TaxTMI 
TaxTMI 
1993 (2) TMI 339
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....andlooms. On 2nd June, 1986, in exercise of the powers conferred under Section 4 of the Act, the Central Government constituted an Advisory Committee. The said Advisory Committee submitted its recommendations. After considering those recommendations the impugned order dated 4th of August, 1986 was issued directing "certain articles/class of articles to be exclusively reserved for production by handlooms". It is this order which is attacked on the following grounds in all these cases. 2. The "Act and the impugned order are violative of Article 14 and 19(1)(g) of the Constitution." 3. According to Mr. M.N. Krishnamani, learned Counsel for the petitioners total reservation of certain items of textiles in favour of handloom would have the effect of creating a monopoly. This court in State of Rajasthan v. Mohan Lal Vyas AIR 1971 SC 2068 has categorically laid down that no monopoly can be created in favour of an individual. Similar views have been expressed by the High courts as seen from Municipal Committee v. Hdji Ismail and Maniram Budha Chamar v. Parnalal Motiram Chamar AIR 1962 MP 275 . 4. Equally, when there is a total prohibition of manufacture of these clothes by the pow....
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.... 11. By the impugned order there is a serious dislocation of powerloom industry and substantive rights guaranteed under Article 19(1)(g) of the Constitution have been violated by Sections 3, 4, 5 and 18 of the Act. Such restrictions amounting to prohibition have been struck down by this Court in Mohd. Faruk v. State of Madhya Pradesh [1970] 1 SCR 156 and Municipal Corporation of the City of Ahmedabad v. Jan Mohammed Usmanbhai [1986] 2 SCR 700 . 12. If the restrictions are unreasonable, certainly the court will refuse to uphold the same. 13. Mr. Altaf Ahmad, learned Additional Solicitor General appearing for the respondent, Union of India, meeting these arguments, states as follows. 14. The Cotton Textile (Control) Order, 1948 is traceable to List III Entry 33 of 7th Schedule of the Constitution. While the impugned Act is covered by List II Entries 24 and 27 this is supplementary to the Industrial Development and Regulation Act, 1951 which is traceable to List I Entry 52 of the 7th Schedule. Under the Industrial Development and Regulation Act Section 2 talks of declaration. Section 3(h) states as to what is meant by Schedule. Section 3(i) states "Schedule" means a Schedule ....
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....ime power looms to displace a large number of handlooms. Then, a Study Group was constituted in 1981. An Expert Committee was constituted to go into handloom, power loom and textile mill industries. Based on this, from time to time, textile policy statements were issued. In the year 1981 and 1985, it is found that next only to agricultural sector, handloom sector provides major rural employment. Therefore, the impugned Act is a product of over all assessment to protect a handloom industry which was sinking in spite of the various concessions. 18. It is incorrect to state that the power loom sector has come to be affected. Originally, the holders of four power looms were exempt. But these power loom owners diverted their products to larger power loom owners. Once those textiles enter the market there was no possibility of finding out whether they had been manufactured by the owners of four power looms. 19. Therefore, it became necessary to impose this prohibition. When the Act advances a directive principle contained under Article 39(b) and (c), it cannot be called unreasonable. 20. We shall first examine the background leading to the passing of the impugned enactment. ....
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.... Commissioner who has given the following recommendations in respect of certain articles for exclusive production by handlooms: It may be true that owing to the dispersed nature of the industry, the much needed orientation of production to market need is very much wanting in the handloom sector. Yet more important is the inherent technological disadvantage of the handloom sector and the unequal competition that it has to face from the mill and power loom sector on this account. 24. It is a matter of common knowledge that the bulk of the handlooms in the country produce 'break and butter item' such as grey dhoties, sarees, towels and plain household fabrics. It is these looms which have suffered on account of the growing competition from the power looms. It is in this context that the reservation of certain items of handlooms acquires importance. 25. In order to obviate the possibility of further litigations, the study Group feels that it would be advisable to have a separate legislation for the handloom sector. The Expert Committee observed in April 1985 thus: The vast growth of power looms has been due to certain advantages which they have enjoye....
