Brooke Bond India (Private) Limited vs The Corporation of Madras

Srinivasan, J.—Messrs. Brooke Bond India Private Limited is the Petitioner. It is a company registered under the Indian Companies Act

with its registered office at Calcutta. The Petitioner deals in packetted tea and coffee. The course of its business is to purchase tea at public

auctions at Calcutta and Cochin, blend the tea and packet the tea and tea-dust in suitable containers in five factories, one of which is situated in

Coimbatore and the others in four other states. We are not concerned in these petitions with its process of manufacture. The tea so packed in air

tight containers is sold through a number of depots situated in the whole of India. These packages are sent to the several depots and sales are

effected to dealers either at the depots where they are stored or by taking them to the premises of the customers. These depots are only places of

storage where the packed tea is kept in cases.

In the city of Madras, the Petitioner has thirty such depots in addition to two big godowns for the purpose of storage.

On various dates during the second half of the calendar year 1960, the Corporation of Madras purported to issue notices to four of these

depots and a godown. The Revenue Officer of the Corporation informed the Petitioner that the Commissioner of the Corporation of Madras had

declared that the use of the premises in connection with storing and sale of tea was dangerous to human life or health or property or will create or

cause a nuisance. This the Commissioner is purported to have done in the exercise of his powers under the residuary clause in Schedule VI of the

City Municipal Act. By virtue of the above declaration, the premises where tea was stored became liable to be licensed u/s 287 of the City

Municipal Act. The Petitioner was accordingly informed that it should take out a licence for the premises in question. Notices were issued in

respect of depots in Usman Road, Devar Sixth Street, Thambu Chetti Street, Jermiah Road and Kilpauk. A further notice issued on 7th

September 1960, related to the Tiruvottiyur High Road premises and the Health Officer of the Corporation of Madras informed the Petitioner that

as the Petitioner was storing and selling tea-dust and leaves without a licence, it was liable to be prosecuted u/s 379A of the Act and that steps

would be taken to prevent the Petitioner from continuing to use these premises for the abovesaid purpose. There was a further notice threatening to

prosecute the Petitioner in this regard.

The Petitioner addressed the Corporation of Madras by a letter, dated 7th November 1960, and pointed out that the mode of trade and sale of

tea was such that both by the nature of the articles and by the manner of disposal thereof, public health, safety or convenience would not be

affected. It was urged that storing of packed tea would not in law come within the purview of Section 287 of the Act as constituting a trade which

is dangerous to public health or safety. The Corporation replied to this letter stating that it was within the jurisdiction and power of the Corporation

to declare whether any particular trade was or was not of a nature bringing it within the mischief of Section 287 and that, since a declaration to that

effect had been made, the Petitioner was bound to take out a licence.

It is in these circumstances that the writ petitions have been filed, praying that this Court may issue a writ or direction in the nature of mandamus

to restrain the Corporation from interfering with the user of the premises by the Petitioner and from enforcing the provisions of Section 287 of the

City Municipal Act.

The grounds upon which the proceedings of the Corporation are attacked are that the imposition of the restriction, viz., the requirement of a

licence for the purpose of carrying on a trade or business, is a restriction on the fundamental right of the Petitioner to carry on business, and unless

the restriction imposed is a reasonable one in the interests of the general public, it is violative of Article 19 of the Constitution. It is pointed out that

the Act itself contains a schedule listing out the trades and occupations which fall within the ambit of Section 287, and tested in the list of such

trades and occupations, which the Legislature has clearly considered to be of a nature requiring a licence for the use of the premises, the trade in

the present instance is not even remotely liable to be regarded as dangerous to the health or convenience of the public. It is urged further, that

under the relevant provisions of the Act, the State Government is vested with an authority to alter or add to the entries in Schedule VI. But this

power of the State Government is exercisable only after such alterations and amendments are laid before the Legislature and approved of by that

body. In contrast therewith, the power that is given to the Commissioner under the residuary clause of Schedule VI is apparently unfettered by any

control of that kind and in sharp contrast to the requirements of previous publication and approval as the exercise of the power by the State

Government calls for, the power of the Commissioner is wholly unrestrained. It is further pointed out that when once a trade carried on in certain

premises comes within the mischief of Schedule VI and Section 287, the user of the premises without a licence becomes a punishable offence.

