Fatehchand Himmatlal & Others v. State of Maharashtra Etc.

PETITIONER:
FATEHCHAND HIMMATLAL & OTHERS
Vs.
RESPONDENT:
STATE OF MAHARASHTRA ETC.
DATE OF JUDGMENT28/01/1977
BENCH:
KRISHNAIYER, V.R.
RAY, A.N. (CJ)
BEG, M. HAMEEDULLAH
BHAGWATI, P.N.
FAZALALI, SYED MURTAZA
CITATION:
1977 AIR 1825 1977 SCR (2) 828
1977 SCC (2) 670

ACT

Constitution of India-Article 301-304(b)--Freedom of

trade and commerce-Reasonable restrictions.

Article 252, 254(2), Seventh Schedule List 1, Entry 52, 97,

List II Entry 30

Doctrine of occupied field--State making a law on a

different topic but covering in part the same area--Wheth-

er irreconcilable conflicts necessary-Whether incidental

provisions can be struck down--Gold Control Act 1968--Con-

flict between a Central law and a State law--Effect of the

assent of the President.

Interpretation of legislative entries in the Seventh

Schedule, whether broad and liberal construction to be

adopted.--Seventh Schedule List II Entry 30, meaning of

money lending and money lenders and relief of agricul-

tural indebtedness--Whether impugned Act is covered by this

Entry.

Maharashtra Debt Relief Act 1976--Constitutional

validity of--Whether the State legislature has legislative

competence--Whether violative of Article 304(b)--Whether

the freedom of trade is absolute--Whether money-lending to

the little peasants, landless tiller, bonded labour, the

pavement tenant and the slum dweller a trade--Whether every

systematic profit oriented activity, however, sinister

suppresive or socially diabolic can be said to be

trade--Whether the test of reasonableness is to be applied

in vacuum or in the context of life’s realities.

Perspective of poverty jurisprudence--Whether differ-

ent from the canons of traditional Anglo-Indian jurispru-

dence--Whether while testing constitutionality the princi-

ples of developmental jurisprudence must come into

play--Procedural unreasonableness--Whether the burden of

proving debtors’ financial position on the lender--Issuance

of certificate in favour of debtor having presumptive value

without hearing the creditor--Absence of appeal---Obligation

of the creditor to move the machinery--Deposit of the orna-

ments before the proceedings can commence--Whether reason-

able--Adoption of summary proceedings, whether valid.

HEADNOTE

The Maharashtra Legislature passed the Maharashtra Debt

Relief Act. 1976. By the said Act the existing debts of some

classes of some indigents have been liquidated. The Act is

a temporary measure. The validity of the said Act was

challenged in the present writ petition and appeals on the

following grounds:

(1) Money lending was a trade covered by

Article 304 of the Constitution. The restric-

tion both substantive and procedural imposed

by the impugned Act are not reasonable within

the meaning of Article 304(b).

(2) The State legislature has no legislative

competence to enact the statute.

(3) So far as the Gold ornaments are

concerned the field is occupied by the Gold

Control Act 1968 passed by the Parliament.

Therefore, inasmuch as the said Act deals with

Gold Ornaments it is beyond the legislative

competence.

829

The respondents contended that:

(1) The money lending in the present case

was not a trade.

(2) Even if it was trade the restrictions

imposed by the statute are reasonable.

(3) The State Legislature is competent to

enact the impugned Act.

(4) The doctrine of occupied field has no

application.

(5) The Gold Control Act and the impugned

Act deal with two completely different situa-

tions.

(6) In any case, there is no inconsisten-

cy between the two Acts.

Upholding the validity of the Act,

HELD: (1) It is cruel legal like to legitimate as

trade this age and bleeding business whereby the little

peasant, the landless tiller, the bonded labour, the pave-

ment tenant and the slum dweller born and buried during the

Raj and the Republic in chili penury. [836 B-C]

Atiabari Tea Co. (1961) 1 SCR 809, 843, referred to.

(2) The topics of legislation listed in the 7th Schedule

must receive a large liberal and realistic interretation.

[836 E]

(3) The freedom while it is wide is not absolute. Every

systematic, profit oriented activity, however sinster,

suppressive or socially diabole, cannot ipso facto exalt

itself into a trade. Dealings of Banks and similar institu-

tions having some nexus with trade, actual or potential, may

itself be trade or intercourse. All modern commercial credit

and financial dealings amount 10 trade. However, village

based age old, feudal pattern of money lending to those

below the subsistence level to the village artisan, the

bonded labourer, the marginal tiller and the broken farmer,

who borrows and repays in perpetual labour, hereditary

service, periodical delivery of grain and unvouchered usuri-

ous interest is a countryside incubus. Such debts ever

swell. never shrink, such captive debtor never become quits.

Such countryside creditors never get off the backs of the

victims. [840 D, 841 F-H]

Ibrahim (1970) 3 SCR 498, referred to.

Automobile Transport (1963) 1 SCR 491, followed.

(4) The economic literature, official and other, on

agricultural and working class indebtedness is escalating

and disturbing. Indeed the money lender is an oppressive

component of the scheme. [844 G]

(5) The test of reasonableness is not to be applied in

vacuum but in the contest of life’s realities. The Legis-

lature was confronted with the cruel species of money-lend-

ers. The life of the law is not noisis but actual experi-

ence.The perspective of poverty jurisprudence is radically

different from the canons and values of traditional Anglo-

Indian Jurisprudence. The subject matter of the impugned

legislation is indebtedness, the beneficiaries are petty

farmers,manual workers and allied categories steeped in debt

and bonded to the money lending tribe. So, in passing on

its constitutionality, the principles of Developmental

Jurisprudence must come into play. [846B, 848G-H]

(6) The exemption granted by the statute to credit

institutions and banks is reasonable because liabilities due

to Government, local authorities and other credit institu-

tions are not tainted with exploitation of the debtor.

Likewise, debts due to banking companies do not ordinary

suffer from over-reaching, unscrupulous or harsh treatment.

Financial institutions have until recently treated the

village and urban worker and petty farmer as untouchables.

[849 E-H]

(7) Maybe some stray money-lenders may be good souls but

the Legislature cannot easily make meticulous exceptions and

has to proceed on broad categorisations, not singular indi-

vidualisations. The creditors have not placed material

before the Court to contradict the presumption which must be

made

830

in favour of the legislative judgment. Since nice dis-

tinctions-to suit every kindly creditor is beyond the law-

making process, the court has to uphold the grouping as

reasonable and the restrictions as justified in the circum-

stances of the case. [850 C-E]

Australian Bank Nationalisation Case: Commonwealth of

Australia v. Bank of New South Wales: 1950 A.C. 235, 311,

approved.

(8) The Court negatived the contention of the petitioner

that there was procedural unreasonableness in the Act. The

section which imposes the obligation on the money lender to

prove the debtor’s financial position, the issuance of a

certificate in favour of the debtor having a presumptive

value without hearing the creditor, the absence of appeal,

obligation of the creditor to move the machinery and the

period of 7 days and the deposit of the ornaments before the

proceedings can commence are all reasonable in the circum-

stances of the case. Viewed in the abstract, those griev-

ances look genuine but when we get down to the reality,

nothing so exists in the so-called provision. The provision

requiring the creditor to move and not the debtor is reason-

able because between the two. the money-lender .,is sure to

be far shrewder and otherwise more capable of initiating

proceedings. To cast that obligation on the debtor when in

bulk of cases he is the village artisan, landless labourer

or industrial worker is to deny relief in effect while

bestowing it in the book. There is nothing objection-

able in the debtor seeking a certificate of qualification

from the small officer of the area. The officer or the

Government servant possesses familiarity with the wherewith-

al and the whereabouts of the persons. Hearing the creditor

before the certificate is issued would merely prolong and

puzzle the proceedings. The creditor does not suffer because

the certificate that the applicant is a debtor raises only a

rebuttable presumption and it is idle to argue that the

creditor has no means of disproving .the income or assets of

his debtor. Ordinarily, the money-lender and the petty

borrower live in and around the same neighbourhood. As

proforma of the certificate to be issued needs mentioning

several particulars these have to be filled by the certify-

ing officer who has, therefore. to make the necessary en-

quiries from and about the debtor. Authorised Officer is

one who exercises quasi-judicial powers even otherwise on

the Revenue side. The adoption of the procedure under the

Maharashtra Land Revenue Code is a fair safeguard although

it is a summary procedure. To equate summary with arbitrary

is contrary to common experience. The obligation for the

production of the pledged article by the creditor as a

preliminary to the institution of the proceedings is also a

just measure so that when a decision is reached the article

may be returned to the debtor in the event of the verdict

going in his favour. Where the subject matter is substan-

tial and fraught with serious consequences and complicated

quest.ions are litigatively terminated summarily, without a

second look at the findings by an appellate body it may be

that unfairness is inscribed on the face of the law but

where little men with petty debts, legally illiterate and

otherwise handicapped are pitted against the money-lend-

ers. absence about appeal cannot invalidate the statute.

Where the enquiry is a travesty of justice or violation of

provisions, where the finding is a perversity of ’adjudica-

tion or fraud on power the High Court is not powerless to

grant remedy even after the recent package of constitutional

amendments. [852 A-H, 853 A-H, 854 A-B]

(9) Entry 30 in List II in the 7th Schedule is money

lending and money lenders; relief of agricultural indebted-

ness. If common sense and common English are components

of Constitutional construction relief against loans by

scaling down, discharging, reducing interest and principal,

and staying the realisation of debts will among other things

fall squarely within the topic. [854 F-H]

(10) The argument that the subject matter of the present

legislation would fall under the residuary power under Entry

97 of List I is negatived. [855 B]

(11) Where Parliament has made a law under Entry 52 of

List I and in the course of it framed incidental provisions

affecting gold loans and money lending business involving

gold ornaments. The State making a law on a different

topic but covering in part the same area of gold loans must

not go into irreconcilable conflicts. The doctrine of

occupied field does not totally

831

deprive the State Legislature from making any law inciden-

tally referable to gold. In the event of a plain conflict

the State Law must step down unless Article 252(2)’can be

invoked. In that case the State law would still prevail if

the assent of the President has been obtained. There is no

conflict between the Gold Control Act and the impugned Act.

Secondly, the subjects of both the legislations can be

traced to the Concurrent List and Article 254(2) validates

within the State the operation of the impugned Act since the

assent of the President has been Obtained. [858 B-D]

JUDGMENT

CIVIL APPELLATE JURISDICTION: Civil Appeals No. 632 to

646 of 1976.

