Case Note & Summary
The dispute arose when the Executive Committee of the Mizo District Council refused to further renew the temporary trading licence of the appellant, a non-tribal trader, who had been carrying on business at Aijal in the Mizo District since 1957 under temporary licences issued and renewed annually. The appellant had invested about Rs. 50,000 in the business. After applying for renewal beyond May 31, 1960, the Executive Committee passed an order on July 11, 1960 refusing any further renewal, directing him to remove his properties from the district by end of July 1960, and imposing a fine of Rs. 500 in case of non-compliance. The appellant challenged this order and Section 3 of the Lushai Hills District (Trading by non-Tribals) Regulation, 1953 before the Assam and Nagaland High Court under Article 226 of the Constitution, contending that the order was mala fide because despite the stated reason that the number of non-tribal traders had reached the maximum, licences had been granted to new traders; and that Section 3 was invalid as violative of Article 19(1)(g). The High Court struck down the parts of the order directing removal and imposing fine but dismissed the rest of the petition on grounds of delay and on the ground that the order was valid and not discriminatory. The appellant then appealed to the Supreme Court by special leave. The core legal issues were whether Section 3 violated Article 19(1)(g) and whether the refusal was arbitrary. The appellant argued that the provision conferred uncanalized power without any criteria or remedy, while the High Court had maintained that the power was not unrestricted because the regulation was passed in pursuance of the Sixth Schedule and could be restricted having regard to the scope of trade in the locality. The Supreme Court majority, speaking through Shelat J. for Subba Rao C.J. and himself, examined the regulation. It noted that the Sixth Schedule Para 10 empowers District Councils to regulate trading by non-tribals. However, Section 3 simply prohibited trading without a licence and left the issuance, renewal, or refusal entirely to the Executive Committee. The Regulation contained no principle or criterion for the Committee to follow, no procedure for show cause, no appeal or remedy. The refusal order cited a maximum limit but did not state what the maximum was, who prescribed it, or under what authority. Applying the reasonableness test from State of Madras v. V.G. Row and State of Rajasthan v. Nath Mal, the court held that a law imposing restrictions on fundamental rights must be examined from both substantive and procedural aspects. A provision leaving unbridled power to an authority cannot be characterized as reasonable. Even though the Regulation was enacted in pursuance of the Sixth Schedule and may be said to contain a policy of protecting tribal interests, that policy was not sufficient where implementation was left arbitrary. The court concluded that Section 3 was invalid and the refusal order based on it could not stand. Bachawat J. dissented, holding that Section 3 was in strict conformity with Paragraph 10 of the Sixth Schedule, which itself was valid, and that protection of Scheduled Tribes was the guiding policy; he would have upheld the provision. The appeal was allowed; Section 3 of the Regulation was declared unconstitutional and void as an unreasonable restriction on the right to trade under Article 19(1)(g); the order refusing renewal was quashed; and the High Court's dismissal was set aside.
Headnote
A) Constitutional Law - Fundamental Right to Trade - Article 19(1)(g) read with Article 19(6) - Lushai Hills District (Trading by non-Tribals) Regulation, 1953, Section 3 - The Regulation required no non-tribal to carry on wholesale or retail business except under a licence issued by the District Council but contained no principle or criterion for granting, refusing, or renewing licences. The appellant was refused renewal after the Executive Committee cited that maximum number of non-tribal traders had been reached, without disclosing who prescribed that maximum or under what authority. Held that the licensing provision imposed an unreasonable restriction on the appellant's fundamental right to carry on trade under Article 19(1)(g) and was not saved by Article 19(6) (Paras 1014-1021). B) Administrative Law - Arbitrary Executive Discretion - Procedural Fairness - Section 3 of Regulation - The provision left unbridled power to the Executive Committee; it provided no machinery for show cause, no appeal, and no remedy against arbitrary refusal. The Committee could refuse or renew at its sweet will, rendering the restriction unreasonable. Held that a provision leaving an unbridled power to an authority cannot be characterised as reasonable and must be struck down (Paras 1014-1021). C) Constitutional Law - Sixth Schedule to Constitution - Paragraph 10 - Power of District Council - The Regulation was enacted under Paragraph 10 for control of trading by non-tribals, which reflects a policy of protecting Scheduled Tribes. However, a statute may contain a policy yet its implementation may be left in such an arbitrary manner that it amounts to an unreasonable restriction; mere conformity with Paragraph 10 does not validate Section 3. Held that Section 3 was invalid despite being made under the Sixth Schedule (Paras 1014-1021).
Issue of Consideration
Whether Section 3 of Lushai Hills District (Trading by non-Tribals) Regulation, 1953 is violative of Article 19(1)(g) of Constitution and not saved by Article 19(6); whether refusal to renew trading licence was arbitrary and unreasonable due to lack of principles, criteria, procedural safeguards and remedy
Final Decision
Appeal allowed; Section 3 of Lushai Hills District (Trading by non-Tribals) Regulation, 1953 declared unconstitutional and void as imposing unreasonable restriction under Article 19(1)(g) of Constitution; order refusing renewal of licence quashed; High Court order dismissing writ petition set aside.
Law Points
- Legal points not extracted
- fundamental right to trade under Article 19(1)(g)
- restrictions must be reasonable under Article 19(6)
- a provision leaving unbridled arbitrary power to authority is unreasonable restriction
- absence of principles criteria procedural safeguards and remedy renders licensing provision arbitrary
- mere policy in parent statute not sufficient if implementation arbitrary
- Sixth Schedule Paragraph 10 cannot immunize regulation from fundamental rights scrutiny