Virtually, therefore, the Commissioner is conferred with uncontrolled authority not only to add to the list of items contained in Schedule VI, but also

to create a punishable offence, merely on the basis of an opinion recorded by him without any prior publication or promulgation. The conferment of

such a power upon the Commissioner is also attacked as amounting to excessive delegation, even apart from the question of the reasonableness of

the opinion of the Commissioner which the Petitioner claims has to be established to the satisfaction of the Court.

In the counter-affidavit filed on behalf of the Respondent, the Corporation of Madras, it is stated that the City Council is the authority to fix the

fees leviable for licences. When the Act in Schedule VI listed certain trades and industries for the purpose of licensing, it was obviously not

intended to be exhaustive of all such licensable trade. It is contended that the Legislature has for that reason empowered the Commissioner to

declare any purpose which in the opinion of the Commissioner is likely to be dangerous to human life or health or likely to create a nuisance. This

statutory power conferred upon the Commissioner, it is claimed, is perfectly legal and the Commissioner is entitled in the exercise of that power to

declare that certain trades carried on in certain premises should require a licence. It is urged that no infringement of the fundamental right of the

Petitioner to carry on its business is caused and that a reasonable restriction in the interests of the general public, which is all that the requirement of

a licence connotes, is perfectly within the competence of the chief executive authority of the Corporation. It is again averred on the part of the

Corporation that when the Commissioner declares his opinion, it is not a rule that is framed under any of the provisions of the Act and that,

therefore, no previous publication or promulgation is called for. The bona fides of the opinion of the Comissioner, it is claimed, cannot be

questioned, and the Commissioner is under the provisions entitled to decide what should be licensed in the interests of public health. Lastly, it is

contended that where a discretion has been conferred upon the Commissioner even though the conclusion reached by the Commissioner might be

disputable, so long as the exercise of the discretion is within the scope of the powers conferred upon him and in the exercise of a statutory

authority, a writ of mandamus should not issue.

In order to appreciate the contentions of either side, it is necessary to refer to a few of the provisions of the Act. The City Municipal Act was

passed in the year 1919. Chapter XI of the Act deals with nuisances and chapter XII with licences and fees. Under the sub-heading Industries and

Factories, the prohibition upon the use of any place within the limits of the city for any of the purposes mentioned in Schedule VI without a licence

obtained from the Commissioner finds place in Section 287; Schedule VI lists out numerous items under the heading Purposes for which premises

may not u/s 287 be used without a licence. For the word premises the word places was substituted by Madras Act LVI of 1961. The further

clause of Section 287 requires that the owner or occupier of every place for the use of which for any purpose a licence is required, shall apply to

the Commissioner for such licence not less than forty-five and not more than ninety days before the place is used for such purpose. The licence

may be granted by the Commissioner, subject to such restrictions and regulations as may be specified, or he may refuse the grant of such licence.

The Amending Act LVI of 1961, made further provisions for dealing with the application for licences. The section also requires applications for

annual renewal of the licence.

In Part V of the Act providing for subsidiary legislation and penalties, provisions are made for making of rules by the State Government to carry

out all or any of the purposes of the Act. Section 347, Sub-Section 3, states:

The State Government may make rules altering, adding to or cancelling any of the schedules to this Act except Schedules I, VII and VIII.

It is thus competent for the State Government to make rules adding to Schedule VI. Under Sub-Section 5, however, a draft of the rules proposed

to be made under Sub-Section 3 shall be laid before both Houses of the State Legislature and the rules shall not be made unless both Houses

approve of the draft either without modification or addition, or with modification or addition, to which both Houses agree. After such approval has

been obtained, the rules are required to be notified in the official gazette before they can take effect. It is clear, therefore, that where the State

Government purports to alter, add to or cancel any of the entries in Schedule VI, a definite procedure is laid down requiring the approval of the

Houses of the State Legislature followed by the publication of the rules in the official gazette. Turning now to Schedule VI, after setting out

numerous items--trades and industries--for the purpose of which a place is required to be licensed u/s 287, a residuary clause was enacted herein

to the following effect:

In general, any purpose or the doing in the course of any industrial process anything which in the opinion of the Commissioner is likely to be

dangerous to human life, or health or property or is likely to create or cause a nuisance.

It is the exercise of the power conferred by this residuary clause that in or about December 1959, the Commissioner made a declaration in respect

of 44 items of trade or industry which, in his opinion, required a licence, when such trade or industry was carried on in any premises in the city of

Madras. One of such item is tea and the purpose for which the premises may not be used, without a licence was stated as storing, packing,

pressing, cleansing, preparing or manufacturing by any process whatever.