(From the Judgment and Order dated the 22/23/26/27th of

April, 1976 of the Bombay High Court in S.C.A. Nos. 997,

2128, 2773, 2077, 2065, 2045, 1172, 1193, 1195, 1196, 1199,

1200, 1210/ 75 and 2050 & 2071 of 1976) and

CIVIL APPEALS NOS. 655 & 1286 of 1976

(From the Judgment and Order dated the 14-5-1976, 23rd,

24th, 27th April, 1976 of the Bombay High Court in S.C.A.

No. 2985 of 1976 and Misc. Petition 4 of 1976) and

WRIT PETITIONS NOS. 98, 102-107, 110-113 & 115-120 1976

Under article 32 of the Constitution of India)

B. Sen, (in CA. 632) Y.S. Chitale, (in CA. 633) Sachin

Chowdhary, (in CA. 634) F.S. Nariman and R.N. Bennerjee,

Adv. (in CA. 637) H.P. Shah, (in CAs. 632-638) A.J. Rana,

(in CA. 635) P.H. Parekh & Miss Manju Jetly, with them, for

the appellants in CAs. 632-637

Vallabhadas Mohta, Sardar Bahadur Saharya & Vishnu

Bahadur Saharya, for the appellants in CAs. 638-644 & 644.

J.L. Nain, A.J. Rana, Janendra Lal, B.R. Agarwala and

Gagras & Co., with him for the appellants in CAs 645 & 646

except for appellant No. 52 in CA. 646

F.S. Nariman, R.N. Banerjee, J.B. Dadachanji " K.J.

John with him for the appellant No. 62 in 646/76

Madhukar Soochak, K. Rajendra Chowdhary, K.A. Shah and

(Mrs.) Veena Devi Khanna, Advocates for the Appellant in

CA. 1286/76

S.K. Dholakia, V.J. Kankaria & R.C. Bhatia, for the

petitioners in all the Writ Petitions.

Niren De, Attorney Genl. (only in CAs. 632, 638 and W.P.

No. 98/76 1. W. Adik, Adv. Genl. of Maharashtra, M.N. Shroff

for the Respondents in the appeals and Writ Petitions

M.P. Chandrakantral Urs and N. Nettar, for the interven-

er in CA. 632/76 (State of Karnataka)

832

K. Parasaran, Adv. Genl. Tamil Nadu. A. V. Rangam,

V. Sathiadev and (Miss) A. Subhashini, in the for the inter-

vener in CA. 632 (State of Tamil Nadu,

K. Rajendra Chowdhary, for the interveners/Applicants A

Ratnaabhapati and Jayalakshimi & Co.

M/s. Jeshtmal, K.R. Chowdhary, Mrs. Veena Devi Khanna,

for the intervener/applicant N. Dhanraj.

B.A. Desai, S.C. Agarwala and V.J. Francis, for Re-

spondents 4 & 5 in CA. 1286/76.

The Judgment of the Court was delivered by

KRISHNA IYER, J. The distance between societal reali-

ties and constitutional dilettantism often makes for the

dillemma of statutory validity and the arguments addressed

in the present batch of certificated appeals and writ

petitions evidence this forensic quandary. Likewise, the

proximity between rural-cum-clum economics and sociaL relief

legislation makes for veering away from verbal obsessions in

legal construction. A constitution is the documentation of

the rounding faiths of a nation and the fundamental direc-

tions for their fulfilment. So much so, an organic, not

pedantic, approach to interpretation, must guide the

judicial process. The healing art of harmonious construc-

tion, not the tempting game of hair-splitting, promotes the

rhythm of the rule of law. These prologuic observations

made. we proceed to deal with the common subject matter of

the appeals and the writ petitions.

A bunch of counsel, led by Shri Nariman and seconded by

Shri B. Sen, have lashed out against the vires of the

Maharashtra Debt Relief Act, 1976 (for short, the Debt

Act). The former has focused on the fatal flaw in the Act

based on Art. 301 of the Constitution and the latter has

concentrated his fire on the incompetency of the State

Legislature to enact the Debt Act. A plurality of submis-

sions by a procession of lawyers has followed, although

the principal points have been comprehensively covered by

Shri Nariman and Shri B. Sen. To encore is not to augment,

and yet, some counsel, who had not much to supplement,

claimed the right to. be heard and exercised it ad libiem,

essaying what had already been forcefully urged and forget-

ting that a fine, fresh presentation of a case is apt to be

staled by a second version of it and pejorated by a third

repetition. While in constitutional issues of great moment

this Court is reluctant to ratio oral submission it is

important, by comity of the Bench and the Bar, to conserve

judicial time in the name of public justice so that internal

allocations avoiding over-lapping may be organised among

many counsel who may appear in several appeals, substantial-

ly dealing with the same points. A happy husbandry of advo-

cacy is helpful for judge and lawyer alike and to streamline

forensic business is the joint responsibility of both the

limbs of the institution of justice.

Back to the beginning. Art. 301 of the Constitution man-

dates

833

"301. Freedom of trade commerce and inter-

course---

Subject to the other provisions of this

Part, trade, commerce and intercourse through-

out the territory of India shall be free."

We may also read the cognate provision viz.,

Art. 304 (b):

"304 (b). Restrictions on trade, commerce

and among States.-

Notwithstanding anything in Article 301

or Article 303, the Legislature of a State may

by law--

X X X X

(b) impose such reasonable restrictions on the

freedom of trade, commerce or intercourse with

or within that State as may be required in

the public interest:

Provided that no Bill or amendment for

the purposes of clause (b) shall be introduced

or moved in the Legislature of a State without

the previous sanction of the President."

The unmincing submission of Shri Nariman is that money-

ending is very much a trade, that the Debt Act deals drasti-

cally with moneylenders in defiance of Art. 301 and, since

the manacles on moneylenders and money-lending are unreason-

ably harsh and callously indiscriminate, the ’freedom" which

belongs constitutionally to professional money-lenders is

breached by the ’statutory liquidation of their loans. Nor

can the invalidatory consequence of this violation be obvi-

ated by Art. 304(b). This latter provision salvages stat-

utes which contravene freedom of trade, commerce and inter-

course only if they possess the virtues of reasonableness

and public interest. The injustice of wiping out the

debts of marginal farmers, rural artisans, rural labour-

ers and workers as provided in the scheme of the Act was

anathematised by Shri Nariman as an unwarrantedly unrea-

sonable annihilation of the trade and ’its capital.

We will deal with this contention presently but we may

merely mention for later discussion another short, lethal

objection to a part of the law, put forward by counsel. He

stated that there was legislative incompetency for the State

Legislature because it had forfeited the power to legislate

on money-lending where gold loans were involved, since

Parliament had occupied the field under Entry 52 of List I

by enacting the Gold Control Act, 1968, and had thereby

elbowed out the State Legislature from that field.

Considerable eclectic study of English, Australian and

American cases was displayed in the course of arguments,

reverberating in Indian precedents dealing with Part XIII of

the Constitution. Of course, we will refer to them with

pertinent brevity, although we must administer to our-

selves the caveat that the same words used in constitutional

enactments of various nations may bear different connota-

tions

834

and when Courts are called upon to interpret them they must

acclimatize the expressions to the particular conditions

prevailing in the country concerned. Different lands and

life-styles, different value systems and economic solu-

tions, different social milieus and thought-ways, different

subject matters and human categories--these vital variables

influence statutory projects and interpretations, although

lexicographic aids and understandings in alien jurisdictions

may also be looked into for light, but not beyond that.

The constitutional guarantee of the commercial mobility and

unity of the country in Art. 301 is sought to be made the

major sanctuary of ’money-lenders’ whose ’freedom’ to lend

and thereby end the lendee is, by legislative judgment,

hand-cuffed. Before unravelling the provisions of the Debt

Act, we must first found ourselves on the quintessentials of

Art. 301 and the juristic and economic basics implied in

that provision. We are not construing a petrified legal

parchment but reading the luscent lines of a human text with

a national mission. We must never forget that the life of

the suprema lex is nourished by the social setting, that

juridical abstractions and theoretical conceptions may be

fascinating forensics but jejune jurisprudence, if the raw

Indian realities are slurred over. We are expounding the

Constitution of a nation whose people hunger for a full life

for each, and therefore, a perception of the signature of

social justice writ on it is imperative. ’Nothing is more

certain in modern society’, declared the American Supreme

Court at mid-century, ’than the principle that there are

not absolutes’. Legal Einsteinism guides the Court, not

doctrinal absolutes, as we will presently discuss.

Since Art. 301 has loomed large in the debate at the

bar, it is pertinent to ask what is its object and design.

For, if the impugned legislation does violate Art. 301, it

must perish unless rescued by Art. 304(b).

This Court, in Atiabari Tea Co. C), tracing the roots of

Art. 301, observed:

"Let us first recall the political and

constitutional background of Part X/II. It is

a matter of common knowledge that, before the

Constitution was adopted, nearly two-thirds of

the territory of India was subject to British

Rule and was then known as British India,

while the remaining part of the territory of

India was governed by Indian Princes and it

consisted of several Indian States. A large

number of these States claimed sovereign

rights within the limitations imposed by the

paramount power in that behalf, as they pur-

ported to exercise their legislative power of

imposing taxes in respect of trade and com-

merce which inevitably led to the erection of

customs barriers between themselves and the

rest of India. In the matter of such barriers

British India was governed by the provisions

of s. 297 of the Constitution Act, 1935. To

the provisions of this section we will have

occasion later to

(1) [1961] 1 S.C.R. 809, 843.

835

refer during the course of this judgment.

Thus, prior to 1950 the flow of trade and

commerce was impeded at several points which

constituted the boundaries of Indian States.

After India attained political freedom in 1947

and before the Constitution was adopted the

historical process of the merger and the

integration of the several Indian States with

the rest of the country was speedily accom-

plished with the result that when the Consti-

tution was first passed the territories of

India consisted of Part A States which broadly

stated represented the Provinces in British

India, and Part B States which were made up

of Indian States. This merger or integra-

tion of Indian States with the Union of India

was preceded by the merger and consolidation

of some of the States inter se between them-

selves. It is with the knowledge of the

trade barriers which had been raised by the

Indian States in exercise of their legislative

powers that the Constitution-makers framed the

Articles in Part XIII. "The main object of

Art. 301 obviously was to allow the free flow

of the stream of trade, commerce and inter-

course throughout the territory of India."

It is fair to realise that Art. 301 springs from Indian

history and hope. We may recall the political and consti-

tutional background of Part XIII--the divided days of Brit-

ish rule, the united aspirations of Independent India, the

parochial pressures and regional pulls leading inevitably to

the erection of fiscal barriers and hampering of economic

oneness. The integration of India was not merely a histor-

ical process but a political, social and economic necessity.

