M. A. Rasheed and Ors. v. The State of Kerala

- RAY, C. J.-These appeals are by certificate from the judgment dated 19 November, 1973 of tho High Court of Kerala. ·

These appeals challange the validity of the notification dated 26 July, 1973 issued by the State Government undi:-r Rule 114(2) of the Defence of India Rules, 1971 hereinafter referred to as the Ruks.

Rule 114(2) is as follows :-

"If the Central Government or the State Government is of opinion that it is necessary or expedient so to do for secur-ing the defence of India and civil defence, the efficient conduct of military operations or the maintenance or in-crease of supplies and services essential to the life of the community or for securing the equitable distribution and availability of any article or thing at fair prices, it may, by order, provide for regulating or prohibiting the production, manufacture, suppli and distribution, use and consumption of articles or thklgs and trade and commerce therell:! or for preventing any corrupt practice or abuse of authority in res-pect of any such matter".

The impugned notification is as follows : -

"No. l 9768/B2/73/ID Dated Trivandrum, 26th July, 1973. S.R.O. No. 474173:-Whereas use of machinery for the extraction Of fibre from coconut husk increased considerably in the. districts of Trivandrum, Quilon and Alleppey in ·recent times;

And whereas mechanisation in the production of such fibre results in very high consumption of coconut husks and the consequent enhancement of the price of such husks;

And whereas due to the very high consumption of coco-nut husks for the production of fibre by using machinery and 8~l25! Sup Cl/75

911 SUPRl!Mf. COURT REPORTS [ 1975] 2 S.(:,JR.

·the e:nhancement of the price of such husks, sufficient quan-tity of such husks are not available at fair prices in the mid districts for use in the traditional sector;

And whereas the Government are of opinion that for securing the equitable distribution and availability at fair prices of coconut husks irn the said districts for production Jf fibre in the traditional sector it is Recessary to prohibit the use of a machinery in those districts for the production of such fibre; · ·

Now, therefore, in exercise of the powers conferred by Sub-Rule (2) of Rule 114 of the Defence <>f India Rules, 1971, the Government hereby prohibit the production of fibre coconut husks by the use of the machinery in the said districts.

By order of the Governor". The appellants are owners of Small Scale Industrial Units. They >employ mechanised process for decortication of retted cocon.ut husks. TI1e \Dain processes involved in the manufacture of coir yare ·are these:· First is retting of grec.n husks. The green husks are covered with leaves and mud. The rcttcd husks are then pounded or beaten. The fibre: and pith then separate. The fibre is extracted, cleaned :!nd dried. Next comes spinning either with the help of ratt or by hand. Ratt is a mechanical contrivance. The final stage is bundling of coir yarn for marketing. Government declared defibring of coconut husks by mechanical means as ~a small scale industry eligible for finan-cial assistance under the Small Scale. Industries Development Scheme. i'vlost of the appellants availed themselves of loans under the Scheme. The appellants alleged in the petitions before the High Court that the cost involved in installing machinery in a proper building for the pur-pose would range from Rs. 22,000 to Rs. 35,000.

The appellants challenged 1lhe notification on the ground that the formation of opinion by the State Government for the purpose of exercise of power under sub-rule (2) of Rule 114 of the Rules is a justiciable issue and that the court should call for the material on ·which the opinion has been formed and examine the same to find out whether a reasonable man or :au~hority could have come to the same conclusion that in its opinion for securing the equitable distribution and availability of retted husks: at fair prices, a regulation or prohibi-tion of the manufacture of fibre from retted husks by mechanical means is necessary. The appellants allege that the reasoQS given in the notification •as justifying the imposition of the total ban on the use of machinery for defibring husks are wholly erroneous and prima facie no reasonable person will consider them as justifying the said ·ban. The appellants also alle:ge that there is no application of lhe mind of the authority to any 1:enuine materia.ls or to any relevant ·considerations in the exercise of the drastic power vested in the autho-· :rity undi:r Rule 114(2) of the Rules.

The High Court held that the appel1'ants did not ·establish by .. material that the opinion formed by the. State Government could not stand.