It is common ground that this declaration adding to the items found in Schedule VI and calling upon persons using any premises for any of the

purposes of the trades or industries mentioned was never published. It was not even brought to the notice of the public by an ordinary publication

as distinguished from a publication in the official gazette. It is also common ground that ever since the passing of the City Municipal Act, 1919, this

is the first occasion when the Commissioner has exercised the power conferred upon him by the residuary clause in Schedule VI.

u/s 357(1) of the Act, a contravention of any provision of any of the sections or rules of this Act specified in the first column of Schedule VII is

made punishable and the person contravening it is liable to be punished with fine as laid down in Schedule VII. Schedule VII of the Act lists out the

various sections of the Act and the Sub-section or clause thereof, the contravention of which invites the penalty indicated in a column of that

schedule. A fine of Rs. 200 can be imposed on conviction for using a place for any of the purposes specified in Schedule VI without a licence and

contrary to licence. It is accordingly clear that the addition of any items to Schedule VI by the Commissioner in the exercise of his power under the

residuary clause has the effect of creating a new offence which is made punishable on conviction. It may also be mentioned that u/s 347(3) of the

Act, the State Government itself is not competent to alter, add to or cancel Schedule VII except by way of amendment of the Act.

Learned Counsel on both sides have covered a wide area of controversy, but in our opinion, the matter can be disposed of on the short point

that the exercise of the power by the Commissioner is not within the proper statutory limits. The foundation of the jurisdiction of the Commissioner

is his opinion that there is likelihood of danger to human life, or health or property or that nuisance is likely to be created or caused. We can

assume,--the language of the statute compels such assumption,--that the opinion is that formed by the Commissioner and not that which a Court

can say that he ought to have formed. The opinion is the result of his subjective satisfaction of the existence of matters sufficient to form it. It is not

the province of the Court to canvass the adequacy of the materials nor can it substitute its views for the view of the Commissioner. Even granting

so much, and giving full allowance to the amplitude of the words of the statute, it would not be proper to say that the Commissioner has the last

word on the subject, and that once an addition is made by him to the list, ostensibly on the ground of an apprehended danger to human life or

health or property or of an expected nuisance, the action would not be open to scrutiny of or to challenge in Court. The propriety of the act of the

Commissioner cannot be defended or justified merely on the ground that he has repeated parrot-wise the expression employed in the statute

namely, that in his opinion there is danger to human life or health or property or there is likelihood of nuisance. Two things are quite essential before

the Commissioner can reach a conclusion or record his opinion in any particular matter, necessitating any addition to the list. One is that there must

exist some facts which may lead to the inference of a likelihood of danger to human life or health or property or creation of nuisance. The second is

that the Commissioner should apply his mind to the facts and take an honest decision on those facts. It is of course not necessary that the

Commissioner should ex facie set out the facts and the reason which impelled him to take the decision. But when his act is called in question he

must be in a position to say that he did not act arbitrarily or in any unreasonable manner but that he took into account certain facts and

circumstances before forming the opinion. It must be remembered in this context that a licensing provision in a municipal enactment is a restriction

upon the person obliged to take out the licence in the matter of carrying on his trade, or business. In the generality of cases, licensing per se may be

treated as a reasonable restriction constitutionally permissible under Article 19(6) of the Constitution. But it is always open to the licensee either to

say that the provision compelling the licensee is an unreasonable restriction or that in any particular case, though the provision is reasonable, the

power has been abused and that it has resulted in an unreasonable restriction on his trade, or business. We are not prepared to say that in the

present case, the provision as such would amount to an unreasonable restriction of the carrying on of the business of the Petitioner. But if it were to

be found that the power has not been properly exercised, we can strike down the act of the Commissioner on the ground that an unreasonable

exercise of a reasonable restriction has infringed the fundamental rights of the Petitioner.

When is a power abused? This cannot be comprehensively or exhaustively answered by a mere catalogue of hypothetical instances. Patent

transgression of power is not strictly abuse in the exercise of power but is something ultra vires the power. Where a power is not genuinely, but

colorable, exercised, where the exercise of the power has a complacent look but an ulterior or oblique purpose, there is abuse or misuse. The

presence of mala fides is not an essential requirement to establish abuse of statutory power. An arbitrary act without due appreciation of the duty

imposed by the statute cannot be defended on the ground that it was done bona fide.