Gajendragadkar J., in Atiabari Tea Co. (supra) pointed out:

"In drafting the relevant Articles of Part

XIII the makers of the Constitution were fully

conscious that economic unity was absolutely

essential for the stablity and progress of the

federal polity which had been adopted by the

Constitution for the governance of the coun-

try. Political freedom which had been won,

and political unity which had been accom-

plished by the Constitution, had to be

sustained and strengthened by the bond of

economic unity." (p. 843)

"Free movement and exchange of goods

throughout the territory of India is essential

for the economy of the nation and for sustain-

ing and improving living standards of the

country. The provision contained in Art. 301

guaranteeing the freedom of trade, commerce

and intercourse is not a declaration of a

mere platitude, or the expression of a pious

hope of a declaratory character; it is not

also a mere statement of a directive principle

of State policy; it embodies and enshrines a

principle of paramount importance that the

economic unity of the country will provide the

main sustaining force for the stability and

progress of the political and cultural unity

of the country." (p. 844)

836

Such being the perspective, the judicial sights must be

set high’ while reading Article 301. Social solidarity is a

human reality, not mere constitutional piety, and a non-

exploitative economic order outlined in Art. 38, is the

bedrock of a contented and united society. Social disorder

is the bete noire of commerce and trade. All this is non-

controversial ground but the learned Attorney General con-

tests the very applicability of Art. 301 to money-lenders

and moneylending visa vis the humble beneficiaries of the

statute, viz., the marginal farmers, rural artisans, rural

labourers, workers and small farmers. It is a cruel legal

joke to legitimate as trade this age-old bleeding business

of agrestic India whereby the little peasant. the landless

tiller, the bonded labourer, the pavement tenant and the

slum dweller have been born and buried during the Raj and

the Republic in chill penury. Is trade in human bondage to

be dignified legally, betraying the proletarian generation?

For whom do the constitutional bells of the socialist Repub-

lic toll? Therefore, argues the Attorney General, it is

juristic blasphemy to call ’unscrupulous moneylending’--a

rural spectre which stalks Maharashtra--a trade at all.

These chronic operations, socially obnoxious and economical-

ly inhuman, cannot be recognised as licit and wear the

armour of Art. 301, for this preliminary reason. Not all

systematic economic activity is trade. Sinister, socially

shocking ones, are not.

Shri Nariman has counter-asserted, backed by a profusion

of precedents, that money-lending in the modern complexities

of business life is a lubricant for the wheels of commerce

and has been treated as trade. It is the life-blood of

business. It needs no argument to say that the topics of

legislation, listed in the Seventh Schedule, must receive

a large and liberal, yet realistic, interpretation. So

understood, the expression ’trade’ in its wide import,

covers not merely ’buying and selling of goods’ but trading

facilities like advances, overdrafts, mercantile documents,

trading intelligence, telegraphic and telephonic communica-

tions, banking and insurance and many other sophisticated

operations connected with and essential for commerce and

intercourse. Even travel facilities in certain circum-

stances have a nexus with trade and commerce and are part of

them. Learned counsel referred to Ibrahim(1) wherein this

Court has referred to the corresponding provisions in the

Australian Constitution and imparted a comprehensive meaning

to ’trade’. American and Australian case law, Halsbury and

the Judicial Committee, were read with special emphasis on

the amplitude of the expression ’trade’. An inventory of

Indian statutes wherein ’money-lending’ as a business was

mentioned and licensed, was also brought to our notice.

Indeed, this wealth of legal literature may well be held to

make out that money-lending, banking, insurance and other

financial transactions, commercial credit and mercantile

advances may, conceptually, be characterised as ’busi-

ness’. Mercantile credit, money-lending, pawn-broking

and advances on pledges are business. Otherwise, the

commerce of our country will grind to a halt. Can we con-

ceive of trade without credit, or commerce without mercan-

tile documents, discounting, lending and

(1) [1970] 3 S.C.R. 498.

837

negotiable paper? To deny to monetary dealings the status

of trade is to push India into the medieval age: Broadly

viewed, money-lending amongst the commercial community is

integral to trade and is trade.

So far we go with Shri Nariman and others who have urged

the same point with allomorphic modifications.

The learned Attorney General’s stance is radical and

rooted in the rural bondage to break which is the mission of

this legislation. If accepted, it will mean that money-

lending, in the limited statutory setting and projected on

the Indian rural-urban screen visa vis the exploited people

below-the-poverty-line, cannot be regarded as ’trade’.

It is apt to be reminded of the then famous epigram of

Frederick W. Maitland: "A woman can never be outlawed, for a

woman is never in law." Money-lending-is it in law at all?

No trade, no Art. 301, and so the baptismal certificate

that Art. 301 insists upon from the economic activity that

seeks its ’free’ blessings is that it is ’trade, commerce

or intercourse’. Thus the critical question is as to

whether money-lending and the class of money-lenders who

have been preying upon the proletarian and near-proletar-

ian segments of Indian society for generations may be legal-

ly legitimated as ’traders’ or ’businessmen’. This is not

an abstract legal question turning on semantic exercises

but a living economic question of incurable indebtedness.

Blood, sweat and tears animate amelioratory law which exiles

literal interpretation. The heartbeats of the Debt Act,

according to the State counsel, cannot be felt without

humanistic ’insight by first ostracising, in the name of

social order, the die-hard, death-grip practices which have

defied legislative policing in the past and have kept, in

chronic servitude, vast numbers of the Indian agrarian

community and working class. But if, as urged by the oppo-

sition, the law flatly flouts Art. 301, it fails.

The rule of law, for functional success, must run close

to the rule of life. Therefore, constitutional assays must

be on the touchstone of societal factors. So we cannot

embark upon a study of the working of stock-exchanges, the

dependence of industry and business on credit and key-loans,

the role of pledges in financing commercial activity, when

the challenge is to an economic legislation dealing with the

lowliest and the lost, the destitude and the desperate, far

from big business and industry, trade and commerce and high

finance and sophisticated credit. We must zero-in on the

social group the Debt Act seeks to save, the pattern of

lending the statute strikes at, the heaviness of the blow

and on whom it falls, and the raison detre of the measure.

Does this specific species of deleterious economic activity,

masked as moneylending ’trade’, qualify for the .freedom

that Art. 301 confers on trade? The specific social malady

and the legislative therapeutics suggested guide the court.

Here again, relativity, not absolutes, rules jurisprudence.

Of course, while interpreting the relevant Articles in

Part XIII and pronouncing upon the concept of ’trade’, we

must have regard to the general scheme of the Constitution

and should not truncate the

838

scope and amplitude of economic unity, free movement, pro-

tection from discrimination, unhampered financial arrange-

ments and the like. Undoubtedly, the freedom, while it is

wide, is not absolute. Our Constitution, framed by those

who were sensitive to the massive poverty of the country and

determined to extirpate the social and economic backwardness

of the masses, could not have envisioned a development where

some will be ’free’ to keep many ’unfree’ [See Articles 38

and 39 (c)]. That is why, to make assurance doubly sure, a

further provision is made in Art. 304(b) by adding a rider

to the freedom of commerce subjecting it to the requirement

of reasonableness and imposition of restrictions in public

interest. Das, J., in Automobile Transport (1) struck the

true note, if we may say so with great respect, that while

the text of the Articles is a vital consideration in inter-

preting them, ’we must’ at the same time, remember that we

are dealing with the Constitution of a country and the

interconnection of the different parts of the Constitution

forming part of an integrated whole’. The learned Judge

asks: ’Even textually, we must ascertain the true meaning of

the word ’free’ occurring in Art. 301 From what burdens or

restrictions is the freedom assured? This is a question of

vital importance even in the matter of construction’.

Later, in the ’ judgment, Das J., drives home the point

that ’the conception of freedom of trade in a community

regulated by law pre-supposes some degree of restriction,

that freedom must necessarily be delimited by considerations

of social orderliness’ (underscoring supplied). Even the

Australian Case (1916 22 CLR 556, 573) conceptulizes freedom

as nothing extra legem, lest freedom should be confounded

with anarchy. ’We are the slaves of the law’, said Cicero,

’that we may be free’. Sir Samuel Griffith, C.J. in Duncan

v. State of Queensland (22 CLR.556, 573), said: "But the

word ’free’ does not mean extra legem any more than freedom

means anarchy. We boast of being an absolutely free peo-

ple, but that does not mean that we are not subject to.

law." The conscience of the commerce clause in India, as

elsewhere, is the promotion of an orderly society. social

justice is the core of the constitutional order.

Two inter-connected, but different facets of freedom of

trade and commerce fall for serious consideration in the

light of the above discussion. Is anti-social, usurious,

unscrupulous money-lending to economically weaker sec-

tions, eligible for legal recognition as ’trade’ within the

meaning of Art. 30,1 ? Secondly, assuming that even such

activities have title to be termed ’trade’ are the provi-

sions of the Debt Act reasonable, regulatory and in the

public interest ?

The learned Attorney General argued for the proposition

that the narrow, noxious category of money-lending with

which we are concerned is so oppressive and back-breaking so

far as the poorest sections of the community are concerned

that a sense of social justice forbids the court to legiti-

mate it as ’trade’. Not all systematic economic activity,

even if not formally banned by the law, can be christened

’trade’, he submits, and relies on Chamorbaughwala to.

reinforce this reason-

(1) [1963] (1) S.C.R. 491. (2) [1957] S.C.R. 930.

839

ing. In that case the impugned Act was said to offend

against Art. 301. The Court, therefore, considered whether

gambling was not ’trade, commerce or intercourse’ and took

a sky-view of the numerous decisions in various countries

bearing on this branch of sociological jurisprudence. One

of the Australian cases dealing with lotteries (Mansell

v. Beck) elicited the observation that lotteries, not

conducted under the authority of government, were validly

suppressed as pernicious. Taylor, J. made the trenchant

observation:

" .... whilst asserting the width of

the field in which s. 92 may operate it is

necessary to observe that not every transac-

tion which employs the forms of trade and

commerce will, as trade and commerce, invoke

its protection. The sale of stolen goods,

when the transaction is juristically analy-

sed, is no different from the sale of any

other goods but can it be doubted that the

Parliament of any State may prohibit the sale

of stolen goods without infringing s. 92 of

the ,Constitution ? The only feature which

distinguishes such a transaction from trade

and commerce as generally understood is to be

found in the subject of the transaction; there

is no difference in the means adopted for

carrying it out. Yet it may be said that in

essence such a transaction constitutes no part

of trade and commerce as that expression is

generally understood. Numerous examples of

other transactions may be given, such as the

sale of a forged passport, or, the sale of

counterfeit money, which provoke the same

comment and, although legislation prohibiting

such transactions may, possibly, be thought to

be legally justifiable pursuant to what has,

on occasion, been referred to as a ’police

power’, I prefer to think that the subjects of

such transactions are not, on any view, the

subjects of trade and commerce as that expres-

sion is used in s. 92 and that the protection

afforded by that section has nothing to do

with such transactions even though they may

require for their consummation, the employment

of instruments, whereby inter-State trade

and commerce is commonly carried on."

