Case Study: Atlas Cycle Industries Ltd. v. State of Haryana, (1979) | Delegated Legislation

The case analyzed by the apex court determined whether the laying requirement of Section 3(6) of the Essential Commodities Act, 1955, is mandatory or directory, based on the legislature's intent.

Case Title: Atlas Cycle Industries Ltd. v. State of Haryana

Court: Supreme Court of India

Citation: AIR 1979 SC 1149; (1979) 2 SCC 196

Judges: Justice S. Murtaza Fazal Ali, Justice Jaswant Singh & Justice P.S. Kailasam

Date of Judgment: October 4, 1978

Facts

1. Atlas Cycle Industries Ltd. and others were prosecuted for acquiring a controlled commodity, namely, black plain iron sheets at a higher price than the maximum statutory price fixed by the Iron and Steel Controller under the Iron and Steel (Control) Order, 1956 (hereinafter as “Control Order”).
2. During the trial, the appellants argued that the notification fixing maximum selling prices was invalid because it was not placed before Parliament as required under Section 3(6) of the Essential Commodities Act, 1955 (hereinafter as 1955 Act).
3. The trial court dismissed this argument, holding that laying the notification before Parliament could be proven through records and it cannot be held that cognizance was taken based on an invalid report.
4. In the writ petition before the High Court, the appellants again argued that non-compliance with the laying requirement renders the control order and notification invalid.
5. The High Court dismissed the writ petition, holding the laying requirement under Section 3(6) as directory and non-mandatory.
6. Hence, the appellants have approached the apex court.

Issues

• Whether non-laying of the notification fixing maximum selling prices of iron and steel before Parliament render the notification invalid and void?
• Whether the laying requirement under Section 3(6) of the 1955 Act is mandatory or directory in nature?
• Does Section 3(6) specify any period for laying or consequences for non-compliance, that shows the intention of the legislature?

Laws Applied

• Sections 3(6), 7 and 10 of the Essential Commodities Act, 1955
• Articles 226 & 227 of the Indian Constitution
• Sections 251A & 288 Cr.P.C
• Section 120-B of the Indian Penal Code 

Arguments Before Court

• The appellants contended that the control order and notification fixing maximum selling prices are invalid as they were not laid before the Houses of Parliament within a reasonable time as required under Section 3(6) of the 1955 Act.
• Further, the non-compliance with the laying requirement in Section 3(6) renders the control order and notification void and not having the force of law. Section 3(6) has to be interpreted as a mandatory requirement. Also, prosecuting the appellants based on an invalid notification is untenable and the charges against them should be dropped.
• The respondent argued that the laying requirement under Section 3(6) is directory and not mandatory. Non-compliance does not invalidate the notification.
• Further, Section 3(6) does not provide for any consequences for not laying the order/notification. This shows it is a procedural direction that is a directory. The notification derives validity from the Control Order which is validity passed. Being a piece of delegated legislation under the order, separate laying is not required.
• The respondent also contended that non-laying does not prohibit the making of the order/notification or affect its operation. So, the requirement is a directory.

Judgment

After laying down the relevant provisions about the case at hand, the apex court noted that the notification in question was issued under sub-clause (1) of Clause 15 of the Control Order.

While deliberating over sub-section (6) of Section 3 of the 1955 Act, the court mentioned that the term “shall” is devoid of absolute decisiveness in legal interpretation. The court must decipher the true legislative intent by considering the entire statute including its scope, nature, and design.

The determination of the legislative meaning necessitates a comprehensive analysis to ascertain the real intention of the legislature. The conclusive factor lies in examining the statute’s overall context, requiring a meticulous examination of its various components. In essence, the court is mandated to go beyond the surface language and delve into the profound understanding of the provision to make sure that the interpretation of such provision is aligned with the legislative objectives. Therefore, the mere use of the term “shall” does not decisively make a provision mandatory.

Relying on State of U.P. v. Manbodhan Lal Srivastava, AIR 1957 SC 912 and State of U.P. v. Babu Ram Upadhya, AIR 1961 SC 751, the court stated that the real intention of the legislature can be determined by considering the whole scope of the statue along with its nature and design. Further, the court also observed that the absence of consequences for non-compliance and inconvenience caused by invalidating government action makes a provision directory.

Therefore, to deem a provision as a directory, two factors are crucial – firstly, the lack of contingency for non-compliance, and secondly, the significant inconvenience and prejudice to the public if the government’s action is invalidated due to the failure to adhere to that provision.

The court discussed parliamentary supervision and control as the rationale behind laying delegated legislation. By relying upon Hukam Chand v. Union of India, AIR 1972 SC 2427, the court outlines three kinds of laying clauses based on degree of control, namely, simple laying, negative resolution, and affirmative resolution. The type of laying adopted would depend on the legislative intention and specific statute.

Analysing Section 3(6), the Court found that it does not provide for laying orders subject to any parliamentary resolution or consequences for non-compliance. It noted that the provision amounts to simple laying after making the order, with no further procedure or prohibition on making orders without parliamentary approval.

The apex court also observed that Jan Mohammad Noor Mohammad Begham v. State of Gujarat, AIR 1966 SC 385, where it was held that mere failure to comply with the laying clause does not affect the validity of rules and therefore cannot be regarded as mandatory.

The court relied on various other rulings to reaffirm that the provisions directing laying before the legislature are generally directory unless made a pre-condition for operation. The court distinguished its ruling in Narendra Kumar v. Union of India, AIR 1960 SC 430. It highlighted that Section 3(6) does not nullify notifications for non-laying, unlike binding consequences in other cases.

The Court distinguished its ruling in the Narendra Kumar case. It highlighted Section 3(6) does not nullify notifications for non-laying, unlike binding consequences in other cases. The absence of a requirement for laying does not prohibit the Government from issuing orders. The Court clarified that if the legislature intended laying to be mandatory, it would have employed explicit negative mandates.

In essence, the Court implied that the legislative intent did not impose an obligatory laying down of orders, as evidenced by the absence of unequivocal directives signalling such a mandate. Therefore, the Court’s interpretation underscores that the government retains the authority to issue orders even in the absence of a mandatory laying requirement, as no clear negative mandates from the legislature exist to restrict his discretion.

The directory nature of sub-section (6) of Section 5, in line with its legislative intent, envisions a straightforward laying process. The Court, considering language, background, and consequences, concluded that non-compliance does not automatically invalidate notifications or orders under delegation.

The Court emphasized that the simplicity envisaged in the legislative framework does not warrant strict consequences for non-compliance, highlighting a pragmatic approach. In essence, while the provisions mentioned above outline a straightforward laying process, the Court reasoned that deviation from it should not lead to automatic invalidation of delegated notifications or orders, considering the broader context and consequences.

Conclusion

In a nutshell, the court observed that the legislature never had the intention to make the laying clause mandatory. After thorough interpretation, the apex court determined that the laying requirement as enshrined under Section 3(6) of the 1955 Act is directory and non-compliance does not automatically invalidate any government action that aligns with the general legal principles. Consequently, the failure to lay the price notification does not impact its enforceability, which affirmed the Court’s stance on the directory nature of the provision and its application to the government's actions.