Holding

Section 28 of the Gold Control Act, 1968 is constitutionally valid and does not suffer from excessive delegation of legislative power.

Summary

The Union of India appealed against the Andhra Pradesh High Court's decision striking down Section 28 of the Gold Control Act, 1968 on the ground of excessive delegation of legislative power. Section 28 prohibits a licensed gold dealer from carrying on money‑lending or banking business on the security of any article or ornament in the same premises unless authorised by the Administrator. The High Court held the provision unconstitutional for granting the Administrator unfettered discretion. The Supreme Court examined whether the lack of express guidelines rendered the power excessive and whether the doctrine of parity of reasoning applied. It held that the overall scheme, purpose and policy of the Act, together with the requirement in Section 5(1) that the Administrator act in accordance with the Act’s objectives and the possibility of revision by the Central Government, provide sufficient guidance, making the discretion non‑arbitrary. The Court distinguished this provision from the earlier invalidated Section 27(6) in Harakchand Banthia’s case, noting the absence of vague terms. Consequently, the appeal was allowed and Section 28 was upheld.

Issues considered

Whether Section 28 of the Gold Control Act, 1968 constitutes an excessive delegation of legislative power.
Whether the doctrine of parity of reasoning is applicable to Section 28.

Legislation cited

Gold (Control) Act, 1968s. 27(6), s. 28, s. 5(1)

Subjects

Gold Control Actdelegation of legislative powerconstitutional validityadministrative discretiondoctrine of paritymoney lendinglicensed premises

Judgment

UNION OF INDIA A

v.
ANNAM RAMALINGAM ETC. ETC.

!list February, 1985 B
(V.D. TULZAPURK:AR, RANGANATH MISRA AND V. KI!ALID, JJ.)
Gold Control Act, 1968, section 28, constitutional validity-Whether
• ·8ection 28 suffers from the vice of excessive delegation of legislative power-
Doctrine of Parity of Reasoning.
c
Section 28 of the Gold Control Act, 1968 bars money lending busi-
ness to be carried on in licensed premises, ei1her by the liQeosed dealer or
by any other person unless authorised by the Administrator to do so.

Drawing analogy from the reasoning adopted by the Supreme Court
in its decision reported in Harakchand Ratanchand Banthla v. Assistant
Collector of Central Excise, Poona, II Division, [1970] I SCR 479=AIR D
J971 SC 1170, the High Court of Andhra Pradesh struck down the said
provision on the ground that it suffers from the vice of excessive delegation
of legislative power in as much as no criteria or guidelines have been
provided by reference to which the power conferred on the Administrator
to refuse permission or grant permission should be exercised and that the
section confers an arbitrary, uocaaalised and unfettered power upon the
Administrator with the result that the licensed dealer is at his mercy while E
seeking permission to carry on moneyalending or banking business on the
security of any article, ornament or both in the same premises in which
he carried on business as such dealer. Hence the appeal 'by special
leave.

Allowing the appeal, the Court F

HELD : I. I Section 28 of the Gold Control Act, 1968 cannot
be struck down on the ground of excessive delegation of legislative power
and its validity must be upheld. [9S7C]

.... 1.2 It is true that no express rule prescribing the conditions or
, circumstances under which the permission can be granted or refused has
been framed nor any particular guide~line has been expressly indicated in
• section 28 by reference to which the power conferred upon him thereunder
could be exercised by tho Administrator, but that is not decisive of the
matter. [954H; 955 A]
H
952 SUPREME COURT REPORTS (1985) 2 S.C.R