(RMDC Case, pp. 915-916)

In the United States of America, operators of gambling

sought the protection of the commerce clause. But

the .Court upheld the power of the Congress to regulate and

control the same. Likewise, the Pure Food Act which prohib-

ited the importation of adulterated food was upheld. The

prohibition of transportation of women for immoral purposes

from one State to another or to a foreign land was held

valid. Gambling itself was held in great disfavour by the

Supreme Court which roundly stated that ’there is no consti-

tutional right to gamble’.

Das, C. 1., after making a survey of judicial thought,

here and abroad, opined that freedom was unfree when society

was exposed to grave risk or held in ransom by the operation

of the impugned

840

activities. The contrary argument that all economic activi-

ties were entitled to freedom as ’trade’ subject to reasona-

ble restrictions which the Legislature might impose, was

dealt with by the learned Chief Justice in a sharp and

forceful presentation:

"On this argument it will follow that

criminal activities undertaken and carried on

with a view to earning profit will be pro-

tected as fundamental rights until they are

restricted .by law. Thus there will be a

guaranteed right to carry on a business of

hiring out goondas to commit assault or even

murder, of housebreaking, of selling obscene

pictures, of trafficking in women and so on

until the law curbs or stops such activities.

This appears to us to be completely unrealis-

tic and incongruous. We have no doubt that

there are certain activities which can under

no circumstance be regarded as trade or busi-

ness or commerce although the usual forms

and instruments are employed therein. To

exclude those activities from the meaning of

those words is not to cut down their meaning

at all but to say only that they are not

within the true meaning of those words.

Learned counsel has to concede that there can

be no ’trade’ or ’business’ in crime but

submits that this principle should not be

extended .... "

We have no hesitation, in our hearts and our heads, to

hold that every systematic, profit-oriented activity,

however sinister, suppressive or socially diabolic, cannot,

ipso facto, exalt itself into a trade. Incorporation of

Directive Principles of State Policy casting the high duty

upon the State to strive to promote the welfare of the

people by securing and protecting as effectively as it may a

social order in which justice---social, economic and politi-

cal--shall inform all the institutions of the national life,

is not idle print but command to action. We can never

forget, except at our peril, that the Constitution obligates

the State to ensure an adequate means of livelihood to its

citizens and to see that the health and strength of workers,

men and women, are not abused, that exploitation, moral

and material, shall be extradited. In short, State action

defending the weaker sections from social injustice and all

forms of exploitation and raising the standard of living of

the people, necessarily imply that economic. activities,

attired as trade or business or commerce, can be de-recog-

nized as trade or business. At this point, the legal cul-

ture and the public morals of a nation may merge, economic

justice and taboo of traumatic. trade may meet and jurispru-

dence may frown upon dark and deadly dealings. The consti-

tutional refusal to consecrate exploitation as ’trade’ in a

socialist Republic like ours argues itself.

The next question then is whether rural and allied money-

lending is so abominable as to be ’bastardized’ by the law

for which the Attorney General pleaded. Shri Nariman

controverted the vulgar generalisation that all money-lend-

ers are vampirish as unveracious imagery. He argued that

many of them were not only licenced but had complied with

the conditions of their licences in doing honest lending

business and supplying rural credit to those in need. He

841

pointed out that institutional credit had hardly penetrated

rural India and the non-institutionalised money-lenders had

done economic service to a primitive peasantry although

several of them had abused. the situation of helplessness in

which the weaker denizens of backward regions found them-

selves..His contention was that there was no justification

for castigating money-lending as non-trade not was there

valid material to condemn wholesale all those who had served

as the financial backbone of agricultural communities in the

past. Reasonable restrictions to obviate abuse were permis-

sible legislation, but obdurate refusal to treat what in

fact was trade as trade was injustice born of hostile

hunches. He had separate arguments on the unreasonableness

of the provisions of the Debt Act which we will deal with

later. The bone of contention between the parties, there-

fore, is as to whether money-lenders as a class and money-

lending as a systematic traditional activity in the special

context of the weakest sections of agrarian humanity and the

working class, can be called ’trade’. The legal principles

have already been explained by us which we may sum up brief-

ly by stating that, generally speaking, the systematic

business of lending is trade, as understood in the commer-

cial world and in ordinary monetary dealings. Moreover,

trade cannot be confined to the movement of goods but may

extend to transactions linked with merchandise or the flow

of goods, the promotion of buying and selling, advances,

borrowings, discounting bills and mercantile documents,

banking and other forms of supply of funds.

It is possible, however, to project a different view

point and this is precisely what the learned Attorney Gener-

al has done. Free flow, understood in Article 301, implies

some movement from place to place. Freedom of trade,

subject to reasonable restrictions, is guaranteed under Art.

19. The special advantage derived by the Trade by virtue of

Art. 301 consists in the interdict on impeding, directly and

immediately, movement of goods or money transactions con-

nected with movement of merchandize or commercial inter-

course. In short, the Attorney General considers the

element of movement as essential to Pat. 301 in contrast

with Art. 19. We see the force of the submission but are

inclined to the view that dealings of Banks and similar

institutions having some nexus with trade, actual or poten-

tial, may itself be trade or intercourse. All modern com-

mercial credit and financial dealings, covered by the

various rulings cited at the bar, come under this heading.

Even so, the village-based, age-old, feudal pattern of

money-lending to those below the subsistence level, to the

village artisan, the bonded labourer, the .marginal tiller

and the broken farmer, who borrows and repays in perpetual

labour, hereditary service, periodical delivery of grain and

unvouchered usurious interest, is a countryside incubus.

This is not an isolated evil but a ubiquitous agrarian

bondage. Such debts ever swell, never shrink. such captive

debtors never become quits, such countryside creditors never

get off the backs of the victims. The worker and peasant of

India whose lot is to be ’born to Endless Night’ is symbol-

ized by Jawaharlal Nehru, an architect of the Constitution,

as the Man with the Hoe:

842

"Bowed by the weight of centuries he leans

Upon his hoe and gazes on the ground, The

emptiness of ages on his face, And on his back

the burden of the world.

X X X

X

"Through this dread shape the suffering ages

look, Time’s tragedy is in that aching stoop,

Through this dread shape humanity betrayed,

Plundered, profaned and disinherited, Cries

protest to the powers that made the world, A

protest that is also prophecy."

All this painful poetry and prose is borne out

by the record in the case and by studies by

economists.

A recent issue of the Eastern Economist reads:

"The problem of rural indebtedness is

as old as Indian agriculture itself. It

is the net result of usurious money lending,

improvident spending and adversities in agri-

culture. The heavy burden of debt not only

continues to cripple our rural economy, but it

also grows in alarming magnitude. Several

attempts have been made by expert bodies from

time to time for a realistic estimation of

rural indebtedness. Nevertheless, the fact

remains that the rural indebtedness in physi-

cal terms is mounting up and the nightmare of

indebtedness continues to haunt the Indian

peasants...

Quite recently the report published by

the All India Rural Debt and Investment Survey

relating to 1971-72 also depicts an increasing

trend in rural indebtedness. It has been

estimated that the aggregate borrowings of all

rural households on June 30, 1971 was Rs.3921

crores, while the average per rural household

being Rs.503/-. Fortythree per cent of the

rural families had reported borrowings ....

If the problem of rural indebtedness is

to be kept within meaningful limits and man-

ageable proportions, following legislative

and non-legislative measures should be taken:

1. At present the institutional agen-

cies provide only 50 per cent of the total

rural credit needs. Increased efforts by all

the institutional agencies are called for

especially in the context of the declaration

of moratorium on rural debt which may affect

the flow of non-institutional finance.

2. There are about 75 million marginal

farmers with less than one hectare of opera-

tional holding, 20 million artisans and 47

million agricultural labourers in rural sec-

tor, who constitute the rural poor. Liquida-

tion of existing debt is an essential step in

order to give relief to these weaker sec-

tions. The Debt Relief Acts passed in differ-

ent states should be effectively implemented.

843

3. Institutionalisation of rural savings

and inculcation of saving habits amongst rural

folk is a positive step to mitigate this

problem. Massive propaganda and education on

economising expenditure may discourage ex-

travagant spending by certain categories of

rural .households. If necessary, certain

legislative measures such as abolishing dowry

system and imposing austere marriages may also

be resorted to.

4. Attempts must also be made to bring the

money lenders under some form of monetary

regulation and control on the lines suggested

by the Banking Commission. Though at present

legislations exist in several states for the

regulation of money lenders they lack enforce-

ment which render the ineffective."

(emphasis, added)

(’Current Trends in Rural Indebtedness--by M.

Gopalan & V. Kulandaiswamy--Eastern Economist

d/April 23, 1976 Vol. 66, No. 17, pp. 826-829)

Professor Panikar, referring to the nightmare

of debt has this to say:

"Perhaps, it may be that the need for

borrowing is taken for granted. But the

undisguised fear that the oppressive burden of

debt on Indian farmers is the main hindrance

to progress is unanimous. There are many

writers who depict indebtedness of Indian

farmers as an unmixed evil. Thus, Alak Ghosh

quotes with approbation on the French proverb

that ’Credit supports the farmer as the hang-

man’s rope the hanged’."

(Rural Savings in India--P. G.K.

Panikar--Somaiya Publications Pvt. Ltd.,

Bombay, 1970)

Dr. Bhattacharya, in his book ’Social Security

Measures in India’ (Metropolitan Book Co.,

Delhi, 1970) dwells on the problem of agri-

cultural indebtedness:

"A sample survey conducted by Second

Agricultural Commission revealed the grim

condition of rural indebtedness. The Survey

observes, ’Of the estimated total number of

16.3 million agricultural labour households

in the country, 63.9 per cent were indebted

and debt per indebted household was Rs.138 per

annum’. This is indeed a danger signal par-

ticularly for a country whose entire economy

is dependent on the prosperity .of rural

population. The same source sums up the total

volume of rural indebtedness in the following

words, ’Thus the total volume of debt of the

indebted agricultural labour households may be

estimated at about Rs.143 crores in 1956-57.

A similar estimate was made on the basis of

the results of the 1950-51 Enquiry (i.e., the

First Agricultural Commission Report) and it

worked out to about Rs.80 crores, Even though

the estimated number of agriculture labour

households in 3---206SCI/77

844

1956-57 was lower by 1.6 million, as,com-

pared with 1950-51, the total debt of indebted

agriculture labour.household had considerably

increased in 1956-57." (pp. 1.64-165)

Dhires Bhattacharya in his ’Concise History of

the Indian Economy’ (Progressive Publishers,

Calcutta, 1972) refers to the Indian rural

drama and the role of the anti-hero played by

the_ money-lender:

"Money-lending thus became an easy

method of earning an income and subsequently

of acquiring valuable title to land in the

event of default by the debtor. Throughout

the nineteenth century ownership rights in

land were being lost by the ryot and acquired

by moneyed interests, both rural and urban."