There is no principle or authority in support of the view that whenever a public authority is invested with power to niake an order which prejudicially affects the rights of an individual whatever nray be the nature of the power exercised, whatever may be the procedure prescribed and whatever may be the nature of the authority conferred, the proceedings of the public authority. must be regulated by the ana-logy of rules governing judicial determination of disputed questions (See Sadhu Singh v. Delhi Administration) ( t).

Where powers are conferred on public authorities to exercise the same when "they are ·satisfied'' or when ".it appears to them", or when "in their opinion" a certain state of affairs exists; or when powers enable public authorities to take "such action . as they think fit" in relation to a subject matter, the Courts will not readily defer to the conclusiveness of an executive authority's opinion as to the existence of a matter of law or fact upon which the validity of the exercise of the power is predicated.

Where reasonable conduct is expected the criterion of reasonable-ness is · not subje~tive, but objective. Lord Atkin in Liversidge v. Anderson(2) said "If there are reasonable grounds, the judge has no further duty of deciding whether he would have formed the same belief any more than, if there is reasonable evidence to go to a jury, the judge is concerned with whether he would have come to the same verdict". The onus of establishing unreasonableness. however, rests upon the person challenging the validity of the acts.

Administrative decisions in· exercise of powers even conferred in subjective terms are to be made in good faith on relevant considera-tions. The courts inquire· whether a reasonable man could have· come to the decision in question without misdirecting himself on the law or the facts in a matenal respect. The stand1ard of reasonableness to which the administrative body is required to conform may range from the court's own opinion of what is reasonable to the criterion of what a reasonable body might have decided. The courts will find out whether conditions precedent to the formation of the opinion have a fac-tual basis.

In Rohtas Industries .Ltd. v. S. D. Agarwala & A nr. (8) .an order under section 237(b) (i) and (ii) of the Companies Act for investi-gation of the affairs· of the company was challenged on the ground that though the opinion of, the Government is subjective, the existence of the circumstances is a condition precedent to the formation of the opinion. It was contended that the Court was not precluded from going behind the recitals of the existence of such circumstances in the order, but could determine whether the circumstances did in fact

100 SUPREME COURl' REPORTS [1975] 2 s.c.R. exist. This Court said that if the opinion of an administrative agency is the condition precedent to the exercise of the power, the relevant matt.er Is the opinion of the agency and not the grounds on which the opinion is founded. li it is established that there were no materials at all upon which· the authority .could form the requisite opinion, the Court may infer that the authority passed the order without applying its mind. The opinio11 is. displaced a.s a relevant opinion if it could not be fonned by any sensible person on the material before him.

1t is appropriate to refer to the Report of the Committee appointed by the State Government to hold enquiries and advise the Government in respect of revision of minimum wages fixed for employment in Coir Industry. The Committee was constituted in the year 1969. The Committee gave its fi.nal report on 25 January, 1971. The Report is publishr.d by the Government of Kerala in 1971. The findings of the Committee are these. With the help of high powered machines, fibre from husks on 1,000 coconuts could' be extracted in 25 to 30 lninutes. 10 workers would be required for effective attending to ttrat work.. 10 workers in 8 hours on an average could defibre husks of about 12000 coconuts. 30 workers would be required to remove the skins of the retted husks. In the usual course, 120 workers would have to be employed for beating husks of 12000 coconuts by hand. In short, by the introduction of a single high powered machine, 80 persons would lose their employment. The Committee felt that under the circumstances when employment is acute especially in that State, it is not practicable to encourage mechanisation for fibre pro-duction till alternative source of employment is developed. There-fore, it is a wise course to regulate the expansion of the use of machi-nery with high productive capacity in order to retain the labour force al tead y working in this field.

One high powered machine does the work of about 90 workers employing only 10 workers to operate it. The fibre -extracted with the help of machinery is not used for the production of coir yarn by a majority of employers in North Malabar area. The fibre is sold to outside agencies in Coimbatore, Salem etc. and not used for spinning coir yarn. The Committee recommended that the Government might appoint a separate committee to study the various problems on account of meehanisation in the industry and make suitable recommendations in that behalf.