We must point out that the Commissioner has in one stroke and literally overnight swelled the entries in the list by adding numerous articles

requiring licences for particular purposes enumerated by him without any indication as to whether there is likelihood of danger to human life, health

or property or apprehension of nuisance. It is true that the words of the clause have been repeated. But it cannot be said from a perusal of the

order of the Commissioner whether storing, packing, pressing, cleansing, preparing or manufacturing by any process whatever of tea is dangerous

to human life or health or property or would create or cause nuisance. It cannot be that the acts for which licensing is required are such as to cause

danger to human life, or to cause or create nuisance. Nor has the Commissioner chosen, so far, to divulge what prompted him to resort to the

residuary power. It seems to us to be obvious that the Commissioner has not applied his mind to the question whether or not the acts for which

licensing is required are such as to call for the exercise of his emergency powers and merely added to the list in the belief that his powers in the

matter were unfettered. He overlooked what is really manifest that the power is coupled with a duty to be satisfied that the occasion prescribed by

the statute was present. The action of the Commissioner appears to have been more a mechanical than a real discharge of his statutory functions.

He no doubt observed the form but missed the essence of his duty. In this view of the matter the action of the Commissioner cannot be upheld.

The learned Advocate-General, appearing for the Petitioner, has invited our attention to Madras Act LVI of 1961, by which the City

Municipal Act, 1919, was amended. By Section 98 of the amending Act, certain amendments were made to Schedule VI. By this Act, the

residuary power conferred upon the Commissioner by the 1919 Act was taken away, and"" in particular certain additions were made to Schedule

VI. Apparently, in effecting the amendments to Schedule VI, the Government had before them the list of forty-four items added by the

Commissioner in 1959, and they proceeded to add to Schedule VI only a few of these forty-four items, such as, beedis, glass, ice. It is very

pertinent to notice that most of the items so added by the Commissioner were not, at the time the amendment of Schedule VI was undertaken,

included in that schedule. Tea was certainly left out. The learned Advocate-General relies upon this circumstance for two reasons. Firstly, he claims

that when the Legislature purported to revise the entire list contained in Schedule VI, it would be proper to infer that they impliedly repealed the list

as prepared by the Commissioner. We are exceedingly doubtful whether this argument can be accepted as valid. It may be that the Legislature

intended to examine the several trades and industries which might be regarded as requiring a licence for being carried on in any place within the

limits of the municipality. But factually, the schedule, as it stood previously, was not scrapped and replaced by another. By the provisions of this

Amending Act, a few more items were added to the schedule and a few of the original items were amended. The doctrine of implied repeal cannot,

therefore, serve the purpose of this argument. But the learned Advocate-General argues that, at any rate, to the extent to which the Government

examined the matter, they would clearly appear to have been of the opinion that several of the items previously added by the Commissioner did not

warrant inclusion in'' the schedule. The weight that one could attach to the opinion of the Commissioner has been, according to the arguments,

considerably lessened by the fact that the Government virtually ignored the additions to the list in Schedule VI made by the Commissioner. If,

therefore, the Legislature did not consider those items as fit matters for inclusion in Schedule VI, it is urged, the validity of the opinion of the

Commissioner that those trades involved any detriment to the health of the general public can hardly be supported. This argument is reinforced by

the further feature that the residuary power which had been given to the Commissioner under the unamended Act was taken away altogether. The

validity of the exercise of the Commissioner''s power, under the residuary clause, has to be considered as on the date when the Commissioner

made the declaration independent of the subsequent Legislative Act. The question is not what the Legislature means by leaving out Tea from the list

of schedule in the recent Act. The question is whether the power entrusted to the Commissioner was valid in law, and if so, was it properly

exercised.

While we agree with Mr. Chengalvaroyan, for the Respondent, that Schedule VI cannot, in the nature of things, be exhaustive for all time and

that new trades and industries may develop which may require adequate control in the interests of the general public and that the reserve power

given to the Commissioner was perhaps necessary, we are loath to agree that a power, the exercise of which definitely involves a restriction upon

the right to carry on a business, may be rested solely on the unfettered discretion of the Commissioner. We have pointed out that even the power

of the Government to alter, amend or add to the entries in Schedule VI is controlled by the statute by the requirement of prior approval of both

Houses of the Legislature and publication in the official gazette. The power that is purported to be conferred upon the Commissioner by the

residuary Clause (such power has since been taken away by Act LVI of 1961) is, in marked contrast, apparently an absolute power subject to no

limitations or safeguards. Whatever might be the position with regard to the validity of the conferment of such power upon the executive authority

of the Corporation prior to the Constitution coming into force, the validity of the conferment of that power has to be examined in the light of the

constitutional safeguards. We have also pointed out that the corollary to the exercise of such power by the Commissioner involves the creation of a

penal offence punishable by a Court of law. Undoubtedly, this is a legislative power and the question would naturally arise whether conferment of

legislative authority is justified in the circumstances. As the learned Advocate-General argues, even conceding the necessity for enlarging the scope

of Schedule VI to meet the coming into existence of new trades and industries, a reasonable construction of that power would be that that power

should be exercised only on emergent occasions.