"The situation created by such extensive

loss of perry by the cultivating classes

exploded into riots against money-lenders and

usurpers of land in several parts of the

country. The agricultural riots in Poona

and Ahmednagar in Bombay Presidency in 1875

are most widely known because they were

followed by the appointment of a Commission of

Inquiry." (pp. 77-78)

The author recounts the series of legislation

made during the British Indian period and

concludes:

"These laws also failed in their purpose

because no restrictions had been imposed on

the transfer of land between members of the

agricultural classes. Money-lenders could,

therefore, operate through a benamidar

(fictitious agent) belonging to an agricultur-

al class and acquire land almost as easily as

before. At the same time the bigger agricul-

turists had no difficulty in swallowing up the

smaller ones by giving loans at exorbitant

rates of interest to the latter. (p. 78)

The economic literature, official and other, on agri-

cultural and working class indebtedness is escalating and

disturbing. Indeed, the ’money-lender’ is an oppressive

component of the scheme. A.N. Agrawal, in his book

’Indian Economy’ (Vikas Publishing House) indicates that

’money-lenders charge heavy interest ranging. from 15% 50%

and often more. In addition to .high interest, these

people take advantage of illiteracy of agriculturists and

manipulate the accounts regarding loans to their advantage.

The conditions of loan repayment are so designed that the

debtor is forced to sell his produce to the mahajan at low

prices and purchase goods for consumption and production at

high prices. In many other ways take advantage of the

poverty and the helplessness of farmers and exploit

them .... Unable to pay high interest and the principal,

845

the farmers even lose their land or live from generation to

generation under heavy debt...Unless viable alternatives are

made available, the mahajan will continue to hold, an impor-

tant, harmful and enervating place m this sphere’. The

harmful consequences of indebtedness are economic and affect

efficient farming, social in that the ’relations between the

loan givers and loan receivers take on the form of relations

of hatred, poisoning the social life’. The money-lenders,

few in number, belong to poor class. There are often dis-

putes between the two classes which get sharpened... on the

exploitation of the poor. In fact the social groups get

split into two broad classes. The exploiting class and the

exploited class. Apart from losing land and leading to

tension in the villages their evil effect is rampant... the

heavily indebted farmers lose even their human existence.

They not only render bonded labour to money-lenders, their

very self-respect and even respect of their women folk do

not remain safe.. They are forced to live the life of

slaves. Of course, laws have now been enacted which protect

these debtors. But these laws are difficult to be enforced

either because farmers are illiterate, or they do not have

enough resources to go to the courts, or the money-lenders

prove too clever for them."

Dr. C.B. Mamoria in his book ’Agricultural Problems of

India’ (Kitab Mahal) has stressed that rural indebtedness

has long been one of the most pressing problems of India.

"Rural people have been under heavy indebtedness of the

average money-lenders and sahukars. The burden of this debt

has been passed on from generation to generation inasmuch as

the principal and interest went on increasing for most of

them..According to Wold. The country has been in the grip of

Mahajans. It is the bond of debt that has shackled agricul-

ture."

Very convincing and compelling, with special reference

to Maharashtra, is the Report of a high-powered Committee

appointed by the Government of Maharashtra to make recommen-

dations for the relief of rural and urban indebtedness. The

study is at once revealing and ’grim. Rural artisans,

industrial workers, marginal farmers and indigent agricul-

turists have been steeped in debt despite statutory meas-

ures and ineffective credit institutions. These human areas

have been the happy hunting ground of money-lenders. The

Bombay Moneylenders’ Act, according to the Committee, hardly

helped bail out the weaker sections. Despite the Act,

licensed and unlicensed moneylenders pursued their exploita-

tive profession. The Debt .Act implements some of the

recommendations of this Committee although positive institu-

tional finance to save the sunken segments from the grip of

the moneylenders remains to go into action. Even enforce-

ment of the Bombay Moneylenders’ Act appears to be lukewarm

according to the Committee. Be that as it may, the economic

distress, for which moneylenders dealing with the weaker

sections are mainly responsible, is clearly brought out in

the Report. Nor is there anything in this Report or in any

other literary material on rural economics (particularly

relating to artisans, workers and collapsing cultivators) to

substantiate the dichotomy of scrupulous and unscrupulous

moneylenders, vehemently pressed before us by Shri

846

Nariman. The former species are more a pious wish and the

latter tribe a spectre on the increase, if statistical

economic studies are to be trusted. The gravestone on the

old ’moneylender’ system and the cornerstone of the new

liberated order .are thus the programme for the Administra-

tion. The Debt Act is part of the package.

There was much argument about the reasonableness of the

restriction on moneylenders, not the general category as

such but the cruel species the Legislature had to

confront--and we have at great length gone into the gruesome

background of economic illequities, since the test of

reasonableness is not to be applied in vacuo but in the

context of life’s realities. Patanjali Sastri C.J., in

State of Madras v.V.G. Rao(1) observed:

"It is important in this context to bear

in mind that the test of reasonableness wher-

ever prescribed, should be applied_ to each

individual statute impugned, and no abstract

standard, or general pattern of reasonableness

can be laid down as applicable to all cases.

The nature of the right alleged to have been

infringed, the underlying purpose of the

restrictions imposed, the extent and urgency

of the evil sought to be remedied thereby, the

disproportion of the imposition, the prevail-

ing conditions at the time, should all enter

into the judicial verdict."

Money-lending and trade-financing are indubitably ’trade’ in

the broad rubric, but our concern here is blinkered by a

specific pattern of tragic operations with no heroes but

only anti-heroes and victims.

Many Conferences, Commissions and resultant enactments

before and after Independence provided but marginal protec-

tion for the rural debtor. Even licensing was evaded by

the money-lender successfully and concilliation machinery

proved a mirage. Statutes made of sterner stuff became the

desideratum.

In the counter affidavit filed on behalf of the State of

Maharashtra, a lurid presentation of the lender-borrower

scenario is found. The deponent states:

"...that it was a common sight around

the secretariat, Government Offices, Textile

Mills, factories and elsewhere in Bombay to

find moneylenders waiting at the gates to

catch workers to collect their dues."

There is also reference to a number of Official Committees

which have examined the question of indebtedness in the

urban and rural areas and have recommended measures of

relief. The affidavit goes on to state:

"I say that in Maharashtra and its

predecessors the State of Bombay there have

been several legislations on this subject

including the Deccan Agricultural Debt Relief

Act, 1879, Bombay Agricultural Debtors Relief

Act, 1939, 1946

(1)[1952] S.C.R. 597.

847

and in the Vidarbha areas of the State, the

Madhya Pradesh Postponement of Execution of

Decree Act, 1956. I say that there is a well-

established history of dealing with indebted-

ness in the State by means of legislation. I

say that .the Reserve Bank carried out an

inquiry in the matter of indebtedness in 1971

which is referred to as All India Debt and

Investment Survey during 1971-72. The Reserve

Bank of India survey established that the

total debt liabilities in the rural areas in

Maharashtra was Rs.358 crores in 1971-72. A

preliminary analysis made by the Reserve Bank

of India also indicated weaker sections of the

community thereby showing the extent of the

burden of debt on the weaker sections of the

community. I crave leave to refer to and rely

upon the statistical tables prepared by the

Reserve Bank of India in this connection when

produced. I say that the extent of indebted-

ness may be much more than what is indicated

by the statistical survey of the Reserve Bank

of India. The licensed moneylenders alone in

the State are known by themselves to have

disbursed during 1972-73 a sum of about 74.37

crores and the information gathered by the

respondents indicates that the known indebted-

ness in the city of Bombay alone would be of

the order of Rs.45 crores. I say that in

addition to the licensed moneylenders unli-

censed money lending is also carried on in the

State.."

The Statement of Objects and Reasons of

the Maharashtra Ordinance VII of 1975 which

was the precursor to the impugned Act contains

the following statement:

"The problem of urban and rural in-

debtedness has assumed enormous proportions in

recent times.. The noninstitutional sources

of credit, namely, unscrupulous. money-

lenders, have been charging usurious rates of

interest, indulging in malpractices and taking

undue advantage of the weak position of the

economically weaker sections of the people

both in rural and urban areas. The Ordinance,

therefore, seeks to give relief to certain

sections of people from indebtedness."

Even the ’whereas’ vocabulary of the draftsman of the Act

refers to the need for immediate action to provide for

relief from indebtedness to certain farmers, rural artisans,

rural labourers and workers in the State of Maharashtra.

The judgment under appeal also makes reference to the

continual legislative effort made in the past to save the

agricultural community from chronic indebtedness. The

learned Judges. observe:

"Indeed, agricultural indebtedness has

always been the bane of Indian economy ever

since the beginning of the twentieth cen-

tury. Any elementary book on. Indian econom-

ics will disclose that even the British

Government had

848

thought it necessary to make an enquiry into

agricultural indebtedness. That was one of

the terms of Royal Commission on Agriculture,

and from time to time enquiry committees were

set up including the Banking Enquiry Committee

to go into the question of agricultural

indebtedness with a view to find out how

alternative sources of credit to be made

available to the agriculturists could be

brought into existence. In a sense, the phrase

’agricultural indebtedness’ has earned a

connotation over the passage of years to

indicate the unhappy position in which an

Indian agriculturist has always found ever

since the phenomenal fall of prices in 1929.

It has become proverbial that an Indian

agriculturist is born in debt, he lives in

debt and he dies in debt."

Eminent economists and their studies have been adverted

to by the High Court and reliance has been placed on a

Report of a Committee which went into the question of relief

from rural and urban indebtedness which shows the dismal

economic situation of the rural farmer and the labourer. It

is not merely the problem of agricultural’ and kindred

indebtedness, but the menacing proportions of the moneylend-

ers’ activities that have’ attracted the attention of the

Committee. Giving facts and figures, which are alarming,

bearing on the indebtedness amongst industrial workers and

small holders, the Committee has highlighted the exploita-

tive role of money-lenders and the high proportion/on of

non-institutional borrowings.

We have made this extensive tour of the economic scene,

with special reference to agricultural indebtedness and the

lot of industrial labour, only to present vividly how the

predatory money-lender has had a stranglehold on rural and

urban proletarians, by resort to methods which are scan-

dalizingly calamitous and unshakably resistant to legisla-

tive policing. The learned Attorney General contends that

the courts must have a sense of history .and sociology

informing their judicial perspective and then it is easy to_

understand the syndrome of village and working class indebt-

edness. There are commercial lendings, banking loans and

institutional finances. There are friendly loans, and

occasional accommodations. There are liabilities arising

from various circumstances between citizen and citizen and

citizen and State. But the pernicious species of money-

lending stubbornly flourishing in the rural and industrial

areas of our country, with the weakest sections as their

bled-white clientele, cannot be regarded as ’trade" because

of the painful pages of economic history to which this

country is witness.