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....and the machinery for this purpose suitably strengthened. New Spindleage would be installed in cooperative sector to the extent possible. To improve the welfare of the handloom weavers, a contributory thrift fund scheme and worshed-cum-housing scheme would be taken up in the Seventh Plan. 26. Due to the recommendations of the various committees under the textile policy statements announced by the Government from time to time, the reservation of certain articles for production of handloom had continued form 1.6.1950 under the Cotton Textiles (Control) order, 1948 issued under Section 3 of the Essential Commodities Act, 1955. However, experience showed that these orders were challenged in course of law, from time to time. The thrust of the argument on behalf of the powerloom was that they had given higher production and the powerloom cloth was cheaper than handloom fabric. Therefore, it was contended that the Notification issued under the Essential Commodities Act which, in effect, seeks to prohibit production was not in consonance with the Essential Commodities Act. It was further urged that the Notification provides for exemption from compliance of reservation order if sufficien....
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.... the Central Government to reserve by notified order certain articles or class of articles for exclusive production by handlooms after taking into consideration the recommendations of an Advisory Committee constituted under the provisions of the Bill, provides for prohibition of manufacture of such articles of class of articles by powerloom or the other sectorism penalties for the contravention of the provisions of the order and other matters necessary for implementing the provisions of the Bill also provides forgiving an exemption to certain articles covered by the order if the Central Government considers it necessary so to do for the purposes of the Handloom industry. 28. With this background, we will examine the provisions of the Act in juxtaposition to the Industrial Development and Regulation Act and Cotton Textile Control Order. 29. The Cotton Textile Control Order is an order issued under the Essential Commodities Act. The object of the Essential Commodities Act is to provide, in the interest of general public, for the control of the production, supply and distribution, and trade and commerce in certain commodities. Sub-section (1) of Section 3 states as follows: ....
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.... of First Schedule is defined as under: 23. TEXTILES (INCLUDING THOSE DYED, PRINTED OR OTHERWISE PROCESSED): 1. made wholly or in part of cotton, including cotton yarn, hosiery and rope; 2. made wholly or in part of jute, including jute twine and rope; 3. made wholly or in part of wool, including wool tops, woollen yarn, hosiery, carpets and druggets; 4. made wholly or in part of silk, including silk yarn and hosiery; 5. made wholly or in part of synthetic, artificial (man-made) fibres, including yarn and hosiery of such fibres. 33. The impugned Act is traceable to Items 24 and 27 of List II of the 7th Schedule of the Constitution which run as under: 24. Industries subject to the provisions (Entries 7 and 52) of List I. 27. Production, supply and distribution of goods subject to the provisions of Entry 33 of List III. 34. Therefore, handloom industry has been taken out of Industrial Development and Regulation Act and a separate enactment has been made. 35. In the light of the foregoing provisions, we shall examine the question whether Cotton Textile Control Order and the impugned Act can operate in the same fie....
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....mji's (supra) case as follows: The relevant Entries in the respective Lists of the Seventh Schedule to the Constitution are as follows: List I, Entry 52: Industries, the control of which by the Union is declared by Parliament by law to the expedient in the public interest. List II. Entry 24: Industries subject to the provisions of entry 52 of List I. Entry 27: Production, supply and distribution of goods subject to the provisions of entry 33 of List III. List III, Entry 33: As it stood prior to its amendment: Trade and commerce in and production, supply and distribution of, the products of industries where the control of such industries by the Union is declared by Parliament by law to be expedient in the public interest. Entry 33 as amended by the Constitution Third Amendment Act, 1954: trade and commerce in, and the production, supply and distribution of,- (a) the products of any industry where the control of such industry by the Union is declared by Parliament by law to be expedient in the public interest, and imported goods of the same kind as such products; (b) foodstuffs, including edible oilseeds and oils; ....
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....52 of List I. Before sugar industry became a controlled industry, both sugar and sugarcane fell within Entry 27 of List II but, after a declaration was made by List II but, after a declaration was made by Parliament in 1951 by Act LXV of 1951, sugar industry became a controlled industry and the product of that industry viz., sugar was comprised in Entry 33 of List III taking it out of Entry 27 of List II. 43. Therefore, where the Cotton Textile Control Order deals with the productions while the impugned Act is an Act which deals entirely with handloom. The order issued under Section 3 of the Act is only for protection and development of handloom industry. There is no question of both the Cotton Textile Control Order and the impugned Order operating in the same field. 44. Hence, this argument is rejected. 45. The next argument is that Clause 20 of the Cotton Textile Control Order enables the Textile Commissioner to have an over all view while under Section 3 of the impugned Act regard is to be had only to the handloom industry. 46. We may now extract Clause 20 of the Cotton Textiles (Control) Order, 1948 which runs as follows: 20. (1) The Textile Commissioner ma....
