by resolution passed by a majority of two-thirds at the least of the Members present and voting at the General Meeting previous to which at least fourteen day's notice has been given that a Member intends at such meeting to propose the making of such bye-law or the decision, alteration of or addition to a bye law or bye-laws".

If therefore a bye-law could be made, by the Association it is manifest that there is no limitation upon its powers such as is to be found in Article 64 which applies only to the Board. The validity of the bye-law therefore cannot be challenge by reference merely to the powers of the Board, because what is contemplated by s. I I is the power of the "recognised Association" to frame the bye-law. We have therefore no hesitation in rejecting the contention that the bye-law as framed contravenes the rules of the Association.

749 Mr. Pathak next contended that the impugned bye-law was invalid because it operated retrospectively. This argument he presented under two heads His first submission was that consistently with the rule that an, enactment 'would not be construed as. retrospective unless the same were to have that effect by express language or by necessary intendment, the impugned bye-law should, be held to affect and close out only those contracts which were entered into after the date on which the byelaw came into operation and that if he was right in this construction the impugned notification had gone beyond the powers conferred on the Commission by the new bye-law. We are wholly unable to accept this submission as to the construction of the bye law. The first paragraph of the ])ye-.law by its list words points out the consequence of a notification by the Forward Markets Commission. It provides that if the Chairman were notified that the continuation of trading in hedge contracts for any delivery etc. "was detrimental to the interests of the general public or the larger interests of the economy of India," then, notwithstanding, anything to the contrary contained the bye-laws of the Association or in any hedge etc. contract the provisions contained in the second paragraph should have effect. , If one had regard only to paragraph and nothing more there might be' some room for a plausible argument that subsisting contracts were not to be affected, though the expression "notwithstanding anything to the contrary contained in any badge etc. contract" would undoubtedly militate against any such contention. But such ambiguity if any is cleared by the provision in paragraph 2 which has effect on the notification under paragraph 1, for by express terms it refers to "every had de contract" and "every on call contract" "in so far as cotton is uncalled there under or in so far as the pride has not been fixed there under". This therefore places it beyond doubt that executory contracts 750 which were subsisting on the date of the notification were within its scope and were intended to be affected by it.

And this, if anything more needed, is made more certain by the I reference in parts (2) to the provisions of old. (3), (4) and (6) of bye-law 52A. Bye-law 62A deals with cases where the Board of the Association resolves repeat its terms "that a state of emergency exists or is likely to occur which makes free trading in forward con. tracts difficult and on obtaining the concurrence of the Forward Markets Commission, then notwithstanding anything to the contrary contained in these Bye-laws subject to these Bye-laws. The following provision %hall have effect "(1) The Board shall at a meeting specially convened in this behalf, (a)fixa date for the purposes herein. after contained, (b)fix settlement prices for forward contracts, (c) fix a special Settlement Day." Clause (3) of bye-law 52A runs :"52A (3) All differences arising out of every such contract between members shall be paid through the Clearing House on the Settlement Day fixed under clause (1) (c) her Clause (4) "52A (4) All differences arising out of every such contract between a member and a nonmember shall become immediately due and payable." and Clause (6) "52A (6 In hedge and on call contracts entered into between a member and a non. member and in contracts to which clause (5) 751 applies, any margin received shall be adjusted and the whole or the balance thereof, as the case may be, shall be immediately refundable.

It is thus clear that the entire machinery for resolving emergencies such as is contemplated by byelaw 52A includes the suspension of forward business now together with the closing out of forward contracts of hedge and on call types whose volume or nature had led to the emergency. It proceeds on the basis that the crisis could not be met unless subsisting contracts were closed out and, so to speak a new chapter begun. That is the ratio underlying the combined effect of bye-laws 52AA and 52 A and in view of this circumstance the argument that on a reasonable construction of the amended bye-law it would apply to contracts to be entered into in future and not to subsisting contracts must be rejected.

If he was wrong in his argument that the byelaw on its proper construction did not affect subsisting contracts such as these of the Appellants, Mr. Pathak's further submission was that the impugned bye-law was invalid and ultra vires of the Act because it purported to operate retrospectively affecting vested rights under contracts which were subsisting on the day on which the bye-law came into force.

Mr. Pathak invited our attention to a passage in Craies' Statute Law, 5th Ed. p. 366 reading:

"Sometimes a statute, although not intended to he retrospective, will in fact have a retrospective operation. For instance if two persons enter into a contract, and afterwards a statute is passed which, as Cockburn, C. J., said in Duke of Devonshire v. Barrow, etc., Co. (1877) 2 Q. B. D. 286, 289) "engrafts an enactment upon existing contracts' and 752 thus operates so as to produce a result which is something quite different from the original intention of the contracting parties, such a statute has, in effect a retrospective operation." The bye-law in so far as it affects executors contracts requiring such contracts to be closed out on a (lay not originally: contracted for and at a price fixed by law is in the above sense undoubtedly retrospective. The submission of learned 'Counsel was that though a legislature which bad plenary power in this regard could enact a, havind a retrospective operation, Subordinate legislation, be it a rule, a bye-law or a notification, could not be made so as to have retrospective operation and that to that extent the rule, bye-law or notification would be ultra vires and would have to be struck down, relying for this position on -the decision of the Mysore High Court reported in AIR 1960 Mys, 326. 'We do not however consider it necessary to canvass the correctness of this decision or the broad propositions laid down in it. It is clear law that a Statute which could validly enact a law with retrospective effect could in express terms validly confer upon a rule-making, authority a power to make a rule or frame a: bye-law having retrospective operation and we would add that we did not understand Mr. Pathak to dispute this position. If this were so the same result, would follow where the power to enact a rule or, a byelaw with "retrospective effect" so as to Affect Pending transactions, is conferred not by express words but where the necessary intendment of I the Act confers such A power. If in the present case the power to make a byelaw so as to operate on contracts subsisting on the day the same was framed, would follow as; a necessary implication from the term of S. 1 1, it would not be necessary to discuss the larger question as to whether and the 753 circumstances in which Subordinate legislation with retrospective effect could be validly made.