The life of the law is not neat noesis but actual expe-

rience. The perspective of Poverty Jurisprudence is radi-

cally different from the canons and values of traditional

Anglo-Indian jurisprudence. The subject matter of the

impugned legislation is indebtedness, the beneficiaries are

petty farmers, manual workers and allied categories steeped

in debt and bonded to the money-lending tribe. So, in

passing on its constitutionality, the principles of Develop-

mental Jurisprudence’ must come into play.

849

We agree with Shri Nariman that the intimate unity of

national life sought to be sustained by Part XIII cannot be

invidiously breached against the money-lenders provided they

qualify to be traders. If a law cuts into the flesh of the

commercial unity and integrity of the country,’ unreasona-

bly or against public interest, Part XIII electrocutes it.

A meaningful, yet minimal analysis of the Debt Act, read

in the light of the times and circumstances which compelled

its enactment, will bring out the human ;setting of the

statute. The bulk of the beneficiaries are rural indi-

gents and the rest urban workers. These are weaker sections

for whom constitutional concern is shown because institu-

tional credit instrumentalities have ignored them.

Moneylending may be ancilliary to commercial activity and

benignant in its effects, but money-lending may also be

ghastly when it facilitates no flow of trade, no movement of

commerce, no promotion of intercourse, no servicing of

business, but merely stagnates rural economy, strangulates

the borrowing community and turns malignant in its reper-

cussions. The former may surely be trade, but the

latter--the law may well say--is not trade. In this view,

we are more inclined to the view that this narrow, deleteri-

ous pattern of moneylending cannot be classed as ’trade.’

No other question then arises, since the petitioners and

appellants cannot summon Art. 301 to their service.

Assuming that all money-lending is ’trade’, can it be

contended that this relief measure is invulnerable to attack

on the ground that the texture of the restrictions is rea-

sonable and regulatory ?

Article 304(b) relaxes in favour of the State the prohi-

bition in Art. 301 provided the law imposes only such re-

strictions as are reasonable and in public interest. Shri

Nariman’s submission is that the Debt Act is too draconic

to fair, processually and substantively, and so it cannot

be rescued by Art. 304(b). With persuasive pressure he

invited us to look at the horror of procrustean infliction

of equal hostility by the legislature in dealing with the

asuric Shylock and the dharmic lender. The law which

brands the good and the bad alike and indiscriminately

discharges all debts, just and unjust, lacks sense, con-

science and reasonableness. Secondly ’How is it fair,’

asks Shri Nariman, ’that, if the object of the legislation

is to save the victims of rural indebtendness and working

class burdens that credit institutions should be exempted

while non-institutionalised lenders should be picked out for

hostile treatment ?’

There is no merit in the plea. Liabilities due to

government to local authorities are not tainted with exploi-

tation of the debtor. Likewise, debts due to banking compa-

nies do not ordinarily suffer from overreaching, unscrupu-

lousness or harsh treatment. Moreover, financial insti-

tutions have, until recently, treated the village and urban

worker and petty farmer as untouchables and so do not figure

in the picture. To exempt the categories above referred to

is reasonable. Many debt relief laws adopt this classifica-

tion and those familiar with the lowest layers of economic

life will agree that this is as it should be. Money-lenders

of the type we are concerned with in the Debt Act are,

850

by and large, heartless in their lending tactics, and the

borrowers are anaemic--mostly members of the Scheduled

Castes and Scheduled Tribes, nomadic groups, artisans,

workers and the like. Section 13 of the Debt Act is illu-

minating, regarding the handicapped humans the statute is

concerned with. We quote that provision:

"13. Aggreement for labour in lieu of

debt to become void.--

Any custom or tradition or any agreement

(whether made before or after the appointed

day), whereunder or by virtue of which a

debtor or any member of his family is required

to work as labourer or otherwise for the

creditor shall be void and of no effect and

shall never be enforceable in any civil

court."

Maybe, some stray money-lenders may be good souls and

to stigmatize the lovely and unlovely is simplistic betise.

But the legislature. cannot easily make meticulous excep-

tions and ’has to proceed on broad categorisations, not

singular individualisations. So viewed, pragmatics overrule

punctilious and unconscionable money-lenders fall into a

defined group. Nor have the creditors placed material

before the Court to contradict the presumption which must be

made in favour of the legislative judgment. After all, the

law-makers, representatives of the people, are expected to

know the socio-economic Conditions and customers. Since

nice distinctions to suit every kindly creditor is beyond

the law-making process, we have to uphold the grouping as

reasonable and the restrictions as justified in the circum-

stances of the case. In this branch, there are no finali-

ties. The observations of the Privy Council in the Austra-

lian Bank Nationalisation Case(1) are apposite:

"Yet about this, as about every other

proposition in this field, a reservation must

be made. For their Lordships do not intend

to lay it down that in no circumstances could

the exclusion of competition so as to create a

monopoly either in a State or Commonwealth

agency or in some other body be justified.

Every case must be judged on its own facts and

in its own setting of time and circumstance,

and it may be that in regard to some economic

activities and at some state of social devel-

opment it might be maintained that prohibition

with a view to State. monopoly was the only

practical and reasonable manner or regulation,

and that inter-State trade, commerce and

intercourse thus prohibited and thus monopo-

lized remained absolutely free."

We do not downright denounce all money-lenders but the

lawmakers have, based on socio-economic facts, picked out a

special class of money-lenders whom they describe as unscru-

pulous.

(1) Commonwealth of Australia v. Bank of New South Wales

[1950] A.C. 235, 311.

851

Every cause claims its martyr and if the law, necessi-

tated by practical considerations, makes generalisations

which hurt a few, it cannot be helped by the Court. Other-

wise, the enforcement of the Debt Relief Act will turn into

an enquiry into scrupulous and unscrupulous creditors,

frustrating, through endless litigation, the instant relief

to the indebted which is the promise of the legislature.

In this perspective, we see no constitutional flaw in

the Act on the score that the sheep have not been divided

from the goats. Realism in the legislature is a component of

reasonableness.. It was urged by Shri Chitale that the

definitional deficiency in ignoring the movable wealth of

debtors makes the scheme arbitrary and unreasonable. A

romantic view of the debtors being considerable owners of

costly art pieces and sophisticated gadgets and yet eligible

for relief is good rhetoric but unrealistic. A pathetic

picture of the money-lender being deprived of his loan

assets while being forced to repay his lender was drawn

but that cannot affect the reasonableness of the relief to

the grass-roots borrower. Nor is it value to attack the Act

on the score that the whole debt i.e., the very capital of

the business, has been dissolved. More often than not, the

money-lender would have, over the Iong-lived debts and

repeated renewals, realized more than the principal if

economic studies tell the tale truly. The injustice of

today is often the hangover of the injustice of yesterday,

as spelt out by history. The business of money-lending has

not been prohibited. The Act is a temporary measure limit-

ed to grimy levels of society. Existing debts of some

classes of indigents alone have been liquidated. If impos-

sible burdens on huge human numbers are not lifted, social

orderliness will be threatened and as a regulatory measure

this limited step has been taken by the Legislature.

Regulation, of the situation is necessitous, may reach the

limit of prohibition. Disorder may break out if the law

does not step in to grant some relief. Trade cannot flour-

ish where social orderliness is not secure. H the ten-

sions and unrests and violence spawned by the desperation of

debtors are not dissolved by State action, no moneylending

trade can survive. It follows that for the very survival

of Trade the regulatory measure of relief of indebtedness is

required. That form this relief should take is ordinarily

for the legislature to decide. It is not ordinarily for

the Court to play the role of ’Economic Adviser to the

Administration. Here amelioratory measures have been laid

down by the Legislature so that the socio-economic scene may

become more contented, just and orderly. Obviously, this

is regulatory in the interest of Trade itself. This policy

decision of the House cannot be struck down as perverse by

the Court. The restrictions under the Debt Act are reason-

able. Equally clearly, if the steps of liquidation of

current debts and moratorium. are regulatory, Art. 301 does

not hit them.

Even so, argues Shri Nariman, procedural presumptions

grossly unreasonable, vitiate the measure. Of course,

reasonableness has a processual facet and if the law is

lawless in its modalities, it becomes unlaw constitutional-

ly. We may illustratively advert to some of the criticisms

but, at the threshold, we confess we are not impressed with

the submissions.

852

Shri Nariman itemised the mischievous provisions in the

Debt Act from the processual angle. Others too reiterated

with consternation that the provision whereby every debt of

every debtor of the specified category stood wholly dis-

charged was improvident, especially because it did not even

require the debtor to move the authorities in that behalf.

On the other hand, the burden was on the creditor to raise

the question by instituting a proceeding as to the disquali-

fication of his debtor for the benefit of the Debt Act. On

top of this obligation to institute proceedings was the

precarious prospect of the order being against the creditor

because the ’authorised officer’ had to hold in favour of

the debtor if he merely produced a certificate under s. 7(5)

from one of those officials enumerated therein--all minor

minions of government at the local level. Once the certif-

icate was produced by the debtor the onus was shifted to the

creditor to make out the contrary. ’How could the money-

lender prove the debtor’s financial position ?’ asked

Shri Nariman. Moreover, the issuance of a certificate by

the local little official was a unilateral process where the

creditor was not entitled to be heard as to the means or

eligibility of the debtor. There were two further unreason-

able procedural impositions on the creditor, argued Shri

Nariman. The lender had to make his application with all

the facts within 7 days from the date of receipt of the

application from the debtor intimating that the debt stood

released. The 7-day period was too short even to make

enquiries about the assets of the debtor, And worse, the

application by the creditor shall be entertained by the

authorised officer only on the creditor depositing the

pledged property of its value. Thus the dice was 80 heavi-

ly loaded against the money-lender that even persons who

were not petty debtors intended to be beneficiaries might,

with illegitimate success, claim the bonus of the Debt Act.

Viewed in the abstract, these grievances may look genu-

ine. but when we get down to the reality, nothing so re-

volting exists in these provisions. It is true that the

creditor has to move, and not the, debtor, before the

authorised officer. As between the two, the moneylender is

sure to be far shrewder and otherwise more capable of

initiating proceedings. To cast that obligation on the

debtor--remember, in the bull of cases he is the village

artisan, landless labourer or industrial worker is to deny

relief in effect while bestowing it in the book. Likewise,

there is nothing horrendous in the debtor seeking a certifi-

cate of qualification from the small officer of the area.