The learned Advocate-General has referred to Ram Krishna Dalmia Vs. Shri Justice S.R. Tendolkar and Others, . In that case, the question

arose whether the power conferred upon the appropriate Government to apply the Commissions of Enquiry Act by notification went beyond the

Act and was discriminatory and violative of the equal protection of laws clause. It was contended that the Government had arbitrarily applied the

Act to the Petitioners and their companies and issued notifications concerning them, but left out others from its operation. Their Lordships of the

Supreme Court pointed out that though the notifications primarily affected only the Petitioners, it could not be overlooked that Parliament, having

left the selective application of the Act to the discretion of the appropriate Government, the latter must of necessity take its decision on the

materials available to it and the opinion it forms thereon. They observe at page 305:

It (the appropriate Government) is the best judge of the reliability of its source of information and if it acts in good faith on the materials brought to

its notice and honestly comes to the conclusion that the act and conduct of the Petitioners and the affairs of their companies constitute a definite

matter of public importance calling for an inquiry with a view to devise measures for preventing recurrence of such evil, this Court, not being in

possession of all facts will, we apprehend, be slow to adjudge the executive action to be bad and illegal. We are not unmindful of the fact that a

very wide discretionary power has been conferred on the Government, and, indeed, the contemplation that such wide powers in the hands of

executive may in some cases be misused or abused and turned into an engine of oppression has caused considerable anxiety in our mind.

Nevertheless, the bare possibility that the powers may be misused or abused cannot per se induce the Court to deny the existence of the powers.

It cannot be overlooked that Parliament has confided this discretion, not to any petty official but to the appropriate Government itself to take action

in conformity with the policy and principle laid down in the Act. As this Court has said in Matajog Dobey Vs. H.C. Bhari, ''A discretionary power

is not necessarily a discriminatory power and that abuse of power is not easily assumed where the discretion is vested in the Government and not in

a minor official.''

The learned Advocate-General points out that a discretionary power vested in the Commissioner transcends all limits in the present case and that

while such a power vested in the Government might perhaps be protected, the power vested in the executive authority of the Corporation stands

on a different footing altogether. We do not wish to express any opinion on the question of the constitutional propriety of a power, which, at the

first blush, appears to be very wide and uncontrolled. It is, however, also possible to take the view that conditions prescribed, danger to human

life, etc., or possibility of creation of nuisance, are by themselves sufficient and reasonable criteria for the guidance of the authority vested with the

exercise of the power.

A Full Bench decision of the Kerala High Court in Harrisons & Crosfield Ltd., Quilon v. Municipal Council, Kottayam ILR (1958) Ker 72

(F.B.), has been referred to. In that case, the challenge was against the licence fees levied for the storage of rubber and tea in certain premises

within the limits of the municipality. The demand for licence and licence fees was made on the basis of a notification published by the municipality in

the Gazette under the provisions of Section 261 of the Travancore District Municipalities Act. That provision enabled the municipal council to

publish a notification in the Government Gazette making it compulsory for a licence to be taken for any one or more of the purposes specified in

Schedule III of that Act, which corresponds to Schedule VI of the Madras Act. One of the points that arose there was whether in respect of the

same premises where both tea and rubber were stored, two licence fees could be demanded. Another contention was that the storage of tea and

the storage of rubber were not specified in Schedule III. The learned Judges relied upon the residuary entry to Schedule III of that Act which was

in the same terms as the residuary entry in Schedule VI in the Madras Act and upheld the validity of the demand for licence, holding that it was for

the executive authority to decide whether the connected purpose was one likely to be dangerous to human life or health, etc. The relevant section

of the Travancore Act did not leave the matter to the final determination of the executive authority. u/s 261 of that Act, it was the municipal council

that took a decision and was enjoined to publish the matter by notification in the Government Gazette. This decision does not meet the points that

have been raised in the present case.

In our opinion, the exercise of the power by the Commissioner in the instant case is not valid. We do not express any opinion on the other

questions raised.

The petitions succeed. The rule nisi is made absolute. The Petitioner will be entitled to his costs.