UNION OF INDIA & ANR. versus M/S. RAJDHANI GRAINS & JAGGERY EXCHANGE LTD. AND OTHERS

Citation: [1975] SUPP. 1 S.C.R. 1 · Decided: 19-03-1975 · Supreme Court of India · Bench: A.N. RAY · Disposal: Appeal(s) allowed

Judgment (excerpt)

1 
UNION OF INDIA & ANR. 
v. 
M/S. RAJDHANI GRAINS & JAGGERY EXCHANGE LTD. 
AND OTHERS 
March 19, 1975 
B 
(A. N. RAY, C. J., K. K. MATHEW AND V. R. KRISHNA IYER, JJ.) 
Forward Contracts (Regulation) Act (74 of 1952) as amended by Amending 
Act ·62 of 1960, ss. 4(/), 6, 14A, 14B, 15 to 18 and 7A of the Forward 
Contracts (Regulation) Rules. 1954--Scope of. 
C 
The object of the Forward Contracts (Regulation) Act, 1952, is to provide 
for the regulation of certain matters relating to forward Contracts, the prohibi· 
tion of cptions in goods and for matters connected therewith. Section 6 of 
the Act provides that the Central Government may, if it is satisfied that it 
\\'Ou1d 
be in the 
interest of trade and also in public interest to grant 
recognition 
to an association, 
grant tecognication 
in such form 
and 
\Vith such condition as mav be specified and shall specify the goods 
D 
\\'ith respect to which forward contracts may be entered into. between 
the members of such assqciation or through or with any such member. Section 
14A(I), inserted by Amending Act 62 Of 1960, provides that no association con-
cerned \\·jth the regulation and control of business relating to forward contracts 
shall, after the commencement of the 1960 Act, carry on such business except 
under, and in accordance with, the conditions of a certificate of registration 
granted by the Commission, and s. 14B provides that on receipt of an applica-
tion under s. l,4A, the Commission rnay, after making such enquiry as it consi-
E 
ders' necessary" grant or refuse the certificate. 
Sections 15 to 18 of the Act. 
authorise the Central Government to· impose restrictions as to commodities with 
respect to which bu.siness in. forward contracts can be carded on. , Rule 7 A ot 
the Forward Contracts (Regulation) Rules, 1954, framed under the Act, pro-
vides that the certificate of registration granted to an association shall be in 
Form F, which states that the registration is granted subject to the conditions 
(i) that the association shall comply with such directions as may from time 
to time be given by the Forward Markets Commission, and (ii) that the asso-
F 
elation shall not conduct forward trading in any commodity other than those 
si>ecified hereunder except with the previous approval of the Forward Markets 
Commission. 
The respondent was granted a certificate of registration under s. 14B with 
the second condition that it shaJl not commence trading- in non-transferable 
specific delivery contracts in any comm9(1ity without obtaining the prior appro-
val of the Commission. 
A direction to the same effect was also given by the 
G 
Commission to the respondent in a letter. 
The respondent filed a \\Tit petition in the High Court for quashing the 
condition and direction, and the High Court quashed them on the grounds : 
( 1) While s. 6 gives power to the Central Government to specify goods in 
respect of which forward contracts may be entered into by the members of 
the recognised association, s. 14A is silent in regard to this matter implying 
that the Commissiolt has no such power; (2) the conditions which the Com-
mission could attach to the certificate Of registration are only those which 
H 
relate to the manner and method of carrying on the business of forward con· 
tracts, and the second condition imposed in the instant case did not relate 10 
the manner or method of carrying on the business; and (3) no power to ini.pose 
·such a condition could be implied as that would be repugnant to the power 
of Government to control, regulate or prohibit forward trade in respect of 
nny commodities, vested irt the Central Government under ss. 1.S to 18. 
' 
SUPREME COURT REPORTS 
[1975) SUPP. S,C.R. 
A 
Allowing the appeal. to tqis ,Courh 
B 
c 
D 
E. 
F 
G 
H 
!/ELD.: .Rule ~A is intra vires the ~ule-making pov,rcr and it v.·as open to 
the Comn11ss1on to impose the second co1\dition in tho certificate of registration. 
The condition and direction are tberefore:valid. '[8-Dl 
' 
( 1 )(a) The areas covered by s. 6 and s. 14A are different. 
The fact that 
an associatjon is recognised by the Government \Vould not enable it to carry 
9n the .business in forward contracts. For that purpose, a certificate under s. 14A 
1s a suie qua non. 
The fact that Central Government has power to attach 
conditions as regards commodlties iO. respect of which the business of forward 
contracts c~n be carried on is not in any way incompatible v.•ith the power ,of 
the

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