l.3 Section 28 of the Gold Control Act, 1968 is part and parcel
of the entire scheme of the Gold Control Act The objective, the policy
and the scheme of the Act together with the necesssity to ensure prevention
of circumvention of tl:le other provisions of the Act afford more than suffi-
cient guidance to the Administrator in the n1atter of t:xcrcising the power
or discretion conferred on him under sec ti on 28. The several restrictions
B that have been put on the activities of the t.raders doing business in gold
will have to be viewed, in the light of th~ purpose for which the Gold
Control Act was passed viz., that even lhough import of gold into India
had been banned considerable quantities of contraband gold were finding
their way into the country through illegal channels affecting the national
economy and hampering the country's economic stability and progress, that
the Customs Department wa!I not in a position to effectively combat the
c smuggling over the long borders and coast-line, that therefore anti-smugg-
ling mea~ures bad to be supplemented by a detailed system of control over
internal transactions. Io fact section S ~1) of the Act requires that the
Administrator should have regard to the policy and purposes of the Act in • A
making bis orders. Moreover against his order under that section a revi-
sion lies to Central Govarnment which implies that he will have to make
judicious use of bis power or discretion arid iiny improper exercise is liable
D to be corrected by a higher authority. Therefore, it cannot be said that
unfettered or uncanalised or arbitrary power ha~ been conferred upon the
Administrator under section 28. [955B; E-G]

1.4 Further section 28 does not impose any blanket or absolute
prohibition upon a dealer from carrying on money.lending, banking or any
other business in the same premises in which he carries on business as a
E dealer bot he is prevented only from c.trrylng on business as money~lender
or banker on the security of any artic:e, ornament or both unless authorised
by the Administrator. Even the restri-.:tion i11 the case of a third person in
carrying on buo;iness as a money-lendor, banker or any other business in the
same premises is not absolute in as much 'lS the Administrator can authorise
the third person to carry on the business in the licensed premises of the
dealer and while implementing such limited restrictions or granting reli:f
against the same he wi11 be guided by the policy and purposes of the Act
F and by the prime consideration that circumvention of the oth;!r provisions
of !Le Act shall not be permitted. [956A-C]

Blhar State Bullion MerchantJ· Assrciatlon v. Union of India, AIR 1971
Patna 240; Raman/al Purshottamdas Chokshi v. Union of India & Others,
14 Guj. L.R. 1112, approved.

Annam Rama/ingam, etc. etc. v. Union f India, Writ Petitions Nos.
3956 3973/68 etc. dated 26.12.69, Andhra Pradesh, reversed.

1. S In Harakchand Banthia's case the Supreme Court found, the
phrases like 'in the region', 'the anticipated demand'. 'suitability' and •
'public interest' as vague, uncertain and therefore declared the unamended
section 27(6) of the Gold Control Act as invalid and the Parliament has
~arried out suitable amendments thereafter. No such vague or indefinite
n expressions or concepts are to be found in section 28 by reference to which
UNION v. A. RAMALINGAM (Tulzapurkar, J.) 953

the Administrator is required _to exercise bis power. In the absence of A
parity of situation or circumstances the doctrine of parity of reasoning
cannot be invoked. [957A-C]

Harakchand Ratanchand Ba11thia v, Assistant Collector of Central
Excist, Poona II Division, [1970] I SCR 479=AIR 1971 SC 1170,
explained and held in applicable.
B
• J- CIVIL APPELLATE JURISDICTION ; Civil Appeals Nos. 1264-67 /71
etc.

From the Judgment and Order dated 26.12.69 of the High
Court of Andhra Pradesh at Hyderabad in W.P. Nos. 3956, 3971,
3983, 3899, 4421, 4474, 4537, 4544, 4570, 4825 and 4933/68. c
D.K. Sen, Gopal Subramanium and R.N. Poddar for the Appel-
.... . !ant.

Ex·parte for the Respondents.

The Judgment of the Court was delivered by D

TULZAPURKAR, J. In these 11 appeals only that part of the
judgment of the Andhra Pradesh High Court is assailed by the
Union of India where the challenge to the validity of section 28 of
the Gold Control Act, 1968 has succeeded. The challenge to the
other provisions of the Act at the instance of persons engaged in
gold trade, i.e , manufacturers, shroffs and dealers in gold was E
rejected by the High Court.