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....0. According to Mr. Krishnaswami, learned Counsel, if there is a total reservation so as to create a monopoly that would be bad in law. He relies on decision in State of Rajasthan v. Mohan Lal Vyas AIR 1971 SC 2068 . It was held thus: A monopoly right cannot be conferred on a citizen under the Constitution nor can it be justified under the Constitution. 51. This argument, in our opinion, proceeds on a misconception. There is no question of monopoly created in favour of handloom industry. Certain kinds of textiles are reserved to the handloom industry. Still there are number of items available for powerloom owners which they can manufacturer. The items of textiles generally manufactured in the mill and powerloom sectors have been left out from reserved items. Only those items which have traditionally been manufactured on handlooms have been reserved for this sector. As a matter of fact, the reservation orders in favour of handloom have been on the statute book since 1950. But this has not deterred the growth of powerloom sector in the last three decades. Recently when the powerloom started producing the items which were traditionally being manufactured on handlooms, that....
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....on of textile sector at the end of Sixth Plan (1984-85) was 11,956 million mitts, of which the share of handlooms was 3514. At the end of Seventh Plan (1989-90) the total production in the textile is estimated at 14500 ml. mts. of which the share of handlooms will be only 4600. These estimated targets indicate that there is sufficient scope for all the sectors including the unorganised powerloom sector to grow during the Seventh Five Year Plan. The differences between the handloom and powerlooms have been defined in the Act itself. The basic difference being that the handlooms are manually operated while the powerlooms are run with the motive force of power. 54. The protection has been given by the Government to handloom weavers because the livelihood of handloom weavers is threatened due to the production of all types of items and varieties by the powerloom industry. It is common knowledge that the handloom weavers are economically very poor and will have no alternative employment in the rural areas unless protected through reservation of varieties for them. So poor is the weaver that he could well say in the words of Karl Marx: Half a century on my back and still a pa....
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.... in big establishments and similar goods produced by small powerloom weavers in the mofussil, who are usually ignorant, illiterate and poor and suffer from handicaps to with big establishments like the petitioner Company are not subject. 58. Equally, Article 46 inter alia requires the State to promote with special care the educational and economical interests of the weaker sections of the people. Therefore, these restrictions can easily be sustained as reasonable since it is in furtherance of the objectives laid down in the directive principles. 59. In view of what we have stated above, even if, these restrictions result in the total exclusion of the powerloom sector that could be upheld as reasonable. In Narendra Kumar's (supra) at page 376 it was held thus: that the word "restriction" in Articles 19(5) and 19(6) of the Constitution includes cases of "prohibition" also; that where as restriction reaches the stage of total restraint of rights special care has to be taken by the Court to see that the test of reasonableness is satisfied by considering the question in the background of the facts and circumstances I under which the order was made, taking into account....
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....ys been to create more employment particularly in rural areas, it will be unthinkable to imagine the social problems that will be created if the employment of millions of handloom weavers is taken away by allowing powerlooms to produce all items without any reservation. Handlooms and handicrafts are the only traditional cottage industries which provide maximum employment in the rural country-side. 62. Hence, we reject this point as well. 63. It has already been noted from the observations of the high-powered Study Team under the Chairmanship of Mr. B.Sivaraman as to how every new powerloom will put out of action six handloom in the country. A handloom actually is a family industry and not an individual's field alone. 64. This means the families of the poor weavers are ruined by encouraging power-loom. It may be tat the cost of production in the powerlooms sector is less but if it is the object of the Government to encourage handloom for continued employment of handloom weavers in rural areas, certainly, nothing worthwhile can be said against the impugned reservation. Besides, even under the Notification issued by the Textile Commissioner on 15.4.77 many of the items st....