After all, the officials enumerated in s. 7(5) are govern-

ment servants, local officials, possess familiarity with the

wherewithal and the whereabouts of persons within their area

and are therefore accessible and competent. There is no

reason whatever for allowing the creditor to be heard at the

certificate stage except to prolong and puzzle the proceed-

ings and by dilatory tactics, deny the relief to be debtor.

The creditor does not suffer because the certificate that

the applicant is a debtor raises only a rebuttable pre-

sumption and it is idle to argue that the creditor has no

means of disproving the income or assets of his debtor.

Ordinarily, the mahajan, the sowcar or money-lender and

the petty borrower live in and around the same neighbourhood

the, former knows the circumstances of the latter and often

these are not

853

isolated transactions between strangers. So much so the

debtor’s financial horoscope or impecunious kismet is nor-

mally within the ken of the creditor. Moreover, a perusal

of the pro-forma of the certificate to be issued needs

mention-of several particulars which have to be. filled up

by the certifying officer who has therefore to make the

necessary enquiries from and about the debtor. Assurance

about the credibility of the certifying officer’s entries is

lent by the personal responsibility cast on him for the

correctness of the particulars mentioned in the certificate.

This is a protection for the creditor that routine and

reckless entries will not be made and that the certifying

officer will take care, prima facie, to be satisfied by

proper enquiry before issuing the certificate. Such a

safeguard warrants the raising of a rebuttable presumption

of correctness and reduces the possibility of injustice to

the creditor for not being allowed an opportunity for

being heard at this stage. In this view also we see noth-

ing unreasonable in the presumptive evidence of the certifi-

cate without the hearing of the creditor.

Fairplay is also afforded in the proceeding not only

because the creditor can rebut the certificate but also

because under s. 8 (6) the authorized officer has the power

and duty to determine all questions in dispute. Section

7(7) expressly provides for an opportunity to the creditor

and the debtor to be heard. After all, the authorised

officer is one who exercises quasi-judicial powers even

otherwise on the Revenue side. While the enquiry is sum-

mary, the procedure under the Maharashtra Land Revenue Code

will be adopted which is a fair safeguard. Summary trial

does not dispense with evidence. or sound judgment but

merely relieves the adjudicator from maintaining elaborate

records. The enquiring officer, may, in appropriate cases,

examine the Debtor or others who can throw light. To

equate ’summary’ with ’arbitrary’ is contrary to common

experience. The obligation for the production of the

pledged article by the creditor as a preliminary to the

institution of the preceedings is also a just measure so

that when a decision is reached the article may be returned

to the. debtor in the vent of the verdict going in his

favour.

The negation of a right of appeal against an order under

s. 7(6) of the Debt Act is another circumstance. Shri

Nariman has pressed before us. He cited other debt relief

measures where a single appeal had been provided for. Does

the absence of a right of appeal render the procedure unrea-

sonable ? It depends. Where the subject-matter is substan-

tial and fraught with serious consequences and complicated

questions are litigatively terminated summarily. Without a

second look at the findings by an appellate body, it may

well be that unfairness is inscribed on the face of the law,

but where little men, with petty debts, legally illiterate

and otherwise handicapped, are pitted against money-lenders

with stamina, astuteness, awareness of legal rights and

other superiority, if the purpose of instant relief is to be

accomplished, the provision of an appeal may, in many cases,

prove abult-in booby trap that frustrates and ruins the

hand-to-mouth debtor. No surer method of baulking the object

can be devised’ than enticing

854

the debtor into an appellate bout! Daughter gone and ducate

too will be the sequel. Of course, where the enquiry is a

travesty of justice or violaion of provisions, where the

finding is a perversity of adjudication or fraud on power,

the High Court is not powerless to grant remedy, even after

the recent package of Constitutional amendments

It is true that in several cases this Court has held that

a right of appeal is a gesture of statutory fairness in the

disposal of cases. Our attention was drawn to the

rulings reported as Jyoti Pershad (1); Mohd Faruk (1) and

Ganesh Beedi Works(2) and other cases hearing on the

necessity of a right of appeal, as an incident of fair

hearing. We cannot dogmatise, generalize or pontificate on

questions of law whose application depends sensitively on

the nature of the subject matter, the total circumstances,

the urgency of the relief and what not. ’We have adduced

sufficient reason to hold that the Debt Act is not bad for

processual perniciousness or jurisprudence of remedies.

The next constitutional missile aimed at the Debt Act

was the incompetency of the State Legislature to enact this

law, for reasons more than one. The main ground was covered

by Shri Nariman, but yet others made their

contributions--sometimes overlapping, sometimes overflowing.

Shri B. Sen also challenged the legislative competency, but

on a different basis.

Several citations, home-spun and foreign, finely woven

theories and subtle punditry, gave a grave mein to the

argument on this branch. But the point in issue, in our

view, admits of straight solution, by-passing the heavy

learning and jurisprudential finery. When Courts are co-

cooned by case-law or caught in the skein of scholarly

doctrines, simple questions become complex. However, prob-

lems of constitutional law can be well left alone where they

do not directly demand a solution in the case on hand.

Enough unto the day is the evil thereof:

What then is the incompetence of the State Legislature ?

Shri B. Sen urged that the wiping out of private debts which

formed the capital assets of the money-lenders---one of the

main things .done by the Debt Act--was not in any of the

legislative Lists and even if Parliament had residuary power

under Entry 97 of List I, the State had none. Entry 30 in

List II is ’money-lending and moneylenders; relief of agri-

cultural indebtedness’. If common sense and common Eng-

lish are components of constitutional construction, relief

against loans by scaling down, discharging, reducing inter-

est and principal, and staying the real isation of debts

will, among other things, fall squarely within the topic.

And that, in a country of hereditary

(1) [1962] 2 S.C.R. 125.

(2) [1970] 1 S.C.R. 156.

(3) [1974] 3 SC.R. 221.

855

indebtedness on a colossal scale! It is commonplace to

state that legislative heads must receive large and liberal

meanings and the sweep of the sense of the rubrics must

embrace the widest range. Even incidental and cognate

matters come within their purview. The whole gamut of

money-lending and debt liquidation is thus us within the

State’s legislative competence. The reference to the Rajah-

mundry Electricity Case(1) is of no relevance. Nor is the

absence of the expression ’relief in Entry 30, List II, of

any moment when relief from moneylenders is eloquently

implicit in the topic. Sometimes, arguments have only

stated to be rejected.

The next ground of attack, in its multi-form presenta-

tion, is that the ’gold loan’ part of the Debt Act is void

because Parliament has occupied file field. It has also

been urged that there is inconsistency between the Debt Act

and the Gold Control Act, and pro tanto the former fails to

have effect.

Let us look at the basics of the legal situation before

us, before examining the wealth of learning counsel has

accumulated. Article 24-6 vests exclusive power in Parlia-

ment over matters enumerated in List I (Seventh Schedule)

and the State Legislature enjoys like power over topics in

List II, subject to clauses (1) and. (2) of the Article.

Plainly, therefore, the State can legislate upon any Entry

in the State .List. We may visualize situations where

Parliamentary occupation may exclude the State Legislature.

Where, for instance, Parliament while enacting on a matter

in the Union List, makes as it is entitled to make, neces-

sary incidental provisions to effectuate the principal

legislation, such ancillary expansions may trench upon the

State field in List II. In such a case, if the State makes

a law on an Entry in its exclusive List, and such law covers

and runs counter to what has already been occupied by Par-

liament, through incidental provisions, it may be argued

that the State law stands pushed out on account of the

superior potency of Parliament’s power in our constitutional

scheme. Again, there are certain telltale heads of legisla-

tion in the Lists where one may plausibly invoke the, doc-

trine of occupied field. Examples may, perhaps, be fur-

nished by Entries 52 and 54- of List I, Entries 23 and 24 of

List Ii and Entry 33 of List III. Without fear of contra-

diction, we may assert that Art. 246(3) read with Entry 30

in List 11, empowers the State to make the impugned law.

Why then is it incompetent? Because, says Mr. Nariman,

the field of gold industry is already occupied by Parliament

and the State Legislature therefore stands excluded. Entry

52 in List I reads:

"Industries, the control of which by the

Union is declared by Parliament by law to be

expedient in the public interest."

Parliament, in the Industries (Development and Regula-

tion) Act, 1951 (Act 65 of 1951) has made the necessary

declaration contemplated in Entry 52 and has occupied the

field of gold industry’, as is

(1)[1954] S.C.R. 770.

856

evident from reading s. 2 and item 1.B(2) of tile First

schedule therein. This expression of Parliamentary intent

to legislate upon the gold industry is enough to expel from

that’ field the State Legislature. This is Shri Nariman’s

contention. But what is the sequitur ? Assuming the ap-

proprlation by Parliament of the power to legislate on gold,

what follows? It can make laws directly on that industry

and ancillarily on every allied area where effective exer-

cise of the parliamentary power necessitates it. So much

so ’business in gold’, licensing of gold merchants, regula-

tion of making or pledging of gold ornaments, keeping of

jewellery, disclosure of gold possessions and the like are

incidental to the parliamentary power and purpose and the

Gold Control Act, 1968 and the Rules made thereunder are

valid (vide, for example, Bantha’s Case: 1970 I SCR 4-79).

Several sections of the Act, some rules and a few rulings

were read before us to drive home the point that gold loans

are already within the ken of the law made under Entry 52,

List I. If so, what ? Does it spell death sentence on the

Debt Act ? Or maim it ? Or leave it intact ?

Here we turn to Entry 24 of List II which runs: "Indus-

tries subject" to the provisions of entries 7 and 52 of List

I". This means that the State Legislature loses its power

to make laws regarding ’gold industry since Entry 24’.

List II is expressly subject to the provisions of Entry

52 of List I. This does not mean that other entries in the

State List become impotent even regarding ’gold’. The

State Legislature can make laws regarding money-lending even

where gold is involved under Entry 30, List II, even as it

can regulate ’gambling in gold’ under Entry 34-, impose

sales tax on gold sales under Entry 54, regulate by munici-

pal law under Entry 5 and by trade restrictions under Entry

26, the type of buildings for gold shops and the kind of

receipts for purchase or sale of precious metal. To multiply

instances is easy, but the core of the matter is that where

under its this power Parliament has made a law which over-

rides an entry in the State List, that area is abstracted

from the State List. Nothing more.

In the Kannan Devan Mills Case(1) this Court put the

point tersely ’while dealing with Entry 52 of the Union

List:

"Once it is declared by Parliament by

law to be expedient -"in the public interest

to control the industry, Parliament can legis-

late on that particular industry and the

States I would lose their power to legislate

on that industry. But this would not prevent

the States from legislating on subjects other

than that particular industry". (underscor-

ing, ours).