A Study Group was appointed to make a report on mechanisation in Coir Industry in Karela. The report of the Study Group is dated 13 April, 1973. It is published by the State Phnning Board in May, 1973.

The Study Group at pages 33 and 34 of the Report stated as fol-lows. In a country like ours where unemployment .and underemploy-ment loom large, any situation which bring<; in unemployment ~ not to be favoured. Where again exceptional benefits are to tlow in as a res~t of mechanisation, and by thoughtful and timely state action the painful effects resulting from mechanisation. could be checkmated 1.t is not always desirable to persist with age-old methods .. Coir lndus-ry brings employment or partial employment to an area where there s chronic unempfoiyment and under-employment. Any kind of mechanisation is bound to cause some displacement of people. But human values should be given the highest priority and any measure which brings suffering to those engaged in an industry cannot be ac-ceptable. Mechanisation can bring steady employment to the few. It l.• .vould also promote betier remuneration. The only diflkulty is that it

·.an take in lesser number of persons,

The Study Group suggested that a composite plan should be thought on these lints. The Coir Industry should be woven into the pattern of are!l development or regional development wl1ich will bring prosperity not only to the coir industry but also to many other ancil-lary industries and avocations. The objective should be to provide at least 300 days' work in a year at reasonable wages to all those engaged in the coir industry. The Study Group recommended that the pace of mechanisation should be such that none should be thrown out of employment, and for those who are displaced, alternative work is to be found in the general development that is envisaged in the all round development plan which should think of not only the coir indus-try but also the other industries and avocations possible to be intro-duced in an area. ·

It is in evidence that mechanisation progressed at a fairly high rate in the three districts of Trivandrum, Ouilon and Alleppey. Out of 414 mechanised units in the wh6le of the Kerala State consisting of 11 districts, 283 are in· these three districts alone. There is a heavy concentration of mechanised units in the three districts. The figure given is that only 10 workers are required for de-fibring husks of 12000 coconuts a working day of ·8 hours by the use of machines as against 120 workers by the process known as hand-method,, The mechanical work is done quickly to consume coconut husks in. very large quantities. There has been large scale unemployment of Jabour engaged in the traditional method ~nd there is serious unrest in the area.

The State Government found in the context and background of the Reports and. materials that the use of machinery for the purpose of extraction of fibre from husks in the region other than Trivandrum, Quilon and Alleppey Districts has not affected the supply and avail-ability at fair pric~s of husks for extraction of fibre in the traditional sector as in the case of the districts of Trivandrum, Quilon and Allep-pey. The situation in other 8 districts, according to the State, does not require action under Rule 114 of the Defence of India Rules. Price increase of husk in these. 8 districts was not comparable with that in the districts of Trivandrum, Quilon and Alleppey. The Govern-ment,· therefore, was of opinion that for securing the equitable distri-bution and availability at fair prices of coconut husks for production of nbre in the traditional sector in the remaining 8 districts of the State it is not necessary in the prevailing circumstances to prohibit the use . of machinery in the remaining 8 districts for the production of fibre.