Before proceeding further it is necessary to notice a submission that under the Act, far from there being a conferment of power to make a bye-law, so as to -affect rights under subsisting contracts, there was a contra indication of such a power being conferred.

In, this connection Mr. Pathak invited, our attention to the: terms of ss. 16 and 17 and 19 of the Act under which the Act has itself made special provision for affecting rights such as those, if the appellants in the present case. Detailing the conseqences of a notification under s. 15, s.16 (a:) enacts "16 (a,,) Every forward contract for the sale or purchase of any goods specified in the notification, entered into before the date of the notification and remaining to be performed after the said, date and which is not in conformity with the provision of section 15, shall be deemed to be closed out at such rate as the Central Government may fix in this behalf.

S.17 (3) enacts "17. (3) Where a notification has been issued under subsection (1), the provisions of section 16 shall, in the absence of anything to the contrary in the notification, apple to all forward contracts for the sale or purchase of any goods specified in the notification entered into before the date of the notification and remaining to be performed after the said date as they apply to all forward contracts for the sale or purchase, of any goods specified in the notification under section 15." and f 19 (2) runs:"19 (2). Any option in good which has been entered into' before the date on which 754 this section comes into force and which remains to be performed, whether wholly or in part, after the said date shall, to that extent, becomes void." Based on these provisions the submission was that Act had made special provisions for retrospective operation of certain notifications so as to affect rights under subsisting contracts and that in cases where there was no such specific provision it was not intended that a bye-law or a notification could have that effect.

We see no force in this argument. The fact that the Act itself makes provision for subsisting contracts being affected, would in our opinion far from supporting the appellants indicate that in the context of a crisis in forward trading the closing out of contracts was a necessary method of exercising control and was the mechanism by which the enactment contemplated that normalcy could be restored and healthy trading resumed.

If therefore we eliminate the provisions in as. 16, 17 and 19 as not containing any indication that a power to frame a bye-law with retrospective effect was withheld from the Association, the question whether such bye-law-making power was conferred has to be gathered from the terms of s. II itself. Thus considered we are clearly of the opinion that a power to frame a bye-law for emergencies such as those for which a bye-law like 52 AA is intended includes a power to frame one so as to affect subsisting contracts for resolving crisis in Forward Markets. We have already referred to the terms of bye-law 52A which shows that when an emergency of the type referred to a. It (2) (a) arises it is not practicable to rescue a forward market from a crisis without (1) putting an end to forward trading, and (2) closing out subsisting contracts so as to start with a clean slate for the 755 future. When therefore under s. 11 (2) power is conferred to frame a bye-law to provide for:

" (O) the emergencies in trade which may &rise and the exercise of power in such emergencies including the power to fix maximum and minimum prices;" &-ad this is read in connection with clause (g) reading:

"regulating the entering into, making, performance, rescission and termination of contra eta............... If It is manifest that the section contemplates the making of a bye-law regulating the performance of contracts, the rescission and termination of contracts and this could obviously refer only to the bye-law affeding rights under contracts which are subsisting on the day the action is taken. It is therefore manifest that s. 11 authorises the framing of a byelaw which would operate retrospectively in the sense that it affects rights of parties under subsisting contracts. Finally it should be borne in mind is that ultimately what we are concerned in a. 1 1 of the Act is the power of the Association to frame the bye-law' for if the Association could validly frame such a bye-law the Central Government could under s. 12 have a similar power. We did not hear any argument to establish that the Association had no such power.

There is one other aspect in which the same problem might be viewed and it is this : The contract entered into by the respondents purported to be one under the bye-laws for the time being in force and any change in the bye-laws therefore would in to be contemplated and provided for by the contract itself, so that it might not be correct to speak of the new bye-law as affecting any accrued 756 rights under a contract. For when those-by-laws were altered the changes would get incorporated into the contracts themselves, so as to afford no scope for the argument that there has been an infringement of a vested right. In the view however which we have taken about the validity of the bye-law on the ground that it was well within the terms of as.' 'II and 12 we do not consider it necessary to pursue this aspect further or to rest our decision on it.

What remains to consider is the challenge to the notification based on the ground that it was vitiated by having been issued malafide. The ground of malafides alleged was that the impugned notification was issued in order to prevent the Board of Directors of the Association.

from applying their minds and exercising their judgment which they were directed to do by the terms of the Consent Memo filed on which the appeal from the judgment in C.S. 2 of 1956 was disposed of on January 24, 195 . To the allegation made in this form in the petition the first respondent, the, Chairman: of the Forward Markets Commission, filed an affidavit in the course of which he pointed out that the continuance of trading in futures was in the circumstances then prevailing