This is authority for the proposition that while Entry

23 of List II, in the light of the fact that under Entry 52

of List I Parliament has made the Gold’ Control Act has

become inoperative to legislate on industry, there’ is no

inhibition whatever on State legislation on

(1) [1973] 1 S.C.R. 356.

857

subjects other than that particular industry. Money.lending

is one such subject and the power to legislate thereon

remains intact.

We are free to agree that the word ’industry’ as a

legislative topic has to be interpreted in the widest ampli-

tude. We also find, as a fact, that dealings in gold,

including pledging, have been covered in part by the Gold

Control Act, 1958; even so nothing prevents the State from

making the impugned Act. In Paresh Chandra Chatterice(1)

Subba Rao J (as he then was ) dealt with an apparent con-

flict between the Central Act (The Tea Act) and a State

legislation [The Assam Land (Requisition and Acquisition)

Act, 1948]. After examining the scheme of the two Laws, the

learned Judge concluded:

"A comparative study of both the Acts

makes it clear that the two Acts deal with

different matters and were passed for differ-

ent purposes."

Unreal and imaginary conflicts between the

Central and the State Acts cannot be the

foundation for invalidation of the latter.

In Kanan Devan (Supra) it was further pointed

out:

"If the Act (the Tea Act) is within the

competence of Parliament and the impugned Act

is within the competence of the State,

the’ petitioners must show that the im-

pugned Act is repugnant to the Tea Act but we

can see no conflict between the provisions of

the impugned Act and the Tea Act."

Banthia(2) was referred to in the course of the arguments

and various passages were stressed by different counsel.

The essential question there was as to whether manufacture

of gold ornaments. by goldsmiths fell within the connotation

of the word ’industry’. It did. It was further pointed out

by Ramaswami J in that case that some of the entries overlap

and seem to be in direct conflict but the duty of the Court

is to reconcile and harmonize while giving the widest ampli-

tude to the language of the Entries. We see nothing in that

decision which contradicts the position that while the Gold

Control Act fell within Entry 52 of List I, the State List

was not totally suspended for that reason for purposes of

legislating on subjects which fell within that List, but

incidentally referred also to gold transactions. Nobody

disputes the paramountcy of parliamentary power. We have to

reconciIe the paramountcy principle with the ’trenching’

doctrine.

In the Canadian Constitution, the question of conflict

and coincidence in the domain in which provincial and domin-

ion legislation overlap has been considered. If both may

overlap and co-exist without conflict, neither legislation

is ultra vires. But if there is confrontation and conflict

the question of paramountcy and occupied field may crop up.

It has been held that the rule as to predominance of domin-

ion legislation can only be invoked in case of absolutely

conflicting legislation in pari materia when it will be an

impossibility to give effect to both

(1) [1961] 3 S.C.R. 88.

(2) [1970] 1 S.C.R. 479.

858

the dominion and provincial enactments. There must be a real

conflict between the two Acts i.e. the two enactments must

come into collision. The doctrine of Dominion paramountey

does not operate merely because the Dominion has legislated

on the same subject matter. The doctrine of ’occupied field’

applies only where there is a clash between Dominion Legis-

latic and Provincial Legislation within an area common to

both. Where both can co-exist peacefully, both reap their

respective harvests (Please see; Canadian Constitutional

Law by Laskin--pp. 52-54-, 1951 Edn).

We may sum up the legal position to the extent necessary

for our case. Where Parliament has made a law under Entry

52 of List I and in the course of it framed incidental

provisions affecting gold loans and money-lending business

involving gold ornaments, the State, making a law on a

different topic but covering in part the same area of gold

loans’, must not go into irreconcilable conflicts. Of

course, if Art. 254(2) can be invoked--We will presently

examine it--then the State law may stir prevail since the

assent of the. President has been obtained for the Debt

Act. Thirdly, the doctrine of ’occupied field’ does not

totally deprive the State Legislature from making any law

incidentally referable to gold. In the event of a plain

conflict, the State law must step down unless, as. pointed

out earlier in the previous passage, Art. 254(2) comes to

the rescue.

Many more decisions were brought to our notice, bearing

on paramountcy, ’occupied field,’ repugnancy and inconsist-

ency. They were elaborated by counsel sufficiently to

convince us that lawyer’s law is divorced from plain seman-

tics and common understanding of Constitutional provisions

becomes a casualty when doctrinal complexities are injected.

May be every profession has a vested interest in the learned

art of incomprehensibility for the laity. Law, in the

administration of which the Bench and the Bar are partners,

probably lives up to this reputation.

All these questions become academic for two reasons.

Firstly, there is no conflict between the Gold Control Act

and the Debt .Act. Secondly, the subjects of both the legis-

lations can be traced to the Concurrent List and Art.

254(2) validates within the State the operation of the Debt

Act.

We are of the view, as earlier discussed, and without

citing further cases on the point, that the State’s legisla-

tive power, save under the, Entry 24 of List II, is not

denuded. Nor is there any conflict between the two Acts.

A detailed study, section by section, of both the legisla-

tions, has convinced us that they can stand together and

that the two authorities and modalities do not contradict

each other and that, by elementary comity, a modus vivendi

between the Gold Act and the Debt Act can be worked out.

The provisions in the Gold Act for declarations and other

formalities may not collide with the obligations and appli-

cations under the Debt Act. We have no doubt that the

authorities charged with enforcement under the two statutes

will understand the sense and spirit of the provisions and

859

see that the object of the Debt Act is not frustrated or its

processes paralysed. Indeed, the learned Attorney General

showed how by reading together the two Acts and remember-

ing their respective purposes a viable resolution of possi-

ble imbroglios is simple, although officialdom is not unfa-

miliar with the art of embroilment where artless customers

are involved or ulterior ends are to be served. The State,

through an effective programme of legal aid and advice and

other prompt instructions-to the agencies involved, should

avoid harassments, hold-ups and red-tapes which are the bane

of processual justice. The jurisprudence of remedies is

still a Cinderella of our system. The Advocate General of

Maharashtra assured the Court that in the fair enforcement

of the law and the follow-up of creating alternative credit

agencies his client will take quick and impartial care.

The learned Attorney General, it may be mentioned before

winding up this part of the discussion, did draw our atten-

tion to Art. 254(2) which is self-explanatory. The State

law will prevail in the State, even if there be repugnancy

with a Central or existing law, given Presidential

assent--provided both the legislations fall under the

Concurrent List. Do they ? He says, yes; and points,

inter alia, to Entry 6 (transfer of property) and Entry 7

(contracts). Of course, the law of contracts deals with

pledges; so does the Gold Control Act. The latter does not

prohibit pawns where gold is involved, but policies it to

prevent evils by prescribing special modalities. The Debt

Act relates to contracts and has fulfilled the requirement

in Art.254(2).

We have nearly come to the end of the judicatory journey

and have reached the constitutional conclusion that the

guarantee that Trade and Commerce and Intercourse shall be

free does not necessitate that the little lendee shall

remain unfree. Article. 301 does permit, in our view,

legislative action to break agrarian indebtedness and urban

usurious bondage lest social disorder disruptive of Trade,

break out.

The impugned Act is a partial implementation of the

economic thesis of Adam Smith when he wrote, two hundred

obsolescent.years ago:

"No society can surely be flourishing

and happy, of which by far the greater part of

the numbers are poor and miserable."

We are in a Republic with social justice as its indeli-

ble signature. And the measure under challenge. promotes

social justice, social order and better conditions for the

business of healthy money lending.

The appalling indebtness which cripples our people is an

unhappy heritage of our economic system. The bonded yes-

terday, the yoke today, and the hope of tomorrow obligate

the State to spell out the future tense of the rural human

order and to focus on the legislative strategies of allevia-

tion before the backlash of social confusion begins, and to

administer, through working mechanisms, and direct,

7--206SCI/77

860

through social cybernetics, our disenchanted society into

fresh formulations of a free future. Without such govern-

mental measures of rural regeneration even the good money-

lenders may have to fold up and the better businessmen wind

up. The larger interests of Trade, Commerce and Intercourse

whose. freedom is a constitutional norm demand that social

order shall be preserved through legislative methodolo-

gy, now radical, now reformatory but always motivated and

moderated by the felt necessities of the times. To come to

humane terms with harsh realities by subjecting itself to

the reasonable, though unpalatable, regulations of the Debt

Act and like measures or to face the adaptational break-

down where law ,may fail to keep order against those who

have nothing to lose except their chains--this is the sort-

of sociological Hobson’s choice before the ’money-lenders’

of Maharashtra. The option is obviously the former and

that is the constitutional vindication of the impugned

legislation. All these laws, in themselves marginal, are

part of the programschrift for a New Deal which is the

cornerstone of the Constitution.

We have been addressed many minor criticisms which

have chopped little logic and made out small discriminations

but serious constitutional decisions go on major considera-

tions, not gossamer-web flimsiness. We have listened to

these meticulous submissions but are not persuaded that we

should even mention them in our longish judgment.

A concluding caveat. The poignant purpose of ending

exploitatire rural-urban lending to the weaker members of

society is the validating virtue of this legislation,

viewed from the constitutional angle. But, as Shri Nariman

at some stage mentioned--and the learned Attorney General

also concurred--mere farewell to existing debts is prone to

prove a teasing illusion or promise of unreality unless the

Administration fills the credit gap by an easy, accessible

and needbased network of humane credit agencies, coupled

with employment opportunities for the small man. The

experience of the. past has not inspired adequate confi-

dence. Authoritative official pronouncement, however, owns

that

"Arrangements so far made to. give

credit and inputs (for rural credit) have had

only limited impact. The problem is a vast

one and seems to be growing in size. Rural

banks, credit societies, farmers’ service

societies--all these have to be strengthened

and their activities expanded. To give pur-

poseful direction to, this task and to ensure

that the interests of agriculturists and

farmers, especially the small farmer, are

looked after, there is need for an Apex Agri-

cultural Development Bank in India."

The legislation we uphold is an added responsibility on

the State. it shall be vigorously enforced with sympathy for

the victim class, lest the progressive measure. prove a

paper tiger. The cadres charged with enforcement must have

right orientation correct grasp and social activism, if this

law is not to leave a yawning implementation

861

gap. Hercics in court and hortation in the House must be

followed by effective enforcement in the field. We state

this not because the State is not in great earnest--it

is--but because many a welfare legislation in the country

reportedly remains a cloistered virtue or slumbrous in

effect. The finest hour of the rule of law is when law

disciplines life and matches promise with performance. On

this note of hopeful valediction we wind up.

We dismiss the appeals and the writ petitions, leaving.

the parties to bear their costs, although we had at least on

one occasion, sufficient provocation to make a different

direction.

P.H.P. Appeals dismissed

862