Section 28 of the Act runs thus :

"28. Money lending business not to be ca•·ried on in
licensed premises-No licensed dealer shall unless authoris- F
ed by the Administrator so to do,-

(a) carry on business as a money-lender or banker on the
security of any article, or ornament, or both,

(bl permit any other person to carry on money-lending,
banking or any other business, G

in the same premises in which he carried on business as
such dealer."

• The High Court has struck down the aforesaid provision only
on the ground that it suffers from the vice of excessive delegation of
legislative power inasmuch as no criteria or guide· lines have been H
SUPREME COURT REPORTS [198Sj 2 s.c.lt
A provided by reference to which the power conferred on the Admini-
strator to refuse permission or grant permission should be exercised
and that the section confers an arbitrary, uncanalised power upon the
Administrator with the result that the licensed dealer is at his mercy
while seeking permission to carry on money-lending or banking
business on tbe security of any article, ornament or both in the same
B
permises in which he carried on business as such dealer. The High
Court's reasoning in this behalf is to be found in its judgment at
page 87 of the paper book and it ru:cs thus :

"The Administrator as is evident from this provision,
is given ultimited authority or power to refuse permission
c or to grant permission. No rules have been framed pres·
cribing the conditions or circumstances under which the
Administrator could refuse permission or grant permission. , J
A dealer is at the mercy of the Administrator and is help-
less against the arbitrary exercise of the power by the
Administrator when he chooses to negative the request.
D It is clear that Section 28 confers an arbitrary and uncanali-
sed power without any criteria for guiding the descretion of
the Administrator. Further, the section does not provide
nor is any rule brought to our notice which enjoins upon
the Administrator to give a hearing to dealer who seeks
permission under this Section and give reasons in case he
decides to refuse the permission."
E
Incidentaly the High Court also proceeded to draw analogy
from the reasoning adopted by this Court in its decision in Harak-
chand Ratanchand Banthias v. Asst. collector of Central Excise Poona,
II Division while declaring sec. 27(6) of the Act, as it stood prior to
its amendment by the Amending Act No. 26 of 1969, constitutionally
F invalid on the ground of conferal of a very wide and vague power
upon the Administrator to grant or renew a licence to a dealer.

For the reasons which we shall indicate presently it is impossi-
ble to the reasoning given by the High Court for striking down sec.
28 in the manner done and in our view the analogy drawn by the
G High Court from the reasoning adopted by this Court while dealing
with unamended sec. 27(6) of the Act is clearly inapplicable.

It is true that no express rule prescribing the conditions or
circumstances under which the permission can be granted or refused

H (1) [1970] l S.C.R. 429=AIR 1971SC1170.
UN10,, v. A. RAMALINGAM (tulzapurkar, J.) 955

has been framed nor any particular guide-line has been expressly A
indicated in sec. 28 by reference to which the power conferred upon
him thereunder could be exercised by the Administrator, but that is
not decisive of the matter. It cannot be disputed that sec. 28 is part
and parcel of the entire scheme of Gold Control as envisaged by the
Act and the object of the enactment and the scheme affords sufficient
guidance to the Administrator in the matter of exercising his discre- B
tion under that section. The main object in putting the Act on the
Statute· Book as indicated by its long title is "to provide, in the
economic and financial interests of the community, for the control
of the production, manufacture, supply, distribution, use and posses-
sion of, and business in, gold ornaments and articles of gold and for
matters connected therewith or incidental thereto." In Harakchand
c
Banthia's case (supra) this Court has further pointed out that even
thongh import of gold into India had been banned considerable
quantities of contraband gold were finding their way into the
country through illegal channels affecting the national economy
and hampering the country's economic stability and progress, that the D
Customs Department was not in a position to effectively combat the
smuggling over the long borders and coast-line, that therefore anti-
smuggling measures had to be supplemented by a detailed system of
control over internal transactions and that the Gold (Control) Act,
1968 was passed for this purpose. In other words, the several
.J restrictions that have been put on the activities of the traders doing E
business in gold will have to be viewed from the aforesaid perspec·
tive. It is also clear that the restrictions which have been imposed
in sec. 28 are meant to prevent the circumvention of other provisions
of the Act. Therefore, in our view the objective, the policy and the
Scheme of the Act together with the necessity to ensure prevention of
circumvention of the other provisions of the Act afford more than F
.. sufficient guidance to the Administrator in the matter of exercising the
power of discretion conferred on him under sec. 28. In fact, sec. 5(1)
of the Act requires that the Administrator should have regard to the
policy and purposes of the Act in making his orders. Moreover against
his order under that section a revision lies to Central Government
which implies that he will have to make judicious use of his power G
or discretion and any improper exercise is liable to be corrected by
a higher authority. If that be so it cannot be said that unfettered or
uncanalised or arbitrary power has been conferred upon the Adminis-
trator under sec. 28.