The appellants also contended that section 3 ( 2 )( 21 ) of the Defence of India Act doc:> not support Rule 114 and secondly section 38 of the Defence of India Act is violated. Section 3(2)(21) of the Defence of India Act confers power on the authority to make orders providing inter alia for th~~ control of trade or industry for the purpose of regulating or increasing the supply of, or for maintaining supplies and s1:rvices essential to the life of the community. Rule 114 is in complete consonance with the powers conferred under the aforesaid section 3(2) (21). Section 38 of the Defence of India Act states that any authority or person acting in pursuance of this Act shall interfere with the ordina:cy avocations of life and the enjoyment of property as little as rnay be consonant with the purpose of ensuring the public safety and interest and the defence of India and civil d·~fcnce. It is a matter of policy for the State Government to decide to what extent there should be interference in relation to the enjoy-ment of property. The public interest is of pa:ramount consideration. In the present case the steps taken are ,in the larger interests of labour engaged in the coir industry. The pre·eminent question is that it is a1\ emergency legislation. In emergency legislation the causes for inducing the formation of the opinion are that coir is one of the most labour intensive industries in Kerala and it is estimated that more than 4} lakhs of worker~ are em~loyed in the various process of coir indus· try like retting, hand-spinning, spindle spinning and manufacture of coir mats and matting and that about 10 Iakhs of people depend upon this industry for their sustenance. Mechanisation in Coir Industry has been taking place in different parts of .the State. The non-meeha· uised sector of this in1dustry is so labour-intensive that mechanisation of fibre production is strongly opposed by workers because mechani-sation results in ve~y high consumption of coconut husks by the mechanised units and the consequent enhancement of price of husks and the non-availability of sufficient quantity of husks at fair price for use in the traditional sector, viz., hand beating of husks. There have b.:en serious tcnsiom including law and order situations.

Because of the very high ;consumption of coconut husks. for the production of fibre by using machinery aJld the enhancement of the price of such husks, sufficient quantity of such husks are not available at fair prices in the Districts of Trivandrum, Qui!on and Allcppey for use in the traditional sector. Therefore for securing the equit-able distribution and availability at fair prices of coconut husks in the said three districts for production of fibre in the traditional sector, it is necessary to prohibit use of machinery in these three disiricts.

The State Government found on materials that use of machines affected the availability of retted coconut husks for equitabl.e distri· bution at fair prices. The notification is on the consideration of relevant and useful material. The opinion of the State Government cannot be said to be based on any mattet extraneous to the scope and purppse of the relevant provisions of the statute. The materials sup-porting the subjective satisfaction indicate that there are reasonable grounds for believing that the prescribed state of affairs exists and a course of action is reasonably necessary for the given purpose. of equitable distribution of coconut husks at fair prices.

The notification is issued after due care ,md caution on the basis of reliable and sufficient data obtained by proper investigation and enquiries. The Government took notice: of section 3S of the Defence of India Act. The Government became satisfied about the public in· tcrest. The notification does not interfere with the avocations and enjoyment of proper~y any more than is necessary for those purposes ll ul' equitable distribution of husks at fair price to the traditional sec-

tor.

An argum.::nt was advanced that the notification offended. Article I 4. The course <if action which the .State adopted is that it became n~cessary to prohibit the use of machinery in the districts of Trivand-rum, Quilbn and Alleppey in the traditional sector. It appears that out of 414 mechanised units in the State 283 units are in the South-ern region of Kerala State consisting of Trivandrum, Quilon and Alleppey and the balance 131 mechanised units are in the remaining 8 districts of the State. The use of machinery for the purpose of ex· traction of fibre from husks in the region other than Trivandrum. Quilon and Alleppey districts has not at present affected the sup and availability at fair prices of husks for extraction of fibre in the · traditional sector as in the case of th(: three Districts. The situation in the 8 districts docs not require action at the present moment. The classification is reasonable. lt bears a nexus to the objects sought to be achieved by the impugned notification. In order to secure equit-ublc distribution and availability at fair prices of coconut husks in the rcmaini11g 8 districts of the State for production of fibre in the traditionaL sector, it is not necessary in the. prevailing conditions to prohibit the use of machinery in the remaining 8 districts.

£t was also submitted that the notification offended Article 30 I. Article 302 states that the State can impose restrictions on the free-dom of trade, commerce or intercourse between one State and anotl!er or within any part of the territory of India. It was said that the Defence of India Act is not a law made by Parliament, imposing restrictions as contemplated under Article 302. The Defence of India Act has been passed by Parliament. The Rules under the Act have legislative sanction. The restrictions are imposed in the interest of the general public. The restrictions :ire reasonable in the interest of the industry and public.

For the foregoing reasons the judgment of the High Court is up-held. · The appeals are dismissed. In view of the fact that the High Co11.rt direc!ed the parties to bear their own costs we also direct that the parties will pay and bear their own costs.