Narendra Kumar And Ors vs.

Union of India And Ors

1960 AIR 430: 1960 SCR (2) 375

1959, decided on 3rd December 1959

Introduction

According to Dr. B. R. Ambedkar, Article 32 is the “soul of the Constitution and very heart of it”. This
Article makes the Supreme Court the defender and guarantor of the fundamental rights. The petition
in the current case Narendra Kumar vs. Union of India[1]was filed under Article 32 for the
enforcement of Fundamental Rights under Article 14, Article 19(1)(f), and 19(1)(g). The case was
decided by the Constitutional Bench of 5 Judges namely K.C. Das Gupta, Bhuvaneshwar P Sinha. (CJ),
Syed Jaffer Imam, J.L. Kapur, K.N.Wanchoo. The case has been briefly discussed in the following part
of the paper.

summary of the Case

The petition was filed under Article 32 of the Constitution for the enforcement of Fundamental
rights conferred by Articles 14, Article 19(1)(f), and 19(1)(g). The three petitioners who had filed the
petition thereof were dealers in imported copper and carried on their business at Jagadhri in the
State of Punjab.

They had entered into contracts on different dates before April 3, 1958, for the purchase of copper
with importers. Before they could take delivery, the Government of India in the exercise of its power
under Section 3 of the Essential Commodities Act, 1955, issued “Non-Ferrous Metal Order”. This
order was made applicable to the imported copper.

The petitioners contended that the clause 4 of Order read with principles specified in the letter of
the 18th April violates the Article 19(1)(f) of the Constitution of India to acquire property and also
the right conferred by Article 19(1)(g) to carry on trade, that these violations are not within the
saving clause of Articles 19(5) and 19(6) of the Constitution of India and therefore are void. It was
further contended by the petitioners that the fixation of price under clause 3 of the Order violates
Article 19(1)(f) and 19(1)(g). Further, the principles specified in the communication are
discriminatory towards the dealers and manufacturers and hence, it was contended that it violates
Article 14 of the Constitution. The Supreme Court held that the petition partly failed and succeeded
in part.Facts of the Case

On different dates before April 13, 1958, the petitioners entered into contracts of purchase of
copper with ‘importers at Bombay and Calcutta, but before they could take delivery from the
importers, the Government of India, in the exercise of its powers under Section 3 of the Essential
Commodities Act, 1955, issued, the Non-ferrous Metal Control Order, 1958 on April 2, 1958.

The price was controlled by Clause 3 of the Order which provides in its first clause that “no person
shall sell or purchase any non-ferrous metal at a price which exceeded the amount represented by
an additional of 31/2% to its landed cost”, and in its second sub-clause that “no person shall
purchase or offer to purchase from any person non-ferrous metal at a price higher than at which it is
permissible for that other person to sell to him under sub-clause. While under Cl. 4 “no person shall
acquire any non-ferrous metal except under and following a permit issued in this behalf by the
controller following such principles as the Central Government may from time specify”.

Clauses 5 & 6 of the order made it obligatory on the importers to notify quantities of non-ferrous
metal imported and to maintain certain books of account, while the last clause i.e., clause 7 confers
powers on the Controller to enter and search any premises to inspect any book or document and to
seize any non-ferrous metal in certain circumstances.

No such principles, however, were published in the Gazette or laid before the two Houses of
Parliament, though certain principles governing the issue of permits by the Controller were specified
in a communication addressed by the Deputy Secretary to the Government of India dated April 18,
1958, to the Chief Industrial Adviser, under which the Controller could issue permits only to certain
manufacturers and not to any dealer.

On April 14, 1958, the petitioners applied for permits to enable them to take delivery of the copper
in respect of which they had entered into contracts, but the applications to grant permission were
refused.

Thereupon, the petitioners filed a petition under Article 32 of the Constitution of India challenging
the validity of the order refusing the grant of the permit as it infringes Article 14, 19(1)(f), and 19(1)
(g).

Issues Involved

Whether the Non-Ferrous Metal Order issued by the Government under Section 3 of the Essential
Commodities Act violates Article 14 and 19 of the India Constitution.

Whether the Non-Ferrous Metal Control Order issued by the Government void.

Arguments

petitioners

(1) that the fixation of the price under clause 3 of the Non-ferrous Metal Control Order, 1958 which
had the effect of driving the dealer out of business in imported copper and similarly, clause 4 of the
said Order read with the communication dated April 18, 1958, which had the effect of eliminating
the dealers from the trade-in imported copper, contravened Articles 19(1)(f) and 19(1)(g) of the
Constitution, and that such total elimination of the dealer amounting to the prohibition of any
exercise of the right to carry on the trade or to acquire property was not a mere restriction on the
rights and was outside the saving provision of clauses (5) and (6) of Art 19,

(2) that the principles specified in the communication dated April 18, 1958 being discriminatory in
nature as between the manufacturers and dealers in copper, infringed Article 14.