Moreover, regard must be had to be the nature of the restric-
tions imposed by the Section. It does not impose any blanket or H
956 SUPRl!MB COURT REPORTS (1985] 2 S.C.R.
A absolute prohibition upon a dealer from carrying on money-lending,
banking or any other business in the same premises in which he
carries on business as a dealer but he is prevented only from carry-
ing on business as money-lender or banker on the security of any l
article, ornament or both unless authorised by the Administrator.
Even the restriction in the case of a third person in carrying on
business as a money-lender, banker or any other business in the
B same premises is not absolute inasmuch as the Administrator can autho-
rise the third person to carry on the business in the licensed premises
of the dealer and while implementing such limited restrictions or
granting relief against the same he will be guided by the policy and
purposes of the Act and by the prime consideration that circum-
vention of the other provisions of the Act shall not be premitted.
c Having regard to this position which obtains in the case sec. 28
cannot be struck down on the ground of excessive delegation of )

legislative power and its validity has to be upheld.

We may indicate that the same provision (section 28) was
challenged before the Patna High Court in Bihar State Bullion
D
Merchants' Association v. Union of India( 1) and the Gujarat High
Court in Raman/a/ Purslwttamdas Chokshi v. Union of India &:
Others (I) and these High Courts have upheld its validity. We
approve the view taken in those cases.

As regards the analogy drawn by the High Court from the
reasoning adopted by this Court in Harakchand Banthia's case
(supra) while declaring unamended sec. 27(6) of the Act invalid we
would like to point out that while conferring power on the Admini-
strator in the matter of granting or renewing a licence to a dealer
the unamended sec. 27( 6) in several of its clauses referred to certain
concepts which Administrator was required to take into account, and
F
these concepts were regarded as indefinite, uncertain and vague. For
instance under clause (a) the Administrator wa• required to have
regard to the number of dealers existing 'in the region' in which the
applicant was intending to carry on business as dealer but the word
'region' was no where defined in the Act; similarly clause (b) requir-
ed the Administrator to have regard to 'the anticipated demand', as
G
estimated by him for the ornaments in that region but the expres.
sion 'anticipated demand' was really vague and incapable of asses.
ment leading to a great deal of uncertainty ; similarly the expression

(I) AIR 1971 Patna, 240.
11 (2) 14 Guj, L.R. 112.
UNION \'. A. RAMALINGAM (Tulzapurkar, J.) 957

'suitability of the applicant' in cl. (e) and 'public interest' in cl. (g) A
did not provide any objective standard or norm and because such
indefinite, uncertain and vague expressions or concepts had been
used in some of the clauses under sec. 27(6) this Court struck down
sec. 27(6) on the ground that it conferred a very wide and vague
power on the Administrator. It may be mentioned that after this
provision was struck down by this Court Parliment has carried out
the necessary amendment in the Act. No such vague or indefinite B
expressions or concepts are to be found in sec. 28 by reference to
which the Administrator is required to exercise his power. In the
absence of parity of situation or circumstances the doctrine of parity
of reasoning cannot be invoked.

In the result we set aside the impugned judgment of the High
Court and declare sec. 28 oflhe Act valid. The appeal succeeds
but since the respondents have not appeared there will be no order c
" as to costs.

S.R•
. ,. Appeal allowed.

- ).·