(3) that the said principles, in any case, had no legal force, as they were not mentioned in the Non-
ferrous Metal Control Order, nor were they notified in the Official Gazette and laid before both the
Houses of Parliament in the manner laid down in sub-section (5) and (6) of Section 3 of the Essential
Commodities Act.

The application was opposed by the respondents; their main contention was being that clause 3 and
4 of the Order and the “principles” specified are laws- which impose reasonable restrictions on the
exercise of rights conferred by Articles 19(1)(f) and 19(1)(g) in the interest of the general public.

It was also contended on behalf of respondents that as the petitioners have not challenged the
validity of the Essential Commodities Act and have admitted the power of the Central Government
to make an order in exercise of the powers conferred by Section 3 of the Act it is not open to the
Court to consider whether the law made by the Government in making the nonferrous metal order
and in specifying the principles under clause 4 of the order violates any of the fundamental rights
under the Constitution.

The order made by the Government can be attacked only if it is outside the power granted by the
section or if it is mala fide. Mala fides have not been suggested and we are proceeding on the
assumption that the Central Government was honestly of opinion that it was necessary and
expedient to make an order providing for regulation and prohibition of the supply and distribution of
imported copper and trade and commerce therein. So long as the Order does not go beyond such
provisions, the Order must be held to be good and the consideration of any question of infringement
of fundamental rights under the Constitution is wholly beside the point. Such an extravagant
argument has merely to deserve rejection.

Respondent

the concept of convertible instruments including CCDs falls within the definition of equity under the
Concession Agreement, while debt means "liability or obligation in respect of a claim which is due
from any person...7";

ICTL does not have any liability or obligation qua IFCI because IFCI is actually an equity participant
and does not have any debt to be repaid;

prior written approval of lenders was required before ICTL could issue any debentures or raise any
loans, which approval was never sought. This approval was required since the lenders wanted to
ensure that their pool is not expanded which had the potential of casting a doubt on the full
recoverability of their debt;

the financing plan itself envisaged CCDs as part of the equity portion of the funding; and

if it was a simpliciter debenture, it would have fallen in the category of financial debt, along with
bonds etc. However, the present case concerns CCDs with liability for coupon payments, buy back
and security being the Sponsor's, failing which the CCDs were to automatically convert to equity.

Related Cases

 Chintaman Rao vs. the State of Madhya Pradesh[2]

 Madhya Bharat Cotton Association Ltd. vs. Union of India[3]
Judgment

It was found that the result of the abuse by the importers of the practical monopoly given to them of
the copper market seriously affected the interests of the general public in India, and that to protect
these interests of the public the impugned legislation in the form of Non-ferrous Metal Control
Order and the subsequent specification of principles was made.

It was therefore held that clause 3 of the Order even though it results in the elimination of the
dealer from the trade is a reasonable restriction in the interests of the general public. Clause 4 read
with the principles specified must also be held for the same reason to be a reasonable restriction.

It was also urged by the petitioners that those principles were discriminatory as between the
manufacturers and dealers and so violate Article 14 of the Constitution. The Court observed that the
differentia which distinguishes dealers and manufacturers have a reasonable connection with the
object of the legislation. And hence, the Court held that there is no substance in the contention
made by the petitioners that the principles violate Article14.

(1) the word “restriction” in Articles 19(5) and 19(6) of the Constitution includes cases of prohibition
“also; that where a restriction reaches the stage of total restraint of rights special care has to be
taken by the Court to see that the test of reasonableness is satisfied by considering the question in
the background of the facts and circumstances under which the order was made, taking into account
the nature of the evil that was sought to be remedied; by such law, the ratio of the harm caused to
individual citizens by the proposed remedy, the beneficial effect reasonably expected to result to the
general public, and whether the restraint caused by the law was more than was necessary for the
interests of the general public.

Comments and conclusion

Fundamental Rights are those rights which are essential for the intellectual, moral, and spiritual
development of citizens in India. In the current case, the petition was filed under Article 32 of the
Constitution challenging the validity of the “Non-Ferrous Metal Control Order” issued by the
Government of India as according to the petitioners, it violated the fundamental rights under
Articles 14, 19(1)(f) and 19(1)(g) of the Indian Constitution. The case Narendra Kumar v. UOI decided
by the Supreme Court on 3rd December 1959 is discussed hereafter.